Owens Corning increases global development

Monthly business news for the reinforced plastics industry

Owens Corning increases global development 1600"

Jane Gilby reports ~ H E LATEST development in ~Owens C o m i n g s global expan~sion has come in the form of a US$25 million investment to install a continuous filament mat line (CFM) at its plant in Guelph, Ontario, Canada• The new line will add approximately 8000 tonnes of CFM capacity and is expected to start up in the first q u a r t e r of 2000. This i n v e s t m e n t follows recent CFM capacity increases at Owens Corning facilities in Battice, Belgium, and Huntington, Pennsylvania, USA. "During the last year, we have seen growing demand for CFM, primarily in pultrusion and resin transfer mouldi n g (RTM) processing," says Bruce Fawcett, general manager, Thermoset Processors, Owens Corning. "We are expanding our offerings to meet customer needs." "We are committed to the growth of the composites i n d u s t r y and have made several large investments, such as the CFM line in Guelph, to support this commitment," says Heinz Otto, president, Composites Systems Business. "With this increase in capacity, we will be better able to service the needs of our customers worldwide?' Despite a 5.3% fall in sales within its Composites Systems Business since 1996, this is the third investment announcement to come from Owens

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Corning in the past month. In addition to the Canadian expansion the firm has dedicated a US$100 million plant in India, built by a joint venture between Owens Corning and Indian conglomerate Mahindra & Mahindra. The Taloja plant began trial production last September and has an initial capacity of 30 000 tonnes, producing glass fibre rovings and chopped strand mat (CSM). The plant will initially focus on global markets with up to 75% of production intended for export. According to Owens Corning's chairman, Glen Hiner, the goal at its Indian plant is to generate annual revenues of $55-60 million from 1999. "We will look at expansion in future along with the growth of the Indian and global markets for composites. Longer term the advantage that we want to have is to develop the market within

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Owens Coming

India so that we can consume significantly higher percentages of the output in the local market." Otto estimates India's composites consumption at approximately 10 000 tonnes per year, a figure that the company aims to grow by 20-30% per year. This is in spite of the fact that the company's Composite Systems Business' sales to the region - included under the term Canada & Other - , have fallen 2.2% since 1997. The second of the company's steps ' in increasing its global presence is the announcement that it now owns the majority share in its glass fibre joint venture in Kimchon, Korea, with a capacity of around 60 000 tonnes per year. This, says Owens Corning, makes it the largest glass fibre reinforcements producer in Asia. "The plants in Taloja and Kimchon are an integral part of our plan to achieve our goals," says Otto. "In addition to providing quality products and

ISSN 1464-2840/99/US$20 © 1999 Elsevier Science Ltd. All rights reserved. This journal and the individual contributions contained in it are protected under copyright by Elsevier Science Ltd. Please see back page for terms and ~L.%v1~.a conditions that apply to their use. ' ( HN(II.OG~'

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service to our valued customers, we are also working with customers to develop composites solutions to meet their needs." Owens Corning's activities in Asia already include four plants in China. However, the focus of these is on building materials and they are smaller compared to the Taloja plant, making the company's investment in India greater than in China. "This is the biggest investment made by Owens Coring in any of its plants worldwide in the last couple of years," says Hiner. According to Hiner it is also unlikely that Owens Corning will contemplate any major takeovers in the next two years.

Algroup merger with Viag is off

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Composites Business Analyst

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Toray revisesincome predictionsfor 1999

Geon Co introduces business segments IN ITS 1998 financial results Geon Co will, for the first time, present the information in two business segments: Performance Polymers and Services (PP&S) and Resins and Intermediates (R&I). The PP&S segment includes: vinyl compounding; speciality r e s i n s ; plastisol formulators (Plast-O-Maric, Adchem, Wilflex); Polymer Diagnostics Inc, an analytical testing and service unit; and Geon's 40% equity interest in the Decillion LLC joint venture with Owens Corning (Composites Business Analyst, November 1998). This joint venture will support the technology and manufacturing expertise of the parent companies to provide materials solutions based on patented

