Following substantial investment, SRL now consolidate

20 March 2006

2004 was a key year for SRL. By August their new facilities - factory, office and warehouse - were virtually completed and ready for occupation. From then on came the painstaking job of moving the various production divisions to their new homes. This was the fourth new tannery on the Shanghai site. Constructed in steel and concrete, the tannery provides a clear working space of 9,000 sq m. In addition, new office space of 2,000 sq m is provided on the mezzanine floor, housing the administration staff and management for the full site in modern office facilities. The completion of the new facilities - for furniture leather and automotive leather - was the springboard which allowed for the next stage of relocating existing businesses to a new layout with some increased production capacity and improved flexibility. This took place with as little disruption of production as could be achieved. The company started life as wet-blue bovine producers but have since expanded into finished leathers. There are four divisions covering the production of finished bovine shoe upper leathers for lifestyle shoes; ovine leathers for garments; upholstery leather; and automotive upholstery leather. The last is a more recent departure - but an important one - as they have formed a partnership with GST, major suppliers of cut leathers to the global automotive industry. Under the agreement, SRL provide GST with their required automotive leather for the local car market. GST are effectively their only customer for this division and take the entire SRL production of automotive leather. Trial work with GST was carried out in November 2004 and initial small-scale production commenced in January 2005 under the guidance of GST and incorporating their retanning and finishing technologies. The potential for the car industry in China is simply huge and now that China is establishing its own manufacturing industry in addition to license agreements with foreign owned automotive groups, automotive business is expected to take off in earnest this year. The China leather business has grown strongly since 1997. As at August 2005, Shanghai Richina Leather employed a total of 2,400 full-time equivalent workers and were processing a per annum equivalent of 1.2 million hides and 2.5 million pelts. After five years of heavy investments and a 20% growth rate each year, the company are now entering a period of consolidation. They invested $17 million in new plant and equipment in 2004 alone. Now they need to focus on margins and the bottom line. They work with major international brands that produce in Asia and are looking for export-driven customers. They experience the same environmental pressures as tanners in North America and Europe, working to the same standards with all their emissions. They have been working with the BLC towards a standard approach to monitoring and measurement. Nike, Timberland and SRL were the initial sponsors for an Environmental Forum. If tanners and their customers can agree that everyone works to the same uniform approach it will simplify environmental management. This avoids being audited by ten different companies in ten different ways. It differs from ISO 1400 in that it is directly targeted at the leather industry and uses common language and terminology. As with most go ahead companies, the ultimate dream is of a zero waste tannery. In the meantime, SRL continue to look for opportunities to reduce wastage, re-use waste materials and to protect the environment cost effectively. They introduced their waste auditing programme in the first half of 2004 and at that time, excluding wastewater sludge, were already recycling 33% of their solid waste. Their latest tannery was officially opened on October 16, 2004. At that time, the chairman of Richina Pacific, John L Walker said: 'Eight years ago, the tannery facilities that we toured today consisted of three largely empty tannery buildings with a handful of workers. Today, SRL represents one of the best examples of the ability to reform state-owned enterprises and in the process create meaningful and productive jobs.' Shanghai Richina leather group consists of: Shanghai Richina Leather Co Ltd (SRL), registered in PR China; Richina Leather Ltd (RLL), Bermuda registered parent company; SRL Trading Ltd (SRLT), Hong Kong registered. Shanghai Richina Leather commenced operations in 1995 as a 55:45 joint venture between Richina Pacific Ltd (then a New Zealand incorporated company listed on the New Zealand Stock Exchange) and the Shanghai Leather Company, a state-owned enterprise. Over the period, Richina Pacific have increased their ownership and taken full management control, reducing the Chinese shareholding to 5%. The factory Location: Bao Shan, Shanghai, China Land area: 55,000 sq m Tannery buildings: four main tanneries each of approximately 11,500 sq m plus ancillary support buildings Production: four million sq ft/month of bovine shoe leather; two million sq ft/month lambskin garment leather; two million sq ft/month of upholstery leather; one million sq ft/month automotive leather. Ownership: Richina Pacific Ltd, parent company, are merging all their China-based manufacturing interests into one company called Richina Industries Ltd. Richina Industries are looking to acquire adjacent land to accommodate SRL and other companies into one site which will be reconfigured as Richina Industrial Park. The management Ernst (Ernie) Hagen is the senior vice president and chief operating officer - Tanning, Richina Industries and is responsible for all tanning activities that are currently part of SRL, SRLT and SLC. Nigel Godey is the operational manager of the bovine shoe leather division, Richina Industries, and Howard Avery is sales manager. These two, both already established with SRL, are now heading the division following the departure of Geoffrey Thams, formerly general manager. Carl Flach is the general manager of the automotive leather division, Richina Industries. He joined RPL in January 2005 bringing his experience from the bovine leather industry in Europe with the Norwegian tannery Borge AS, producers of high quality leather. Gary He is general manager, upholstery division, Richina Industries. He joined Richina Industries tanning division on September 1, 2005. He brings more than 15 years of extensive experience in the Chinese leather industry and has worked in both tanning and 'cut and sew' for upholstery leather. Leo Li is the financial controller for Richina Industries. He was appointed to the newly-established position in August 2005. A qualified accountant, he has had more than five years' experience within SRL in senior financial roles.

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