The speculative-grade corporate bond market has made a sharp turnaround from earlier in the year, said an article published today by Standard & Poor's, titled "U.S. Speculative-Grade Spreads Sector Index Review: Prices Might Be Ahead Of Fundamentals (Premium)."
"The spread on Standard & Poor's speculative-grade bond index has tightened 947 basis points this year to 700 basis points as of Nov. 12, and high-yield bond returns have eclipsed 50%," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
Credit quality has begun to stabilize, albeit at a very weak level. Downgrades have slowed considerably, falling to 106 in the third quarter of 2009 from 241 in the first quarter and 210 in the second quarter.
"Credit metrics, such as debt to EBITDA and interest coverage, are likely at or near the cyclical bottom. However, rapid improvement would take a surge in top-line growth, which we believe is unlikely to happen this year," said Ms. Vazza. "We expect fundamentals to remain weak for speculative-grade-rated companies in 2010."
Sectors with high leverage and low interest coverage levels such as forest products and building materials, automotive, capital goods, and media and entertainment have the highest risk premiums.
Spreads have tightened across all sectors, with some sectors, such as automotive, experiencing significant tightening, more so a result of the removal of defaulted issues from the pool rather than an increase in bond prices in the sector.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect on the Global Credit Portal at www.globalcreditportal.com and to RatingsDirect at www.ratingsdirect.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Thursday, November 19, 2009
Sunday, November 8, 2009
Steel product makers fear Afta influx
Steel and stainless steel product manufacturers have called for measures to protect local businesses, at risk from the elimination of import tariffs under the Asean Free Trade Agreement (Afta)in January.
Once the import tariff is removed,cheaper steel and stainless steel products, mostly from China, are expected to flood into the local market.
Ekachai Youngvanich, vice-chairman of the executive committee of Satien Stainless Steel Plc and a member of the Federation of Thai Industries' steel club,said several steel and stainless steel companies had discussed the potential impact and how to tackle the problem.
"The government should help us and protect the local industry. We're worried that independent importers will bring in low-quality kitchenware products to Thailand. The market will get more intense and consumers will not be safe using these products," he said.
Satien Steel Kitchenware, the maker of Zebra kitchen products, aims to avoid tough competition by shifting to focus on premium products.
But governments in many Southeast Asian countries have already implemented measures to protect their manufacturers, which makes it harder for Thai companies to export to these markets.
For example, Malaysia has already set up the Malaysian Industrial Standards Institute to test imported Thai stainless-steel tubes.
"We think our company will get a positive effect when exporting products to Asean. The non-trade barrier will make our price go down, so we can sell 5% to 10% more products," said Mr Ekachai.
Purchasing power for stainless kitchenware products has improved both locally and overseas at the moment, he said. The company has had more export orders from the United States, Europe and Australia.
The company will therefore open its new 200-million-baht production facility at its Rayong factory by the middle of next year. This will raise production capacity by 10-15% from the current 6,000 tonnes per year, and should enable the company to meet demand over the next five years.
About 70% of production will serve the domestic market and the rest exports.
Sales of Satien Stainless Steel last year were at 1.2 billion baht. They are expected to increase by 5-7% this year,less than last year's double-digit growth due to the downturn and the H1N1 flu outbreak. Demand for stainless-steel kitchenware from hotels and restaurants has also fallen in line with the slump in tourism.
Mr Ekachai said demand for Satien's kitchenware will increase by 7-10% next year because of the rebound. The company aims to achieve annual sales of 1.5 billion baht within the next five years.
Once the import tariff is removed,cheaper steel and stainless steel products, mostly from China, are expected to flood into the local market.
Ekachai Youngvanich, vice-chairman of the executive committee of Satien Stainless Steel Plc and a member of the Federation of Thai Industries' steel club,said several steel and stainless steel companies had discussed the potential impact and how to tackle the problem.
"The government should help us and protect the local industry. We're worried that independent importers will bring in low-quality kitchenware products to Thailand. The market will get more intense and consumers will not be safe using these products," he said.
Satien Steel Kitchenware, the maker of Zebra kitchen products, aims to avoid tough competition by shifting to focus on premium products.
But governments in many Southeast Asian countries have already implemented measures to protect their manufacturers, which makes it harder for Thai companies to export to these markets.
For example, Malaysia has already set up the Malaysian Industrial Standards Institute to test imported Thai stainless-steel tubes.
"We think our company will get a positive effect when exporting products to Asean. The non-trade barrier will make our price go down, so we can sell 5% to 10% more products," said Mr Ekachai.
