ZC Rubber offers IPO update, Thailand factory supports profit in 1H 2022

Hangzhou Zhongce Rubber Co. Ltd (ZC Rubber) recently issued an update on the progress of its initial public offering (IPO). According to the data, Zhongce Haichao (a company established by four local Hangzhou enterprises in 2019 in order to invest in ZC Rubber, namely Hangzhou Great Star Industrial Co., Ltd., Hangcha Group Co., Ltd., Juxing United Holding Group Co., Ltd., and Hangzhou Haichao Enterprise Management Partnership (Limited Partnership) holds 41.08 per cent of the tyre manufacturer’s shares and is the company’s controlling shareholder. Qiu Jianping and his daughter Qiu Fei hold 46.95 per cent of the shares and corresponding voting rights of ZC Rubber through Zhongce Haichao and several other companies and therefore control ZC Rubber.

According to ZC Rubber, the tyre maker wants to raise 7 billion yuan (about £846 million; 962 million euros) through the planned IPO. 2.85 billion yuan (about £345 million; 391 million euros) will be added to working capital, and 150 million yuan (about £18.13 million; 20.6 million euros) will be used to upgrade research and development projects and transform information construction technology. The rest of the funds will be used for capacity building and renovation of the four manufacturing bases.

In the first half of 2022, ZC Rubber’s revenue was 15.2 billion yuan (about £1.838 billion; 2.088 billion euros), and its net profit reached 576 million yuan (about £69.64 million; 79.12 million euros). In the first half of the year, the ZC Rubber produced 8,332,800 all-steel radial [truck] tyres (a capacity utilisation rate of 87.35 per cent) and sold 8,974,800 units, for 7.44 billion yuan (about £900 million; 1.022 billion euros). During the same period, the tyre maker produced 23.6214 million semi-steel [car and light truck] radials (at a capacity utilisation rate of 89.41%) and sold 24.0051 million units for 4.61 billion yuan (about £557 million; 633 million euros). In addition, ZC Rubber also produces various other products, such as bias tyres and motorcycle tyres.

Thailand becoming an increasingly important production base

As of 30 June 2022, ZC Rubber reports that it runs 20 first-tier subsidiaries, eight second-tier subsidiaries, two third-tier subsidiaries and four branch companies. The operating conditions of each tyre manufacturing base show that the net profit of ZC Rubber in the first half of the year mainly comes from the Thailand factory.

“Since the production base in Thailand was put into operation in 2015, it has become an important production base and profit growth point”, ZC Rubber representatives commented, adding:

“overseas production capacity has become an important source of profit for Chinese tyre companies. The investment and management level of overseas production bases will greatly affect the profitability of Chinese tyre companies”.

From January to June, the net profit of ZC Rubber’s Thailand factory exceeded 400 million yuan (about £48.36 million; 54.95 million euros), close to 70 per cent of the tyre manufacturer’s total net profit.