glass reinforced plastic (GRP) technol- future held for Neste Polyester, part of ogy. In the early stages of formation Neste's chemicals interest. Decillion will not have a significant Risto Lapinleimu, senior vice presimpact on revenues in 1999. ident, Neste Polyester, told Composites 1998 sales for the company's PP&S i Business Analyst the answer is simbusiness reached US$839.2 million in i ple: "Neste Polyester is not for sale". 1998, resulting in business earnings of However, Neste Chemicals is. $93.8 million for the same period. Fortum is currently looking at several acquisition and merger oppor,...' t u n i t i e s and L a p i n l e i m u confirms that potential offers are already on ..," .,,-'" the table. ,.. ..." ,.." ...: .." ..• Lapinleimu is also keen to stress .,. .,-" .. .J' ... that the overall strategy of Neste Chemicals will not change and investors are likely to develop its core and established businesses, of which Neste Polyester is one. "This ' is a good opportunity, not a threat", he says. This comment came six weeks after the announcement that Neste Oy was to transfer its chemicals business to Neste Chemicals Oy, one of five diviGeon Co sales - US$ millions sions of the Fortum group (Composites Source: The Geon Co Business Analyst, March 1999). Though described as Fortum's 'fifth division' Neste Chemicals represents i 11% of Fortum's 1998 net sales. At i FM5397 million, this is a 13.1% increase on its 1997 net sales of THE CHIEF executive of Swiss FM4771 million. firm Alusuisse-Lonza Holding Ltd (Algroup) Sergio Marchionne says that the p l a n n e d merger with G e r m a n utility firm Viag has failed on the basis of a new evaluation by the German company. Part of Algroup's manufac- FURTHER indications that Japan is turing interest includes unsaturated not out of the economic woods comes polyester. from carbon fibre producer Toray Viag said that its valuation of the Industries of Japan. The firm has merger would give its shareholders revised its projected business result for 67.5% of the new company compared the fiscal year ending 31 March 1999. with Algroup's 32.5%. Algroup believes The company's previous projection announced in November 1998 targeted that the merger should be based on the original and agreed valuation - 65% to consolidated net sales of approximately ¥1040 billion, operating income of Viag and 35% to Algroup. around ¥60 billion, ordinary income of about ¥48 billion, and net income of approximately ¥11 billion. Now it expects net sales to reach be sold as one ¥1000 billion, a fall of ¥40 billion or WHEN Finnish firms Neste and IVO 3.8% from the predicted result. Net joined forces last year to become : income is also predicted to decrease, Fortum it was decided that energy, not down to ¥5 billion, a fall of 54.5%. Toray chemicals, was to form the core of its believes that an intensive programme business. This left many in the com- to improve profitability, already underway, will boost performar~ce in 2000. posites industry wondering what the

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M a y 1999

B-2 repair centre moves UNDER a partnership agreement with the US air force, Northrop G r u m m a n Corp's Integrated Systems and Aerostructures Sector is transferring its composite m a n u f a c t u r i n g and repair operation for the B-2 stealth bomber to the composites repair and overhaul facility at Hill Air Force base, Ogden, Utah. According to the company the transition of the specialised composite repair operation is essential for the air force's long term support of the B-2. It is hoped that it will now provide the capability to handle all composite spares and repairs on the fleet of 21 B-2 aircraft for the next 30 years.

BP Amoco cuts jobs THE ANNOUNCEMENT that BP Amoco Chemicals is to slim its workforce down by 15% to 20 000 has had little effect on the structure of its composites business. Ben Bogner, a senior chemical engineer for BP Amoco, told Composites Business Analyst, t h a t though there has been some reorganisatien within its composites business, the majority of the job cuts have been implemented in other business sectors. Though there have been no big budget cuts to date, Bognor thinks it unlikely that staff numbers will grow within BP Amoco's chemicals business in the near future. The cuts so far experienced have m a i n l y impacted on exploratory research.

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IN A US$55 million deal US firm Denali Inc is set to acquire Netherlands based Welna NV which, the firm says, will create the world's largest engineered fibre reinforced i plastic (FRP) products company. i Denali Inc, a manufacturer of engi~! neered composite products for corro-

May 1999

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Denali Inc Net sales - US$ thousands Source: Denali Inc

sion resistant equipment, is set to buy Welna for C37 per share and will assume approximately ~11.5 million of the company's debt. Operating through two divisions Welna designs, m a n u f a c t u r e s and installs FRP pipe systems, vessels and related equipment requiring high corrosion resistance. The new company will have approximately $250 million in annual revenues and manufacturing locations in the USA, Netherlands, Germany, France, Poland, Venezuela, Thailand ] and the UK. "The combination of Denali and Welna creates a tremendous core of engineering and manufacturing capabilities," says Edward de Boer, Denali's president and chief executive officer. "The diversity and scope of our products, markets and technologies will allow Denali to provide more complete and efficient solutions to our customer's needs, whether they are in North America, Europe, Asia or South America. Besides being highly stratei gnc, Denali believes the transaction to i be accretive in calendar year 2000 and beyond." According to Welna's chief executive officer, Henk Kroes, Welna brings to the combination a strong competitire position in the European market and good access to the surrounding area, particularly through its subsidiaries in France and the UK. The t r a n s a c t i o n is subject to ~i approval by Welna NV shareholders and other closing conditions and is i

