ONLINE EXCLUSIVE: The State of the Industry
December 1, 2007
The
various facets of the ceramic industry each enjoy individual successes and
opportunities, and face their own challenges.
The ceramic industry is exceptionally broad and far-reaching, impacting nearly every facet of our lives. The industry is traditionally categorized into five main sectors-advanced ceramics, whitewares, refractories, glass and brick/structural clay-many of which also have their own internal segments. All of these facets of the ceramic industry enjoy individual successes and opportunities, and face their own challenges. Following are some recent trends, highlights and forecasts for each sector.
Drivers for growth include applications in armor, automotive (diesel particulate exhaust filters and composite brakes), medical (joint replacement and dental products), electronic sensors and wear parts. Fuel cell applications are also expected to have a positive impact. For example, according to Innovative Research and Products, the market for micro fuel cells is expected to reach $112 million by 2011, rising at an incredible 55.7% annual average growth rate from $12 million last year.3
Ceradyne, Inc., one of the segment’s most active participants, reported record sales for 2006 of $662.9 million, which was an 80% increase from $368.3 million in 2005. The company continues to receive massive orders from the U.S. military for its ceramic body armor, and in June 2007, its Vehicle Armor Systems division, in conjunction with Ideal Innovations, Inc., introduced the BULLTM, a new high-threat vehicle. According to Marc King, vice president of Armor Operations for Ceradyne, the BULL was designed for close urban terrain and can withstand the most lethal improvised explosive device (IED) threats.
In addition, the U.S. Army Tank Automotive Command (TACOM) accepted Ceradyne’s alternative lightweight armor materials for evaluation by its Long Term Armor Strategy team. “This is the culmination of an 18-month run-up of development, testing and data collection necessary to meet the Army’s stringent performance requirements and start a process that will, we believe, clearly demonstrate that Ceradyne’s advanced armor materials can perform on a par with metal armor solutions, and at a significant savings in weight,” said King. “Following what is expected to be the successful conclusion of a comprehensive test and evaluation program, Ceradyne’s advanced armoring materials will be made available to OEM truck manufacturers on a pre-approved basis whereby they can be incorporated into existing production and future vehicle cab designs.”
Saint-Gobain Ceramics has also reacted to high demand in the armor arena. In April 2007, the company announced that it will expand production capacity at its plant in Niagara Falls, N.Y., to meet increased demand for ceramic body armor. To accommodate the increased production, the plant will undergo a multi-million-dollar expansion project, which is expected to be completed by the end of the first quarter of 2008.
Acquisitions and diversification continue to advance Ceradyne’s growth. In June, the company announced the opening ceremonies for its newly built 98,000-square-foot factory in Tianjin, China, which will produce high-purity ceramic crucibles for the forming of large polysilicon ingots for use in the manufacture of photovoltaic (PV) silicon solar cells. In addition, Ceradyne acquired Minco, Inc. in July for $27.5 million in cash. A key provider to Ceradyne’s Thermo Materials division, Minco’s powders will be used extensively at the new plant in China.
In September, the company announced that it had completed its acquisition of EaglePicher Boron LLC (EP Boron), for $69.6 million in cash, to support its activities in the nuclear and semiconductor markets. “I am very pleased with this latest Ceradyne acquisition, which meets our diversification objectives and provides us with a strategic opportunity that supports our continued expansion into both the nuclear waste containment and semiconductor arenas,” said Joel P. Moskowitz, Ceradyne’s chairman and chief executive officer (CEO).
CoorsTek also continued to take advantage of favorable market conditions, announcing the opening of its Specialty Materials Center in July. The multi-million-dollar center provides a comprehensive resource for advanced ceramic material development. In addition, the company is expanding overseas with a new technical ceramics manufacturing facility in South Korea. (See “Center of Excellence” in this month's features for additional details.)
CoorsTek also announced its acquisition early this year of Gaiser Tool Co., a precision tooling manufacturer. CoorsTek retained the Gaiser brand while infusing technical and material innovations to further enhance the company’s market position, and expected to expand its micro-component capabilities for a variety of markets as a result of the acquisition.
The advanced ceramics sector continues to benefit from increasing use in automotive applications. In September, Corning Inc. announced that it had introduced a new ceramic substrate for light-duty gasoline and diesel-powered vehicles. With its ultra-thin walls, the new substrate enables reduced fuel consumption and increased engine power through low exhaust system backpressure. Corning reported 2006 total sales of $5.17 billion, and its Environmental Technologies segment (including ceramic technologies and solutions for emissions and pollution control in mobile and stationary products) accounted for 12% of that figure.
Corning also announced that it will embark on a $300 million facility improvement plan for its Sullivan Park Research and Development campus near Corning, N.Y. The plan includes the significant renovation of an existing research and development building, as well as the construction of a new facility. Results are expected to include increased operational efficiency, flexibility, space utilization and energy efficiency. All phases of the project are expected to be completed by 2013, with expenditures phased over the course of the six-year period.
The continued emphasis on renewable energy sources is providing many opportunities for advanced ceramics. In April, Kyocera Corp. announced that it would expand its annual solar module manufacturing capacity to 500 megawatts (MW) by the end of March 2011-more than double its current annual capacity of 240 MW-in response to global demand. The company has secured supply contracts with silicon producers to ensure the steady increase in production capacity.
Although overall consumption set a new record, the increase in 2006 was slightly less than the 3.8% seen in 2005 due to the slowdown in the new housing market and decline in overall floor covering sales. The strong remodeling and commercial markets continued to bolster tile sales overall, however. Remodeling also especially impacts the tile industry, since the two rooms most frequently remodeled are kitchens and bathrooms.
The top five sources for imports included Italy, 661 million square feet (a 4.1% decrease from the previous year); Mexico, 452 million square feet (+ 10.6%); Brazil, 430 million square feet (- 4.8%); China, 346 million square feet (- 53.9%); and Spain, 346 million square feet (- 5.0%). Although imports still make up a large portion of the marketplace, it is encouraging that domestic production and shipments continue to grow.
The Freedonia Group projects that U.S. demand for hard surface flooring will advance 3.9% per year to 11.9 billion square feet in 2011 (valued at $13.5 billion).4 Hard surface flooring is expected to continue to gain market share from carpets and rugs, and demand will be driven by the growing consumer preference for high-end products such as wood, laminates and ceramic tile.
Mohawk Industries, Inc., parent company of Dal-Tile, Inc. reported net earnings of $455.8 million for 2006, which was an 18% increase from the previous year. Following the company’s release of fourth quarter 2006 sales results, in which the Dal-Tile segment grew 4%, Jeffrey S. Lorberbaum, Mohawk’s chairman and CEO said, “Dal-Tile is following industry trends with residential sales slowing and commercial sales growing. We are reducing expenses, increasing productivity, and focusing on the commercial and redecorating channels. Our plant expansions were completed and will enhance our position.”
Dal-Tile’s third quarter 2007 earnings were flat in comparison to last year’s third quarter. “We believe we are out-performing the industry and have benefited from our significant position in the commercial channel,” said Lorberbaum. “We are repositioning some of our sales efforts to the commercial and multifamily channels from the residential channels. Dal-Tile introduced higher value products from our new production lines, new exterior stone products, and new merchandising and warranties for our ceramic accessories.”
GranitiFiandre’s total revenues increased by 13% for 2006 despite energy cost increases of upwards of 22.8%, as well as the negative contribution from U.S. subsidiary StonePeak Ceramics, which was in full startup mode for the first half of the year. For the first half of 2007, GranitiFiandre’s sales increased by 20.9% vs. the same period a year ago. While the company’s sales in the Italian market were similar to last year, sales in other European countries increased by 22.5% and in the rest of the world by 60.6%.
