Hong Kong-listed plastics and metal components maker Eva Precision Industrial Holdings Ltd. is investing more than $60 million in factories in China's Shandong province, as it continues a global push.
The company is expanding there and at its injection molding factory in Vietnam in part to supply office equipment manufacturers like Samsung and HP.
In January, Eva told the Hong Kong Stock Exchange it paid 141.5 million yuan ($22.5 million) for a 50-year lease on three plots of land in Weihai, Shandong province, totaling about 3.75 million square feet.
Shenzhen-based Eva said it "plans to develop the lands into an industrial park for the manufacture of office automation products to serve Samsung Printing Solutions and other potential customers."
The first phase of that factory, with a floor area of 850,000 square feet, is scheduled to start production in the second half of 2019.
To meet existing demand from office equipment companies, Eva said it had earlier rented a nearby plant and installed 38 injection molding machines. The company will transfer those machines to the new plant and install 22 more, for a total of 60, according to Chief Financial Officer Francis Wong.
The new plant will include mold making, metal stamping, injection molding and assembly operations. Eva is investing an additional HK$280 million (US$35.7 million) to build and equip the facility, Wong said.
As part of the ramp-up in Shandong, Eva also in December paid HK$52.7 million (US$6.7 million) to purchase component manufacturer Intops (Weihai) Electronics Co. Ltd. from its parent company, South Korea's Intops Co. Ltd., to serve office equipment makers, according to a filing at the Hong Kong exchange.
The Shandong investments come in part because of a shake-up in Eva's customer base. In September 2016, HP Inc. bought Samsung Printing Solutions and started moving Samsung's production from Suzhou to Shandong.
"As the production demand from [HP Printing] increased significantly in 2018, HP Printing would like us to start production for them right now," Wong said. "Accordingly, we acquired Intops Weihai in December 2017 so that we can have production capacity to start serving [HP] in 2018."
The shifts in manufacturing in its customer base resulted in a temporary drop in shipments from Eva's Suzhou factory, a longtime supplier for Samsung.
The drop took a bite out of corporate-wide sales figures, which decreased 1.6 percent to HK$3.157 billion (US$402.3 million) for the fiscal year ending Dec. 31, Eva said an earnings report released March 27.
The 25-year-old company, however, said it's bullish on opportunities arising from another change in its client base — longtime customer Fuji Xerox's reverse takeover of Xerox in January.
Eva noted that Fuji Xerox primarily served Japan and Asia Pacific, while Xerox serves the United States and Europe.
In its results report, Eva writes that the takeover is "very likely to strongly drive the group's revenue from 2018 onwards as the group has been one of the key suppliers of Fuji Xerox with a business history of more than 15 years."
Last year, Eva started production at its first plant outside of China, in Haiphong, Vietnam, and has a 495,000 square foot expansion underway.
When that expansion is completed later this year, the entire plant will have 42 injection molding machines, Wong said. Sales for the Haiphong plant for the year were HK$97.04 million (US$12.37 million).
Eva built the plant at the request of nearby office equipment companies, who want to tightly integrate the Chinese company into their supply chains, Eva said in its earnings statement. Eva also hopes to leverage the new location to expand into the supply chains for high-end consumer electronics.
The Vietnam plant provides mold making, metal stamping, injection molding and assembly operations. Eva is investing HK$400 million (US$51 million) in the plant.
Eva also is building a factory in San Luis Potosí, Mexico, to serve nearby automakers and Tier 1 automotive suppliers. The plant, slated for completion by the end of the year, will focus on metal stamping of car parts. Wong said the company currently has no plans to install plastics processing machinery there.
Worldwide, Eva has 392 injection molding machines, he said. Last year it generated HK$1.38 billion (US$175.9 million) in sales from mold making and plastics processing, and with the remainder, HK$1.7 billion (US$226.5 million) from metal stamping and lathing.
The company currently has seven plants in China and offices in the United States, Japan and South Korea.
Key customers in the office equipment segment include Samsung, Canon, Fuji Xerox, Konica Minolta and Ricoh. Automotive customers include Ford, Peugeot and Mazda, while smart-device customers include Apple and Samsung.
For the year, it said gross profit advanced 4.7 percent to HK$783.1 million (US$99.8 million) while profit attributable to equity holders jumped 150 percent to HK$133.7 million (US$17 million), largely due to a more favorable tax situation.