Automotive compounder China XD Plastics Co. Ltd. (Nasdaq: CXDC) has been working on its fourth production base in Nanchong, Sichuan province since 2013.
It broke ground on the 300,000-metric-ton facility in December 2013 and had aimed to complete the construction within two years (22 months to be exact). In other words, the plant would start production in 2015.
But the project did not progress as originally planned.
In August 2014, in an earning call, CFO Taylor Zhang said the company failed to take into consideration the humid climate in Sichuan in its original CapEx planning.
“The condition is pretty humid...that will affect the quality of our raw material and also the finish products,” he said.
The company decided to address the issue by building additional steel cylinder storage. But that required additional $80 million on top of the $190 million XD had earmarked for the year. Zhang also said for 2015 it planned to spend $120 million on the project.
Zhang also blamed the local government handing over the land later than scheduled as well as poor land quality. Nevertheless, the company told investors the Sichuan project will become operational in early 2016.
In November, Chairman and CEO Han Jie reiterated the target of early 2016.
It looks like the local government decided to give the project a nudge.
According to local reports from government-run news outlet newssc.org, local official visited XD's headquarters in the first week of the year, restating its willingness to create a business friendly environment and boost investors' confidence.
On Jan. 23, Han Jie and team met with the local government officials again, this time in Nanchong.
Han said he's confident in Nanchong's growth and would accelerate the project.
The total planned investment is 2.7 billion yuan ($435 million) including 72 production lines. XD has already paid 1.13 billion yuan ($180.7 million) for production equipment, and the plant is expected to reach “trial production condition” by December, the report said.