Eva invests $125 million in Mexico, China

Chinese plastics and metals processor Eva Precision Holdings Ltd. is plunging ahead with investments of more than $125 million in Mexico and China to expand work for global customers in the office equipment and automotive industries.

The company is spending $100 million on a new factory in Weihai, Shandong province, to build office equipment for Samsung's printer business, while it is making an investment of more than $25 million on a plant in San Luis Potosí, Mexico, for the auto industry in North America.

In July, the publicly traded Hong Kong-based company inked a memorandum of understanding with the local government in Weihai to purchase a 94-acre parcel in the Weihai Torch High Technology Industrial Development Zone.

Eva anticipates investing about $100 million to build a 753,000-square-foot factory and research and development center for office automation equipment.

Eva is building the facility at the behest of longtime customer Samsung Printing Solutions, which Eva said has seen a leap in demand for its own products after rival HP Inc. bought Samsung's printer business for $55 billion in September 2016. But Eva anticipates sales to other customers, too.

"We believe that the potential sales volume of the group's future Weihai industrial park, when completed, can be strong," Eva spokeswoman Cindy Lung wrote in an email.

The former Samsung Printing Solutions unit is "significantly" enlarging its production facilities in Weihai and has retained the Samsung brand name for those products, she said.

While waiting for the new factory to open in late 2019, Eva will ramp up production for Samsung-branded equipment later this year at rented space in Weihai.

"As office automation equipment products consist of many plastic components [e.g. cartridges, plastic gears and casings of the copiers], a substantial portion of the new Weihai industrial park will be dedicated to plastic manufacturing," Lung wrote.

The investment in Weihai follows shifting demand from the former Samsung unit.

Eva told the Hong Kong stock market that after HP acquired that unit, the former Samsung unit decided to consolidate its manufacturing in Weihai and move it away from existing manufacturing in Suzhou, China.

An Eva plant in Suzhou had been doing that work for Samsung, but Eva said it believes the potential sales for Weihai would be "significantly higher" than Suzhou over the long-term.

Eva is also going big — and global — in the automotive industry.

Already a Tier 1 supplier — its largest auto industry customer is Wuhan, China-based Dongfeng Peugeot-Citroen Automobile Co., Ltd. — Eva is investing HK$200 million to HK$250 million (US$25.6 million to US$32 million) to build a new facility in San Luis Potosí, a hub of Mexico's auto industry.

That facility will initially work for French supplier Faurecia SA, Lung said. It's also near General Motors and BMW plants.

The new facility is on a 20.5-acre parcel. Phase one, with a floor area of approximately 172,000 square feet, is scheduled for completion in late 2018, Lung wrote.

Noting that Mexican-made cars are sold throughout the Americas, Lung wrote that "our investment in Mexico facilitates our entry into international markets."

"The new industrial park in Mexico is constructed under the invitation of Faurecia," Lung wrote.

At first, most of the production in Mexico will be metal parts for seating components for Faurecia, but Eva hopes to expand into plastic parts. Both the Weihai and San Luis Potosí plants will also make molds.

Approximately 42 percent of Eva's first-half 2017 sales of HK$1.52 billion (US$194 million) were related to plastics molding.

The new investments come despite a slight slowdown in Eva's business in the first half of the year.

In a filing to the Hong Kong Stock Exchange, the company blamed the shifts in the Samsung business for sales decreasing 4.2 percent in first half, although it noted that profit margins improved because of cost controls and more use of automation.

Sales in the period were HK$601 million (US$76.9 million) for injection molding and HK$38.9 million (US$4.98 million) for mold making for plastic parts.

The company also said it's ramping up production at a new factory it opened in Vietnam in late 2016, to work for the local manufacturing plants of global office automation equipment companies.