Purchasing power for stainless kitchenware products has improved both locally and overseas at the moment, he said. The company has had more export orders from the United States, Europe and Australia.
The company will therefore open its new 200-million-baht production facility at its Rayong factory by the middle of next year. This will raise production capacity by 10-15% from the current 6,000 tonnes per year, and should enable the company to meet demand over the next five years.
About 70% of production will serve the domestic market and the rest exports.
Sales of Satien Stainless Steel last year were at 1.2 billion baht. They are expected to increase by 5-7% this year,less than last year's double-digit growth due to the downturn and the H1N1 flu outbreak. Demand for stainless-steel kitchenware from hotels and restaurants has also fallen in line with the slump in tourism.
Mr Ekachai said demand for Satien's kitchenware will increase by 7-10% next year because of the rebound. The company aims to achieve annual sales of 1.5 billion baht within the next five years.
Wednesday, November 4, 2009
SCG PAPER TURNS TO ALTERNATIVE PULP MATERIALS
SCG Paper is resorting to other materials for paper pulp-making, to ease the expected increase in global waste paper prices due to higher demand from China.
President Chaovalit Ekabut said that the other materials for pulp-making, would offer the same quality as waste paper. Importantly, the production cost should be lower than when using waste paper to be imported from the United States.
The paper unit of the Siam Cement Group expects the global demand for waste paper next year to increase due to the business resumption of paper manufacturers in China.
Chaovalit said several Chinese paper manufacturers have resumed their operations after suspensions during the economic crisis. Those companies will have to order waste paper from the US, which is the largest supplier.
The move of Chinese paper-makers might affect other paper manufacturers including SCG Paper because the company is one of those that purchases scrap paper from the US to be made into new paper products.
Chinese paper manufacturers are expected to order a lot of scrap paper. They are expected to produce 2 million tonnes next year.
Chavalit said the company has to reduce risk from the expected shortage of scrap paper by considering using another material that is not made from scrap paper, such as weeds.
Other material prices should be lower than scrap paper, he said.
He said that the resumption of Chinese paper manufacturing has driven scrap paper prices up from the current level of between US$160 (Bt5,350) and $170 per tonne.
However, the scrap paper price is not expected to increase to $250 like in 2008, because of the low paper consumption of the US. The low consumption in the US is in line with the country's economic crisis. The consumption of paper this year dropped by 30 per cent.
In addition, the company believes the economic situation has bottomed out because sales revenue and net profit in the third quarter improved from the second quarter, he said.
SCG paper earned sales revenue of Bt11.23 billion, up 6 per cent from the second quarter while net |profit increased by 10 per cent to Bt701 million from the last quarter and increased 13 per cent year on year.
Chavalit noted that the pick up of sales revenue in the third quarter might help the total sales revenue this year meet flat growth or drop a little from last year's Bt47 billion. The company earlier predicted a plunge in sales in 2009 due to the crisis.
He said that the company outlook next year should be brighter because it will realise full revenue from a new paper craft plant in Vietnam. The company expected the plant in Vietnam would contribute Bt2.5 billion in sales revenue next year.
Chavalit added that besides the new plant in Vietnam, the company is ready for new investment. One of SCG Paper's investments is the merger and acquisition of paper plants in Thailand and overseas.
He could not reveal the investment budget for M&A, but said the M&As should be seen soon.
President Chaovalit Ekabut said that the other materials for pulp-making, would offer the same quality as waste paper. Importantly, the production cost should be lower than when using waste paper to be imported from the United States.
The paper unit of the Siam Cement Group expects the global demand for waste paper next year to increase due to the business resumption of paper manufacturers in China.
Chaovalit said several Chinese paper manufacturers have resumed their operations after suspensions during the economic crisis. Those companies will have to order waste paper from the US, which is the largest supplier.
The move of Chinese paper-makers might affect other paper manufacturers including SCG Paper because the company is one of those that purchases scrap paper from the US to be made into new paper products.
Chinese paper manufacturers are expected to order a lot of scrap paper. They are expected to produce 2 million tonnes next year.
Chavalit said the company has to reduce risk from the expected shortage of scrap paper by considering using another material that is not made from scrap paper, such as weeds.
Other material prices should be lower than scrap paper, he said.
He said that the resumption of Chinese paper manufacturing has driven scrap paper prices up from the current level of between US$160 (Bt5,350) and $170 per tonne.