The company attributes its growth in the first half of the year to the positive results obtained by StonePeak and Porcelaingres, its subsidiary in Germany. The growth in brand sales in the U.S. was 89.3%, with total sales in the first half of €24.5 million (~ $35.3 million). “With these fundamentals, we are extremely confident of reaching and bettering the growth objectives of the 2007 budget and the 2008-2009 Business Plan, which forecasts growth in sales of 44% in three years,” said Graziano Verdi, chairman and chief executive officer of GranitiFiandre.
Sanitaryware manufacturers also benefit from the increasing renovation trend for bathrooms, though the residential housing slump in the U.S. is having a negative affect. In February, American Standard Companies Inc. announced that it would separate its three businesses to focus on its air conditioning brand. Accordingly, American Standard announced in July that it would sell its worldwide Bath and Kitchen products business to funds advised by Bain Capital Partners, LLC for $1.755 billion in cash.
Upon completion of the sale, which was expected in the fourth
quarter of this year, Bain Capital will acquire all of American Standard’s Bath and Kitchen
business. The sector posted 2006 sales of $2.4 billion and includes 26,000
employees and 54 production facilities in 23 countries worldwide. “This is a
major milestone in our plan to separate American Standard into three focused,
better understood companies,” said Fred Poses, American Standard chairman and
CEO. “We believe that Bain Capital’s all-cash offer provides excellent value
for our shareowners. Bath
and Kitchen is a global market leader, with size, global reach and
organizational talent. It has a rich history and a great future for its
customers, employees and new owners.”
“We look forward to supporting the management team and dedicated employees in realizing the company’s full potential through continued operational improvements, further enhancing and leveraging its strong family of brands, and accelerating growth,” said Walid Sarkis, a London-based managing director at Bain Capital.
The Bath and Kitchen business posted second quarter 2007 sales of $660.5 million, a 6.4% increase from the previous year’s second quarter, driven by the introduction of innovative products and new commercial contracts. However, as part of its ongoing initiatives to rebuild Bath and Kitchen’s profitability, American Standard announced plans to discontinue production at its ceramic plant in Excelsior, UK, resulting in the elimination of about 140 jobs. The closure will cost about $17 million ($12 million after taxes) and, once completed, is expected to generate annual savings of about $10 million starting in 2008.
Villeroy & Boch, though still focusing on the European market, is continuing to pursue a strategy of globalization. The company recently purchased three sanitaryware factories in Mexico, and foresees high growth potential in China, India and the United Arab Emirates. The company’s foreign business has risen to 71% of total sales over the past 10 years. Villeroy & Boch’s Bath and Wellness Division increased sales by 13.6% in 2006.
The dinnerware segment of the whitewares industry has struggled for years primarily as a result of the consumer trend toward more casual lifestyles, among other challenges. However, manufacturers are beginning to see improved results.
For its fiscal year ended March 31, 2007, Waterford Wedgwood plc recorded a loss of €17.1 million (~ $24.6 million) in comparison to a €130.8 million (~ $188.5 million) loss in the prior year. The company focused on three steps to improve profitability: “right-size” the Group, improve margins, and contemporize its brands through innovative product development and new relationships with designers and trend leaders.
The Group’s Waterford Crystal division achieved positive earnings for the first time in three years. Having arrested the sales decline of recent years, Waterford is continuing to update its product range. Initiatives already launched and reportedly selling well include Robert Mondavi by Waterford, Marc Jacobs, the Ballet Collection of contemporary crystal and china, and the Marquis Vintage Garden Collection.
Waterford Wedgwood’s Ceramics Group more than halved its operating loss and achieved positive earnings at the EBITDA level for the first time in three years. Wedgwood, Royal Doulton and Rosenthal have implemented new product initiatives, including Barbara Barry at Wedgwood and the Gordon Ramsay and Sir Terence Conran ranges for Royal Doulton, as well as Rosenthal’s A La Carte collection of contemporary crystal and porcelain tableware. A Martha Stewart by Wedgwood collection is also in development.
In March, Oneida Global Foodservice announced a global marketing and licensing agreement with Waterford Wedgwood. The alliance is expected to provide the worldwide hospitality industry with access to a best-in-class luxury brand portfolio, including Waterford Crystal and Wedgwood fine dinnerware, and to a design partnership that will offer highly tailored fine dining solutions.
As part of its focus on major growth opportunities, Oneida plans to leverage its market expertise and integrated global supply chain to bring the Wedgwood and Waterford brands to the highest-end hotels, restaurants and cruise line operators in the Americas, Middle East-Africa and Asia Pacific regions. It will also be responsible for developing new opportunities for Waterford in Europe. In addition, Oneida and Waterford Wedgwood established a design collaboration to create new, elegant dining options and capitalize on trends in the culinary sector.
The IISI further reports that China remains the single largest market and strongest growth area for steel. Steel use in China is forecast to increase by 13% in 2007 and 10% in 2008, encompassing 35% of the world total. According to the IISI, steel consumption in China was 442.7 million metric tons (mmt) in 2006, a far cry from Japan (116.2 mmt), the U.S. (98.6 mmt), Russia (70.8 mmt) and South Korea (48.5 mmt).6
Other industries have an impact on the refractories segment as well. For example, RHI Refractories announced at the end of 2006 that it would expand its capacity in China due to expected sales volume increases in industries such as cement, lime, nonferrous metals and glass. The company is extending its original plant in Dalian by adding a production line for 35,000 tonnes of fired magnesia bricks. The total capital expenditure is budgeted at €12 million (~ $17 million); the extension measures were scheduled to be completed by the end of 2007.
According to RHI, its objective is to increase its current revenue of approximately €1.3 billion (~ $1.8 billion) to €2.0 billion (~ $2.8 billion) by the year 2010 through organic growth and acquisitions. In February, the company announced that it had completed its acquisition of Monofrax Inc. from Vesuvius Crucible Co. RHI established RHI Monofrax Ltd. as a new legal entity for the acquisition of the assets.
Monofrax is a producer of fused-cast refractory products, which are used primarily in the glass industry. In 2005, Monofrax reported annual revenue of $45 million in the U.S., Asia Pacific and Europe. According to RHI, the integration of the Monofrax business into its worldwide sales network significantly strengthened its position as a full-line supplier of fused cast refractories specialties, while providing it with another technologically, logistically and economically optimal production site for high-grade refractory products, especially for the specialty glass market in North America.
Morgan Crucible’s Insulating Ceramics segment
(including the Thermal Ceramics and Molten Metal Systems [formerly known as
Crucibles] divisions), achieved a 13.8% increase in sales for 2006. Underlying
operating profit increased 29.8% through a combination of top line growth and
cost reduction programs. Within the Thermal Ceramics division, improved sales
growth was driven by continued positive market conditions in the U.S., Middle East and Asia.
The division has been successful in counteracting increasing costs for energy
and raw materials through operational improvements and price increases.
Sales for the Insulating Ceramics segment in the first half of 2007 were up by 9.6%, while underlying operating profit increased 38.2%. In terms of project-based sales for the Thermal Ceramics business unit, the first half of the year was very strong compared to 2006. The main impetus came from European businesses, where the drivers included a series of major orders for aluminum, petrochemical, and iron and steel projects for delivery into the Middle East, India and other Asian markets. New products launched during the last three years now account for 20% of the segment’s European fiber sales.
