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Listed Indonesian garment maker earmarks $70M for expansion
Publication Date : 15-08-2014
Publicly listed Indonesian garment manufacturer Pan Brothers has prepared US$70 million for a massive three-year expansion to enable the company to tap the potential of Southeast Asia’s emerging garment markets.
Pan Brothers — manufacturer of a number of world famous brands — is also setting its sights on expanding to other countries in the region, namely Vietnam, Cambodia and China, to further pave its way to the wider global market.
Anne Patricia Sutanto, the company’s vice chief executive officer, said on Thursday that as part of the expansion program, her company was partnering with Japan's Mitsubishi — the company’s biggest customer — to establish seven factories together between 2014 and 2016.
The company’s factory-building partnership with Mitsubishi started last November, with Pan Brothers holding 85 per cent of the stake.
Anne explained that the partnership would bring in four new factories this year — all of which will be located in Boyolali, Central Java.
Two new factories will be built next year and another will be established in 2016, although their locations have yet to be disclosed.
Anne said the factories would cost her company $70 million.
“The new factories will increase our production capacity by 48 million pieces a year, to around 90 million pieces by 2016,” she said.
She said the expansion was motivated by increasing demands for garments in Southeast Asia and was also driven by the government’s ambition to advance the country’s garment exports, now that the world’s largest garment exporter, China, is shifting its business from textiles to services and is facing an economic slowdown.
Buyers, according to her, are also looking elsewhere for new supplies outside of China to feed their markets as they are facing rising labor costs and declining labor supply.
Lower-wage South East Asian countries have become the main alternative to replace the Asian giant, with countries like Vietnam and Cambodia seeing mushrooming garment factories.
The government expects that Indonesia’s textile and garment exports will grow from $12.6 billion in 2012 to $75.36 billion in 2030, raising the country’s contribution to global textile exports from 1.8 per cent to 5 per cent within the aforementioned period.
Anne said that Pan Brothers was also looking to establish a factory in Vietnam and had secured a local partner to carry out the plan.
She refused to name the partner, or reveal the total investment needed for the regional expansion, simply saying that the company is currently on a business trial with the local partner to work on $20 million worth of orders from sporting goods company Adidas, to test the investment atmosphere in the country.
“If the trial goes well, we plan to start investing there next year with us holding 51 per cent of the stake. We will either build a new factory there or acquire an existing one,” she said.
She added that Pan Brothers was also mulling over whether to acquire a factory in Cambodia and to set up a research and development office in China.
Pan Brothers — which manufactures brands like Nike, North Face, Lacoste and Emporio Armani — exports 99 per cent of its sales. The company’s biggest export market is Asia, which gets 39 per cent of total sales, followed by the United States and Europe with 30 per cent each.