New Factory

**promotion blocked**.au was very distrusting of the 26% investment in the new factory under an aluminum parent company.

I emailed management for verification.

XPD is a 26% shareholder is a seperate venture, comprising 7 investors , each from the Jinjiang area.
The 26% came about due to the various capital commitments from the partners.
They are all in different forms of manufacturing.

So I guess that makes good business sense.  7 manufacturers sharing the investment burden in a giant factory, with XPD leasing a portion of it, that could be increased without further investment.

He referred me to the prospectus for details on the $15m investment.

The prospectus said that construction should be complete in mid 2015.  I'm guessing that construction is now done and they're now in the process of purchasing machinery and hiring employees.

He said that they can lease space supporting up to 8 production lines, supporting production of up to 8 million pairs per annum.  The prospectus said 5 million - I don't know where that change came from.

Fool mentioned lease costs of $1.5m per year.  If that can support production of 8 million pairs of boots, it sounds cheap.

The logic behind the factory placement is cheaper employees and logistics.  The prospectus mentioned up to 1500 employees there.  I'll take a wild guess and say they make AUD7500 each per year.  If that's 10% cheaper than the current location, then it could save $1.1m in employee costs.

I'm optimistic about the new factory and expect costs per pair to fall a little thanks to it, and margins to rise.  All we need is for sales to continue rising to support the new factory's production.

I would probably buy more now if I didn't have to invest my available cash in my own business.