Resco Products, Inc. is also growing through acquisitions. In December 2006, it announced that it had acquired the assets of New Castle Refractories Co., including the plants located in New Castle, Pa., Newell, W.V., and Massillon, Ohio. “The acquisition of New Castle Refractories will expand Resco’s product offerings and result in complementary and synergistic benefits to Resco and its customers,” said William K. Brown, Resco’s president and CEO.
In June of this year, Resco announced that it had acquired Shenango Advanced Ceramics, LLC, New Castle, Pa. “The acquisition of Shenango Advanced Ceramics will complement the current product offerings from Resco’s New Castle Refractories operations,” said Brown.
Increasing costs have also affected Resco, however. According to the company, its costs for alumina and magnesia-based raw materials have increased 25-55%, and ocean and domestic transportation costs have increased as well. The company also continues to be impacted by high and fluctuating natural gas and electrical pricing, which has remained unpredictable since the hurricane season of 2005.
In addition to increasing its pricing, Resco continues to pursue innovative ways to control or reduce the impact of cost escalations. For example, in June the company announced that it had completed several major upgrades at its Greensboro, N.C., plant, including the addition of state-of-the-art drying equipment, an expansion of the roller hearth kiln and the installation of two new shuttle kilns.
Trading profit for Cookson’s Ceramics division increased 22% for 2006, driven by revenue growth in the high-margin flow control and fused silica product lines. The company updated its strategic plan in November 2006, and goals include the expansion of higher-margin specialty products, which make up two-thirds of the division’s revenue, through a focus on emerging markets and improved efficiencies. According to Cookson, its profitability in linings (primarily monolithics and the construction and installation business) lags behind competitors and provides another opportunity for improvement.
For the first half of 2007, underlying revenue for Cookson’s Ceramics division grew 14%. The company is benefiting from the steel industry’s conversion to enclosed continuous casting technology in China, Russia and the Ukraine, as the process reportedly requires Cookson’s flow control products. Production capacities are being expanded for a variety of product lines and regions, including new slide-gate and linings facilities in Mexico and new glass roller and Solar CrucibleTM plants in China and Poland.
In October, Cookson announced the closure of the Vesuvius plant in Buffalo, N.Y., as part of its program of restructuring in maturing markets. A phased run-down of activity is planned through 2008 with final closure by year end. The facility, which manufactures isostatically pressed foundry crucibles, has relatively high labor costs. Production will be relocated to Vesuvius’ existing facility in Monterrey, Mexico.
The production furnace is expected to start mass production in Autumn 2008, and the polishing line is forecasted to start up in 2009. According to Asahi, demand for TFT liquid crystal panels is strong for television sets and personal computers, and is expected to rise at an annual rate of 20% on a unit basis.
Corning Inc. is also seeing increased demand for LCD applications. The company’s Display Technologies segment, which manufactures glass substrates for active matrix LCDs, accounted for 41% of Corning’s total sales of $5.17 billion in 2006. Third quarter 2007 sales for the segment were $705 million, at 16% sequential increase and a 39% increase over the third quarter of 2006.
Corning will also focus on emerging technologies to drive growth. For example, the company is in early-stage development for a silicon-on-glass technology that is focused on enabling display glass to be transformed into an “engineered substrate” for advanced electronic applications.
“Reorganization” could be the buzz-word for the flat glass industry. Following its acquisition of Pilkington in June 2006, NSG Group announced in January that it had approved a new top-level organizational structure for the enlarged group. An integrated Flat Glass Business was in effect by April and consists of a global Building Products Business Line and a global Automotive Business Line.
In June, NSG announced that it had entered into a sale agreement with CSR Limited for all of the Group’s Flat Glass operations in Australia and New Zealand, known as Pilkington (Australia) Limited and Pilkington (New Zealand) Limited. In the announcement of the sale, NSG announced that it believed the transaction offered better value to the company’s shareholders than would be realized by retaining the operations within the company.
NSG announced in October that it will adopt the Pilkington brand for its global Flat Glass business. “In the new NSG Group, Flat Glass now accounts for around 85% of our global operations, with manufacturing in 27 countries worldwide and sales in over 130,” said NSG Chairman Yozo Izuhara. “We aim to present a single face to all our customers in both Building Products and Automotive, and that means adopting a single global brand for all our markets in those sectors.”
In September, Glaverbel announced that it had
changed its name to AGC Flat Glass Europe to align the branding of Glaverbel’s
operations with that of the AGC group globally. The rebranding of Glaverbel is
part of a global brand unification that unites all AGC companies under a single
brand and logo. “We’re immensely proud to present ourselves as part of the
family of the global glass leader,” said Jean-Francois Heris, president and CEO
of AGC Flat Glass Europe. “A single brand identity will allow us to raise our
profile across the world.”
Also in September, PPG Industries announced that it had signed an agreement with Platinum Equity of Beverly Hills, Calif., under which the company would divest its automotive original equipment manufacture (OEM) glass and automotive replacement glass (ARG) and services businesses. The total sales price for the businesses being divested is approximately $500 million before minority interest. Under the terms of the agreement, an affiliate of Platinum Equity would acquire the businesses’ assets. Completion of the transaction was expected in the fourth quarter, subject to customary closing conditions.
“This transaction is a significant milestone in PPG’s continued transformation to focus on coatings and specialty products, and it will significantly reduce PPG’s exposure to the U.S. automotive market,” said Charles E. Bunch, chairman and chief executive officer. “This sale will also provide us with more resources to pursue profitable growth in coatings, aerospace, optical products and opportunities in Asia.” Bunch added that the divestiture puts the auto glass businesses in a better position to compete by providing a strong platform from which to maximize profitable growth.
According to the U.S. Department of Commerce, shipments of glass containers decreased by 1.4% in 2006, while production increased by 1.6%. The majority of glass containers were produced for beer (59.0%). The rest of the production was for food (16.2%), beverages (8.8%), wine (5.4%), ready-to-drink alcoholic coolers and cocktails (3.2%), and liquor (3.1%). The “other” category (including containers for chemical, cosmetic, health, household, industrial, medicinal and toiletry products) accounted for 4.3% of 2006 production. For January through May 2007, total glass container shipments rose 1.2%, while production decreased 0.6%.
According to a report released by The Freedonia Group, U.S. food container demand will rise modestly (3.3%) to $23.5 billion in 2011.7 Unfortunately, the glass container segment is expected to continue to lose ground to plastic containers, as well as bags and pouches. Glass prospects could benefit from a premium and high-purity image, which are key advantages with increasingly popular organic and/or natural foods.
Beverage container demand in China is forecast to increase 8.9% per year to more than 181 billion units in 2010.8 Glass containers account for the largest share of packaged beverages in volume terms, benefiting from the large amount of beer produced in China (nearly all of which is packaged in glass bottles). The use of returnable glass bottles in the beer market limits unit demand, however.
In March, the Saint-Gobain Group announced that, following a search for strategic partners for Saint-Gobain Desjonquères, its specialty bottles business, it would sell 100% of Saint-Gobain Desjonquères and its subsidiaries to two investment funds, Sagard and Cognetas. Under the agreement, the Saint-Gobain Group agreed to reinvest a 20% stake in the business.
A manufacturer of glass bottles for the perfume, cosmetics and pharmaceutical industries, the specialty bottles business of Saint-Gobain Desjonquères and its subsidiaries delivered consolidated sales of €607 million (~ $821 million) in 2006 and operating profit of €50 million (~ $68 million). According to Saint-Gobain, the sale was part of its ongoing business development strategy.
