To ALL, here are some more thoughts about Lenox's potential.
I've been trying to get a handle on just how big the markets are that Lenox's resins address. We've seen estimates of the size of the foundry industry's resin consumption, about 800,000,000 lbs. annually, worldwide. At a conservative $.50/lb, that xlates to a $400M market. I've been told the glued wood products market is much larger, but I haven't seen any estimates as to how large it is. Well, I've tried to find out.
I did some library research recently into the market for glued wood products. I discovered a government document, called the Census of Manufactures. The latest version (they have) is for 1992. I could not find, in one number, what I wanted, namely the amount of glue used in glued wood products yearly, but I did find some other numbers that are relevant.
That document reports that the amount of glues and adhesives used in hardwood plywood and softwood plywood amounted to $227.5M. If I'm reading the charts correctly this number does not include the amount used in "structural plywood" or in "reconstituted wood products". Moreover this number is for production in the US only. I still don't know what fraction of worldwide production of these products occurs in the US.
Some other numbers that the book gives that may be used as a basis for estimation: In a chart of "Value Shipped", the chart indicates that the total value of the following
1) Hardwood plywood
2) Hardwood plywood-type products
3) Softwood plywood-type products
4) Softwood plywood, rough
5) Softwood plywood, sanded
6) Softwood plywood, specialties
7) Fabricated structural wood products
amounted to $7,586M, for the US for 1992. I don't know what exactly the terms mean, although it appears, from the chart, that some glued wood products are not included, such as wood veneers, which could easily be another $1,000M or more.
What might worldwide production be? I don't know, but I hear that a lot of production does not occur in this country.
Let's make some suppositions:
1) US production is 1/2 of worldwide production
2) Production since 1992 has increased only 10%
3) Wood veneers make up only 10% of the total glued wood products
On that basis, using the $7,586M number for US production in 1992, we'd get a market of about $18,544M for worldwide production.
How much of that goes to pay for the glues to make the products? I don't know and would welcome anyone's input who knows something about this industry. My understanding is that the glues are the only material input that has a significant cost, since these products are made mostly from wood that would otherwise be waste. Most of the cost of manufacturing the products is, of course, labor. And, these numbers are not cost of manufacture, but value shipped. So, we need some additional assumptions. Suppose:
4) Cost of manufacture is 1/4 of the value shipped.
5) Glue is 10% of the cost of manufacture.
Then the market here for glues is 2.5% of the total $ number above, or about $464M. This number is in the ballpark of the first number reported above for the amount of glues used in plywood production. Using the above assumptions on that number gives an estimated market of at least $557M worldwide. So, maybe the assumptions aren't terribly far off. I've tried to make them conservative, but as I am not familiar with the processes involved, I can't vouch for them. If US usage is much less than half of that worldwide, if wood veneers constitute a much larger percentage of the whole, if worldwide usage has increased significantly since 1992, then the estimates will be correspondingly low.
If those numbers are anywhere near to being correct, and Lenox resins are what they seem to be, that would be the potential market for them, just from the wood products industry.
With the estimate from the foundry industry being 800,000,000 lbs annually, and an estimate of, say, $.50/lb for the resins, there's a $400M market there.
It looks indeed that the potential total market for Lenox resins is at least in the $Billion+/year range. Not a bad potential for a company that this fiscal year expects to have sales of about $.5M, i.e., less than 5/10,000ths of its potential.
I welcome any feedback about the reasoning and assumptions here.
TIA,
-DT
P.S. Fantasy time: imagine Lenox reaches its potential, or nearly so, just in these two markets, as they are estimated above, and also that its stock price grows at, say, just 1/2 the rate of its rate of revenue increase. Then, we're looking at a stock that will increase by a factor of nearly 1,000. I.e., an investment of $1000 at the current prices would become nearly $1,000,000. Comments?
Regards,
-DT
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