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Tire Maker Kenda to Kick Off Investments Worth NT$15 B. in 2014

Jun 04, 2014 | By CENS

Kenda Rubber Ind. Co., Ltd., a major Taiwanese rubber-tire maker, recently announced plans to kick off a NT$15 billion (US$500 million) investment project by the end of this year.

The tire maker said that some of the investment will go into a new factory in Huizhou, Guangdong province, to focus mainly on producing smaller tire products for powered two-wheeler (PTW), bicycle, and industrial applications. The company expects to pass the necessary environment evaluation and receive construction permission as early as June. The total investment in Huizhou facility will be between NT$5 billion and NT$6 billion (US$166.7 million and US$200 million).

Kenda is also scheduled to begin building a new passenger car radial tire factory in Kunshan, Jiangsu Province (it will be the company's second factory there) with total investment of about NT$10 billion (US$333.3 million). Environmental assessment is being carried out, and the firm hopes to start construction in the fourth quarter.

However, Kenda said, the serious smog problems in China have made the environmental assessment process more stringent and lengthy, so the starting date will be decided by the time needed to complete environmental assessment.

In recent years, Kenda has continuously developed bigger-tire production at its factories in Yuanlin, central Taiwan, and Tianjing and Kunshan in China. Car tires currently account for 29% of the company's total revenue, compared to 27% for bicycle tires and 27% for PTW tires.

Kenda's planned Huizhou factory is expected to take over production from the company's PTW tire plant in  Shenzhen, Guangdong Province, which has suspended operations while the local government renovates the industrial zone there, and will add new capacity as well. The daily production capacity of the new factory will be some 60,000 PTW tires and 90,000 bicycle tires.

When the new facility kicks off production, which is scheduled for the second quarter of 2015, it will turn out products half for domestic sale and half for export.

Kenda registered revenues of NT$7.91 billion (US$263.9 million) in the first quarter of 2014, up 16.73% year-on-year. Thanks to stronger demand from recovering markets in the U.S. and Europe, the firm estimates that its second-quarter revenue will grow further, reaching close to NT$10 billion (US$333.3 million).

The Taiwanese tire maker said that China is a high-potential market in which the demand for both aftermarket replacement and original equipment tires is increasingly strong. About 100 million cars are currently running on China's streets and roads, the company explained, creating a huge demand for aftermarket tires. To meet the rising demand for higher-quality and -durability tires in the huge Chinese market, Kenda has been consolidating its foothold there.

This year, Kenda said, shipments to the North American market are expected to increase by 5% to 6% and those to Europe about 10%, due to last year's relatively low base for comparison.

Kenda's Operating Results (Q1, 2013-Q1, 2014)

Q1, 2013
Q2, 2013
Q3, 2013
Q4, 2013
Q1, 2014
Consolidated Revenue
NT$7.61 billion
NT$7.06 billion
NT$7.38 billion
NT$10.4 billion
NT$7.90 billion
Net Earnings
NT$769 million
NT$888 million
NT$810 million
NT$769 million
NT$856 million
EPS
NT$1.01
NT$1.21
NT$1.06
NT$1.01
NT$1.12
Source: Market Observation Post System, Taiwan Stock Exchange (TSE)


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