Semperit says dispute with Thai unit hurting glove business, expansion

By Khettiya Jittapong

BANGKOK, Nov 25 (Reuters) - Semperit Holding AG said a legal dispute with its partner Sri Trang Agro-Industry Pcl in top rubber producer Thailand had dented operations at the Austrian firm's glove unit and hurt its expansion plans in the Asian country.

Since 2014, Semperit has filed three cases against Sri Trang in the Swiss International Court of Arbitration, saying the Thai firm had breached their joint venture (JV) agreement.

It initially claimed 35 million euros ($37.08 million) in damages but later raised the amount to 82 million euros, according to a Sri Trang statement earlier this year. At the time, Sri Trang had said it was not obligated to pay the damages because the company and other subsidiaries had not breached any provisions of the JV agreement.

Semperit and Thai natural rubber producer Sri Trang have a joint venture company Siam Sempermed Corp.

The legal dispute has hurt the day-to-day operations at Semperit's glove unit, competitive pricing, raw material prices and delivery plans, Chief Executive Officer Thomas Fahnemann told Reuters in Bangkok on Friday. It is unknown when the arbitration proceedings will be concluded, Fahnemann added.

Sri Trang declined to comment.

Semperit's CEO said the company would like to make an investment in Thailand but "unfortunately the legal dispute with the Thai joint venture partner makes it difficult for us to take another big step in Thailand".

The Austrian company, which has two production sites in Thailand, is now focusing on expanding elsewhere in Southeast Asia, Fahnemann said. The company's unit, Sempermed, is increasing output capacity at Kamunting in Malaysia, he said.

After a 150-million euro acquisition of Latexx Partners in Malaysia in 2012, Sempermed already has six glove producing factories in Malaysia and a seventh plant has been constructed with the first few production lines operational, he said.

The new plant, which will be fully operational in 2017-18, is Semperit's largest ever investment valued at more than 50 million euros. Its production capacity is expected to double to about 12 billion units of gloves per year, which is as many as the first six plants produce together, he said.

Semperit is also looking for an opportunity to boost its presence in Asia where glove consumption per capita is low.

The group has spent more than 70 million euros in Asia in the past five years, excluding those spent via joint ventures. Some 75 percent of the amount was spent in Malaysia, 20 percent in China and the rest in India, Thailand and Singapore.

More than 10 percent of Semperit's annual sales come from Asia, with majority of it coming from Europe, he said. ($1 = 35.6800 baht) ($1 = 0.9438 euros) (Reporting by Khettiya Jittapong; Editing by Himani Sarkar)