However, the scrap paper price is not expected to increase to $250 like in 2008, because of the low paper consumption of the US. The low consumption in the US is in line with the country's economic crisis. The consumption of paper this year dropped by 30 per cent.
In addition, the company believes the economic situation has bottomed out because sales revenue and net profit in the third quarter improved from the second quarter, he said.
SCG paper earned sales revenue of Bt11.23 billion, up 6 per cent from the second quarter while net |profit increased by 10 per cent to Bt701 million from the last quarter and increased 13 per cent year on year.
Chavalit noted that the pick up of sales revenue in the third quarter might help the total sales revenue this year meet flat growth or drop a little from last year's Bt47 billion. The company earlier predicted a plunge in sales in 2009 due to the crisis.
He said that the company outlook next year should be brighter because it will realise full revenue from a new paper craft plant in Vietnam. The company expected the plant in Vietnam would contribute Bt2.5 billion in sales revenue next year.
Chavalit added that besides the new plant in Vietnam, the company is ready for new investment. One of SCG Paper's investments is the merger and acquisition of paper plants in Thailand and overseas.
He could not reveal the investment budget for M&A, but said the M&As should be seen soon.
Wednesday, October 28, 2009
MAKERS OF BUILDING MATERIALS "BIGGEST GAINERS"
The building material, steel, downstream petrochemicals, auto parts and discountstore sectors will benfit from the government's second economic stimulus package, according to a research paper by SCB Securities.
Firms making building materials are expected to reap the biggest gains from the Thai Khemkhaeng (Invest for Strength) scheme phase I, worth Bt200 billion.
About Bt59 billion of the Bt200billion package will be used to develop small reservoirs and repair irrigation systems, and PVC manufacturers such as Thai Plastic and Chemicals and Vinythai will enjoy the benefits.
The brokerage said another Bt35 billion would be allocated for building and repairing roads, boosting asphalt demand and benefiting Tipco Asphalt.
Tata Steel (Thailand) and G Steel will also be beneficiaries from the stimulus package, as steel bar and wire will be major raw materials in construction works related to irrigation systems, hospitals and electric trains, SCB Securities said.
However, the brokerage is nor sure whether Sahaviriya Steel will also gain, as PVCpipe prices and maintenance costs are lower than those for steel pipelines.
Cement-makers Siam Cement, Siam City Cement and TPI Polene are other expected gainers in the buildingmaterials sector.
The brokerage estimates that the 10-12 electricrail routes will need 9 million10 million tonnes of cement.
"It is too early to calculate cement demand for all the routes, but the Purple, Red and Blue lines alone will create 2.53 million tonnes of cement consumption over their fouryear construction periods," the paper said.
For the consumption sector, Big C Supercentre and Siam Makro will be winners from the Thai Khemkhaeng programme, as about Bt20 billion will be allocated to village funds.
From the previous village funds' budget in fiscal years 20042005, Big C and Makro reported sales growth in existing branches at 3 per cent and 6 per cent, respectively. This is well above Big C's current performance of minus 2.5 per cent to positive growth of 3 per cent, and Makro's growth of 13 per cent.
Makro tends to receive greater benefits from such schemes than Big C as its products are more related to economic activities.
This said, SCB Securities recommends "buy" on Big C with a 12month target price of Bt55 based on the dividend discount model, and "sell" on Makro with a 12month target of Bt67.
However, as both firms will benefit from the government's economic stimulus measures, the brokerage will soon review its assumptions.
Given that the package will bolster economic activities in rural areas, the demand for pickups and tractors will increase, making Somboon Advanced Technology a winner.
The company is Thailand's largest axle-shaft manufacturer for pickups with a market share of 80 per cent. Moreover, it supplies shafts to Siam Kubota, the country's largest tractor producer.
The brokerage recommends "buy" for the stock, with a 12month target price of Bt13.
The government's plan to lower the ratio of students to computers from 38:1 to 20:1 will create demand for 200,000 PCs. IT City, the computer peripherals and equipment distributor, will therefore stand to gain.
For the consumption sector, Big C Supercentre and Siam Makro will be winners from the Thai Khemkhaeng programme, as about Bt20 billion will be allocated to village funds.
Firms making building materials are expected to reap the biggest gains from the Thai Khemkhaeng (Invest for Strength) scheme phase I, worth Bt200 billion.
About Bt59 billion of the Bt200billion package will be used to develop small reservoirs and repair irrigation systems, and PVC manufacturers such as Thai Plastic and Chemicals and Vinythai will enjoy the benefits.