The Freedonia Group forecasts that U.S. glass fiber demand will expand 2.3% annually to 8.1 billion pounds in 2011.9 The best growth is anticipated for glass wool fiber, with overall demand constrained by slow textile glass fiber advances as nanomaterials displace glass fibers in reinforced plastics. Textile glass fiber prices will continue to be squeezed by the impact of lower-priced imports from countries in Asia, particularly China.
In December 2006, PPG Industries and Devold AMT AS signed a letter of intent to form a 50-50 joint venture to manufacture glass-fiber reinforcement fabrics for the North American wind energy turbine market. Multiaxial and unidirectional fabrics are major components in windmill blades, and they are also used in the manufacture of a variety of marine, construction and consumer products.
The new company, called PPG-Devold, leverages PPG’s infrastructure and position in the U.S. market and Devold’s investment in stitched reinforcement technology and customer relationships. The joint venture includes construction of stitched reinforcement fiber glass production lines at PPG’s wholly owned fiber glass plant in Shelby, N.C.
“The housing market is still contracting, but action by the Federal Reserve to cut the federal funds and discount rate calmed the financial markets and sent a message to American consumers that our central bank intends to ensure that the economy continues to move ahead,” said David Seiders, chief economist for the National Association of Home Builders (NAHB). “This will help to support housing, especially if the Fed takes further action in the months ahead. We expect starts and permits to bottom-out by mid-2008 before a systematic recovery process gets underway.”
According to The Freedonia Group, demand for U.S. brick and block products is expected to increase 4.1% annually to $7 billion in 2010.10 Unfortunately, the bulk of that growth will be concentrated in concrete products. Consumption of clay brick is forecast to drop to 10.2 billion units in 2010. Common brick, which accounts for the majority of total brick demand, will bear the brunt of the decline. However, specialty clay brick products, such as glazed brick, landscaping brick and other low-volume brick products, will fare better, showing positive growth through 2010.
In response to the U.S. housing slump, Boral Bricks Inc. announced in January that it was transferring production from two plants (Augusta Plant #013 and Macon Plant #050) to other facilities to streamline manufacturing and distribution. The company planned to continue to focus on green initiatives to develop processes and technologies that are increasingly environmentally friendly.
Brampton Brick announced a 6% decline in net sales for 2006 as a result of lower shipments in both its clay brick and concrete products business segments. According to Brampton, its brick shipments were affected primarily by a slowdown in residential construction activity. Similarly, Brampton’s net sales for the first half of 2007 were $46 million, compared to $53 million in the first six months of 2006. The company cited unfavorable weather conditions and the decrease in U.S. home construction for the decline. On a positive note, Brampton is in the process of building a new facility in Indiana, which is expected to be operational in early 2008. (CI’s May 2008 Brick & Clay Record supplement will feature additional details regarding the new plant.)
In contrast, overseas brick manufacturers have more cause for optimism. In June, Imerys announced that it will invest €100 million (~ $133 million) by the end of 2011 in its clay brick production assets. The company plans to increase rectified brick capacity at its Gironde-sur-Dropt and La Boissière du Doré locations, and to construct two new plants in Southeastern and Northern France. The capacity extensions and the new unit in the South of France are expected to come on-stream gradually in 2008 and 2009, while the Northern project should be operational by 2011. According to Imerys, the expansion is essential to meet high growth in the French brick market, which is likely to increase by 5% over the next five years.
Wienerberger saw its group revenues for 2006 increase by 14%. Higher demand in Europe, among other factors, enabled the company to overcome negative effects such as a severe winter at the beginning of the year, higher costs for plant startups and inventory reduction, the new residential construction slump in the U.S., and higher energy prices. Similarly, its group revenues for the first half of 2007 were up by 21%, due again to strong European construction activity, as well as favorable weather at the beginning of the year. “I expect Wienerberger will report strong earnings growth for the full year because of the excellent results recorded during the first two quarters, and our optimistic outlook for the second half,” said Wolfgang Reithofer, chief executive officer.
Acquisitions are an important factor in Wienerberger’s growth
strategy. General Shale Brick, Wienerberger’s North American subsidiary,
acquired Arriscraft International in June. The acquisition of the Cambridge,
Ontario-based brick, stone and marble producer marked General Shale’s first
acquisition of a manufacturing entity outside of the U.S., and Weinerberger’s entry in
the Canadian market. Weinerberger anticipates that it will benefit from
synergies through the use of the direct sales network in the U.S. and the potential for new
bolt-on projects.
Also in June, Wienerberger continued its expansion strategy with the acquisition of Korevar, reportedly the third largest clay paver producer in the Netherlands. “[With this acquisition], we will organically grow our brick and roof tile business over the coming years,” said Heimo Scheuch, Wienerberger managing board member with responsibility for Northwest Europe. “The clay pavers segment nearly doubled in volume from 185 to 330 million units between 2000 and 2006, and we expect further growth over the mid-term. With this product we intend to concentrate not only on the market for public infrastructure projects, but, in particular, on private construction.”
In August, Wienerberger completed its acquisition of Baggeridge Brick PLC. “With its experienced management team and employees, its potential for synergies and its major raw material reserves, Baggeridge will assist with achieving sustainable growth and enhance our position,” said Riethof. “The combined operation will become the third largest brickmaker in Great Britain, which is the largest facing brick market in Europe.”
In October, Wienerberger announced that it will continue its expansion strategy in Belgium with additional investments in hollow brick production. Plans call for the enlargement of the Zonnebeke and Egem sites, as well as the renewal of the outdated Rumst site. The total investments are estimated at roughly €54 million (~ $77 million).
In addition to the capacity increases, the company will focus on the implementation of environmental technologies in line with the 2010+ emission goals set by the European Community. All three Belgian plants will be provided with state-of-the-art scrubber technologies to reduce emissions during the production process. In addition, the plant in Rumst will introduce raw material from recycled brick into the production cycle on a large scale to reduce the use of primary raw materials and energy.
Editor’s note: The foregoing information (except where noted) was compiled from publicly available information in news releases and annual reports.
The
roof of the Stillwell Ave.
subway station in New York City,
N.Y., is home to the world’s
largest building-integrated solar plant with thin-film modules. Photo courtesy
of SCHOTT AG.
The ceramic industry is exceptionally broad and far-reaching, impacting nearly every facet of our lives. The industry is traditionally categorized into five main sectors-advanced ceramics, whitewares, refractories, glass and brick/structural clay-many of which also have their own internal segments. All of these facets of the ceramic industry enjoy individual successes and opportunities, and face their own challenges. Following are some recent trends, highlights and forecasts for each sector.
The
BULL’s armor provides needed protection against explosively formed penetrators
(EFPs) and conventional improvised explosive device (IED) attacks. Photo
courtesy of Ceradyne, Inc.
Advanced Ceramics
The advanced ceramics sector is arguably the most robust segment of the ceramic industry. According to a recent report from Enceram, the market for engineering ceramics (defined in the report as structural, environmental and process applications) reached $2.7 billion in Europe and $1.9 billion in the U.S. in 2006.1 A recent report from The Freedonia Group projects that demand in the U.S. will increase 7.0% per year to over $12 billion by 2010.2Drivers for growth include applications in armor, automotive (diesel particulate exhaust filters and composite brakes), medical (joint replacement and dental products), electronic sensors and wear parts. Fuel cell applications are also expected to have a positive impact. For example, according to Innovative Research and Products, the market for micro fuel cells is expected to reach $112 million by 2011, rising at an incredible 55.7% annual average growth rate from $12 million last year.3
Ceradyne, Inc., one of the segment’s most active participants, reported record sales for 2006 of $662.9 million, which was an 80% increase from $368.3 million in 2005. The company continues to receive massive orders from the U.S. military for its ceramic body armor, and in June 2007, its Vehicle Armor Systems division, in conjunction with Ideal Innovations, Inc., introduced the BULLTM, a new high-threat vehicle. According to Marc King, vice president of Armor Operations for Ceradyne, the BULL was designed for close urban terrain and can withstand the most lethal improvised explosive device (IED) threats.
