JEC COMPOSITES MAGAZINE - Issue #85 - November/December 2013 - 11

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glass fibre

2013, a turning point for CPIC

While going international is a must that can also drive growth,
it also involves risks. Incorporating entities with a different
culture is a challenge, as is establishing a consistent global
strategy.

hen CPIC acquired OCV
Capivari Fibras de Vidro in May
2011, we announced that CPIC
was starting to go global. Then the company
acquired Bahrain Abahsain Fiberglass (AFG)
last July, adding a foothold in the Middle East
to the one it has in South America and boosting its international scope in a relatively short
span of time. CPIC must now integrate these
two new entities and bring this new group
together in a highly competitive environment.

One foot in South America...
In May 2011, CPIC, one of China's three
largest glass fibre production bases, acquired a 100% holding in Brazilian glass fibre
producer OCV Capivari Fibras de Vidro
from Owens Corning Group. This acquisition marked a milestone, being the first of its
nature by a Chinese state-owned company.
CPIC Brasil is located in the city of Capivari,
in the countryside of São Paulo. With 350
employees, the company is considered as
one of the main manufacturers of glass fibre
reinforcements in Brazil, providing 40% of
the domestic market supply. It produces
multi-end and single rovings, chopped
strands and chopped strand mats, but also
imports a wide range of products from CPIC
China. Last March, CPIC Brasil inaugurated
its new production line after three months of
rebuilding, the acquisition of new equipment,
some structural reforms, and professional training for its technical staff. The modernisation
project provides conditions for the company

to expand its production capacity up to 60%
and enlarge the product portfolio.
One of the main new features of the modernisation project is the installation of a new glass
fusion oven that will enable CPIC to increase
the production of standard products such
as rovings and glass fibre, while adding new
products to the manufacturing range.

...the other in the Middle East
Last July, CPIC announced the acquisition of
Bahrain Abahsain Fiberglass (AFG), a company it first cooperated with in 2008. CPIC
invested US$35 million in cash contribution
to acquire 60% of AFG's shares. AFG was
founded in 2005 and is held by Saudi Abahsain Group. AFG's 60,000-square-metre ECR
glass fibre factory is located in the Bahrain
International Investment Park. With two
furnaces, it has an annual production capacity of 60,000 metric tons (MT). In 2012,
AFG's sales reached about 29,000 MT with
a production and sales rate close to 100%.
Acquiring AFG has been a key step for CPIC
to remain globally competitive in the new
situation, which offers significant synergies.
AFG has a good platform infrastructure, close
to the final markets in Europe and America
and with obvious tariff advantages. Once fully
integrated, it is expected to become CPIC's
global cost-competitive production and sales
centre. AFG will become CPIC's low-cost
overseas production base, a major export base
for high-end products radiating out to Europe
and America, and CPIC's integrated base in
the Middle East.
Energy costs account for a significant proportion of total glass fibre production costs.

In China, the upward pressure on domestic
gas prices and labour costs is becoming
increasingly strong. Bahrain has abundant
natural gas resources and its energy costs
are less than half of CPIC's present costs.
Frontline employee wages there are no higher
than China's domestic level. Bahrain is also a
free trade port in the Middle East. Fibreglass
import tariffs from Bahrain to Europe are
only 3.5%, and non-existent from Bahrain to
the United States. The transport distance is
also much shorter. Therefore, producing glass
fibre in Bahrain and exporting it to Europe
and America can solve the two above-mentioned issues, increase the company's sales
profit, expand its market share in Europe and
America, and enhance its long-term competitiveness. CPIC's overseas layout also targets
these long-term goals. Abahsain Group has
indicated a desire to develop a downstream
glass fibre business jointly with CPIC. The
Group has obvious local resource advantages.
CPIC may further consider utilizing AFG as a
base to improve its profitability by integrating
fibre and fabric activities to meet demand
from European and American customers
for CPIC fabrics manufactured in Bahrain,
Saudi Arabia and other international locations
where the integration conditions are met.
These two major investments, along with the
rising R&D and production costs, represent a
twofold challenge for CPIC: financial in that
both acquisitions must be made profitable;
and managerial in that they must be formed
into a veritable group with a strategic vision
and specific objectives. n

No85 November - December 2013 /

More information:
www.cpicfiber.com

jec composites magazine 11

http://www.cpicfiber.com

JEC COMPOSITES MAGAZINE - Issue #85 - November/December 2013

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