Denali says it is set to create world's largest FRP firm

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Composites Business Analyst i

expected to be completed in August, the first fiscal quarter of 2000.

newly formed company are predicted World Star vehicle owned by WTA and to be US$420 million. Composites One will pay a royalty to WTA for all future will be a joint venture of GLS Corp vehicles it produces incorporating a the parent company of GLS construction design using the composDistribution Corp - and Cook ite chassis platform based on the Composites & Polymers, owner of CMI design and technology of the World HAVING only acquired certain assets and RP. Star. of glass fibre fabric m a n u f a c t u r e r "The vision of Composites One is "The agreement is equitable for Clark-Schwebel in September 1998, both parties and will benefit both comHexcel Corp is to close its Hexcel to be the most dynamic, innovative panies," says BAT's president Joe Schwebel m a n u f a c t u r i n g facility in and respected supplier of composite LaStella. Cleveland, Georgia, partly as a result materials in North America," says Steve Dehmlow, Composites One's of increasing competition in Eastern Europe and Asia. The plant is expected chief executive officer. "Our primary to close by 1 July 1999. focus is to help our customers build The facility, opened in 1980, cur- better products, more cost effectively. rently employs 100 people and pro- Customers have come to expect an duees fabrics used to make rigid, sin- ' extremely high level of local service gle-sided and double-sided printed and technical support from CMI, GLS US CHEMICAL firm H u n t s m a n Corp, wiring boards. Production equipment and RP." Salt Lake City, Utah, and BASF from the Cleveland facility will be According to Lean Garoufalis, Petronas Chemicals Sdn Bhd (BPC), moved to the Hexcel Schwebel facility Composite One's chief operating offi- Malaysia, hav e signed an agreement to in Anderson, South Carolina. cer, the aim of the firm is to eliminate use H u n t s m a n ' s maleic anhydride "The decision to close our redundant operations and administra- technology and catalyst in BPC's new Cleveland facility is a direct result of tive expense, though he is confident butanediol (BDO) plant in Gebang, continuing efforts to consolidate our that job losses will be minimal as the Malaysia. operations, reduce operating costs and firm strives for a high growth rate. Maleic anhydride produced at the respond to competitive market condifacility will be used as feedstock for tions," says William D. Bennison, presthe 100 000 tonne per year plant, ident of Hexcel Schwebel. "The market which is expected to come on stream for products made in Cleveland was in 2002. affected by inventory adjustment in "This marks the seventh consecu1998, and currently is under intense' tive time that a company has selected pressure from Asian and East Huntsman's maleic anhydride technolCOMPOSITE Automobile Research European competitors," he adds. Ltd (CAR) and its wholly owned sub- ogy over our competitor's technology," "Notwithstanding these factors, we sidiary World Transport Authority Inc says Thomas Fisher, H u n t s m a n ' s believe that strong consumer demand (WTA), have completed negotiations senior vice president. for cellular telephones, computers and Fisher continues, "The three that for the sale of WTA's Master License to other personal electronic devices, comare butanediol plants each use the World Star Andino/Panama for the bined with Hexcel Schwebel's leading integrated process utilizing the combinations of .Colombia, Venezuela, marketing position in lightweight fabnation of H u n t s m a n and Kvaerner Ecuador and Panama. This will allow rics for high,tech multilayer printed World Star Andino/Panama to build technologies, which provide licensees wiring boards, offer attractive potensell and distribute the World Star line the industry's best BDO economies." tial for the future." The new facility will use of composite utility vehicles in these H u n t s m a n ' s proprietary butane-tocountries. The sale calls for 24 factories to maleic anhydride technology and catabe installed at US$372 000 each with lyst to construct an n-butane based, fixed bed maleic anhydride plant. $112 000 of the sale going towards the Currently the world's largest producer Master License sale price. In total THREE of the USA's leading composof maleic anhydride this is the second WTA's Master License sales are in i ites distributors, Composite Materials announcement regarding Huntsman's excess of $2.6 million. The factory sales i Inc (CMI), GLS Composites maleic anhydride interests in as many to the four nations will exceed Distribution Corp and RP Associates, months. are set to combine their businesses, $6.2 million. The firm already has maleic anCAR and WTA have also agreed to forming a new company called hydride interests in the USA, Saudi settle a lawsuit filed with the San Composites One. It is intended that Arabia, Germany and Mexico the new organization will serve over i Diego Superior Court against BAT (Composites Business Analyst, March 7000 customers from 30 distribution i International Inc. BAT now acknowl1999). edges and recognizes the rights to the centres in the USA. 1999 sales for the i

