(Yicai) June 18 -- Sailun Group has unveiled a USD1.14 billion plan to expand production capacity in Egypt, marking the Chinese tire maker’s second such move in less than two months and its third since last August, as the firm seeks to strengthen its global footprint and hedge against rising trade barriers.

Sailun will build a new factory in the Suez Canal Economic Zone in Egypt’s Suez province, with an annual output of 27 million semi-steel radial tires, 1.65 million all-steel radial tires, and 20,000 tons off-the-road tires, the Qingdao-based company announced yesterday. Construction is expected to last 24 months.

Semi-steel radial tires are primarily used for passenger cars or light commercial vehicles, all-steel radial tires are mainly designed for heavy-duty trucks, and OTR tires are used in engineering and mining machinery, such as excavators, mining trucks, and loaders.

Once put into operation, Sailun expects the project to generate average annual operating income of USD11.6 billion and average annual net profit of USD1.7 billion. The after-tax payback period is estimated at 5.7 years, with an investment yield of 14.9 percent.

Egypt serves as a pivotal global trade hub and core logistics and commercial center covering North Africa and the Middle East, supported by a mature open trade framework, Sailun noted. Once the local plants start operation, the company can flexibly adjust production schedules in response to shifting tire demand and tariff policies across different regions and countries, it added.

Last August, Sailun revealed a USD2.91 billion investment to build a tire factory in Egypt. In April this year, the firm announced a supplementary investment for the site, a USD2.85 billion project designed to further lift production capacity. 

Once all three projects are fully operational, Sailun’s total annual capacity in Egypt will reach 36 million semi-steel radial tires, 3.3 million all-steel radial tires, and 20,000 tons OTR tires.

The company will then have tire production bases in China, Vietnam, Cambodia, Mexico, Indonesia, and Egypt, which is expected to strengthen its global layout and effectively mitigate operational risks stemming from international trade barriers.

Sailun’s shares [SHA: 601058] closed down 2.5 percent at CNY11.50 (USD1.58) each in Shanghai today, after earlier dropping by as much as 3.4 percent to the lowest since April last year. The stock has shed roughly 36 percent of its value since reaching a record high of CNY17.87 (USD2.45) on Dec. 12.

Editor: Futura Costaglione