Xerium Announces New Business in China

 

Xerium Technologies Inc., Youngsville, N.C., USA, a global provider of industrial consumable products and services, announced that it has materially completed the $60 million successful restructuring of its business in China. The business is now in a position to locally serve customers in China, Asia, and also export certain products globally. The make-over of its China and Asian business has taken more than three years to complete with a number of key aspects required for full implementation. Xerium has implemented an all-Asian business model and will now run its entire Asian business from Shanghai. Highlights of the repositioning of Xerium’s Asia business are as follows:

• Production has begun at Kunshan, China, Press Felt Plant. Xerium completed a two-year, multi-million dollar construction project to build and equip a brand-new press felt plant in Kunshan, China. This greenfield plant is located in the heart of the Yangtze River papermaking region, which is at the center of the largest papermaking region in the world—China. It took more than two years to design, build, equip, and commission. Until this new plant began production, Xerium served this region mainly as an exporter of products made in Europe. Xerium has significantly increased its competitive position with this plant and will now be able to more closely partner with customers in China and the rest of the world. For the first time ever, customers in China will receive locally provided and optimized state-of-the-art press felt solutions from Xerium. Xerium will conduct business in local currency and local languages. The Kunshan plant will be able to service the largest pulp, paper, paperboard, and tissue machines in the world, as the main machine in the plant is greater than 15 meters wide. This central machine and its foundation weighed almost 1 million pounds at installation, and is one of the largest of its type in the world. For some press felt designs, the company will be able to make three pieces simultaneously—a first for the company. The plant has state-of-the-art information systems and supply chain interfaces along with real time operational communication systems throughout the site. It is conducting business from a new Infor™ information technology platform. The company is moving a large portion of its press felt production to this plant in China. The plant has initiated production. 

• Renovated Changzhou, China Rolls Plant. Xerium completed a two-year, multi-million dollar investment program to completely renovate its rolls and mechanical service plant in Changzhou, China. This plant is located in the Yangtze River papermaking region. Until this renovation was completed, Xerium had served this region for many decades by exporting high-end working rolls from Europe. Xerium has now transferred all of its technology to this plant—SMART® Roll production cell, spreader roll production cell, polyurethane production cell, suction box production cell, and upgraded extrusion and drilling equipment. The plant can now produce all of Xerium’s designs. The plant recently received ISO-9000 quality certification. 
• Implemented new Asia Headquarters in Shanghai. Moved and reincorporated Xerium Asia headquarters into the Shanghai Free Trade Zone. This special Chinese government approval allows Xerium to import/export at the lowest possible cost, expedite customs processing, provide shorter lead times for materials transfer, enables maximum leverage of working capital for Xerium across Asia, and receive improved tax treatment as a local Chinese business entity. The entity is now in place. 
• Implemented new Chinese Capital Structure. Implemented a local capital structure and banking relationship by moving a portion of the Xerium corporate debt structure to China. The company has implemented a multi-million RMB on-going loan in China with ICBC, the largest bank in the world. Xerium will now conduct local business in local currency (RMB) and finance and fund its China business locally in RMB. This will also enable Xerium to both secure a natural business hedge and receive local entity tax treatment. The new loan and new ICBC financial relationship are complete and in place. 
• Localized all Asian Leadership. Moved its Asia business leadership from the U.S. and Europe to China. The key top personnel moves involved moving president and CFO positions from the U.S. to Shanghai, sales leadership from Europe and Australia to Shanghai, and technical leadership from Europe to Shanghai. All of these personnel moves are complete.
• Implemented Chinese IT structure. Moved its IT and data support from Europe to Shanghai. The company has completed its data center in Shanghai and is partnered with SAP as its provider for rolls plant information technology, and is partnered with Infor™ for machine clothing plant information technology. Both technology providers have huge businesses in China and are also located in Shanghai. 
• Implemented Contemporary Asian Supply Chain. Moved its Asia supply chain and warehousing activities from in-house/locally provided into a global partnership with Panalpina, one of the world’s leading providers of end-to-end supply chain solutions. Xerium is connecting its internal systems with Panalpina to give its customers a seamless electronic supply chain. The supply chain moves are in place. 

Harold Bevis, president and CEO of Xerium, made several comments regarding this business realignment. "Competing and winning in China and throughout Asia is central to Xerium’s corporate repositioning. Xerium’s legacy markets in North American and European newsprint, printing, and writing are all under pressure. These market segments are going through permanent correction. Several years ago, the board of Xerium decided to tackle this situation head-on and reposition its assets and commercial profile directly into growth markets globally.

 

 

 

"These China investments have taken a few years and a lot of money to implement. We are very happy that these new investments are coming on line now," Bevis said. "The commercial objective is to provide machine optimization solutions with world-class technology and shorter lead times, at a local cost structure. Customers will immediately benefit from improved costs, better lead times, better technology, and better service. This new business startup is a key part of Xerium’s investment strategy to realign its global business model and global factory locations to line up with growth markets in the world. 

"This business restructuring is an important part of the business strategy being deployed at Xerium—to reposition the company into growth markets. We are excited about our new future in Asia. This restructured business is now underway producing and selling machine clothing, performing on-machine service, and performing in-factory rolls and mechanical service," Bevis concluded.