Hexcel shuts facility

Huntsman signs new maleic anhydride deal

Composite vehicles to be made in South America

US distributors join forces to form firm

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Composites Business Analyst

May 1999

, US strives to legalise hemp cultivation ~ FARMERS across the USA are enlist! ing state legislatures in an effort to legalise the cultivation of hemp, a natural fibre alternative to glass fibre. The states of Montana and Virginia have formally called for an end to a federal ban on 'industrial' hemp, and in Minnesota a bill has been passed which is aimed at allowing the production of experimental hemp. New Hampshire, North Dakota and Tennessee are also actively consider' ing legalising hemp farming. Canada began allowing hemp production in 1998. Farmers planted 24 million m 2 of hemp and claimed profits of approximately US$200 per 4000 m 2. The reluctance to legalise hemp comes predominately from anti-drug organisations, including the White House's Office of National Drug Control Policy, that are concerned that it would send the wrong signal to young people, and t h a t m a r i j u a n a farmers could hide their crop with industrial hemp plants• Across Europe many car makers have already conducted research into the use of n a t u r a l fibres as a replacement to glass in reinforced plastics, and though they may never be as strong and consistent as glass based equivalents n a t u r a l fibres could be a substitute in applications where glass represents an over designed solution•

Cray Valley builds on Asian business PART of the composites interest of French oil and gas group Total, Cray Valley, is to strengthen its presence in Asia with the acquisition of the structural resin activities of South Korean firm DAE Sang group, based in Chun Ju. DAE's composites business includes unsaturated polyesters, vinyl ester, gel-coats and sheet moulding compound• Located 220 km south of the capital Seoul, DAE's production facilities have an a n n u a l capacity of approxi-

May 1999

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Total's resingroupsales1998 FFr billions Source: Total

mately 50 000 tonnes. Sales for the fiscal year 1998 reached US$15 million. By establishing this foothold in the Korean structural resins market Cray Valley is considerably strengthening its Asian presence in a market already larger than that of its home territory of France. Total's resins business is said to c u r r e n t l y r a n k second in Europe and the USA. Ongoing demand in both of these markets helped sales for the division reach FFr6.3 billion in 1998

Styrene supply deal TEXAS, USA, based Westlake Styrene Corp and Dow Hydrocarbons and Resources Inc have signed a letter of intent for a long-term supply agreement for styrene. Under the agreement Westlake will supply a significant volume of its styrene production from its Lake Charles, Louisiana, facility for Dow's styrene derivative needs in North America.

Clarification Composites Business Analyst would like to clarify that in the profile of Brunswick Technologies Inc (BTI) in the February 1999 issue the statement that Tech Textiles was not in good financial shape at the time of its acquisition by BTI was an error. The company had been profitable for all five years of T&N plc's ownership but was no longer part of the engineering based group's core business.

Composites BusinessAnalyst B

Owens Corning JaneGilby looksat the developmentand growth agenda of the USA'slargestglassfibre producer and examines its evolution within the European and Asian markets. wens Corning, Toledo, Ohio, USA, is one of the leading global manufacturers of glass fibre reinforcements for the composites industry and has grown its sales from nearly US$3.4 billion in 1994 to $5 billion 1998. Its business is concentrated on two areas - Composites Materials and Building Materials. Acquisitions have been a significant part of this growth and within its core businesses the company has completed 17 acquisitions since 1994 for an average purchase price of $1.2 billion. These have diversified its materials portfolio beyond glass fibre to include polymers, such as vinyl and styrene, and metal and stone. Owens Corning's growth agenda has focused on increasing sales and earnings by acquiring businesses with products that can be sold through exist= i n g or complementary distribution i channels, achieving productivity improvements and cost reductions in existing and acquired businesses and entering new growth markets. Implem e n t i n g two initiatives, System ThinkingT M and Advantage 2000, Owens Corning hopes to enhance sales growth and improve productivity across all businesses, which it hopes will result in it reaching $600 million in income from operations for the year 2000. In spite of the company's improved strategic position in 1997 competitive