In addition, the U.S. Army Tank Automotive Command (TACOM) accepted Ceradyne’s alternative lightweight armor materials for evaluation by its Long Term Armor Strategy team. “This is the culmination of an 18-month run-up of development, testing and data collection necessary to meet the Army’s stringent performance requirements and start a process that will, we believe, clearly demonstrate that Ceradyne’s advanced armor materials can perform on a par with metal armor solutions, and at a significant savings in weight,” said King. “Following what is expected to be the successful conclusion of a comprehensive test and evaluation program, Ceradyne’s advanced armoring materials will be made available to OEM truck manufacturers on a pre-approved basis whereby they can be incorporated into existing production and future vehicle cab designs.”
Saint-Gobain Ceramics has also reacted to high demand in the armor arena. In April 2007, the company announced that it will expand production capacity at its plant in Niagara Falls, N.Y., to meet increased demand for ceramic body armor. To accommodate the increased production, the plant will undergo a multi-million-dollar expansion project, which is expected to be completed by the end of the first quarter of 2008.
Acquisitions and diversification continue to advance Ceradyne’s growth. In June, the company announced the opening ceremonies for its newly built 98,000-square-foot factory in Tianjin, China, which will produce high-purity ceramic crucibles for the forming of large polysilicon ingots for use in the manufacture of photovoltaic (PV) silicon solar cells. In addition, Ceradyne acquired Minco, Inc. in July for $27.5 million in cash. A key provider to Ceradyne’s Thermo Materials division, Minco’s powders will be used extensively at the new plant in China.
In September, the company announced that it had completed its acquisition of EaglePicher Boron LLC (EP Boron), for $69.6 million in cash, to support its activities in the nuclear and semiconductor markets. “I am very pleased with this latest Ceradyne acquisition, which meets our diversification objectives and provides us with a strategic opportunity that supports our continued expansion into both the nuclear waste containment and semiconductor arenas,” said Joel P. Moskowitz, Ceradyne’s chairman and chief executive officer (CEO).
CoorsTek also continued to take advantage of favorable market conditions, announcing the opening of its Specialty Materials Center in July. The multi-million-dollar center provides a comprehensive resource for advanced ceramic material development. In addition, the company is expanding overseas with a new technical ceramics manufacturing facility in South Korea. (See “Center of Excellence” in this month's features for additional details.)
CoorsTek also announced its acquisition early this year of Gaiser Tool Co., a precision tooling manufacturer. CoorsTek retained the Gaiser brand while infusing technical and material innovations to further enhance the company’s market position, and expected to expand its micro-component capabilities for a variety of markets as a result of the acquisition.
The advanced ceramics sector continues to benefit from increasing use in automotive applications. In September, Corning Inc. announced that it had introduced a new ceramic substrate for light-duty gasoline and diesel-powered vehicles. With its ultra-thin walls, the new substrate enables reduced fuel consumption and increased engine power through low exhaust system backpressure. Corning reported 2006 total sales of $5.17 billion, and its Environmental Technologies segment (including ceramic technologies and solutions for emissions and pollution control in mobile and stationary products) accounted for 12% of that figure.
Corning also announced that it will embark on a $300 million facility improvement plan for its Sullivan Park Research and Development campus near Corning, N.Y. The plan includes the significant renovation of an existing research and development building, as well as the construction of a new facility. Results are expected to include increased operational efficiency, flexibility, space utilization and energy efficiency. All phases of the project are expected to be completed by 2013, with expenditures phased over the course of the six-year period.
The continued emphasis on renewable energy sources is providing many opportunities for advanced ceramics. In April, Kyocera Corp. announced that it would expand its annual solar module manufacturing capacity to 500 megawatts (MW) by the end of March 2011-more than double its current annual capacity of 240 MW-in response to global demand. The company has secured supply contracts with silicon producers to ensure the steady increase in production capacity.
The new raw material contracts will allow Kyocera to expand capacity throughout
its quadripartite global manufacturing network for solar modules, which
includes plants in Yohkaichi and Ise, Japan; Tijuana, Mexico; Kadan, Czech
Republic; and Tianjin, China. Kyocera will invest an estimated 30 billion yen
(about $250 million) in plants and equipment throughout this network during the
course of the expansion effort.
In August, SCHOTT Solar, a 100% subsidiary of the SCHOTT group, and WACKER
Chemie AG announced their plan to set up two joint ventures to produce and
market silicon wafers for solar applications. Over the next several years, the
two partners will invest a total of €370 million (~ $509 million) in facilities in
Jena (Thuringia) and Alzenau (Bavaria). The joint venture, called SCHOTT
WACKER Solar GmbH, was scheduled to start operations in 2007 and will produce
multi-crystalline silicon ingots and wafers. Solar wafer production capacity is
set to expand in stages, reaching about one gigawatt/year by 2012. The second
joint venture, called WACKER SCHOTT Solar GmbH, will handle sales to other
solar cell producers to capitalize on growth opportunities and related scale
effects.
In addition, SCHOTT Solar announced in September that it plans to build a new
PV manufacturing facility that will increase its domestic PV production by more
than 60 MW. In addition to producing solar PV modules, the new facility, which
is scheduled to go online in 2009, will be designed to produce receivers for
concentrated solar power (CSP) plants. This will provide SCHOTT with the
ability to begin producing solar receivers at the facility if the market
develops as the company anticipates.
In October, Ferro Corp. announced that it would begin construction in the
fourth quarter of 2007 on a 16,500-square-meter (177,604-square-foot) facility
in Suzhou, China,
for the production of aluminum pastes for the Southeast
Asia solar cell manufacturing market. The new site is expected to
begin production in the third quarter of 2008 and will include expansion
capacity to accommodate the expected growth of Ferro Electronic Material
Systems’ business positions in China
and Asia for products such as silver pastes,
surface technology products, multi-layer materials, electronic glass and
precious metal powders.
The
surface of GranitiFiandre’s Luminar material is
covered by a continuous series of concentric circular engravings,
resulting in a bright, reflective surface. The effect is created in part
through a special treatment that is applied to the technical porcelain
stoneware. Photo courtesy of GranitiFiandre.
Whitewares
According to the Tile Council of North America (TCNA), the U.S. ceramic tile industry continued to grow in 2006. A record 3.36 billion square feet of tile was consumed, an increase of 3% over 2005. Domestically produced tile increased as well, with 692 million square feet produced vs. 667 million square feet in 2005 (a 3.7% increase).Although overall consumption set a new record, the increase in 2006 was slightly less than the 3.8% seen in 2005 due to the slowdown in the new housing market and decline in overall floor covering sales. The strong remodeling and commercial markets continued to bolster tile sales overall, however. Remodeling also especially impacts the tile industry, since the two rooms most frequently remodeled are kitchens and bathrooms.
The top five sources for imports included Italy, 661 million square feet (a 4.1% decrease from the previous year); Mexico, 452 million square feet (+ 10.6%); Brazil, 430 million square feet (- 4.8%); China, 346 million square feet (- 53.9%); and Spain, 346 million square feet (- 5.0%). Although imports still make up a large portion of the marketplace, it is encouraging that domestic production and shipments continue to grow.
