Victrex Plc: Investment to Create a Joint-Venture for Peek Manufacture in China

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Victrex plc today announces the creation of a joint-venture between its subsidiary, Victrex Hong Kong Limited, and Yingkou Xingfu Chemical Company Limited, to build and operate a new PEEK polymer manufacturing facility in Liaoning, China, subject to certain performance conditions, including finalizing land purchase and permit applications. Victrex, which will be the majority partner and lead the joint-venture, will benefit by further differentiating and complementing its portfolio of PEEK and PAEK grades, in anticipation of a range of significant long-term growth opportunities across several end markets in China, as well as aligning with China’s ‘Made in China 2025’ initiative, where specifying domestically produced PEEK in certain applications is expected to gain momentum.

Victrex already has an established relationship with its joint-venture partner through its monomer supply chain, with Yingkou Xingfu having significant experience of developing and operating chemical facilities in China which meet international quality, process and environmental standards.

Today’s announcement builds on Victrex’s recent appointment of a General Manager for China and an increased commercial presence, as well as its strong technical service offering to customers, which includes its existing Technical Center in Shanghai. The investment sets the stage for Victrex to serve some of its regional customers from a local facility and in a more diverse way. Victrex will also oversee the management of process know-how and intellectual property during development of the polymerization process.

Victrex’s share of the overall investment, the majority of which comprises capital investment during construction, is expected to total £32m funded in cash, with approximately £28m of capital expenditure and £4m of start-up costs, with commissioning of the facility anticipated in early 2022. The new plant will eventually be capable of producing up to 1,500 tonnes¹ per annum. Establishing a new PEEK polymer plant in China is in line with Victrex’s record of investing in capacity ahead of demand, with an expectation that future capacity increases will be more gradual, rather than larger multi-year investments.

 “This investment is in line with our record of not only investing ahead of demand, but in complementing and further differentiating our range of PEEK and PAEK grades, as well as setting the stage for specific geographic growth, whereby we can capitalize on the significant opportunities in China and the Asia Pacific region by having a competitive manufacturing presence there,” said Jakob Sigurdsson, Chief Executive of Victrex.  “Alongside the ‘Made in China 2025’ initiative, some of our increasingly diverse application areas mean our customers require a quality and differentiated PEEK offering. While we already manufacture a range of PEEK and PAEK grades, this will enhance our portfolio, making us even better positioned in a region where we have seen strong growth in recent years and continue to see attractive opportunities, aligned to our know-how and strong technical and application development capabilities. Overall, we believe this is a good entry point to a China manufacturing operation, working with an established partner and offering an attractive returns profile.” 

The joint-venture will establish Victrex Hong Kong Ltd as the majority partner with a 75% share, with leadership being assumed by Victrex once the facility is operational. The investment follows on from Victrex commencing a debottlenecking project at its main Hillhouse UK facilities in FY 2020, which will add up to 1,000 tonnes per annum of nameplate capacity when completed. This announcement is a class 2 transaction made in requirement with the UK Listing Rules.