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Composite Materials Net sales by region Source: OwensComing

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Composites Business Analyst

pricing in several of its product markets has negatively impacted on its financial results. Worldwide composite products pricing decreased by approximately 6% through 1997. However, volume increases in the North American composites market during 1998, particularly the fourth quarter, helped to offset price declines in European and Asian markets. Net sales for financial year 1998 were $5 billion, a 15% increase on the 1997 level of $4.3 billion. Sales outside of the USA represented 20% of total sales for 1998, compared to 24% in 1997. Sales for the Composite Materials segment fell 5% in total through 1998 with no one customer accounting for more t h a n 5% of sales in 1998. Within the USA sales in fiscal 1998 fell to $686 million, down 3% on sales in 19971 Composite Materials' sales within Europe also decreased down 5.1% - to $372 million in 1998. The largest decrease in regional sales loss is attributable to the Canada & Other segment which includes Asia Pacific. Sales to this region fell 14% in 1998 to $135 million from $157 million in 1997. However, income from operations for Composite Materials rose to $202 million in 1998, a 22.4% increase over 1997. Net loss for Owens Corning as a whole for 1998 was $705 million compared to net income of $47 million for the fiscal year 1997. Included in the 1998 net loss is a $1.4 billion pretax restructuring charge for asbestos litigation. At the end of 1998 the company

established a National Settlement Programme (NSP) in which approximately 90% of the asbestos cases against Owens Corning are to be settled. Under this NSP 50 plaintiff's law firms have agreed to resolve more than 176 000 of the cases against the company and will establish procedures and fixed payments for resolving future claims without litigation, for a period of at least 10 years (Composites Business Analyst, J a n u a r y 1999). A $117 million r e s t r u c t u r i n g charge in 1998 includes approximately $90 million for costs associated with the elimination of around 1900 personnel positions worldwide and $27 million for the divestiture of non-strategic businesses and facilities. "In 1998, we achieved a substantial operating improvement over 1997 and put our performance back on track. We exceeded our goals in achieving savings from restructuring, from optimising logistics and materials sourcing, and in implementing synergies from acquisitions. We also saw significant margin improvement despite the fact that after several price increases were implemented in 1998," says Glen H. Hiner, Owens Corning's chairman and chief executive officer. "In addition, we made important advances in both our Building Materials and Composites businesses as we realised benefits from our System Thinking strategic approach, which leverages our powerful brand and distribution network." " T h e economic e n v i r o n m e n t in North America continues to be

May 1999

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positive. Our productivity improved 6.9% in 1998, a benefit of our restructuring and productivity initiatives, as well as synergies from acquisitions. We expect to achieve the same level of ' improvement again in 1999." Owens Corning recently increased its presence in Asia by gaining 70% ownership in LGOC, now called Owens Corning Korea; and dedicated a stateof-the-art m a n u f a c t u r i n g facility in Taloja, India. Following the closure of Aurora Glass Fibre in Australia, Owens Corning has agreed to mainrain supply to the firm's customer base and has now established a direct presence in the country. Plans have also been announced to install a continuous filament mat (CFM) line at the company's p l a n t in Guelph, Ontario, Canada. The new line will add approximately 8000 tonnes of CFM capacity and is expected to be operational in the first quarter of 2000. The investment follows recent increases of CFM capacity at Owens Corning's facilities in Battice, Belgium, and Huntingdon, Pennsylvania, USA. "Through our market driven growth focus we are developing powerful industry alliances to bring new composite solutions to key markets", says Heinz Otto, president, Composites Systems business. "This is a very different approach to the market because our goal is to capture much more than the value of glass fibre composite." The 6% fall in the sales experienced by the company's Composite Materials segment is mainly attributed to the sale of 51% of the comp-

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CompositeMaterials Incomefrom operationsby region (US$ millions) Source: Owens Coming