The Freedonia Group projects that U.S. demand for hard surface flooring will advance 3.9% per year to 11.9 billion square feet in 2011 (valued at $13.5 billion).4 Hard surface flooring is expected to continue to gain market share from carpets and rugs, and demand will be driven by the growing consumer preference for high-end products such as wood, laminates and ceramic tile.
Mohawk Industries, Inc., parent company of Dal-Tile, Inc. reported net earnings of $455.8 million for 2006, which was an 18% increase from the previous year. Following the company’s release of fourth quarter 2006 sales results, in which the Dal-Tile segment grew 4%, Jeffrey S. Lorberbaum, Mohawk’s chairman and CEO said, “Dal-Tile is following industry trends with residential sales slowing and commercial sales growing. We are reducing expenses, increasing productivity, and focusing on the commercial and redecorating channels. Our plant expansions were completed and will enhance our position.”
Dal-Tile’s third quarter 2007 earnings were flat in comparison to last year’s third quarter. “We believe we are out-performing the industry and have benefited from our significant position in the commercial channel,” said Lorberbaum. “We are repositioning some of our sales efforts to the commercial and multifamily channels from the residential channels. Dal-Tile introduced higher value products from our new production lines, new exterior stone products, and new merchandising and warranties for our ceramic accessories.”
GranitiFiandre’s total revenues increased by 13% for 2006 despite energy cost increases of upwards of 22.8%, as well as the negative contribution from U.S. subsidiary StonePeak Ceramics, which was in full startup mode for the first half of the year. For the first half of 2007, GranitiFiandre’s sales increased by 20.9% vs. the same period a year ago. While the company’s sales in the Italian market were similar to last year, sales in other European countries increased by 22.5% and in the rest of the world by 60.6%.
The company attributes its growth in the first half of the year to the positive results obtained by StonePeak and Porcelaingres, its subsidiary in Germany. The growth in brand sales in the U.S. was 89.3%, with total sales in the first half of €24.5 million (~ $35.3 million). “With these fundamentals, we are extremely confident of reaching and bettering the growth objectives of the 2007 budget and the 2008-2009 Business Plan, which forecasts growth in sales of 44% in three years,” said Graziano Verdi, chairman and chief executive officer of GranitiFiandre.
Sanitaryware manufacturers also benefit from the increasing renovation trend for bathrooms, though the residential housing slump in the U.S. is having a negative affect. In February, American Standard Companies Inc. announced that it would separate its three businesses to focus on its air conditioning brand. Accordingly, American Standard announced in July that it would sell its worldwide Bath and Kitchen products business to funds advised by Bain Capital Partners, LLC for $1.755 billion in cash.
Unique shapes can capture a holiday mood and enhance
any dining experience. Photo courtesy of Oneida Ltd.
“We look forward to supporting the management team and dedicated employees in realizing the company’s full potential through continued operational improvements, further enhancing and leveraging its strong family of brands, and accelerating growth,” said Walid Sarkis, a London-based managing director at Bain Capital.
The Bath and Kitchen business posted second quarter 2007 sales of $660.5 million, a 6.4% increase from the previous year’s second quarter, driven by the introduction of innovative products and new commercial contracts. However, as part of its ongoing initiatives to rebuild Bath and Kitchen’s profitability, American Standard announced plans to discontinue production at its ceramic plant in Excelsior, UK, resulting in the elimination of about 140 jobs. The closure will cost about $17 million ($12 million after taxes) and, once completed, is expected to generate annual savings of about $10 million starting in 2008.
Villeroy & Boch, though still focusing on the European market, is continuing to pursue a strategy of globalization. The company recently purchased three sanitaryware factories in Mexico, and foresees high growth potential in China, India and the United Arab Emirates. The company’s foreign business has risen to 71% of total sales over the past 10 years. Villeroy & Boch’s Bath and Wellness Division increased sales by 13.6% in 2006.
The dinnerware segment of the whitewares industry has struggled for years primarily as a result of the consumer trend toward more casual lifestyles, among other challenges. However, manufacturers are beginning to see improved results.
For its fiscal year ended March 31, 2007, Waterford Wedgwood plc recorded a loss of €17.1 million (~ $24.6 million) in comparison to a €130.8 million (~ $188.5 million) loss in the prior year. The company focused on three steps to improve profitability: “right-size” the Group, improve margins, and contemporize its brands through innovative product development and new relationships with designers and trend leaders.
The Group’s Waterford Crystal division achieved positive earnings for the first time in three years. Having arrested the sales decline of recent years, Waterford is continuing to update its product range. Initiatives already launched and reportedly selling well include Robert Mondavi by Waterford, Marc Jacobs, the Ballet Collection of contemporary crystal and china, and the Marquis Vintage Garden Collection.
Waterford Wedgwood’s Ceramics Group more than halved its operating loss and achieved positive earnings at the EBITDA level for the first time in three years. Wedgwood, Royal Doulton and Rosenthal have implemented new product initiatives, including Barbara Barry at Wedgwood and the Gordon Ramsay and Sir Terence Conran ranges for Royal Doulton, as well as Rosenthal’s A La Carte collection of contemporary crystal and porcelain tableware. A Martha Stewart by Wedgwood collection is also in development.
In March, Oneida Global Foodservice announced a global marketing and licensing agreement with Waterford Wedgwood. The alliance is expected to provide the worldwide hospitality industry with access to a best-in-class luxury brand portfolio, including Waterford Crystal and Wedgwood fine dinnerware, and to a design partnership that will offer highly tailored fine dining solutions.
As part of its focus on major growth opportunities, Oneida plans to leverage its market expertise and integrated global supply chain to bring the Wedgwood and Waterford brands to the highest-end hotels, restaurants and cruise line operators in the Americas, Middle East-Africa and Asia Pacific regions. It will also be responsible for developing new opportunities for Waterford in Europe. In addition, Oneida and Waterford Wedgwood established a design collaboration to create new, elegant dining options and capitalize on trends in the culinary sector.
Cookson
is building new Solar CrucibleTM plants to meet
increasing demand. Photo courtesy of Cookson Group plc.
Refractories
According to the International Iron and Steel Institute (IISI), 2006 saw a particularly strong 8.5% worldwide increase in steel use.5 The projection for 2007 is a 5.9% increase, and 2008 should see an additional increase of 6.1%-all great news for the refractories industry. Steel demand growth in Africa, Asia and South America was particularly strong, while North America should see a positive trend for 2008 following an inventory draw-down in 2007.The IISI further reports that China remains the single largest market and strongest growth area for steel. Steel use in China is forecast to increase by 13% in 2007 and 10% in 2008, encompassing 35% of the world total. According to the IISI, steel consumption in China was 442.7 million metric tons (mmt) in 2006, a far cry from Japan (116.2 mmt), the U.S. (98.6 mmt), Russia (70.8 mmt) and South Korea (48.5 mmt).6
Other industries have an impact on the refractories segment as well. For example, RHI Refractories announced at the end of 2006 that it would expand its capacity in China due to expected sales volume increases in industries such as cement, lime, nonferrous metals and glass. The company is extending its original plant in Dalian by adding a production line for 35,000 tonnes of fired magnesia bricks. The total capital expenditure is budgeted at €12 million (~ $17 million); the extension measures were scheduled to be completed by the end of 2007.
According to RHI, its objective is to increase its current revenue of approximately €1.3 billion (~ $1.8 billion) to €2.0 billion (~ $2.8 billion) by the year 2010 through organic growth and acquisitions. In February, the company announced that it had completed its acquisition of Monofrax Inc. from Vesuvius Crucible Co. RHI established RHI Monofrax Ltd. as a new legal entity for the acquisition of the assets.
