Computations of earnings capability for first 4 lines as outlined in my previous post.
Mooter, from what was stated during the July 1 conf. call, and as confirmed by your post #734, here are what appear to be the MAXIMUM capabilities for the first 4 production lines, with the companies 40% profit goal and 90% yield.
Line 1 laptop cells, probably based on 2 shifts/day
---------3 million batteries/yr x $24/battery x 40% x .9 =- --------------------$27.4 mln/yr
Line 2 cellphone cells
25 batt/min x 60 min/hr x 23 hr/day x 360 d/yr x $8/batt x 40% x .9 = ------- $35.8 mln/yr
Line 3 laptop cells
16 batt/min x 60 min/hr x 23hr/day x 360 d/yr x $24/batt x 40% x .9 = -------$68.7 mln/yr
Line 4 laptop cells
16 batt/min x 60 min/hr x 23hr/day x 360 d/yr x $24/batt x 40% x .9 = ------ $68.7 mln/yr
-----------------------------------------subtotal-----------------------------$200.6mln/yr
-----------------operating cost, general & administrative----------------------($30 mln/yr)
----Irish taxes should be offset by rebate but included regardless----------------($ 8 mln)
net profit(approx $30 mln rebate not included)----$162.6 mln/21.7mln sh = -- $7.49/sh/yr
This maximum capacity figure compares well with $6/sh/yr posted in the summary.
Here are some "real world" numbers that appear likely during the ramp-up by Q2 1998. They are based on 2 shifts/day and 33% profit. Cal Reed indicated that they would be happy with 50% to 70% yield during the ramp-up. I will use 60%. This time I will include the approx $32 mln rebate from the Irish govt that kicks in after the first $4.5mln of product is shipped.
Line 1 laptop cells
------2.5 million batteries/yr x $24/battery x 33% x .6 =- ----------------------$10mln/yr
Line 2 cellphone cells
---25 batt/min x 60 min/hr x 15 hr/day x 360 d/yr x $8/batt x 33% x .6 = ---- $10.8 mln/yr
Line 3 laptop cells
---16 batt/min x 60 min/hr x 15hr/day x 360 d/yr x $24/batt x 33% x .6 = ----$20.7 mln/yr
Line 4 laptop cells
---16 batt/min x 60 min/hr x 15hr/day x 360 d/yr x $24/batt x 33% x .6 = --- $20.7 mln/yr
----------rebate by Irish government after first $4.5 mln shipped----------------$32 mln
------------------------------------subtotal------------------------------------$94.2mln/yr
------------------operating cost, general & administrative----------------------($26 mln/yr)
------------------------------------Irish taxes est-------------------------------($ 5 mln)
--------------------------------net profit---------$63.2 mln/21.7mln sh = -----$2.91/sh/yr
The Irish tax estimates are based on 8% of the cost to produce multiplied times a general tax rate of 33%. This amounts to about 2.6666% of the cost to produce.
For the high speed lines, the 24/min figure comes from Cal Reed's statement on the conf call that the production rate is 240 bi-cells/minute and cellphone batteries require 10 bi-cells each. The 16 /min figure for laptop batteries is from his statement that it requires 4 to 6 bi-cells for a laptop cell. The mid-range figure results in 48 cells/min. I divided by 3 cells/battery for the 16 batteries/minute that corresponds with the rate you indicated in your post #774.
A point for clarification is the estimated value per battery. My understanding is that laptop batteries will be made by stacking three 4 x 4 inch 3.8 volt 15.5 watt-hr cells and connecting them in series for a total of about 47 watt-hr. At $2 per watt-hr they should sell for about $94 each wholesale. This would be more in line with your observation of $500 per battery retail. I would suggest that the $24 figure at 16 per minute applies more correctly to cells, and at 15.5 watt-hr per cell and $2 per watt-hour, we are very conservative with the $24 figure.
As yields improve, so should the likelyhood of adding the third shift with the obvious economics of increasing production without further capital investment. You noted that my pervious estimates were significantly higher than yours. I remember that they were based on 3 shifts/day rather than two, which should, for the most part, account for the difference. I believe my line 1 numbers are now lower than yours.
Regarding the likelyhood of problems with the high speed lines, I understand that the company was very pleased with their testing in Italy, and that the line was thoroughly tested with expired resins and chemicals. I further understand that the bulk of remaining concern centers on not yet having used fresh chemicals. It is my opinion that this risk is relatively insignificant and related problems should be easily overcome.
I assume that you have spoken with the company since the conference call.
I will welcome your comments, especially on cell vs battery count.
Best Regards, FMK |