May 1999

any's yarns and speciality materials agreements allow us and our partners business in the third quarter of 1998 to to directly serve market needs through a USA subsidiary of Groupe Percher the many synergies that exist between Industries, Badinieres, France, for companies," says Otto. $340 million. These joint ventures and technolIn September 1998 Owens Corning ogy agreements have set the precedent announced a joint marketing agree- for the future activities of Owens ment with Composites Materials LLC Corning. Though the uncertainty of to develop markets and electronic global markets and economies is i applications for composite solutions always a challenge to all in the com- i using conductive fibres. This was foll- posites industry Owens Corning is owed a month later with the announce- establishing itself as much more than ment that Owens Corning had formed a glass fibre producer and by 2001 it an alliance with Pyramid Operating ' aims to have 25% of its sales come Systems to develop and offer a technol- from products other than glass fibre. ogy and business system for compos- As for further expansion in the near ites moulding in marine, construction future it is unlikely that large acquisiand automotive aftermarkets in North tions will be part of Owens Corning's America. Within Europe Owens strategy. More joint v e n t u r e s and Corning also established a joint ven- small acquisitions are likely, but as for ture - StaMax - with DSM Automotive anything larger the company expects Polymers in October 1998 to market to be back in that arena in 2001. long fibre reinforced polypropylene (PP) materials targeted at automotive applications. The most recent alliance has been the formation of Decillion in December 1998 with The Geon Co. Owens Corning holds a 60% share in this venture to provide unique technology for reinforced thermoplastic polymers, initially focused on glass fibre and polyvinyl chloride (PVC) composites using a variety of processing techniques. "These joint ventures and

Composites BusinessAnalyst I

Saint-Gobain

remains positive. Vetrotex has also announced plans for greater industrial investment for 1999: 17% of turnover against 12% in 1998. This will build on its recent acquisition of Czech company Vertex, which will increase Vetrotex's range of thermoset products, and its acquisition of the FGP plant in India, facilitating its development in Asia.

SGL Carbon Group I Except per share data

Saint-Gobain is the leading European producer of reinforcement fibres for composites. The company's Reinforcements Division operates plants in ' n i n e countries: France, Germany, Spain, Italy, USA, Canada, Argentina, Brazil and South Korea through its subsidiaries, including glass fibre manufacturer Vetrotex. Currently the number two global supplier of reinforcements Saint-Gobain's distribution network covers most markets in the world. Net sales for the group reached 1 Except per share data i F F r l l 6 901 million in 1998, up 9.2% i G e r m a n firm SGL Carbon is the i on net sales of F F r l 0 7 078 million in world's largest manufacturer of carbon i 1997. Sales within its Reinforcements and graphite based products. The comi Division also increased to FFr16 318 pany's primary product is the graphite million in 1998, a 7% increase on 1997. electrode, which conducts current to Operating income for the Saint-Gobain fire electric steel furnaces. More t h a n group was F F r l l 647 million in 1998, half of SGL Carbon's sales are to the for the Reinforcement's Division it was steel industry. FFr1788 million, u p 19% on the prior SGL's composites businesses are year. Overall operating income for the held within the business lines of group represents 10% of its sales; Carbon Fibres and Carbon Composites. within its Reinforcements Division The company reports that both of operating income represents 11% of these business lines are favourably sales. Net income amounts to positioned to rapidly expand their FFr7196 million, a n increase of sales, as their products are increasing27.9% compared to 1997. Earnings per ly being substituted for others, or are share based on the total number of being used to improve key characteristics of other materials. shares issued at 31 December 1998 SGL Carbon evolved from the 90 295 788 shares - are FFr79.69 merger of numerous companies during , against FFr63.08 at the end of year 1992 and 1993 to meet the challenges 1997. arising from the increasing globalisaDespite monetary uncertainty at the end of 1998 and difficulties in tion of markets. Following restructurassessing trends in Asian, North and ing efforts and a significant t u r n around in earnings, it went public on South American markets, Vetrotex estimates that there is still growth the Frankfurt Stock Exchange in 1995. 1998 was, according to SGL, the potential for composites in 1999 and most difficult year it had faced since that, in the long term, the trend

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Composites BusinessAnalyst

its foundation. The group was able to m a i n t a i n its consolidated sales on the previous year's level despite the negative impact of the Southeast Asian/Japanese financial crises. Group sales rose 1% in 1998 to DM2112 billion, from DM2095 billion in 1997. Expenditures for research and development (R&D) climbed 21% to DM47 million and represented an unchanged 2% of group sales. In relation to sales, the main focus of the company's R&D activities was within its Technical Products business for the further development of applications for carbon fibres and composites. This business area expanded through internal and external growth throughout 1998 to become the company's second largest business area. SGL anticipates that its business in 1999 will continue to reflect the negative effects of the financial crises in the Far East and Russia which swept across the steel industry in North America and Western Europe in the fourth quarter of 1998.

