Conti Sime to Raise Tyre Output

Continental Sime Tyre Sdn Bhd is targeting to raise its output of passenger car tyres to 5.5 million by the middle of 2007, up from last year’s 3.5 million units. The company, a 70:30 merger between Continental AG and Sime Darby Bhd, said it is attempting to increase production at its Alor Star factory to 4.5 million tyres by the end of this year and move passenger tyre manufacturing to Alor Star as well.

Sime chief executive officer Dieter Saar the Malaysian Star newspaper that the Petaling Jaya plant would focus on producing commercial tyres. The company has two more smaller factories, in Kulim and Alor Gajah. “So far, Continental has invested about 250 million ringgits in the factory here and in Alor Star. However, we cannot expect a return on these investments yet as we are in the middle of several upgradings,” Saar said.

Sime is also aiming to increase exports to between 20 and 25 per cent of production by the end of this year from 15 per cent currently, and possibly to 40 per cent in the long term, the newspaper reported. Currently, Malaysia, Thailand, Indonesia, China and Australia are the company’s biggest markets.

The tyre manufacturer recorded a total turnover of 1 billion ringgits in 2005, with passenger tyre sales contributing to 50 per cent of total revenue. Saar hopes earnings would continue to improve but conceded that high raw material prices such as rubber could pose a challenge.

Saar also explained that the company would look to pass on about 25 per cent of the recent increase in raw material costs to its customers. Sime had raised tyre prices by about 3 per cent in February and could be increasing prices again this year, but Saar said most of the company’s customers understand the situation.