Cheng Shin plans Indonesia plant

Tire maker Cheng Shin Rubber Industry Co (正新橡膠) said on Friday that a planned factory in Indonesia should be completed in March 2016.

The new US$320 million facility should be able to produce 40,000 motorcycle tires and 16,000 passenger car radial tires per day.

Cheng Shin has acquired the land for the new factory and is set to complete the registration process by the end of next month for its new subsidiary Maxxis International Indonesia, which is to be responsible for operating the plant, the company said.

“The new factory is located in Greenland International Industrial Center, 37km east of Jakarta, and construction is slated to start in March next year and be completed within a year,” global sales and marketing director Lenny Lee (李宏格) said at an investors’ conference.

In the second quarter, the company had the capacity to produce 164,000 passenger car radial tires and 194,000 tires for motorcycles per day, the company said.

Sales of passenger car radial tires accounted for 38 percent of Cheng Shin’s revenue of NT$64.29 billion (US$2.14 billion) during the first half of the year, with sales of motorcycle tires making up 13 percent, the company said.

Last quarter, the company posted a profit of NT$3.39 billion, or NT$1.05 per share, down 29.94 percent from NT$4.64 billion, or NT$1.43 per share, seen in the same period a year ago and 7.63 percent from the NT$3.67 billion, or NT$1.13 per share, recorded the previous quarter, according to the company’s filing with the Taiwan Stock Exchange.

The decline in profit was because Cheng Shin paid taxes of about NT$700 million on retained earnings last quarter, Cheng Shin vice president Wu Hsuan-miao (吳軒妙) said, adding that the taxes were higher than the previous year because the company reported higher retained earnings.

The company also booked foreign exchange losses of NT$1.59 billion last quarter, a rise from the losses of NT$833.24 million seen in the same period a year ago — a sharp decrease from the foreign exchange gains of NT$268.15 million seen in the previous quarter, according to the company’s stock exchange filing.

The company forecast its profit next quarter would be higher than that posted for this quarter on the back the yuan strengthening against the New Taiwan dollar.

The company’s revenue last quarter declined 7.47 percent to NT$32.69 billion from NT$35.33 billion from the same period a year ago. However, the figure was up 3.48 percent from the NT$31.59 billion booked in the previous quarter, the filing said.

Lo said the year-on-year decline was due to a drop in average selling prices resulting from severe competition in China.

The company’s revenue this quarter would also decline from the NT$34.86 billion seen for the same quarter a year ago because of lower prices for its products, it said.

Commenting on anti-dumping charges in the US against Chinese tire manufacturers, Wu said the impact on Cheng Shin would be minor as most of its tires shipped to the US are made in its plants in Paiwan and Thailand.

Asked if high tariffs likely to be imposed on Chinese tire exports to the US would cause tire shipments in China to rise and competition there to exacerbate, Wu said Cheng Shin’s customers in China have different expectations than those buying cheap tires.

“Manufacturers of cheap tires in China do not provide an after-sales service to customers, and they attract a different kind of client,” Wu said.Cheng Shin’s sales in China accounted for 59 percent of its revenue in the first six months of this year, it said.