Monofrax is a producer of fused-cast refractory products, which are used primarily in the glass industry. In 2005, Monofrax reported annual revenue of $45 million in the U.S., Asia Pacific and Europe. According to RHI, the integration of the Monofrax business into its worldwide sales network significantly strengthened its position as a full-line supplier of fused cast refractories specialties, while providing it with another technologically, logistically and economically optimal production site for high-grade refractory products, especially for the specialty glass market in North America.
Morgan
Crucible’s Thermal Ceramics division has seen improved sales growth driven by
positive market conditions in the U.S.,
Middle East and Asia. Photo courtesy of Morgan
Crucible.
Sales for the Insulating Ceramics segment in the first half of 2007 were up by 9.6%, while underlying operating profit increased 38.2%. In terms of project-based sales for the Thermal Ceramics business unit, the first half of the year was very strong compared to 2006. The main impetus came from European businesses, where the drivers included a series of major orders for aluminum, petrochemical, and iron and steel projects for delivery into the Middle East, India and other Asian markets. New products launched during the last three years now account for 20% of the segment’s European fiber sales.
Resco Products, Inc. is also growing through acquisitions. In December 2006, it announced that it had acquired the assets of New Castle Refractories Co., including the plants located in New Castle, Pa., Newell, W.V., and Massillon, Ohio. “The acquisition of New Castle Refractories will expand Resco’s product offerings and result in complementary and synergistic benefits to Resco and its customers,” said William K. Brown, Resco’s president and CEO.
In June of this year, Resco announced that it had acquired Shenango Advanced Ceramics, LLC, New Castle, Pa. “The acquisition of Shenango Advanced Ceramics will complement the current product offerings from Resco’s New Castle Refractories operations,” said Brown.
Increasing costs have also affected Resco, however. According to the company, its costs for alumina and magnesia-based raw materials have increased 25-55%, and ocean and domestic transportation costs have increased as well. The company also continues to be impacted by high and fluctuating natural gas and electrical pricing, which has remained unpredictable since the hurricane season of 2005.
In addition to increasing its pricing, Resco continues to pursue innovative ways to control or reduce the impact of cost escalations. For example, in June the company announced that it had completed several major upgrades at its Greensboro, N.C., plant, including the addition of state-of-the-art drying equipment, an expansion of the roller hearth kiln and the installation of two new shuttle kilns.
Trading profit for Cookson’s Ceramics division increased 22% for 2006, driven by revenue growth in the high-margin flow control and fused silica product lines. The company updated its strategic plan in November 2006, and goals include the expansion of higher-margin specialty products, which make up two-thirds of the division’s revenue, through a focus on emerging markets and improved efficiencies. According to Cookson, its profitability in linings (primarily monolithics and the construction and installation business) lags behind competitors and provides another opportunity for improvement.
For the first half of 2007, underlying revenue for Cookson’s Ceramics division grew 14%. The company is benefiting from the steel industry’s conversion to enclosed continuous casting technology in China, Russia and the Ukraine, as the process reportedly requires Cookson’s flow control products. Production capacities are being expanded for a variety of product lines and regions, including new slide-gate and linings facilities in Mexico and new glass roller and Solar CrucibleTM plants in China and Poland.
In October, Cookson announced the closure of the Vesuvius plant in Buffalo, N.Y., as part of its program of restructuring in maturing markets. A phased run-down of activity is planned through 2008 with final closure by year end. The facility, which manufactures isostatically pressed foundry crucibles, has relatively high labor costs. Production will be relocated to Vesuvius’ existing facility in Monterrey, Mexico.
Glass is an important market for refractories manufacturers. Photo courtesy
of RHI Refractories.
Glass
Applications for advanced glasses are continuing to provide the best opportunities for growth in the glass sector. Asahi Glass Co., Ltd. announced in October that it will increase its production capacity of glass substrates for thin film transistor-liquid crystal displays (TFT-LCD). Spending about 30 billion yen (~ $255 million), Asahi will establish a production furnace with a 5 million square meter per year capacity and a polishing line for the substrates at its Takasago Plant.The production furnace is expected to start mass production in Autumn 2008, and the polishing line is forecasted to start up in 2009. According to Asahi, demand for TFT liquid crystal panels is strong for television sets and personal computers, and is expected to rise at an annual rate of 20% on a unit basis.
Corning Inc. is also seeing increased demand for LCD applications. The company’s Display Technologies segment, which manufactures glass substrates for active matrix LCDs, accounted for 41% of Corning’s total sales of $5.17 billion in 2006. Third quarter 2007 sales for the segment were $705 million, at 16% sequential increase and a 39% increase over the third quarter of 2006.
Corning will also focus on emerging technologies to drive growth. For example, the company is in early-stage development for a silicon-on-glass technology that is focused on enabling display glass to be transformed into an “engineered substrate” for advanced electronic applications.
“Reorganization” could be the buzz-word for the flat glass industry. Following its acquisition of Pilkington in June 2006, NSG Group announced in January that it had approved a new top-level organizational structure for the enlarged group. An integrated Flat Glass Business was in effect by April and consists of a global Building Products Business Line and a global Automotive Business Line.
In June, NSG announced that it had entered into a sale agreement with CSR Limited for all of the Group’s Flat Glass operations in Australia and New Zealand, known as Pilkington (Australia) Limited and Pilkington (New Zealand) Limited. In the announcement of the sale, NSG announced that it believed the transaction offered better value to the company’s shareholders than would be realized by retaining the operations within the company.
NSG announced in October that it will adopt the Pilkington brand for its global Flat Glass business. “In the new NSG Group, Flat Glass now accounts for around 85% of our global operations, with manufacturing in 27 countries worldwide and sales in over 130,” said NSG Chairman Yozo Izuhara. “We aim to present a single face to all our customers in both Building Products and Automotive, and that means adopting a single global brand for all our markets in those sectors.”
Multiple
glass solutions for Antwerp’s
new Law Courts. Photo courtesy of AGC Flat Glass Europe (formerly Glaverbel).
Also in September, PPG Industries announced that it had signed an agreement with Platinum Equity of Beverly Hills, Calif., under which the company would divest its automotive original equipment manufacture (OEM) glass and automotive replacement glass (ARG) and services businesses. The total sales price for the businesses being divested is approximately $500 million before minority interest. Under the terms of the agreement, an affiliate of Platinum Equity would acquire the businesses’ assets. Completion of the transaction was expected in the fourth quarter, subject to customary closing conditions.
“This transaction is a significant milestone in PPG’s continued transformation to focus on coatings and specialty products, and it will significantly reduce PPG’s exposure to the U.S. automotive market,” said Charles E. Bunch, chairman and chief executive officer. “This sale will also provide us with more resources to pursue profitable growth in coatings, aerospace, optical products and opportunities in Asia.” Bunch added that the divestiture puts the auto glass businesses in a better position to compete by providing a strong platform from which to maximize profitable growth.
According to the U.S. Department of Commerce, shipments of glass containers decreased by 1.4% in 2006, while production increased by 1.6%. The majority of glass containers were produced for beer (59.0%). The rest of the production was for food (16.2%), beverages (8.8%), wine (5.4%), ready-to-drink alcoholic coolers and cocktails (3.2%), and liquor (3.1%). The “other” category (including containers for chemical, cosmetic, health, household, industrial, medicinal and toiletry products) accounted for 4.3% of 2006 production. For January through May 2007, total glass container shipments rose 1.2%, while production decreased 0.6%.
