Alco to put $50m into Dongguan plant
AUDIO products maker Alco Holdings will invest $50 million for the first phase of a new support facility in Dongguan, Guangdong.
The new plant will have facilities for making foam rubber, pulp moulding and wooden cabinets for audio products, and for gift-box printing.
Finance director Andrew Kuok said the vertical integration would help reduce production costs and enhance control of delivery.
The one million square foot site on which the plant will be built is in Haujie town, close to its other factories, which make radio cassette recorders, compact disc players and CD-ROM drives for computers.
Mr Kuok said the company, which bought the land for about $11 million two months ago, would develop it in two stages, with first-stage construction expected to begin in April.
The company's sales are spread evenly in Europe, the US and Asia, but it plans to boost its exposure to China, which currently provides only four per cent of turnover. Alco plans to increase that to 10 per cent by 1995.
Alco has recently secured domestic sales rights on the mainland through a joint venture in Guilin. Mr Kuok said the venture would sell 30 per cent of its products in China.
The company would also seek a Chinese partner for its audio products factory in Dongguan so the plant could sell domestically as a joint venture, he said.
''China is a very big potential market,'' said Mr Kuok, pointing to the burgeoning demand for high-quality compact disc players and cassette recorders there.
While Alco sells 90 per cent of its products under private labels or for original equipment manufacturing (OEM) customers, it plans to promote its own brand-name, Venturer.
''We will first launch the Venturer programme in Europe,'' said Mr Kuok, adding that it would also sell directly to large retailers - such as K mart in the US - to achieve higher profits.
Mr Kuok said Alco's switch to high-end products had contributed significantly to earnings and sales growth. For the six months ended last September, its turnover was doubled and after-tax profit was more than tripled from a year ago.
He expected the latest push into CD-ROM drive manufacturing to provide the biggest potential for earnings growth, as the new product captured higher profit margins in a largely untapped market.
Alco would also start making telephones and video cassette recorders in a new manufacturing facility in Shun Shan, Mr Kuok said.
He said the planned investment was about $40 million, with the facility being in operation by year's end.
Mr Kuok said Alco was now sitting on surplus cash after an issue of convertible notes worth $120 million to the US-based investment fund, Blackstone Offshore Capital, in September.
It also raised $7.8 million in a placement to the Japanese-based electronics giant Aiwa Co in July.