UK floor covering specialist Low & Bonar in 200 million yuan Jiangsu expansion
Low & Bonar, the British maker of high-performance materials used in flooring and the building industry, is doubling production at its facility in Changzhou, Jiangsu province, buoyed by strong demand from Chinese customers.
Chief executive Brett Simpson also told the South China Morning Post that the extra production line at the plant, about 160 kilometres northwest of Shanghai, would be operational by 2018 to reinforce its expansion.
“China’s is a growing and very important part of our global strategy,” Simpson said. “In the areas where we are investing, we see solid underlying trends.”
The company, which has its roots in Dundee in Scotland, started building the wholly owned factory in Changzhou in 2015 and launched operations there last year.
Currently, 60 million square metres of its “Colback” product, a widely used non-woven material used in the backing of carpet tiles, wall-to-wall carpeting, mats and moulded car carpets, can be produced in the factory each year. Expanding the facility will cost about 200 million yuan (US$29 million).
Low & Bonar’s products are also used in roofing, air and water filtration, road and rail construction and decorative products.
Its Chinese sales are worth about €40 million (US$42.5 million) annually and represent nearly a 10th of its global business.
Simpson now predicts the firm’s expansion lies in Asia, and mainly China, and that the region will account for a third of its total sales worldwide, on par with its operations in Europe and the United States.
He said business growth in China was largely beating its average rate worldwide.
The Colback product can be used in residential and commercial properties, but its focus here is on the latter.
The Changzhou factory was the company’s first production site outside Europe and the US.
“We tend to make products close to their markets,” Simpson said. “We can transfer our best technologies into China, build here and develop our local team.”
China’s urbanisation drive, the rising affluence of its middle classes and efforts to upgrade its industrial mix are increasingly ushering in demand for higher-quality materials.
There have been mounting worries, however, over its industrial outlook, which is saddled with industrial overcapacity, lofty debt levels and increasing capital outflow, although Simpson is remarkably upbeat about his firm’s prospects in the country.
He said it was wrong to use the example of areas that were slowing to allude to an overall weak economy.
The mainland’s local governments have been striving to digest redundant office buildings and residential properties in low-tier cities following a round of reckless construction spree over the past decade.
According to global property service firm JLL, office buildings are now falling in price amid a new wave of supply while competition for the best site is escalating.
But Joe Zhou, JLL’s head of research in China, said proper urban planning and synergies created between different cities could help ease the pain being suffered by some in the country’s real estate industry.
“Good coordination among local governments is needed,” he said. “Some industries would be better advised to move out from major metropolises to neighbouring smaller cities.”
The headline has been amended to say the expansion costs 200 million yuan, not US$200 million