Todd, good post.
A couple of points on the markets you identified.
Auto - good top end number. This product would be chopped fiber.
Sheilding - again chopped fiber. Competition is conductive additives such as carbon black (petroleum byproduct) or other metallic additives. My guess would be that the top here is 50% less than yours.
Shipping containers - I really think this is a stretch. The designs currently being tossed around are mostly glass and aluminum/steel can be used for high load stiffeners cheaper. Also, 95% of containers are made in Asia - Toho and Toray absolutely dominate the Asian carbon fiber market with some 95% share.
Wood beams - the only advantage carbon fiber adds for glu-lam beams is reducing the size of the beam. The amount of wood eliminated by using a small bit of carbon fiber costs less than the carbon fiber. In other words you have to pay more for a beam which offers some lighter weight and less depth. Only advantage is if you have a building where vertical clearance is critical. I've been following this application for over 5 years and every year I hear that it will use a million pounds of fiber and every year it doesn't. By the way, Akzo has an exclusive arrangement with the company who holds the patent on carbon-wood beams. Akzo has funded much of the development and I don't see any way that Zoltek will ever be able to sell any fiber for this application.
Your expectation of cost is way off. Go get the SAE report I listed earlier. Many studies have been made to suggest the lowest selling price for carbon fiber is around $7.50/lb if a company is expected to be able to reinvest. Reason:
Acrylic fiber costs $0.60/lb in massive quantities. Carbon fiber precursor requires a "pure" acrylic with some special processing during the spinning process. This is why Zoltek cannot just use the Hungarian acrylic for carbon. The additional steps add cost and the theoretical low end for carbon fiber precursor is around $1.25/lb.
Tulvio was close in his conversion, but it actually takes 2.2 lbs of precursor to make 1 lb of carbon. So you are at $2.75/lb before you burn the fiber. Now, depending on where your fiber plant is, you use a significant amount of high cost energy to run this fiber through oxidation and carbonization ovens. Energy probably adds about $1/lb. Then add the labor to run the carbon line, say 3 operators (1 to load, 1 to unload, 1 to operate ovens/furnaces - just guessing), 7 days a week, 365 days a year.
Labor 3 operators x 24 hrs x 7 days x 52 weeks x $15/hr = $393,000
$393,000 / 1 million lbs per line = $0.39 / lb
We are now at $4.14/lb without any overhead or depreciation on the line. If $60MM buy you seven lines (current industry sentiment is the $60MM will only buy around 3 lines - based on the costs of the Akzo, Toray, Toho expansions, but we'll assume best case):
Depreciation = $60MM / 7 lines / 15 years / 1 million lbs = $0.57
Overhead, SG&A - I don't have the S-3 or the annual report at home, so I'll have to look into this later this week, but my assumption would be that these categories would total $15MM/year at the volumes we are assuming, so that equals $1/lb.
So my total for absolute optimum cost is $6.71. If they sell at $7.50 the margin is only 11%. So my Income statement looks like
Sales $112.5 (15 million lbs x $7.5) the wood beams are out.
Pretax 12.4
Net 7.4
Number of shares 16
EPS $0.46 this is only for the carbon fiber, add $0.40? for acrylic
Anyways you get the picture - the growth story is going to be very different - even if they can capture 75% of the available "best case" emerging market. For your own fun,run through next years numbers. assume 3 lines up at mid year.
Your last comment was the best Todd. You have hit the nail on the head. There is absolutely nothing keeping the big carbon fiber guys from taking this market Toray, Toho, Amoco, Hexcel are not playing today because there is a chronic shortage of small tow fiber for aerospace and this sells for $30+/lb. When the shortage is gone, they will all look elsewhere to grow. It will be fun to look back at these analyst reports in the near future.
Best of luck.
Flyguy. |
