Companion to team up for ceramic tile plant
LISTED Companion Building Materials is teaming up with Italian and Chinese parties to establish a $300 million ceramic tile manufacturing plant in Shanghai.
Doreen Siu York-chee, chairman of the ceramic tiles group, said the plant was expected to generate a better profit margin due to lower production costs on the mainland.
Companion is involved mainly in importing and selling a large range of quality ceramic tiles, as well as marble and granite products.
The firm also provides installation services for its granite and marble products, and through its retail outlets, sells an extensive range of bathroom accessories.
Most of the company's ceramic tiles are sourced from Italy, with value of about $300 million per year, said Ms Siu.
But she said volume of imported ceramic tiles would decline after the planned production line of high-quality Italian ceramic tiles became operational.
A letter of intent had already been signed among the three parties.
But the deal would not be completed until the distribution of shareholdings among three parties was finalised, said executive director Stephen Siu Youk-yuen.
In spite of having no final decision on equity distribution, Mr Siu expected the company would achieve a 40 per interest in the project.
The expansion is in line with Companion's strategy of stepping up its operations in China, which now accounts for 15 per cent of total business.
In its move towards mainland expansion, Companion recently announced a $99 million issue of new shares to China-backed Shougang Concord and New China Hong Kong.
Mr Siu said the placement to the two companies, which have strong connections in China, would help Companion's expansion in that country.
More co-operation with two companies was expected after the new share issue, according to Mr Siu.
The proposed project includes plans for acquiring high-quality state-owned ceramic tile manufacturing operations, which have been facing financial problems due to poor management.
Mr Siu did not elaborate because he said the plans were not yet finalised.
But he said there would be more opportunities in north and central parts of China.
Following the new share placement, Shougang Concord and New Hong Kong China each will hold 9.9 per cent stake in Companion.
The company had no plans to tap money from stock market in the near future following the latest placement, said Mr Siu.