Oct 3 2007
Cookson Group plc (“Cookson”), a leading materials science company, today announces three new expansion projects in China and a further rationalisation project in the US, which will combine further to enhance the prospects of Vesuvius, Cookson’s Ceramics division.
Commenting on these new initiatives, Francois Wanecq, Chief Executive of the Ceramics division, said:
“The three expansion projects - totalling £20 million of investment - will further enhance Vesuvius’ local presence in the Chinese market.
“Through new joint ventures we will strengthen our relationship with two of China’s leading steel producers and, through the significant expansion of our Solar Crucible™ capacity, we will be able to capitalise further on the high levels of growth in the solar power industry.
“In addition to these investments in the high-growth emerging market of China, we are continuing to restructure in maturing markets with the planned closure of a further production facility in the US.”
Joint Venture agreement with Wuhan Iron & Steel Corporation (“WISCO”)
Since 2003, Vesuvius has operated a 50/50 Joint Venture with WISCO, China’s fourth largest steel producer, producing slide-gate refractories. This operation had revenue of £6 million in 2006.
Based on this success, a further 50/50 Joint Venture between the parties has been formed, for the production of VISO™, Vesuvius’ range of isostatically-pressed alumina-carbon products used to control and protect the flow of molten metal in the continuous casting steelmaking process. The new Joint Venture, to be managed by Vesuvius, will involve the construction of a new facility in Wuhan, Hubei Province. Around half of the production will be dedicated to supplying VISO™ products to satisfy the anticipated expansion of WISCO’s own steel-making capacity, with the remainder available to Vesuvius to sell to other Chinese steel producers.
Vesuvius’ share of the investment in the new facility will be £2 million and the facility is expected to be completed by the second quarter of 2008.
Joint Venture agreement with Anshan Iron and Steel Corporation Group (“Angang”)
Vesuvius has recently signed a Letter of Intent with Angang for the formation of a 50/50 Joint Venture to supply various refractory products to Angang. Following the completion of the proposed merger with Benxi Iron & Steel, Angang will be China’s largest steel producer and has plans to significantly increase its steel production over the next five years from the current level of 15 million tons per annum to between 40 and 50 million tons. The Joint Venture, to be managed by Vesuvius, will supply Angang with a significant proportion of its total magnesia-carbon brick, magnesia based monolithics and VISO™ requirements from these three new facilities.
Vesuvius’ share of the investment in the three new facilities, to be built in Liaoning Province, will be £7 million with completion expected by the end of 2008.
Construction of new £11 million Solar Crucible™ facility in Jiangsu Province (“Sunrise”)
Cookson has completed two new Solar Crucible™ facilities so far in 2007, in China (Wei Ting, Jiangsu Province) and Poland (Skawina), both of which are expected to be at full capacity by the first quarter of 2008. In August 2007, it was announced that a further new facility is to be built in Moravia, Czech Republic for completion by the first quarter of 2008. Each of these facilities manufacture Solar Crucibles™ used in the manufacture of photovoltaic (“solar”) cells.
In response to continued strong growth in the solar power industry, an additional facility (“Sunrise”) is to be constructed in Jiangsu Province, close to Vesuvius’ existing Solar Crucible™ facility in Wei Ting, capable of producing around 40,000 Solar Crucibles™ annually. The total investment in the new facility will be just over £11 million and it is expected to be completed by the end of 2008. All production from this facility will be supplied, under a five year agreement, to a new £245 million solar cell factory to be constructed in Jiangsu Province by Glory Silicon Energy (“GSE”). GSE’s factory will represent one of the largest facilities of its type in the world, capable of producing solar cells generating 1,500 megawatts of electricity per annum.
The solar power industry is currently experiencing very strong, double digit, growth which has accelerated during 2007 as supplies of polysilicon feedstock have increased. This new investment, coupled with the other investments in Solar Crucible™ production, will enable Cookson to continue to benefit from this strong demand and maintain its leading market position as a key supplier to the solar power industry.
Closure of Buffalo (New York) facility
As part of the programme of restructuring in maturing markets, Vesuvius’ facility in Buffalo, New York is to be closed. Negotiations with the relevant unions on the closure terms were recently concluded and there will be a phased run-down of activity through 2008 with final closure by year-end. The facility, which manufactures isostatically-pressed foundry crucibles, has relatively high labour costs and production is to be relocated to Vesuvius’ existing facility in Monterrey, Mexico. The closure, which will result in cash-related rationalisation costs of £5 million in 2007, is expected to generate cost savings of £1 million per annum from the beginning of 2009. These rationalisation costs are included within the expected £10 million total rationalisation charge for 2007 for Cookson as a whole.