Pou Chen Budgets US$300 M. for Capital Expenditure in 2014

To optimize production capacity overseas, Taiwan-based Pou Chen Group, a major contract manufacturer of athletic and casual footwear, has a budget of US$300 million for capital expenditure this year.

Patty Tsai, the group's CEO, pointed out that the group's capital expenditure this year notably surges from nearly US$180 million last year; and R&D spending will be maintained at about 3% of overall turnover. In 2013, the group's consolidated revenue totaled NT$226.665 billion (US$7.55 billion).

Construction of factories in Indonesia and Burma consume the major part of the budget. The one in Burma has been under construction since May, at a cost of US$30-50 million, and is scheduled to become operational in the third quarter of 2015 with initial monthly output of 300,000 pairs of various shoes. In the short term, the plant's overall monthly output will be expanded to 1 million pairs.

Pou Chen will pour US$40-50 million into setting up another factory as the fourth in Indonesia soon, which is scheduled to start mass production in the first quarter of next year with monthly capacity of 300,000 pairs as well.

Southeast Asia is the bread basket for Pou Chen, given that the group's capacity in China, Vietnam and Indonesia accounts for 34%, 34% and 31%, respectively of the total at present. In the future, Tsai noted, the group will raise the share in Vietnam and Indonesia to 70% overall  and lower that in China to 25-29%, to optimize its capacity.

One main reason among others the group intends to cut dependence in China is the strike by local workers at a factory owned by the subsidiary, Yue Yuen Industrial Holding, in Dongguan, southeastern China, that was sparked mainly by welfare payment and lasted 12 days in April to involve more than 30,000  workers as the country's largest labor strike in the past two decades, estimated to have cost the firm US$80-90 million. With a 49.98% stake owned by Pou Chen Group, Yue Yuen raked in US$7.582 billion in 2013. (SC)