Nan Liu Enterprise Co (南六) has ramped up capital expenditure this year, as the nation’s leading nonwoven fabrics manufacturer expands production capacity in Taiwan and China to meet rising market demand.
Nan Liu, which spent NT$260 million (US$8.27 million) on capital expenditure last year, on Wednesday said it is expecting a larger scale of operations this year to further enhance its sales and earnings.
The company has reached a 50-year rental agreement for 10 hectares of land in Kaohsiung’s Yanchao District (燕巢) to build production facilities focusing on biodegradable nonwoven products, Nan Liu finance department manager Chuang Chun-chin (莊春金) said at an investors’ conference organized by the Taiwan Stock Exchange.
In China, two air-through and thermal-bond nonwoven fabric production lines have begun operations at the company’s plant in Pinghu, Zhejiang Province, and Chuang said its clients are assessing the first batches of products from them.
“Capital expenditure will continue rising over the next three years,” she said, without offering exact numbers.
Nan Liu makes polypropylene nonwoven fabrics for diapers for Japanese company UniCharm Co, and US firms Procter & Gamble Co and Kimberly-Clark Corp. The company’s other products include nonwoven fabrics for surgical scrub suits, facial masks, microfiber cleaning cloths, dust cloths and mops.
The company is aware of intensifying competition in the Chinese market, but is confident that it can retain a significant technological lead over its Chinese peers for the next decade, Nan Liu president Huang Ho-tsun (黃和村) said.
“While it is true that deep-pocketed Chinese rivals can buy the same German machines as we do, Nan Liu’s engineers have been working closely with German machinery makers since the design phase,” Huang said.
As a result, the same machines can yield about 150m to 160m of nonwoven fabric in one minute, significantly outpacing the default capacity of 70m to 80m, a major factor contributing to Nan Liu’s favorable profit margins ranging between 18 and 22 percent, he said.
While wages are increasing in China, the company expects the upgrade of automated production systems to meaningfully reduce labor costs, Chuang said.
“We are not concerned over rising wages in China, as we utilize automated production extensively,” she said.
“In fact, we welcome the change, as rising wage levels translate to higher consumption in the Chinese market [and therefore make a greater contribution to the company’s sales],” she added.
As a slew of leading local and foreign makers have entered the Chinese market in a bid to grab a slice of the consumer boom there, Nan Liu hopes Chinese consumers can first get acquainted with its nonwoven fabric household products through diapers.
“As babies outgrow diapers, it is hoped that their parents would start using wet wipes and mop heads for other household cleaning needs,” Chuang said.
Nan Liu has not released its earnings results for the first half of the year.
In the first quarter, net profit leaped 55.3 percent year-on-year to NT$151 million, or NT$2.08 per share, on the back of tax refunds and foreign-exchange gains.
In the first six months, revenue rose 15.82 percent year-on-year to NT$3.003 billion, while revenue in the second half is expected to be higher than the first half, boosted by sizeable orders of nonwoven fabrics for surgical scrubs from Japanese clients, Chuang said.
Nan Liu also expects to secure a 30 percent global market share for the company’s spunlace nonwoven fabrics this year, compared with last year’s 20 percent, she said.
Nan Liu shares rose 0.6 percent to NT$169 yesterday in Taipei trading. They have risen 20.28 percent so far this year, while the broader market has declined 5.55 percent over the same period.
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