News from Notch Consulting, Inc.

April 30, 2008

Phillips Carbon Black Posts Best-Ever Results

Filed under: Carbon Black — Notch @ 12:33 pm

On Tuesday, Phillips Carbon Black posted its best ever financial results for the quarter and fiscal year ended March 31, 2008. For the year ended March 31, 2008, the company reported net profit of Rs. 89.30 crore based on total income of Rs. 1039.3 crore. Net profits rose nearly four-fold from the previous year period, compared to a 3.7% increase in total income.

Here is a copy of the audited results.

In an article from The Telegraph (Calcutta), Sanjiv Goenka, vice chairman of RPG Enterprises (parent company of PCBL), stated that the results represented “a complete re-invention of the company. What we had done three years ago at CESC has been done in PCBL now.” CESC, another subsidiary of RPG, is an Indian power company.

Also from the Telegraph article:

Incidentally, carbon black feedstock price rose sharply to $70 per barrel in March 2008 compared with $41 a year ago. But PCBL managed to mitigate the rise in input cost by transferring the burden on to consumers.

PCBL is now investing Rs 350 crore in its fourth plant at Mundra in Gujarat. It also plans to expand its Cochin plant. The funds will come from internal accruals only. Following the expansion in 2009-10, PCBL will become the sixth largest producer with 410,000-tonne capacity, up from 270,000 tonnes at present.

April 25, 2008

Why Did PAX Fail?

Filed under: Run-flats — Notch @ 4:06 pm

That is a key question in the wake of Michelin’s announcement that it was ceasing OE sales of its PAX run-flat system. Michelin poured significant resources into this technology, which it compared to the radial tire in terms of its expected impact on the tire industry.

My own thoughts on contributing factors can be found here.

For another view, here is an analysis by Rita Gunther Mcgrath.

An excerpt:

While it certainly isn’t fair to retrospectively criticize the approach Michelin took to introducing this innovation, there were some trouble signs even early on. A Business Week article appearing on August 16, 2004, notes that the PAX tires don’t fit into conventionally designed vehicles. To use them, cars must be equipped with specially designed chassis and wheels. A PAX-friendly auto can’t take regular tires. What that means is that to get the tires replaced, customers must find an authorized PAX service center to repair or replace the tires. The lack of compatibility with pre-existing infrastructure proved to be a contributor to the products’ undoing.

As an addendum, it deserves to be said that the failure of the PAX system should not be interpreted as a trouble sign for the entire run-flat segment — in fact, it was in part the success of self-supporting run-flats that doomed Michelin’s support ring PAX technology.

Citing Record High Raw Material Costs, Cooper Tires to Report 1Q Results that are ‘Considerably Below Expectations’

Filed under: Tires — Notch @ 3:41 pm

Cooper Tires & Rubber today issued a news release commenting on its first quarter results, which will be reported on May 7.

As a result of the challenging economic environment, the Company expects to report modest earnings for the quarter ended March 31, 2008. Our current estimate is considerably below expectations, due primarily to continued increases in raw material costs globally, increased charges for product liability claims related primarily to revised estimates on existing claims, and the decline in the volume of unit shipments in North America, particularly in March.

Recent changes in macroeconomic conditions in North America have created a new set of challenges for our Company. Consumers have reduced the number of miles driven in reaction to the economic slowdown, and subsequently are delaying tire purchases. The declining dollar’s impact and other factors that have driven record-high raw material prices, specifically, in natural rubber and oil-derived materials, coupled with the use of last-in, first-out cost flow assumptions for inventory accounting in North America, have all contributed to the increased volatility in expected earnings.

Co-Gen Unit at Borger Back On-Stream

Filed under: Carbon Black — Notch @ 3:28 pm

As I reported on Tuesday, Sid Richardson had an incident on Monday when it tried to bring one of its co-generation boilers back on-line after a unit turnaround at its Borger, Texas plant. According to the company, the incident did not affect production or shipments from the plant.

On Friday, April 25, Sid Richardson indicated that the co-gen unit was back on-stream and that it and the plant were running at normal operating levels. The company has completed an internal investigation into the incident but did not release details of the nature of the problem. This is all the information I have at this time.

Eliokem Raises Wingstay Prices

Filed under: Rubber Chemicals — Notch @ 12:25 pm

This week, Eliokem S.A.S. made two announcements regarding its Wingstay L antioxidants. On Monday, Eliokem announced that it plans to expand capacity for Wingstay at its Ningbo, China plant. The expansion will boost capacity by 20% and will be complete by June 2008. The plant was built in 2004 specifically to produce Wingstay L for the Asian market.

On Wednesday, Eliokem announced that it would raise prices for Wingstay L by 25% effective July 1. The company attributed the increase to “the continuous and unprecedented escalation in raw material costs,” specifically para cresol. Other factors include the depreciation of the US dollar against the Euro and other currencies, and changes in the Chinese VAT rates in July 2007 that reduced the profitability of products manufactured in China.

