Big future in Asia for Formica

Jonathon Ling. Photo / Glenn Jeffrey

One big New Zealand-owned company clipping the ticket on China's rapid expansion is Formica Group, the global iconic surface goods business headquartered in the United States.

Formica Asia is 100 per cent owned by Penrose-headquartered Fletcher Building, with a large New Zealand and Australian shareholder base.

Formica has been in China for more than 20 years, and around four to five years ago undertook the construction and commissioning of a new plant in Qing Pu, on the outskirts of Shanghai. Now, Fletcher chief executive Jonathan Ling has a $200 million expansion plan for Formica Asia, pushing further into China and Malaysia.

At the time of completion of the Shanghai plant, it was a modern low-cost facility.

But Philip King, Fletcher's investor relations manager, said that during the past four years its capacity had been increased by 30 per cent with the installation of a fourth laminate press and it was now close to full capacity.

"The plant was initiated around the time Fletcher Building acquired Formica in 2007," he said.

Formica occupied the number one position at the top of the high pressure laminates market in China, he said.

Ling said its products were used in China's rapidly expanding commercial sectors for fast food, hospital and hotel expansion, but increasingly Formica was being used in residential situations as well. He cited Starbucks and McDonald's as some of the food chains where Formica was used in Asia.

King said the commercial sector was still the most important buyer in China.

"While many people in the West think of Formica as a product used in kitchens and bathrooms, the reality is it is used more in commercial settings than in the home.

"This is particularly the case in Asia where most of Formica's revenues come from the commercial sector. Formica is used extensively in places like KFC and Starbucks stores.

"Other uses in China include office buildings, retail shop fit-outs, transport including trains and ships, hotels and hospitality, and the healthcare sector."

He said though competition in China was intense, Formica's global brand strength and position as a premium product manufacturer had seen it grow its presence in the market, especially as many local businesses valued the service, design and quality of well-recognised Western brands such as Formica.

"Unlike many international businesses that have established operations in China, virtually all of the Formica high pressure laminate manufactured in China is sold within China itself.

"Only small amounts of product are exported from China, mainly to Australia and New Zealand and parts of southeast Asia."

King said growth in demand for Formica high pressure laminate meant the plant at Qing Pu was nearing full capacity. A second plant which would double capacity was under consideration on an alternate site.

This would probably be in south or southeastern China where growth was strong and Formica had the opportunity to significantly expand its presence. "Formica's business in China is managed and run and by local employees, which is the Fletcher Building business model for all the countries we operate in." .