New rule shuts down Srithai plant in China

Srithai Superware has announced the shutdown of its 22-year-old melamine factory in China after the government there announced a regulation forcing factories out of urban areas. 

In addition, the company’s factory in China has been pressured by other negative factors, including increasing labour costs and high incidence of copycat products.

Sanan Angubolkul, chairman and president of Srithai Superware, said the company had decided to close its factory in Beijing after operating there for 22 years, and would turn it into distribution centre. The factory is a joint venture between Srithai, which owns a 40-per-cent stake, and Beijing Huatai Replica of Porcelain Products Co. 

The factory, whose monthly production capacity is 80 tonnes, has served both the domestic Chinese and export markets.

“More than 20 years ago, we set up our first factory outside Thailand in China, as we saw China as having cheap labour and ability to produce high volumes of goods. The situation has been changing, as investing in China will not be able to enjoy high growth any more. The labour cost in China is increasing while the Chinese people favour ceramics rather than melamine,” Sanan said.

He said the company’s branded melamine products had been imitated by Chinese counterfeiters, which had produced melamine wares at low cost and sold at low prices in the same stores as the company’s genuine products.

Sanan said Srithai Superware had set up factories for melamine and packaging products in four major countries – Vietnam, Indonesia, China and India. 

Meanwhile in Thailand, Sanan said, the market is slowing down, affected by the slowdown of the economy and declining purchasing power. The company has decided to diversify its risk by putting more focus on the packaging business, which it has operated for more than four years. Major packaging products are plastic water bottles and covers and food and beverage containers for cinemas, sales of which have enjoyed annual growth of more than 20 per cent.

Srithai Superware targets Bt10 billion in sales this year, of which 74 per cent or Bt7 billion will be from plastic products, 21 per cent from melamine products, and 5 per cent from other sources such as multi-level marketing. About 76 per cent of its sales are domestic. 

According to Bualuang Securities, Srithai’s exit from the 40-percent-owned melamine business in China would boost the Thai company’s margin. Beijing Huatai Replica of Porcelain Products typically posts net losses of about Bt10 million a year. As such, the divestment will mean no more losses to book after the second quarter of 2013, which will boost net margin. 

The securities house raised Srithai’s earnings forecast for the 2013 fiscal year by 6 per cent to Bt620 million. The 2014 forecast was also raised by 5 per cent to Bt700 million.