Tuesday, July 8, 2008

Answers from Alloy Steel's CFO

In my previous post on Alloy Steel International (AYSI.OB), I noted that I had asked the following questions of the company via e-mail:

- In your SEC filings, I didn't see any specific clients of yours named. Are you unable to disclose their names due to contractual issues?
- With respect to your current clients, what percentage (roughly) of their equipment that uses wear plates uses Alloy Steel's Arcoplate wear plates?
- If it is a small percentage, is this because your clients are using Arcoplate on a trial basis?
- Is it because they are waiting for you to ramp up capacity with your second mill?
- Have you been materially affected, or do you anticipate being materially affected by the reduced natural gas supply as a result of the Varanus Island explosion earlier this month?
- Have you, or would you consider, licensing your manufacturing process to other companies?

Today I received the following response from Alloy Steel's CFO:

Dear David,

I apologise for delay in responding to your email but due to airline delays did not arrive back in Australia until 5 July.

In relation to your queries I advise: -

- We do not declare clients name due to issues of commercial confidentially but suffice to say they include BHP Billiton Rio Tinto FMG, Caterpillar Komatsu and many other major miners and international equipment manufacturers.
- Very hard to give a precise figure because of size of fleets but in most instances in excess of 60%
- The new mill will apart from giving increased capacity with present product range will allow in penetrating new markets with new products and super alloy products.
- We expect to experience a slow down in orders from some mining companies effected by the gas shortage; however the timing of this cannot be determined.
- At this stage we are not intending to license manufacturers of the product.

Overall, this sounds encouraging, particularly the part about the potential of the new mill to produce new products. Regarding the CFO's second point, I assume the 60% estimate he mentions refers only to the clients' fleets in Australia, which would leave the potential to equip their fleets in other parts of the world with wear plates. I'll e-mail him to clarify that though.


DaveinHackensack said...

Update: Just heard back from the CFO via e-mail (it's almost noon Perth time as I write this), and my assumption was correct: the 60% estimate refers to the client companies' Australia-based fleets only.

Daniel said...

I like their response to the first question. We don't name names but here are some names! Thanks for the update on this one...

DaveinHackensack said...

Yeah, that's kind of funny. FYI, the reason why I asked was that I'd seen some of those names tossed around on message boards, but didn't see any names mentioned in the company's filings. So it's better to hear it from the horse's mouth.

Incidentally, you know you're investing in a small company when the CFO position isn't a full-time job yet. Alloy Steel's CFO also has his own business: Winduss & Associates. When I worked for a start-up earlier this decade, our CFO had a similar arrangement.