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Couristan has moved production of its Axminster carpets from the UK to Thailand by signing a partnership deal with Thailand Carpet Manufacturing.

The Thai company produces carpets under the Tai Ping and Royal Thai brands.

"We selected Thailand to be our new manufacturing site because we believe Thailand Carpet Manufacturing has the ability to produce premium carpets rather than our plants in China and Poland," Couristan chairman George Couri said yesterday.

"Thailand's political uncertainty will not affect our business plan because we believe this is a temporary situation," he said.

The relocation is a part of the UK company's drive to cut product costs by 40-50 per cent. It will require laying off 115 staff at its UK plant.

Couristan has sold to its Thai partner 14 carpet machines with a combined capacity of 400,000 square yards a year for Bt60 million.

In return, Couristan will import Axminster carpets under the Couristan brand produced by Thailand Carpet Manufacturing.

Under a 10-year contract, Couristan will take delivery of 300,000-500,000 square yards a year for US$7 million (Bt248 million) to $10 million.

The Thai company's exports have been running at $3.9 million a year on average.

Couristan is the market leader in Axminster carpets, shipping to Europe and the US. The US market takes 95 per cent of its total exports. The total production capacity of its plants in the UK, China and Poland is 1.5 million square metres. Its total revenue is $150 million a year.

"Although the US market faces an economic recession, we have long experience in exporting our products to that market. When we succeed in reducing our production cost by moving our plant from the UK to Thailand, we can manage our prices to compete with our rivals in the US market," Couri said.

Chalermbhand Srivikorn, chairman of Thai Carpet Manufacturing, said the company had set aside an investment budget of Bt75 million for this deal, with Bt60 million going for the 14 machines from Couristan at Bt6 million a year over the 10-year contract. The remaining Bt15 million will be used to install the equipment at its plant in Don Muang district.

"We also will hire 100 more workers for our new plant," managing director Charlie Jangvijitkul said.

The company's production capacity for Axminster carpets will increase from 400,000 square yards a year to 800,000 after the set-up of the new machines is completed by the middle of next year.

"We believe that our sales will show strong growth next year after our new machines are working, although our domestic sales are expected to drop sharply next year following the country's slight economic growth," he said.

If the company didn't have this deal, its exports next year would be lower than last year, he said. But now after the deal, the company has strong confidence that its total sales next year will continue the growth average of 10 per cent and might up it to 15 per cent a year. In the first half of this year, Thai Carpet Manufacturing earned Bt7.49 million from Bt309 million in revenues, with 45 per cent from domestic sales and the rest from exports. Nearly a half of its exports go to the US, followed by the Middle East, Europe and Asia.

With the new machines ready by summer, US sales should rise from an average of 45 per cent of exports to 60 per cent in the next year, Charlie added.