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Anne Gibson

Property editor of the NZ Herald

Indian factory first step for Fletcher

Subcontinent demands patience but provides firm with great opportunities, says laminates CEO

The temperature inside the 10,000sqm factory can exceed 40°C.
The temperature inside the 10,000sqm factory can exceed 40°C.

Coping with monsoons, 40°C-plus heat and waiting weeks for internet or telephone connections are challenges of manufacturing in India described by a Fletcher Building boss.

Melbourne-based Paul Zuckerman, chief executive of Fletcher's laminates and panels division, said the purchase of an existing laminates manufacturer in Gujarat for 365 million rupees ($8.2 million) was a clear sign that the business saw opportunities there.

Fletcher Building bought the decorative laminate manufacturing factory from listed Indian manufacturer Well Pack Papers & Containers last year and more plants are planned.

Zuckerman said doing business in India was unlike anywhere else and demanded patience and understanding.

Paul Zuckerman, chief executive of Fletcher's laminates division, plants a mango tree in the grounds of the factory.
Paul Zuckerman, chief executive of Fletcher's laminates division, plants a mango tree in the grounds of the factory.

Fletcher's purchase of the 10,000sqm factory would be the first permanent footprint the Penrose-headquartered business would have on the subcontinent, he said.

Mark Adamson, Fletcher chief executive, told shareholders at the annual meeting last month of travelling to India, which he found ripe for expansion.

Zuckerman said the country also presented difficulties.

"It's a unique place and you do wind up finding that it isn't an easy regulatory system and there's no simple set of business rules. You're dealing with the national and local government as well as potentially the local farmers because our factory abuts their property," Zuckerman said.

"It took us some time to get telephone service, longer than you'd want to wait. Access to different roads, telephone lines and high-speed internet lines we'd take for granted here.

"But they're not common in every part of India yet," he said, citing waits of many weeks.

"The infrastructure is not there. Someone has to run cables or lines to the factory. It is unique. You wouldn't be worrying about any of those things in Auckland."

The Fletcher Building laminates factory at Kalol, Gujarat, is the first permanent footprint for the Penrose-headquartered business on the subcontinent.
The Fletcher Building laminates factory at Kalol, Gujarat, is the first permanent footprint for the Penrose-headquartered business on the subcontinent.

The plant is in Kalol, Gujarat, in India's northwest and sits alongside paddocks with crops and livestock.

"It's not unusual to pull into the small carpark and have monkeys sitting on the fence."

Temperatures got up to over 40C and the factory was not air conditioned, he said, although it was open.

Treated paper had to be stored in cool, dry conditions so a few hundred square metres of the factory was airconditioned.

"You can imagine people think it's a cushy job being there, so we have to rotate them around," Zuckerman said.

Formica is used in manufacturing wall coverings, kitchens, benchtops and office and commercial furniture and the products had been sold in India for more than 40 years but the rise of the middle class meant there was more demand for the products.

"We never owned the source of local production in India. We sent product into India and had someone else at times make product for us under our brand," Zuckerman said.

"But the weakness is you never build the full relationship from start to finish with a customer.

"The market perceives you still to be a temporary player, as you can come and go. Whereas now, our strategy to buy an already running facility was our lowest risk.

"We initially bought that facility with the long-term plan that [we] could have four plants across India. We want to expand significantly in India with Formica, by developing and buying further plants.

"There are currently so many manufacturers in India that we see further acquisition as an option. There are places in India that are growth areas where there are very few plants, in the southeastern side near Hyderabad or Chennai.

"We don't always appreciate how big India is and quite often the infrastructure is not like it is in Western markets so having local manufacturing is a great way to grow," said Zuckerman.

Fletcher is looking to expand on its existing site by installing another press and adding on to the factory. A new press would raise capacity by 50 per cent, Zuckerman said.

Formica could then produce more than seven million square metres of Formica laminate per year. Further shifts would be added and a further 20 people could be employed, Zuckerman said. About 70 people worked in the factory now but 70 more were employed in sales and distribution throughout India.

"We'd look to add that press in the next two to three years and add some future sites by either acquiring or building in a different geographic part of India in the next three to four years," Zuckerman said.

"We've owned the business there for less than 12 months. The people are absolutely fantastic, so we've hired and added to our own capability already so we see the quality of people we find is really just super and their enthusiasm has exceeded our expectations."


Indian plans

• World's largest laminate market
• Fletcher Building bought a plant last year
• That is at Kalol, Gujarat, northern India
• Three more plants could be added soon

- NZ Herald

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