Kiwi firm builds bigger factory in Mexico as Trump talks tariffs
Fisher & Paykel Healthcare has started building a new manufacturing plant in Mexico at a cost of about $50 million despite concerns it could be hit by an import tax floated by United States president Donald Trump.
The medical device company first announced its plan to expand its existing plant at Tijuana in Mexico in August, when pollsters and bookies were giving Trump only a slim chance of winning the US presidency.
Spokeswoman Rachel Reynolds said earthworks had now begun and it expected the new facility would be completed early next year.
F&P Healthcare has used Mexico as a manufacturing base to supply US healthcare providers with its respiratory face masks. But that strategy is threatened by the Trump Administration's tentative proposal to levy a 20 per cent tax on imports from Mexico to fund a new barrier on the countries' border.
Reynolds said the Auckland firm was keeping a close watch on the situation. He reiterated a comment that chief executive Lewis Gradon made in November, when he said the company could divert production from Mexico elsewhere and supply the US market from New Zealand – where it still does the bulk of its manufacturing – if necessary.
Gradon also noted in November that the lower value of the Trump-hit Mexican peso would make manufacturing in Mexico cheaper.
The peso fell by more than 10 per cent against the US dollar in the wake of Trump's election and was last week trading at about the same level that it reached in the immediate aftermath of the election.
Reynolds said the company had found Tijuana an attractive place to manufacture medical devices. "We have an excellent team of very skilled people there," she said.
F&P Healthcare is the country's most valuable technology company with a market capitalisation of $5 billion. In August it also announced plans to build a fourth building at its headquarters in East Tamaki at a cost of between $100m and $150m.
Analyst Morningstar said exports from F&P Healthcare's Mexican factory to the US accounted for 18 per cent of the company's sales.
Just over a third of the company's products were made in Mexico, and about half of its output from Mexico was exported to the US.
Morningstar is recommending investors accumulate shares in the company, valuing them at $10 – a 12 per cent premium to F&P Healthcare's closing share price on Friday.