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Brunswick Technologies Inc

1 E x c e p t per share data

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Brunswick Technologies Inc (BTI), Brunswick, Maine, USA, a developer of reinforcement products for the cornposites industry, reports increases in net sales and net income for the 1998 fourth quarter ending 31 December 1998 compared with the same quarter of 1997. 1998 year end figures were also up on the previous year.

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May 1999

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coatings and chemicals, reports first Net sales for the fourth quarter reached US$11 096 700, a 48% in- quarter 1999 sales of US$1.8 billion, a crease from the corresponding period of fall of 6% from the first quarter of 1998. Net income for the quarter is 1997. Net income for the quarter came to $352 600 compared with the previ- $123 million, 36% below the comparaous year's figure of $97 200. Net sales ble period of the last fiscal year. The company's net income result for 1998 totalled $41 422 100, up 36% includes a n after-tax r e s t r u c t u r i n g on 1997, while net income of $1 548 300 charge of $20 million. This relates to was 21% up on the previous year. the integration of PPG's recent packag1998 results include 10 months of ing coatings acquisitions. Without the operations of Brunswick Technologies Europe Ltd (BTI Europe) which BTI charge PPG reports that net income for the first quarter of 1999 would have acquired in March 1998. During the year BTI strengthened its foothold in been $143 million, $49 million below Europe, while in US domestic opera- the comparable 1998 quarter. "The US economy continues to pertions it added a new production line, form well with strong auto sales and upgraded an existing machine and completed building expansions in housing starts," says PPG's chairman Raymond W. LeBoeuf. "However, North Maine and Texas. BTI's chairman and chief operating America's and Europe's basic manuofficer Martin Grimnes says fourth facturing sectors are experiencing deflationary pressures, with margins quarter results met expectations and squeezed by declining prices. In addithat the stabilised gross margin of 21% was largely a result of improved mar- tion, negative trends that began last i gins in BTI Europe, lower domestic i year, associated with the troubled i raw material pricing, and continued i economies of Asia and now Brazil, persisted through the first quarter." ~ improvement in manufacturing effi"We are addressing this environciencies at the company's Maine plant. ment with aggressive actions intended Grimnes notes that fourth quarter to grow earnings more quickly and revenue was 7.6% up on the third consistently for the long term, includquarter, driven by 6.4% growth in net revenue domestically and 14.4% inter- ing strategic acquisitions, new product nationally. But he expects revenue introductions, further manufacturing growth in 1999 to slow as the company efficiency improvements and other concentrates on improving margins cost reduction actions," adds LeBoeuf. The company cites the mid-1998 and earnings growth. divestment of European fiat and autoPPG Industries motive glass operations as part of the reason behind the decline of the company's Glass segment sales. Effects of low-priced Asian glass fibre, particularly for use in electronics production, have also contributed to lower sales and operating earnings. LeBouef says that PPG will sustain growth with profitable acquisitions and i n v e s t m e n t in steady growth, higher m a r g i n businesses, reinforcing competitiveness and profitability by heightening supplier involvement in search of innovative technology and increasing quality and efficiency. PPG's board of directors has also declared a regular quarterly dividend 1 Except p e r share data of $0.38 per share payable on 11 June 1999 to shareholders of record of Pittsburgh, USA, based PPG Industries, a global producer of glass fibre, 10 May 1999.

May1999

Fortum Group

1 E x c e p t p e r share data

Lower prices of crude oil and electricity are cited as the main reasons for F i n n i s h energy group Fortum's reduced operating profit and net sales for the 1998 financial year. The organi- ' sation's net sales for 1998 totalled FIM50.5 billion compared with FIM60.0 billion in 1997, while net sales for 1998 of FIM50 501 million were 16% lower than in the previous year. The Board of Directors is proposing that Fortum pay a dividend of FIM0.75 per share. The Fortum Group was established last year, combining the businesses of IVO and Neste Oy. IVO's and Neste's eight divisions have been restructured into five Fortum divisions. The focus of Fortum is on energy through its Oil and Gas and Power and Heat divisions, which are supported by the Operation and Maintenance and Engineering divisions. The fifth divi- ' sion is Chemicals, which includes Neste Chemicals which incorporates unsaturated polyester resins and gelcoat supplier to the composites industry Neste Polyester. Fortum confirms that it is planning to sell off non-core businesses and assets. These include Neste Chemicals, which is expected to be sold as a complete business u n i t incorporating Neste Polyester (see page 2). It had been rumoured that Neste Polyester would be sold off on its own but this ' has been strongly denied by a spokesperson for Neste Polyester. Fortum says that if market prices of oil and electricity.continue to be as low as at the start of 1999, its performance in 1999 will be similar to 1998.

