Cheng Shin Rubber Industry Co (正新橡膠), the world’s ninth-largest tire maker, is considering building its seventh plant in China to deepen its presence there.
With six factories in southern and central China, Cheng Shin’s plan to construct a new plant in northern China would help it satisfy growing demand, vice president Wu Hsuan-miao (吳軒妙) said yesterday.
Wu made the remarks after the company held its annual general meeting in Yuanlin (員林), Changhua County, where shareholders agreed to the company’s proposal to distribute a cash dividend of NT$1.5 and a stock dividend of 15 percent, based on last year’s earnings of NT$8.54 billion, or NT$5.64 per share.
“We will come up with a concrete plan on the construction of a new plant early next year, when the global demand for tires is set to stabilize,” Wu said by telephone.
Cheng Shin needs to expand its production capacity to meet demand, as the company’s existing factories are likely to reach full capacity by the end of this year, from about 90 percent capacity at the moment, Wu said.
Cheng Shin, known for its brands CST, Maxxis, Sakura and Presa, also expects its revenue to rise steadily this year from last year on the back of rising car sales in emerging markets and lower raw material costs.
“Demand in China and other emerging markets, such as India and Indonesia, is growing faster than in developed countries,” the company said in a report distributed to shareholders.
Barclays Capital analyst Sidney Yeh (葉昌明) said Cheng Shin is better positioned than its peers in terms of geographic exposure to the European and US markets, where tire demand is weakening.
“Cheng Shin derived 9 percent of its sales from European and North American markets last year,” Yeh said in a note on Tuesday last week. “The exposure is much smaller than [that of] global peers, such as Michelin, Bridgestone, Goodyear and Hankook.”
The company’s combined sales to China and other emerging markets accounted for about 70 percent to 80 percent of its total revenue of NT$12.6 billion (US$420.83 million) in the January-to-March quarter, Wu said.
With the completion of three new factories in China and one in Taiwan in the past year, the company’s total sales of tires are expected to reach 39.2 million units this year, a more than 300 percent increase from 11.26 million units the previous year, the company said. It did not yesterday give revenue and earnings forecasts for this year.
Fubon Securities Investment Services Co (富邦投顧) analyst Will Hsieh (謝文凱) said in a note on May 15 that Cheng Shin could grow its revenue by 10 percent to NT$143.26 billion this year from last year, with net profit increasing 16.9 percent year-on-year to NT$19.45 billion, or NT$6.9 per share.
Cheng Shin shares rose 0.86 percent to NT$93.8 yesterday.