According to a report released by The Freedonia Group, U.S. food container demand will rise modestly (3.3%) to $23.5 billion in 2011.7 Unfortunately, the glass container segment is expected to continue to lose ground to plastic containers, as well as bags and pouches. Glass prospects could benefit from a premium and high-purity image, which are key advantages with increasingly popular organic and/or natural foods.
Beverage container demand in China is forecast to increase 8.9% per year to more than 181 billion units in 2010.8 Glass containers account for the largest share of packaged beverages in volume terms, benefiting from the large amount of beer produced in China (nearly all of which is packaged in glass bottles). The use of returnable glass bottles in the beer market limits unit demand, however.
In March, the Saint-Gobain Group announced that, following a search for strategic partners for Saint-Gobain Desjonquères, its specialty bottles business, it would sell 100% of Saint-Gobain Desjonquères and its subsidiaries to two investment funds, Sagard and Cognetas. Under the agreement, the Saint-Gobain Group agreed to reinvest a 20% stake in the business.
A manufacturer of glass bottles for the perfume, cosmetics and pharmaceutical industries, the specialty bottles business of Saint-Gobain Desjonquères and its subsidiaries delivered consolidated sales of €607 million (~ $821 million) in 2006 and operating profit of €50 million (~ $68 million). According to Saint-Gobain, the sale was part of its ongoing business development strategy.
The Freedonia Group forecasts that U.S. glass fiber demand will expand 2.3% annually to 8.1 billion pounds in 2011.9 The best growth is anticipated for glass wool fiber, with overall demand constrained by slow textile glass fiber advances as nanomaterials displace glass fibers in reinforced plastics. Textile glass fiber prices will continue to be squeezed by the impact of lower-priced imports from countries in Asia, particularly China.
In December 2006, PPG Industries and Devold AMT AS signed a letter of intent to form a 50-50 joint venture to manufacture glass-fiber reinforcement fabrics for the North American wind energy turbine market. Multiaxial and unidirectional fabrics are major components in windmill blades, and they are also used in the manufacture of a variety of marine, construction and consumer products.
The new company, called PPG-Devold, leverages PPG’s infrastructure and position in the U.S. market and Devold’s investment in stitched reinforcement technology and customer relationships. The joint venture includes construction of stitched reinforcement fiber glass production lines at PPG’s wholly owned fiber glass plant in Shelby, N.C.
Manufactured
with all-natural clay, Boral® Pavers are available in colors
ranging from deep brown and burgundy to light tan and grey. Photo courtesy of
Boral Bricks Inc.
Brick/Structural Clay
The continued decline of the U.S. housing industry is providing multiple challenges for the brick industry. Housing starts fell 2.6% in August to a seasonally adjusted annual rate of 1.331 million units, according to figures released by the U.S. Commerce Department. Starts were down 19.1% from a year earlier, falling to the lowest level in 12 years. Starts of new single-family homes were down 7.1% for the month to a seasonally adjusted annual rate of 988,000 units. The August pace for single-family construction was 27.1% below a year earlier.“The housing market is still contracting, but action by the Federal Reserve to cut the federal funds and discount rate calmed the financial markets and sent a message to American consumers that our central bank intends to ensure that the economy continues to move ahead,” said David Seiders, chief economist for the National Association of Home Builders (NAHB). “This will help to support housing, especially if the Fed takes further action in the months ahead. We expect starts and permits to bottom-out by mid-2008 before a systematic recovery process gets underway.”
According to The Freedonia Group, demand for U.S. brick and block products is expected to increase 4.1% annually to $7 billion in 2010.10 Unfortunately, the bulk of that growth will be concentrated in concrete products. Consumption of clay brick is forecast to drop to 10.2 billion units in 2010. Common brick, which accounts for the majority of total brick demand, will bear the brunt of the decline. However, specialty clay brick products, such as glazed brick, landscaping brick and other low-volume brick products, will fare better, showing positive growth through 2010.
In response to the U.S. housing slump, Boral Bricks Inc. announced in January that it was transferring production from two plants (Augusta Plant #013 and Macon Plant #050) to other facilities to streamline manufacturing and distribution. The company planned to continue to focus on green initiatives to develop processes and technologies that are increasingly environmentally friendly.
Brampton Brick announced a 6% decline in net sales for 2006 as a result of lower shipments in both its clay brick and concrete products business segments. According to Brampton, its brick shipments were affected primarily by a slowdown in residential construction activity. Similarly, Brampton’s net sales for the first half of 2007 were $46 million, compared to $53 million in the first six months of 2006. The company cited unfavorable weather conditions and the decrease in U.S. home construction for the decline. On a positive note, Brampton is in the process of building a new facility in Indiana, which is expected to be operational in early 2008. (CI’s May 2008 Brick & Clay Record supplement will feature additional details regarding the new plant.)
In contrast, overseas brick manufacturers have more cause for optimism. In June, Imerys announced that it will invest €100 million (~ $133 million) by the end of 2011 in its clay brick production assets. The company plans to increase rectified brick capacity at its Gironde-sur-Dropt and La Boissière du Doré locations, and to construct two new plants in Southeastern and Northern France. The capacity extensions and the new unit in the South of France are expected to come on-stream gradually in 2008 and 2009, while the Northern project should be operational by 2011. According to Imerys, the expansion is essential to meet high growth in the French brick market, which is likely to increase by 5% over the next five years.
Wienerberger saw its group revenues for 2006 increase by 14%. Higher demand in Europe, among other factors, enabled the company to overcome negative effects such as a severe winter at the beginning of the year, higher costs for plant startups and inventory reduction, the new residential construction slump in the U.S., and higher energy prices. Similarly, its group revenues for the first half of 2007 were up by 21%, due again to strong European construction activity, as well as favorable weather at the beginning of the year. “I expect Wienerberger will report strong earnings growth for the full year because of the excellent results recorded during the first two quarters, and our optimistic outlook for the second half,” said Wolfgang Reithofer, chief executive officer.
Also in June, Wienerberger continued its expansion strategy with the acquisition of Korevar, reportedly the third largest clay paver producer in the Netherlands. “[With this acquisition], we will organically grow our brick and roof tile business over the coming years,” said Heimo Scheuch, Wienerberger managing board member with responsibility for Northwest Europe. “The clay pavers segment nearly doubled in volume from 185 to 330 million units between 2000 and 2006, and we expect further growth over the mid-term. With this product we intend to concentrate not only on the market for public infrastructure projects, but, in particular, on private construction.”
In August, Wienerberger completed its acquisition of Baggeridge Brick PLC. “With its experienced management team and employees, its potential for synergies and its major raw material reserves, Baggeridge will assist with achieving sustainable growth and enhance our position,” said Riethof. “The combined operation will become the third largest brickmaker in Great Britain, which is the largest facing brick market in Europe.”
In October, Wienerberger announced that it will continue its expansion strategy in Belgium with additional investments in hollow brick production. Plans call for the enlargement of the Zonnebeke and Egem sites, as well as the renewal of the outdated Rumst site. The total investments are estimated at roughly €54 million (~ $77 million).
In addition to the capacity increases, the company will focus on the implementation of environmental technologies in line with the 2010+ emission goals set by the European Community. All three Belgian plants will be provided with state-of-the-art scrubber technologies to reduce emissions during the production process. In addition, the plant in Rumst will introduce raw material from recycled brick into the production cycle on a large scale to reduce the use of primary raw materials and energy.
Editor’s note: The foregoing information (except where noted) was compiled from publicly available information in news releases and annual reports.