Taffeta ups fabric production

25 June 2007 00:00  [Source: ICB]

Formosa Taffeta, an affiliate of Taiwan's Formosa Plastics, is aggressively expanding in Vietnam to capitalise on the burgeoning textile industry.

Taffeta, the world's largest nylon fabric maker, is ­planning to ramp up production and processing at two plants in Vietnam this year, to cater for downstream industry demand, said Crane Ni, a ­financial analyst.

The company will increase textiles output at the Long An and Dong Nai plants in ­southern Vietnam, from a combined 13m yards (11.9m m) to 17m yards.

It represents a new frontier for the company, which is keen to follow its key customers to the country amid a boom in textile production.

"There is good potential for growth in Vietnam as downstream customers, such as Nike, are operating there," said an Asia-based analyst at Macquarie Securities in a report.

Around 70% of Formosa Taffeta's nylon fabrics is used in the production of garments and textiles, such as sportswear, swimsuits and casual clothes. The remaining 30% is used for leather, tyre cord, automobiles and household decoration.

Taffeta has also begun incrementally to increase products that are technologically advanced and provide a higher gross margin, said Ni. "We expect the Vietnam plants to start contributing to full-year 2007 earnings," he added.

Taffeta is in a strong position because affiliates Formosa Plastics and Nanya Plastics have plants in Vietnam that supply chemical fibre makers.

"Taffeta will benefit from being part of a vertically-­integrated supply chain," said Ni.

The attraction of Vietnam is partly that government policies encourage foreign investment and a well-educated workforce. Higher labour costs in China because of wage inflation have also displaced investors.

"Infrastructure in Vietnam, such as roads and electricity supply are adequate at this point, and the government is moving to invest in this to support growth," said the analyst.

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