The brokerage said another Bt35 billion would be allocated for building and repairing roads, boosting asphalt demand and benefiting Tipco Asphalt.
Tata Steel (Thailand) and G Steel will also be beneficiaries from the stimulus package, as steel bar and wire will be major raw materials in construction works related to irrigation systems, hospitals and electric trains, SCB Securities said.
However, the brokerage is nor sure whether Sahaviriya Steel will also gain, as PVCpipe prices and maintenance costs are lower than those for steel pipelines.
Cement-makers Siam Cement, Siam City Cement and TPI Polene are other expected gainers in the buildingmaterials sector.
The brokerage estimates that the 10-12 electricrail routes will need 9 million10 million tonnes of cement.
"It is too early to calculate cement demand for all the routes, but the Purple, Red and Blue lines alone will create 2.53 million tonnes of cement consumption over their fouryear construction periods," the paper said.
For the consumption sector, Big C Supercentre and Siam Makro will be winners from the Thai Khemkhaeng programme, as about Bt20 billion will be allocated to village funds.
From the previous village funds' budget in fiscal years 20042005, Big C and Makro reported sales growth in existing branches at 3 per cent and 6 per cent, respectively. This is well above Big C's current performance of minus 2.5 per cent to positive growth of 3 per cent, and Makro's growth of 13 per cent.
Makro tends to receive greater benefits from such schemes than Big C as its products are more related to economic activities.
This said, SCB Securities recommends "buy" on Big C with a 12month target price of Bt55 based on the dividend discount model, and "sell" on Makro with a 12month target of Bt67.
However, as both firms will benefit from the government's economic stimulus measures, the brokerage will soon review its assumptions.
Given that the package will bolster economic activities in rural areas, the demand for pickups and tractors will increase, making Somboon Advanced Technology a winner.
The company is Thailand's largest axle-shaft manufacturer for pickups with a market share of 80 per cent. Moreover, it supplies shafts to Siam Kubota, the country's largest tractor producer.
The brokerage recommends "buy" for the stock, with a 12month target price of Bt13.
The government's plan to lower the ratio of students to computers from 38:1 to 20:1 will create demand for 200,000 PCs. IT City, the computer peripherals and equipment distributor, will therefore stand to gain.
For the consumption sector, Big C Supercentre and Siam Makro will be winners from the Thai Khemkhaeng programme, as about Bt20 billion will be allocated to village funds.
Thainox share sale rumoured to Posco
Thainox Stainless Plc, Southeast Asia's largest stainless steel producer, said yesterday that its top shareholder was in sale talks, stoking speculation of a possible $370-million sale to the world's sixth-largest steelmaker.
Thainox did not identify a possible buyer, but a source at the South Korean steelmaker Posco told Reuters on Wednesday that talks to buy a further stake in Thainox were in the final stages.
The Mahagitsiri Group, which owns 51.7% of Thainox and represents one of Thailand's richest families, was in talks for a possible sale of shares to an undisclosed party but was undecided, a stock exchange statement said.
Prayudh Mahagitsiri, the company's chairman and chief executive, and a key power-broker in the government led by deposed former prime minister Thaksin Shinawatra, declined to comment on the reports.
The news sent Thainox shares (INOX)up 11.5% to a four-year high of 1.65 baht in the morning session on the Stock Exchange of Thailand. The shares closed yesterday at 1.50 baht, up two satang, in trade worth 86.4 million baht. The stock has risen nearly 69% this year on speculation about a possible sale.
"We were informed that they are in the process of negotiation on the terms and conditions of the share sale transaction, and until now they have reached no conclusion," it said in the statement to the SET.
Posco had no official comment yesterday regarding the possible acquisition of Thainox Stainless Plc.
But an industry source close to the matter said:"If share prices are rising [as in the current situation], it will be hard for Posco to acquire Thainox."
Posco currently owns 15% of Thainox.Analysts say the South Korean steelmaker is seeking to acquire the Thai company to expand its cold-rolled coil capacity and overseas presence.
But any acquisition that raises Posco's stake to 25% or more would require it to offer to buy the remaining shares, according to Thai market regulations.
Earlier this week, Korean media quoted unidentified industry sources as saying Posco would buy 85% of Thainox for between 400-500 billion won ($342 million to $427.5 million). But the company source said that the rumoured acquisition prices were not correct.
Thainox did not identify a possible buyer, but a source at the South Korean steelmaker Posco told Reuters on Wednesday that talks to buy a further stake in Thainox were in the final stages.
