Fletcher unveils new China Formica plan

Mark Adamson, Formica Group president and chief executive. Photo / Richard Robinson

Formica, Fletcher Building's laminates business, is expanding in China and will build a new factory of about 5ha as part of its $200 million push into Asia.

In the United States-headquartered company's most ambitious expansion plan this decade, Mark Adamson, Formica president and chief executive, said yesterday a new laminates plant would be built in Jiujiang, a city of about 4.8 million people in the Jiangxi province.

Fletcher shares closed up 18c, or 2.4 per cent, yesterday at $7.57.

The plant would be one of the largest in the Formica group and double the company's capacity in China, Adamson said.

Formica has been in China for more than 20 years, and around four to five years ago it undertook the construction and commissioning of a new plant in Qing Pu, on the outskirts of Shanghai.

Fletcher chief executive Jonathan Ling this year announced a $200 million expansion plan for Formica Asia, pushing further into China and Malaysia. Adamson said yesterday China offered huge opportunities.

"The commercial construction boom, coupled with the massive construction of government-subsidised housing projects, has accelerated the demand for laminate. The Chinese market - already twice the size of the United States market - continues to grow by 15 per cent a year," he said.

The Jiujiang plant will be finished by 2013 and will manufacture high-pressure laminate to support the demand in China and other select Asian markets. The 50,000sq m factory, equivalent to 5ha of indoor floor space, is planned to allow for future growth and will employ about 400 people.

Ling indicated this year that he expected big results from Formica because its products are 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.

Although 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," Ling said.

Philip King, Fletcher investor relations manager, said demand for Formica high-pressure laminate meant the plant at Qing Pu was nearing full capacity.

Fletcher's Formica purchase has not always been popular and analysts once called it a debilitating acquisition.