Kingboard boosts factory capacity

It expects expansion to meet demand for laminates, a key component of PCBs

Kingboard Chemical Holdings plans to spend 800 million yuan (HK$749.84 million) this year to expand capacity and invest in raw materials production, as part of efforts to meet rising demand and lower costs.

The world's largest maker of laminates - a key component of printed circuit boards (PCB) found in electronics products - plans to increase its capacity to make paper laminates by 12 per cent to 2.8 million sheets this year and glass epoxy laminates by 21 per cent to 1.7 million sheets.

Kingboard, listed on the main board, commands 30 to 40 per cent of the global paper laminates market and nearly 10 per cent of the glass epoxy laminates sector, chairman Paul Cheung Kwok-wing said.

The company also plans to produce more raw materials on its own to guard against profit erosion, as input prices rise sharply amid lower prices for its finished products.

Kingboard will increase capacity 12 per cent to 1,800 tonnes for copper foil by year-end, bleached kraft paper 100 per cent to 3,600 tonnes, glass yarn 100 per cent to 2,000 tonnes, formalin 25 per cent to 50,000 tonnes and epoxy resin 50 per cent to 3,000 tonnes.

Copper foil, kraft paper, glass fabric and glass yarn are components of PCBs, which are glued together with epoxy resin. Formalin is a raw material of epoxy resin.

The company made a net profit of $186.6 million for the first half to June on a turnover of $1.85 billion. No audited year-on-year comparable figures were available due to a change in its financial year.

Net profit for the six months to September last year was $201 million. Turnover was $1.7 billion.

Mr Cheung said overall turnover climbed about 20 per cent in the first half.

Operating profit margin fell to 14.2 per cent from 15.8 per cent in the previous period.

The company's joint venture with China National Offshore Oil Corp, parent of offshore oil producer CNOOC, has received central government approval to build a 1.47 billion yuan plant on Hainan island capable of making 600,000 tonnes of methanol annually using natural gas as a feedstock. Methanol is a raw material in formalin.

Mr Cheung said Kingboard would use 200,000 to 300,000 tonnes of the output annually. Production was scheduled for late next year or early 2005.

Managing director Patrick Chan Wing-kwan said Kingboard would contribute 200 million yuan to the project while China National would invest 300 million yuan. Debt financing will fund the remainder.

The company recently started producing tetrabromobisphenol-A - a raw material in epoxy resin - with annual capacity of 10,000 tonnes and is building a 120,000 tonne a year methanol plant in Hebei province.