Sailun unveils major $1.1bn Egypt tire expansion plan

Shanghai, China – Sailun Group plans to invest $1.14 billion (€980 million) in a major tire capacity expansion project in Egypt that would significantly increase its production footprint in the country and support growing demand across Africa, Europe and North America.

In a 17 June stock exchange filing, the Chinese tire maker said it intends to build the “Egypt tire capacity enhancement project” with annual capacity for 27 million passenger car radial (PCR) tires, 1.65 million truck and bus radial (TBR) tires and 20,000 tonnes of off-the-road (OTR) tires.

The total investment amounts to $1.141 billion, including $1.09 billion in construction costs, $42.1 million in working capital and $9.19 million in interest during construction.

According to the SSE filing, the project is designed to “better match and meet the needs of customers in the global market” and to enhance the company’s “overall strength and global core competitiveness” in line with “global industrial development trends and the company’s internationalisation strategy.”

Part of the expansion was unveiled in April and will be undertaken by Shams El Sherouk Tyre Co. Ltd., Sailun’s existing Egyptian subsidiary, which is already developing facilities with annual capacity for 9 million PCR tires and 1.65 million TBR tires. (ERJ report)

The remaining capacity – comprising 18 million PCR tires, 1.65 million TBR tires and 20,000 tonnes of OTR tires – will be built by a newly established wholly owned subsidiary in Egypt, provisionally named Senro Tyre Co. Ltd.

Once completed, Sailun said its Egyptian operations would have annual production capacity of 36 million PCR tires, 3.3 million TBR tires and 20,000 tonnes of OTR tires, creating what it described as a "global production matrix" spanning China, Vietnam, Cambodia, Mexico, Indonesia and Egypt.

Earlier in April, the Chinese group announced plans to expand its Egyptian operations through added capacity at Shams El Sherouk. (ERJ report)

The new SSE filing, however, did not expressly link the April expansion plans to the recent announcement.

Sailun expects Egypt’s location at the crossroads of Africa, Asia and Europe, together with the logistics advantages offered by the Suez Canal to help it optimise raw material procurement and product exports, while improving supply chain efficiency.

Sailun also said the project would strengthen its ability to respond to regional orders, improve delivery capabilities and help “effectively avoid existing and potential international trade barriers.”

To finance the expansion, the group plans a series of capital injections through its overseas subsidiaries, including investments in Sailun Hong Kong, Sailun Singapore, Sailun Europe, Shams El Sherouk and the proposed Senro Tyre entity.

The investment remains subject to shareholder approval as well as approvals or filings with relevant Chinese authorities and regulators in Egypt.

Sailun cautioned that changing market conditions, financing environments, government policies and global economic developments could affect the project’s implementation.

The group estimates the completed project could generate average annual revenue of $1.16 billion and average annual net profit of $170 million.