Adopting an Asset-Light Model to Rapidly Increase Production
Capacity To Further Improve Market Share in Southern China
(22 November 2011 – Hong Kong) Vinda International Holdings Limited (“Vinda International” or the “Company”, together with its subsidiaries collectively known as the “Group”; stock code: 3331), a leading manufacturer and branded seller of household paper products in the PRC, is pleased to announce that, the Company entered into the Lease Agreement with Jiangmen Taiyuan Paper Company Limited (“Landlord”), to lease a piece of land located in Sibei Yangsha, Xinjiang Village, Sanjiang County, Xinhui District, Guangdong with an area of approximately 116,838 square meters (together with a factory and ancillary infrastructures and facilities). Upon completion of the factory, its annual production capacity is estimated to be no less than 80,000 tons.
The management of Vinda International commented, “The market in Southern China for tissue paper enjoyed tremendous growth in recent years, and Vinda International has maintained its leading position in this region. Despite having an aggregate of 180,000 tons production capacity from its production plants located in Guangdong Province, the Group’s production capacity is not sufficient to satisfy its market demands. This Lease Agreement not only allows the Group to rapidly increase its production capacity within Southern China, via an asset-light model, to further increase our market share; but can also reduce high logistic costs resulting from the need to source finished products from other regions. Moreover, using this asset-light model to expand production capacity provides the Group with more agility for its cash flow, in handling daily operations as well as business development. The Group believes that this is a cost-effective and time-efficient arrangement.”
Pursuant to the Lease Agreement, the Landlord will be responsible for the construction of a factory and the ancillary infrastructures and facilities in the factory, including the boilers, water sewage disposal treatment and electricity facility, at its own costs in accordance with the specifications and requirements of Vinda International.
The Lease Agreement will be effective as of 22 November 2011, for an initial term of 15 years, with an initial fixed annual rental of RMB 29,000,000 until 31 December 2014. In addition, Vinda will enjoy a rent-free period of not less than 12 months and the Landlord also granted the Tenant an option during the term of the Lease Agreement to purchase the rented property and all incidental infrastructures and facilities at the fair market value as at the time when the option is exercised.