|Combined sales:||€ 1 197 million|
|Capital expenditures (PP&E):||€ 85 million|
|Total assets:||€ 1 175 million
China’s economy grew at the slowest rate since 1990, coming in at 6.6%. Trade tensions with the US weighed on export opportunities and industrial output growth. The tire market in China grew about 2% in 2018 but tailed off towards the end of the year.
India confirmed its strong growth potential with an estimated GDP growth of 7.3%, compared to 6.7% in 2017, nearly closing the gap on the UK to become the world’s fifth-biggest economy.
Indonesia’s economy, the largest in Southeast Asia, continued to grow at a stable rate by reaching an estimated 5%. Investments in Indonesia, however, slowed down somewhat during the course of the year.
Bekaert is present in Asia with manufacturing sites and development centers in China, India, Indonesia, Malaysia and Japan. Bekaert will start a greenfield investment in Quang Ngai Province in the central coastal area of Vietnam. The construction works will start during the course of the second quarter of 2019. The plant will produce rubber reinforcement products and serve customers worldwide.
Bekaert delivered +7.7% organic sales growth in Asia Pacific, driven by good volume growth (+5.7%) and the positive aggregate effect of passed-on wire rod price increases and price-mix (+2%). The robust growth of rubber reinforcement activities across the region was partly offset by weaker volumes in other sectors, among which the sawing wire activities in China and the steel wire activities in Malaysia. Adverse currency effects (-3.1%) drove top line growth down to +4.6%.
Underlying EBIT decreased to € 86 million at a margin of 7.2%. The margin decrease was the result of loss-making sawing wire activities (€ -9 million compared with € +21 million last year), the weak performance of our activities in Malaysia, and high start-up costs related to the expansion program in India. The rubber reinforcement business progressively improved the margin performance in the second half of the year, particularly in China and in India. This trend is visible in the segment’s underlying EBIT for the second half.
Reported EBIT dropped to € 54 million due to the impairment of tangible and intangible assets related to sawing wire in China and the restructuring costs in Ipoh (Malaysia), which were partly offset by gains from the sale of land and buildings following the closures of the plants in Huizhou (China) and Shah Alam (Malaysia).
In anticipation of continued growth perspectives, Bekaert invested € 85 million in PP&E in the region in 2018, including expansion investments in China, India and Indonesia.
The 2018 edition of the Global Tire Tech Forum organized by the China Tire Industry Association (CRIA) was held in Hefei City, Anhui Province. More than 260 international and Chinese representatives from all players in the tire supply chain participated in the event.
Bekaert was invited to give a key note speech on super tensile/ultra tensile steel cord developments supporting the reduction of tire weight and rolling resistance. The event was a perfect opportunity to meet up with industry peers and customers interested in value creating solutions for the tire industry.
In October 2018, Bert De Graeve, Chairman of Bekaert, and a selective group of business and political leaders met Chinese Premier Li Keqiang during the Asia-Europe meeting in Brussels (Belgium).
India has become the world’s fourth largest automobile market and continues to grow at a fast pace: the Indian tire industry expanded by 6% compared with 2017, mainly driven by increased radialization (up 10% in commercial vehicle markets). As the only domestic steel cord producer in the country, Bekaert anticipated the current and future growth and therefore invested significantly in the course of 2017-2018.
We invested in both half-product capacity (previously sourced from Bekaert China) and end-product capacity to accommodate the increasing demand from tire customers in the country. Having a fully integrated production process enhances business continuity in times of trade uncertainties between countries. It also puts us in a position to offer speed and flexibility in supporting the evolving needs of the customers.
Our team in India had to deal with new challenges such as consistent quality and supply reliability of local wire rod because the Indian steel mills were not used to producing the grades or volumes needed. It took some time to ensure stability in the supply process. The team is currently working very closely with the suppliers to co-create a supply excellence model that will benefit the entire supply chain.
We are growing in other sectors as well, with more Dramix® capacity to serve local and export construction markets, and newly added products to the portfolio to serve the agricultural markets in India.