INTERVIEW-Dupont Unveils China Research Center,Ponders M&A
Mon Oct 31, 2005
SHANGHAI (Reuters) - U.S. chemicals firm Dupont Co. (DD.N: Quote, Profile, Research) is pondering more acquisitions in China and will unveil in November its second-largest research center worldwide in China, aiming to expand its $1 billion annual sales there, top executives said.
Chief Executive Charles Holliday said on Sunday he hoped the research house slated for Shanghai -- part of a strategy of pursuing growth in emerging markets from India to Russia by coming up with new products -- would differentiate the company from rivals such as BASF AG (BASF.DE: Quote, Profile, Research) in China.
Competition in the world's seventh-largest economy is heating up as multinationals from Dow Chemical Co. (DOW.N: Quote, Profile, Research) to Bayer AG (BAYG.DE: Quote, Profile, Research) invest billions of dollars to expand capacity in the country, raising the spectre of a glut and margin erosion.
Indeed, Dupont's bigger rival Dow Chemical posted $2.2 billion of revenue in China in 2004 -- more than twice Dupont's.
"Our thrust is to keep bringing out new products," Holliday told Reuters on the sidelines of a city government forum.
"The price competition is still there, but as long as we can differentiate ourselves," the executive said. "That's why all the research and development facilities are here in China."
Shrugging off concerns over lax enforcement of intellectual property rights, multinationals from Applied Materials (AMAT.O: Quote, Profile, Research) to Alcatel S.A. (CGEP.PA: Quote, Profile, Research) have in past years shifted research increasingly to China, which is crawling up the value chain.
Though China accounts for just 4 percent of Dupont's $29 billion in global revenue, it ranks as the firm's fastest-growing major market and has helped salve some of the pain from soaring crude oil prices over the past year.
In 2004, the Wilmington, Delaware-based corporation posted $1 billion in sales in China, up 32 percent from the previous year.
Now, Dupont plans to double its existing investment of $600 million to $700 million in China over the next five years, to help extend the country's proportion of its overall sales.
"Most of that goes into building our own facilities, but we also are looking for M&A opportunities," Thomas Powell, Dupont's Greater China president, said without elaborating.
Executives declined to put a number to future growth.
"We've still got plenty of room" for revenue growth, Powell said. "We're investing, and expect it to continue to grow."
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