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Aerial View Of New Xerium China Plant - Phase 1 (Graphic: Business Wire)

Stocks in this article: XRM

Xerium Technologies, Inc. (NYSE:XRM), a leading global provider of industrial consumable products and services, today announced plans to build a new, high-end press felt plant near Shanghai, China. This greenfield plant will employ the industry’s most advanced press felt manufacturing technology capable of supplying the highest quality products for the most demanding machines in the region.

Production at the new plant is expected to begin by Q1 2015. Xerium’s decision to build a new machine clothing plant in China is based upon several important business reasons.

  • The company’s sales in Asia are growing differentially higher than in other parts of the world and 3 rd party market estimates are for these consumption rates to continue for a long time.
  • There is strong customer preference for the company’s high-end press felt products in Asia, especially in tissue. Today, the company supplies products to the region from 21 of its global plants.
  • Xerium is committed to reducing its overall cost structure by repositioning its manufacturing footprint in low cost countries. Xerium is already expanding its current operations in Mexico, Brazil and China. This investment will be another step forward in that direction and the building plant site is being designed to accommodate future expansions to further lower Xerium’s cost structure materially.
  • This new plant enables quick turns for customers with short lead time and emergency coverage requirements.

The company will fund the investment from its normal cash flow and capital structure and Xerium’s overall capital spending will be substantially similar to previous estimates.

“This new low-cost, high-tech plant in China is another big step forward for Xerium,” said Harold Bevis, Xerium’s President and CEO. “This state-of-the-art facility will produce the most advanced press felts in the world and its quality processes are being modeled after our plant in Gloggnitz, Austria, which will create one of the best press felt facilities in the world. It will be a big advancement for our Chinese customers specifically as it will allow Xerium, for the first time ever, to provide quick in-county press felt service to the largest pulp, paper and board market in the world. This new facility will immediately become our lowest cost plant and strengthen our global manufacturing base. This investment decision demonstrates our commitment to making material changes to improve Xerium’s go-forward sales and profit business model. Several options exist for the next steps in the China plant evolution, but no decisions have been made yet. We will do one phase at a time in a high-quality, low-cost manner and build from there.”

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