The Mahagitsiri Group, which owns 51.7% of Thainox and represents one of Thailand's richest families, was in talks for a possible sale of shares to an undisclosed party but was undecided, a stock exchange statement said.
Prayudh Mahagitsiri, the company's chairman and chief executive, and a key power-broker in the government led by deposed former prime minister Thaksin Shinawatra, declined to comment on the reports.
The news sent Thainox shares (INOX)up 11.5% to a four-year high of 1.65 baht in the morning session on the Stock Exchange of Thailand. The shares closed yesterday at 1.50 baht, up two satang, in trade worth 86.4 million baht. The stock has risen nearly 69% this year on speculation about a possible sale.
"We were informed that they are in the process of negotiation on the terms and conditions of the share sale transaction, and until now they have reached no conclusion," it said in the statement to the SET.
Posco had no official comment yesterday regarding the possible acquisition of Thainox Stainless Plc.
But an industry source close to the matter said:"If share prices are rising [as in the current situation], it will be hard for Posco to acquire Thainox."
Posco currently owns 15% of Thainox.Analysts say the South Korean steelmaker is seeking to acquire the Thai company to expand its cold-rolled coil capacity and overseas presence.
But any acquisition that raises Posco's stake to 25% or more would require it to offer to buy the remaining shares, according to Thai market regulations.
Earlier this week, Korean media quoted unidentified industry sources as saying Posco would buy 85% of Thainox for between 400-500 billion won ($342 million to $427.5 million). But the company source said that the rumoured acquisition prices were not correct.
SIAM MORTAR TO SPEND UP TO BT700M ON CAPACITY BOOST
Siam Mortar, a construction-materials unit of Siam Cement Group, is planning to invest Bt600 million to Bt700 million to boost its annual production capacity of ready-to-use mortar by 500,000 tonnes by 2011.
The expansion is expected to serve its future growth of 20-25 per cent per year, despite shrinking demand in the overall cement market.
Managing director Rewat Suriyapananont said Siam Mortar currently operated at 80 per cent of production capacity of 1.3 million tonnes per year. It has three production plants, of which two are
located in Saraburi and the other in Nakhon Si Thammarat.
"We need to expand our production capacity and conduct aggressive marketing strategies if we plan to double our sales in five years," he said.
The new plant could be located in the central region, where demand is high, he added.
Although overall cement consumption is expected to fall by 5 per cent this year, Rewat is confident his firm's mortar sales will maintain growth of 10-15 per cent to 1 million tonnes thanks to high-quality products and innovative solutions for customers.
"Even though our sales growth is increasing, the growth in 2009 will still be lower than the [average] 20-25 per cent over the past five to six years, as a result of the economic slowdown. However, we believe that our sales growth will rise to 20 per cent next year, since property developers have returned to proceeding with their incomplete projects in big cities like Phuket," he said.
About 80 per cent of Siam Mortar's sales are from big property projects, with the remainder generated by private houses and the house-renovation market.
"Since the economic crisis erupted, we realised we should focus more on the private housing market. Despite a small volume of cement demand, it has more sustainable growth than large property projects," he said.
Hence, the company plans to change the sales proportion to generate 40 per cent of sales from property projects and 60 per cent from private housing and the renovation market.
He said the future trend of the cement market would be to develop eco-friendly products that would be good for both the environment and inhabitants' health.
"SCG Cement has allocated a budget of Bt200 million for research and development each year, because we will change ourselves from a cement-maker to a solution provider. For example, we will not only sell cement but also wall and floor systems in the future, in order to better utilise customers' budget and time," he added.
Presently, the total market for mortar cement is worth about Bt2 billion, with a volume of 2 million tonnes per year. It is predicted to expand by 10 per cent this year.
Siam Mortar has a 50-per-cent share of the market, followed by TPI Polene with 40 per cent and Siam City Cement with 10 per cent.
The expansion is expected to serve its future growth of 20-25 per cent per year, despite shrinking demand in the overall cement market.
Managing director Rewat Suriyapananont said Siam Mortar currently operated at 80 per cent of production capacity of 1.3 million tonnes per year. It has three production plants, of which two are
located in Saraburi and the other in Nakhon Si Thammarat.
"We need to expand our production capacity and conduct aggressive marketing strategies if we plan to double our sales in five years," he said.
The new plant could be located in the central region, where demand is high, he added.
Although overall cement consumption is expected to fall by 5 per cent this year, Rewat is confident his firm's mortar sales will maintain growth of 10-15 per cent to 1 million tonnes thanks to high-quality products and innovative solutions for customers.
