Sentury Tire intends to build 523m euro Spanish tyre plant

Sentury Tire, the tyre manufacturer behind the global Landsail tyre brand, has outlined its plan to construct a 522.59 million euro car and light truck tyre plant in the Galicia region of northwest Spain. Qingdao Sentury Tire Co, Ltd’s board of directors approved the proposal to build capacity for 12 million high performance and light commercial tyres on a three-year schedule at a meeting in the last quarter of 2021, announcing this intention to the Shenzhen Stock Exchange on 19 December. The company has implemented a 100 per cent owned subsidiary, Sentury Tire (Spain) Co, Ltd, via its Hong Kong trading company for the project, and wants to ramp up production in two phases; it expects the plant to reach 50 per cent capacity (six million tyres) after two years, with the second half added after three years. Sentury wants to achieve these milestones in 2024 and 2025 respectively, pending construction conditions in Spain and the availability of funding, which Sentury plans to self-raise.

In its financial projections, Sentury added in its report to Shenzhen that the proposed Spanish plant would expect to reach revenues of 504 million euros per year and profit of 114.6 million euros, when fully functional. Sentury projects that the investment would be recovered (after income tax) in 7.43 years, including the construction period, with the total investment rate of return of 17.73 per cent, according to its Shenzhen filings.

Sentury’s 833Plus strategic plan

Sentury Tire currently has one overseas manufacturing base in Thailand in addition to its home plant in Qingdao. The company has previously attempted to invest a similar amount ($530 million) building a North American plant of similar size in a project announced in September 2016. Plans for the facility, which was to be built in LaGrange, Georgia, USA, were shelved in May 2019 amid trade issues between China and USA. These issues were thought to have delayed Sentury floating on the Shenzhen Stock Exchange, a move that eventually took place in September 2020. Tyrepress reported that the IPO literature showed Sentury was considering a scenario in which an Eastern European tyre plant would make sense. The 160 million euros raised by the IPO ultimately appeared destined for enhancements to R&D and extending its manufacturing capabilities to aviation tyres.

The proposed Spanish plant would add around a third to Sentury’s global tyre manufacturing capacity, taking it to around 34 million tyres per annum. In addition to its prominent Landsail brand, Sentury is a manufacturing partner of UK-owned brand Davanti Tyres, which continues to grow in global markets itself. It also manufactures tyres under the eponymous Sentury brand, as well as Delinte, Groundspeed, and Pantera.

The Iberian Peninsula is somewhat atypical of light vehicle (car and light truck) tyre manufacturing in Western Europe, with premium brands, such as Continental and Bridgestone continuing to invest in their car tyre manufacturing facilities there. The theme in the other major European markets is towards the contraction of capacity, in favour of larger factories in Eastern Europe, where Asian manufacturers have generally chosen to situate European plants. Rising shipping costs and the drive for sustainability suggest the trend for globalising Asian manufacturers building plants in Europe will continue.

Sentury says the new plant forms part of the implementation of its 833plus strategic plan. The key component of the global development strategy, which is designed to enhance the company’s overall competitiveness and profitability, are eight “digital tyre intelligent manufacturing bases” over the next decade or so. These are planned to comprise three in China, two in Thailand, and one each in Europe, Africa, and North America. Sentury also wants to have three global R&D centres (China, plus one each in Europe and North America) and three “global user experience centres.”