(Yicai) Aug. 9 -- Linglong Tyre, China’s third-biggest tire supplier, said it will invest USD645 million to meet growing demand in Europe by increasing the production capacity of its factory in Serbia. The company’s shares rose.

The project will lift the output of high-performance radial tires at the plant in the Zrenjanin Free Zone by 1.1 million units a year, Linglong said late yesterday. That will include 800,000 tires for buses and trucks, 150,000 for farm vehicles, 50,000 for engineering vehicles, and 100,000 refurbished tires.

The Zhaoyuan-based company will directly invest USD193 million, with the rest coming from bank loans. The firm also said it will build a 24-megawatt distributed solar power station at the plant to reduce its carbon emissions.

After climbing by as much as 4.2 percent in the morning trading session, Linglong’s shares [SHA: 601966] ended 1.2 percent higher at CNY16.71 (USD2.33) apiece today. The broader Shanghai market came off 0.3 percent.

Preliminary work on the project should be completed by the end of December, according to the construction schedule. Building work will begin in January and the project will become operational in December 2030.

The project will likely bring an average annual net profit of USD123 million after reaching full capacity, with an expected average operating revenue of USD282 million, the company said, adding that the time needed to recover the investment is just under six years, including the construction period.

Linglong produced 79.1 million tires last year, and has five factories in China along with another in Thailand. The first phase of the Serbian plant, which began trial production in the first half of last year, has a planned output of 13.82 million tires of various types a year, Linglong has said. The firm expects it to reach the designed capacity for each product by the end of next June.

Linglong's net profit was CNY1.4 billion (USD195.1 million) last year, according to its annual financial report. Operating revenue reached CNY20.2 billion (USD2.8 billion), with CNY9.4 billion coming from overseas markets.

Editor: Martin Kadiev