Hwa Fong to Use NT$1.5 B. Syndicated Loan for Expansion

Hwa Fong Rubber Ind., Ltd., a major tire manufacturer in Taiwan, recently signed an agreement with eight domestic banks for a syndicated bank loan of NT$1.5 billion (US$50 million).

At the signing ceremony, Hwa Fong's chairperson Tiffany Su announced a cooperation project with important partners in Cambodia by signing a cooperation letter of intent (LOI) in early July; while the Taiwanese tire maker plans to soon start building a plant there.

Hwa Fong's Cambodian tire plant will be in an industrial zone near the border between Cambodia and Vietnam, with Hwa Fong to hold a 51% stake and daily capacity of about 15,000 bicycle tires initially, to be shipped mainly to Association of Southeast Asian Nations (ASEAN) and Latin America markets, with the start-up in mid-2016 and total investment of about NT$600 million to NT$1 billion (US$20 million to US$33.3 million). In the third-stage construction, Hwa Fong plans to locally produce passenger car radial (PCR) tires. According to Su, bicycle tires produced at the first stage will be supplied to major Taiwanese bicycle makers with factories in Cambodia.

Hwa Fong has set up long-term and stable partnerships with international tire brands and vehicle makers, such as tire vendors Sumitomo of Japan, Michelin of France, as well as powered two-wheeler (PTW) vendors Yamaha Motor Taiwan Co. (Yamaha), Kwang Yang Motor Co., Ltd. (KYMCO) and Sanyang Industry Co., Ltd. (SYM). In addition, Hwa Fong is also the Taiwanese agent of imported Continental tires from Germany.

Thanks to increasing orders from major customers such as Michelin, Vittoria, Honda, Kawasaki, and Decathlon Group, Hwa Fong's bicycle-tire production capacity has been booked. Su said that the management of Michelin is scheduled to visit Hwa Fong's factory in Thailand, with plans to further expand the cooperation.

Su stressed that her company will continue to install manufacturing equipment in Taiwan for capacity expansion; while the company's Thai facility has completed capacity-expansion to upgrade daily capacity of motorcycle tires to 10,000 units. The expanded Thai factory will start mass production in the third quarter, and is expected to help Hwa Fong further enhance competitiveness in the ASEAN motorcycle-tire market.

Su also added that Hwa Fong plans to pour US$10 million into Chinese subsidiary Hwa Fong Rubber (China) Co., Ltd., and US$20 million into Hwa Fong Rubber (Suzhou) Co. The syndicated bank loan and compensation from the Chinese government for the expropriation of its old plant in Changshu, Jiangsu Province of China, Su announced, will enable Hwan Fong to set up a 110,000 square-meter factory in China with targeted daily capacities of 30,000 bicycle tires, 30,000 motorcycle tires, and 45,000 inner tubes.

The syndicated loan for Hwa Fong, Su said, includes NT$1.2 billion (US$40 million) and US$10.76 million, to be used to install new production equipment in Taiwan and overseas production-capacity expansion.

In addition to core tire-production, Su announced that Hwa Fong Rubber (Thailand) Ind. , Ltd. will jointly set up a venture in Thailand with Taiwanese assembled-bicycle maker Mingcycle Cycle Industrial Co., Ltd. and overseas investors, to promote Ascent own-brand bicycles for sale in the ASEAN market.