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SCMP Reporter

By boosting investment in downstream manufacturing, the windshield glass firm hopes to reduce production costs 13pc

The mainland's largest windshield glass exporter, Xinyi Glass Holdings, aims to raise $800 million  from a flotation on the Hong Kong main board to fund plans to expand downstream manufacturing.

On top of the $250 million it invested last year to build its first float-glass plant in Humen of Dongguan, the Hong Kong company budgeted to invest a further  $400 million this year in the new business.

'Float glass is the main raw material for our products. We can largely reduce our cost of material purchase as well as packaging and transport costs if we produce the float glass ourselves,' Xinyi chief executive Gerry Tung Ching-sai said.

Xinyi has begun to market its  initial public offering this week and expects book building to take place on January 19 to 27. It will launch the retail offering  on January 22 to 24, with the shares due to be listed on February 3.

Kingsway Financial Services Group is the sole sponsor for Xinyi's Hong Kong listing.

Mr Tung said the company's aggressive expansion  sought to meet surging overseas demand,  especially from carmakers and  windshield glass makers that were increasingly outsourcing glass products from the mainland.

Xinyi  paid  $2,400 per tonne for the  120,000 tonnes of float glass it bought last year. The company estimates savings of $800 a tonne by making the float glass itself.

Float glass accounts for about 33 per cent of Xinyi's  production costs. The  savings  through vertical integration  translate into a reduction in  production costs of about 13 per cent. In 2003, Xinyi's  turnover grew more than  30 per cent to more than  $800 million, with a net profit of  between $170 million and $180 million.

Mr Tung said Xinyi had been maintaining a  net profit margin of more than 20 per cent in  the past three years and expects  the high  margin trend to continue.

The company expects the 350,000-tonne float-glass plant to be in production in the first quarter of next year at the latest. It  forecast about two-thirds of the float glass would be  consumed domestically and the remainder  sold overseas.

Xinyi invested about $300 million last year to build  factories and expand existing ones in its upstream glass plants in Shenzhen,  Wuhu of Anhui and  Humen, allowing the company to increase  windshield glass production capacity by  50 per cent and double its construction-glass output capacity.

Xinyi claimed it was the second-largest  windshield glass manufacturer in the mainland, with  a 36.2 per cent share of the export market.

Its key competitor in the country is Shanghai-listed A share Fuyao Group Glass Industries.

Taiwan's electronics component maker Hon Hai Precision Industry also aims to list its telecommunications gear unit Foxconn International Holdings on the Hong Kong main board next month.

Foxconn has hired Goldman Sachs and UBS as its listing sponsors.



Xinyi seeks $800m to fund expansion