Danish Ecco shoes among major casualties

The Danish shoemaker Ecco will probably lose about 2 billion baht (360 Million DKK) as a result of flood damage to its factory in the Saha Rattananakorn Industrial Estate in Ayutthaya.

All machines for shoe production are submerged and the shoemaker will need at least three months to import new machines to replace damaged ones, an industry source said.

Capacity at the Ayutthaya plant was 7 million pairs last year with sales of 6 billion baht.

It means Ecco Thailand will probably lose at least 1.5 billion baht in sales during three months of production suspension. This is not included the cost of 500 million baht for leather materials and new machines.

The plant was chosen as a logistics hub for Ecco to distribute shoes and wet blue hides to its network in Asia. Saha Group, the country’s largest consumer products conglomerate, has a small stake in Ecco Thailand.

Apart from the Ecco shoe operation, the group has 10 shoe-related factories including Bangkok Rubber in the Saha Rattananakorn Industrial Estate, said Boonchai Chokwattana, a director of Saha Group.

“I don’t know how much we will actually lose in terms of damage costs to machinery and sales,” he said. “However, we still have other shoe production bases in Bangkok and Sri Racha in Chon Buri.”

However, Mr Boonchai is very concerned about product delivery problems. The group is now adjusting its logistics plan to prevent a shortage of shoe products in stores.

The company’s food products such as Mama instant noodles have been recording higher sales but the group expects consumer purchasing power will decline after that because many people will use money for home repairs after the floods.

Chalit Limpanavech, a marketing expert, said the floods at Saha Rattananakorn Industrial Estate may be a case study for the government. The issue has created a negative view among foreign investors as the government does not appear to have a serious strategy to alleviate the impact on industrial and economically important areas.

“This will affect foreign investor sentiment in the short term. To restore foreign investor confidence, the government should set up a crisis management team, implement action plans and communicate with investors,” Mr Chalit said.

Apart from the floods, the government’s policy to increase the minimum wage to 300 baht a day may mean that Thailand is no longer the best strategic location for companies looking for low labour costs in Asia.

Tan Passakornnatee, the CEO of Mai Tan Co, the producer and marketer of Ichitan green tea, said its green tea factory at Rojana Industrial Park had prepared by building an earthen dike and concrete wall around the factory with some water pumps installed. If the water is not higher than 1.5 metres, the barriers can prevent a flood.

So far, 198 factories with 90,000 workers in Rojana Industrial Park have begun evacuation plans and built dikes to prevent damage to their properties. The Bang Pa-in Industrial Estate has raised the alert level from being on guard to preparedness level.

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