The FINANCIAL — Towards 2022 the LEGO Group plans to expand and invest significantly in factories in Mexico, Hungary and Denmark to match the increasing demand for LEGO products.
In November 2015, the first step to expand the current LEGO factory in Monterrey, Mexico, begins. The factory in Mexico is planned to undergo a massive expansion, adding up to 190,000m2 to the factory. The investment in the factory will potentially include additional moulding, processing, packing and warehousing and consist of a EUR 3 digit million amount towards 2022, where the expansion of the factory is planned to be fully operational, according to LEGO.
“The exact details of the expansion and investment will naturally depend on the future development in demand for LEGO® products. Based on our current expectations we project an additional 3,000 colleagues in the factory in Mexico by 2022. Construction will begin before the end of 2015, and manufacturing will begin in 2018 according to our current plans”, says Bali Padda, Chief Operations Officer and Executive Vice President.
Global investments to bring high quality play to more children
The investments in Mexico are not stand-alone. The LEGO Group today announces plans for further investments in manufacturing capacity also in Billund, Denmark and Nyíregyháza, Hungary.
“As a company we are dedicated to inspire and develop children all over the world through great LEGO play experiences, and we are thrilled to experience a really high global demand from children and customers. The investment plans we share today will enable us to reach even more children in the future with fun LEGO products of the highest quality,” says John Goodwin, CFO and Executive Vice President of the LEGO Group, adding:
“It also means that we anticipate welcoming thousands of new employees to the Group as we continue to expand our global presence. This is a significant announcement for us and it sends a clear signal that we are committed to ensuring that we can meet the future product demands of children and customers.”
Hungarian factory to be expanded
The LEGO factory in Nyíregyháza, Hungary, is also planned to undergo significant expansions. In order to meet the expected demand from customers and consumers, the LEGO Group will begin installing moulding machines during 2016 in a nearby rented facility and begin expansion of the LEGO factory with additional warehousing and processing facilities in the near future.
“In addition we are investigating the opportunity of expanding the LEGO factory site with moulding and packing over the coming years – with the potential of doubling the size of the factory and investing a EUR 3 digit million amount towards 2020,” says Bali Padda.
The planned expansion in Hungary will mean that in 2016 an additional 150 employees are expected to be recruited. Depending on the development of LEGO sales and potentially further investments made, as many as 1,600 new jobs may be created in Nyíregyháza towards 2020.
Continued investments in LEGO Group Headquarters
The LEGO Group will also continue to invest in the LEGO factory located at the company’s headquarters in Billund, Denmark. In June 2015, the LEGO Group announced a DKK 1 billion investment to find new sustainable alternatives to current raw materials. This includes the establishment of a Sustainable Materials Centre, which will be based in Billund, and recruitment of approximately 100 employees to work on this challenge.
In addition, the existing moulding facility in Billund will be further updated and modified with new moulding technologies during 2016.
“Our moulding facility in Billund plays an important part in our ability not only to deliver products to children globally but also to continue to innovate and lift our manufacturing know-how to new levels across the globe. In 2016 we will invest a EUR 2 digit million amount in new manufacturing technologies in Denmark, which will improve our ability to deliver the products our customers demand,” says Bali Padda.
Investments needed to follow demand
The planned expansions follow an already high investment level in manufacturing capacity in the LEGO Group. In 2013, the Group invested DKK 2.6 billion in property, plant and equipment, rising to 3.1 billion in 2014.
“In the past decade we have seen LEGO sales growth in the double digits year after year. We are of course very excited about this development, as it is the result of thousands of LEGO employees working to develop, manufacture and distribute LEGO products. The high demand also puts a strain on our factories around the world, and we make these investments to ensure that we can deliver all the products consumers desire both in the short and long term,” says John Goodwin, adding:
“We are regularly reviewing the needs for further investments in order to deliver on our ambition of eventually bringing LEGO play to every child in every country around the world.”
The LEGO Group most recently opened an expansion of its manufacturing site in Kladno, Czech Republic, earlier this year and is currently in the process of constructing its first factory in China, which is set to start manufacturing this year and be fully operational by 2017.