CompositesBusinessAnalyst i

Australia requires awareness of composites if industry is to grow The Australian composites industry is small by the standards of many countries, producing around 45 500 tonnes of finished composites in 1998, a figure expected to change little as we head into the next millenium. Jane Gilby examines the basis of the country's composites industry and where its future lies. he major user of composites in Australia is the building sector which accounted for around 8000 tonnes in 1997. As a result of the country's climate the largest market segments have traditionally included marine, personal watercraft and swimming pools. A recent report issued by the Composites Institute of Australia i (CIA) suggests that the extreme sensi- i tivity of these segments to economic ing, fast prototyping, low pressure booms and downturns has caused prepregs and more effective fabricamajor fluctuations in the market. This tion techniques. These, i,n conjunction has created difficult situations for both with emerging overseas applications fabricators and suppliers. This has in the civil engineering and infraresulted in traditionally strong marstructure areas, are expected to conkets for composites becoming static, tribute significant new growth as the falling behind transportation and corr- industry matures. osion resistance sectors in demand for A major factor currently affecting composites. the Australia industry is competition At present there is no major use both internal and from imports. The of composites in structural building recent closure of Aurora Glass Fibre's applications. The CIA concludes that Australian glass fibre reinforcement this is predominantly the result of manufacturing facility - customers are industry conservatism and restrictive now supplied by the Australian marbuilding codes. keting branch of Owens Coming - now A predominant sector in European, leaves the country's composites indusUS and Asian markets - automotive try entirely dependant on imports for has seen little growth in Australia and its fibre reinforcement requirements. is limited by the size of the Australian Aurora's closure was founded on the population. The small population excludes the economic r u n lengths needed to exploit some manufacturing processes and technologies already widely used in the northern hemisphere. Sheet moulding compound (SMC) per capita usage is still far below that of the European and US markets. The CIA also confirms that new technologies being introduced into Australia have the potential to allow economically viable fabrication of composite products in the lower r u n lengths associated with the Australiancompositesindustry Australian market. Included in these Source: Composites Institute of Australia new developments are lower cost tool-

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Composites Business Analyst

basis that the global market for glass fibre has become increasingly competitive in recent years with smaller, independent operators like Aurora finding it increasingly difficult to compete against larger operations. The area of resin production is not exempt from this factor either. This sector of the Australian composites industry has recently seen the respective acquisitions of Hatrick and Anzol by Nuplex and Valspar. In the early 1990s the Australian composites industry saw continuing growth, often 1% or more than the typical 2-3% growth per a n n u m in the country's gross domestic product (GDP). Recent years have shown a flattening of that pattern, hnprovements against worsening economies throughout the area have been made and loss of business to lower labour cost neighbours has fallen. The CIA believes this is thanks in part to an aggressive marketing programme it has adopted, Noel Drayton, executive director of the CIA, sees a significant upsurge in the interest in composites as an encouraging sign for future growth, The number of conferences and seminars, coupled with the composites component of tertiary engineering courses, is increasing and this can only help in assisting Australia's 200 or so composires companies look forward to a more economically and technologically advanced future.

May 1999

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Raw materials pricing

Pricing supplied by ICIS-LOR. Contact Nel Weddle; tek +44-181-652-3535; fax: +44181-652-3929; e-mail: [email protected]

Comment Many in the composites industry hold the view that fabricators of composite products do not get high enough prices for t h e i r products. Composites are often thought of as being a replacement plastic material not engineered materials in their own right. Part of the problem seems to lie at the beginning of the composites processing chain - raw materials pricing.

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Composites BusinessAnalyst

Certain m a r k e t sectors, such as aerospace and corrosion r e s i s t a n t products, are a l r e a d y commanding higher prices for their products but this has yet to filter through to the majority of composites processors. If higher prices could be charged then this would allow raw material producers to increase their prices yet also invest i n development, producing improved and better materials quickly - in turn helping the industry.

May 1999