Eliokem previously raised prices for Wingstay L by 15% in February 2008 (effective April 1) and by 10% in September 2007 (effective November 1, 2007).

Thoughts on Technology Adoption

Filed under: Run-flats — Notch @ 11:48 am

From South Africa’s Engineering News comes a timely meditation on one-size-fits-all technology solutions, in this case addressing run-flat tires.

An excerpt:

There is this ad currently showing on TV, for Bridgestone tyres, that tends to irritate me. It shows this happy guy whose BMW has just run over a nail in the road and has a flat tyre. The ad then tells us: “Bridgestone run-flat tyres let you travel up to 80 km at up to 80 km/h after air loss.” I am sure that this is great news when you get a flat tyre in the middle of the Karoo, at dusk, and you are driving one of those cars that now brag that they have no spare wheel because the car has run-flat tyres.

That run-flat system may be fine for Germany, where a motorist can expect to find some service station within 80 km of anywhere. Note also the use of the words “up to” in the ad.

In South Africa, to drive any car around without a spare wheel is nuts. Have the run-flat if you like, but not in place of the spare. To me, when I see that ad, and others that are similar, I immediately imagine German designers designing a car for German conditions – the soccer field. South Africa has the golf course, so the design criteria do not apply here.

I remember an occasion when I was in Germany, and a group of folks were stunned to discover that I had often driven a car all day, like driving from inland to the coast. It was then that I discovered that driving from Pretoria to Cape Town was the same distance as driving from Rome to Amsterdam. European drivers just have no concept of these distances in a car. To them rally drivers drive these distances, not normal, respectable citizens.

April 22, 2008

Flexsys Statement on Patent Issues

Filed under: Rubber Chemicals — Notch @ 10:35 am

On April 8, 2008, Flexsys published an update on the status of its patents covering 4-ADPA manufacturing. Below is the main text of the announcement.

Flexsys invests significantly in the discovery, development and commercialization of manufacturing processes for rubber chemicals, and it holds numerous patents covering these inventions. Flexsys is committed to aggressively protecting its patent estate including, as necessary, the pursuit of legal actions on a global basis. Following is an update on certain of these matters.

• The Flexsys patents at issue are valid;
• Sinorgchem’s process is covered by the Flexsys patents; and,
• The importation of Sinorgchem’s 4-ADPA and 6PPD into the United States by Sinorgchem violates section 337 of the U.S. Tariff Act.

In 2007, a three-judge panel of the United States Court of Appeals for the Federal Circuit overruled the ITC’s finding that Sinorgchem had literally infringed Flexsys’ patents and remanded the matter to the ITC to determine whether Sinorgchem’s processes infringe Flexsys’ patents on other grounds set forth by Flexsys. On April 7, 2008, the Federal Circuit denied Flexsys’ request for a rehearing of the decision by the full panel of judges on the Federal Circuit.

Flexsys will continue to vigorously pursue this matter with the ITC. The limited exclusion order issued by the ITC remains in effect. Once the ITC process has been completed, the path will be clear for Flexsys to vigorously pursue its civil patent infringement case against Kumho Tire, KKPC and Sinorgchem. This case is currently pending in U.S. District Court for the Northern District of Ohio.

Birla Close to Agreement on Mexico Plant

Filed under: Carbon Black — Notch @ 10:21 am

According to an article in the Economic Times on Sunday, Aditya Birla Group is close to signing a land deal with the Port Authority of Altamira, Mexico for the construction of a $150 million carbon black plant.

“We may sign the agreement next week. The 150 million dollar project will be completed within two years,” Group’s Joint President in Latin America Surendra Goyal, who is part of the business delegation accompanying President Pratibha Patil here, said.

Co-Gen Unit Down at Sid Rich Borger, Texas

Filed under: Carbon Black — Notch @ 10:12 am

On April 21, Sid Richardson had an incident when it tried to bring one of its co-generation boilers back on-line after a unit turnaround at its Borger, Texas plant. As of now, the co-gen boiler is still down, but the company does not expect this development to affect production or shipments from the plant.

This is all the information I have on this situation at this time.

More later.

April 19, 2008

Michelin Gives Up on PAX

Filed under: Run-flats — Notch @ 3:17 pm

Here is an article from tomorrow’s New York Times detailing Michelin’s recent decision to stop selling its PAX system to OEs. Michelin will continue to supply replacements and service the tires of customers who already have PAX.

I previously wrote about the decision here.

According to the Times:

Michelin decided to discontinue PAX because automakers had several other choices in run-flat technology and there was “slow growth of the extended-mobility tire segment in general.” Ms. Mann said complaints from some consumers and lawsuits about problems — including high replacement costs and difficulties getting the tires repaired — did not play a role in the decision.

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