Continental Tyres to invest €7m in South Africa

ERJ staff report (TP)

Johannesburg − Continental Tyres South Africa plans to invest more than R100m (€7m) in the country next year to expand and diversify its tire manufacturing capacity at its plant in New Brighton in Port Elizabeth, reported Roy Cokayne for Business Report.

It hopes to become a hub for speciality tires, particularly in the underground mining industry, for the sub-Saharan African and global market.

Darwin Zabala, the general manager finance and information technology, said that Continental SA had this year invested four times the company’s average annual investment and next year would be investing seven times. He declined to comment on the value of the investments.

Dieter Horni, the managing director, said it was a “three digit” figure in millions, adding that Continental had increased its investment in South Africa in each of the past five years.

The investment excludes its expenditure in its retail operations through its ContiTrade initiative tire retail initiative.

Zabala said the investment would largely be in four areas: run-flat tires that it sold largely to original equipment manufacturers; increasing the capacity of its 4x4 manufacturing, a market in which it had a large share and wanted to continue growing in South Africa and sub-Saharan Africa; increasing its manufacturing capacity in mining and agricultural tires; and a project to invest in a new coal boiler to be more efficient and lower the cost of production because the price of electricity in Port Elizabeth was expensive.

He said Continental SA would by the first quarter of next year be able to produce about 3.6m passenger and run-flat tires a year, which was about 11,300 tires a day, compared with about 3.2m tires in 2010. But Zabala said its capacity was mixed use and it could produce 4x4 tires with the same equipment.

Shaun Uys, the head of marketing and sales in sub-Saharan Africa, said it was almost doubling its production capacity of speciality tires and the plant would have the installed capacity to produce about 26 tonnes of speciality tires a day in the first half of next year compared with about 15 tonnes a day in 2010. He said speciality tires included those for underground mining machines, tractors and military vehicles.

Uys said if projected growth in the speciality tire business did materialise, Continental SA could become a worldwide hub for underground mining tires because of its unique situation and the technology in its Port Elizabeth plant.

“Then there is another round of investment that could come depending on how this goes,” he added.

Horni said that, depending on the demand in the market, Continental SA would export worldwide but this was a long-term project that would happen over the next five years.

Uys said Continental SA had no exports of significance of speciality tires at present.

Horni said there had been a mindset change in Continental’s head office in Hanover, Germany, because in about 2010 speciality tires were only focused on fork-lift tires. Now the company realised that there was a huge demand and market for underground mining tires. “This is something relatively new for us and we are excited about that.”

Uys said the difference now was that Continental SA was starting to produce for other mining applications after being predominantly in platinum mining.

“We will be going into coal and up into Africa. The ore belt runs down Africa, we’ll go into Zimbabwe, the Democratic Republic of Congo and Tanzania,” he said.

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Full story from Business Report