"Even though our sales growth is increasing, the growth in 2009 will still be lower than the [average] 20-25 per cent over the past five to six years, as a result of the economic slowdown. However, we believe that our sales growth will rise to 20 per cent next year, since property developers have returned to proceeding with their incomplete projects in big cities like Phuket," he said.
About 80 per cent of Siam Mortar's sales are from big property projects, with the remainder generated by private houses and the house-renovation market.
"Since the economic crisis erupted, we realised we should focus more on the private housing market. Despite a small volume of cement demand, it has more sustainable growth than large property projects," he said.
Hence, the company plans to change the sales proportion to generate 40 per cent of sales from property projects and 60 per cent from private housing and the renovation market.
He said the future trend of the cement market would be to develop eco-friendly products that would be good for both the environment and inhabitants' health.
"SCG Cement has allocated a budget of Bt200 million for research and development each year, because we will change ourselves from a cement-maker to a solution provider. For example, we will not only sell cement but also wall and floor systems in the future, in order to better utilise customers' budget and time," he added.
Presently, the total market for mortar cement is worth about Bt2 billion, with a volume of 2 million tonnes per year. It is predicted to expand by 10 per cent this year.
Siam Mortar has a 50-per-cent share of the market, followed by TPI Polene with 40 per cent and Siam City Cement with 10 per cent.
Tuesday, October 20, 2009
Aussie firm shifts to Phuket
Australia-based swimming pool producer Autumn Solar Pty Ltd will shift its manufacturing base to Phuket to benefit from the Asean Free Trade Area.
The relocation involves a joint-venture with a local pool producer and investment of 50 million baht.
Managing director Steve Merrett said the move from Ulladulla, a coastal town in New South Wales, Australia, to Phuket would help reduce manufacturing costs by 15% to 20% due to lower wages,cheaper raw materials and savings in transportation costs.
The relocation would start this month by moving salt chlorination system production. Full production would be completed within two years when it will close its factory in Australia, he said.
The firm also plans to close a plastics factory in China which will shift to the new centre in Phuket, he said.
"It's an opportunity to have Thailand as our manufacturing base," he said."We can import materials from Australia with zero tax and export the products to China, our main market, and the rest of the world without tax as well."
The firm currently exports 90% of the equipment made at the Ulladulla plant to China, Thailand, Vietnam, Europe and the US. Autumn Solar had a turnover of US$55 million last year, he said.
The company yesterday announced a joint venture with JD Pools 2004(Thailand) which will establish a firm with registered capital of 50 million baht.
Thanusak Phungdet, chief executive of JD Pools, said the firm's factory in Phuket would double to 10,000 square metres with Autumn Solar's relocation.
The company plans to increase its exports from 20% of production to 50%in three years. It targets annual sales of 1 billion baht with the joint venture.
The Thai pool market this year is estimated at about 2 billion baht, up 10%to 15% on last year. JD Pools expects sales of 600 million baht this year, up 12% on 2008 but below its 15% target.
The relocation involves a joint-venture with a local pool producer and investment of 50 million baht.
Managing director Steve Merrett said the move from Ulladulla, a coastal town in New South Wales, Australia, to Phuket would help reduce manufacturing costs by 15% to 20% due to lower wages,cheaper raw materials and savings in transportation costs.
The relocation would start this month by moving salt chlorination system production. Full production would be completed within two years when it will close its factory in Australia, he said.
The firm also plans to close a plastics factory in China which will shift to the new centre in Phuket, he said.
"It's an opportunity to have Thailand as our manufacturing base," he said."We can import materials from Australia with zero tax and export the products to China, our main market, and the rest of the world without tax as well."
The firm currently exports 90% of the equipment made at the Ulladulla plant to China, Thailand, Vietnam, Europe and the US. Autumn Solar had a turnover of US$55 million last year, he said.
The company yesterday announced a joint venture with JD Pools 2004(Thailand) which will establish a firm with registered capital of 50 million baht.
Thanusak Phungdet, chief executive of JD Pools, said the firm's factory in Phuket would double to 10,000 square metres with Autumn Solar's relocation.
The company plans to increase its exports from 20% of production to 50%in three years. It targets annual sales of 1 billion baht with the joint venture.
The Thai pool market this year is estimated at about 2 billion baht, up 10%to 15% on last year. JD Pools expects sales of 600 million baht this year, up 12% on 2008 but below its 15% target.
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