Howe Australia move into Slovakia

18 June 2005

Howe Leather, Melbourne, Australia, have set up a head office for Europe and a production unit in Kosice, East Slovakia. The company will install €1 million worth of new technology for processing leather products in rented premises of 3,400 square metres. Production launch is said to have taken place in May. During the first phase, the unit should employ between 60 and 100 people. General manager Richard Duda said that initially there would be a one-shift production which is later expected to expand to two and three shifts. Turnover should grow gradually to €30 million within two years. All output from the new production unit will be exported. The company have supply contracts for large automotive producers such as BMW, Audi and Land Rover. Howe are the 14th investor brought to East Slovakia by US Steel's economic development centre. Other factors such as six times lower labour costs than those prevailing in Australia makes good business sense. The move into Slovakia comes after Howe, owned by Schaffer Corporation, reported sharp setbacks in earnings in the half-year to December. As forecast at the previous annual meeting, profit plunged 34% from $10.1 million to $6.7 million as earnings in the two main divisions fell. Group revenue was down 27% at $76.6 million. Executive chairman John Schaffer said revenue fell 16% in the automotive leather division after the Chinese government restricted car loans. The leather division lost a further $2 million with the rise in the value of the Australian dollar against the US dollar. Schaffer said the currency problem would gradually ease as the company were moving to set up a processing plant in Slovakia in Eastern Europe. 'Slovakia is ideally located geographically to supply Howe's European customers and production of cut sets from this facility is scheduled to commence in April 2005', Mr Schaffer said at the time of the financial report. In addition, Howe plan to set up a leather-cutting plant in Shanghai, where Schaffer is confident car sales will continue to grow.

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