Zoltek (NYSE:ZOLT) manufactures and sells commercial-grade carbon fiber and oxidized acrylic fiber. The company’s carbon fiber is used primarily to build the blades on wind turbines. Its oxidized acrylic fiber, termed “technical” fiber by Zoltek, is used primarily to build aircraft brake pads. Zoltek is a relatively small company in the carbon fiber industry, compared to industry giants like Cytec Industries (CYT) and Hexcel (HXL); in 2009 its total revenues were $138 million, and its net loss was $4.2 million.
Traditionally Zoltek supplied most of its products to the aircraft industry. To diversify its product line away from the aircraft market, where it is a small player, Zoltek has expanded into niche markets like wind energy, which has been a driver behind Zoltek's sales increases. As of 2009, Zoltek is a long-term turbine blade provider for the top two pure-play producers of wind turbines in the world, Vestas and Gamesa.
Zoltek's fiscal year ends on September 30 of every year. For 2009, its total sales decreased by 25.2% to $138.8 million. This decline in revenues is due to lower sales volume, driven by the weak economic climate worldwide in 2009. The largest impact was the decline in carbon fiber sales, which accounted for $40.7 of the total $46.9 million decline in 2009.
Zoltek manufactures two main products:
Zoltek’s carbon fibers have many applications. Chief among them is being used as the building material for the blades on wind turbines. Carbon fiber is rapidly replacing glass fiber as the material of choice in production of wind turbine blades. Carbon fiber is lighter and provides more stiffness. Zoltek’s biggest customer in 2007 was the world’s largest wind turbine producer, Vestas Wind Systems.
Zoltek’s technical fiber is oxidized acrylic fiber that is made out of polyacrylonitrile; the company is the largest producer of polyacrylonitrile fibers in the world. Zoltek’s technical fiber is useful for heat and flame resistance applications. The company’s technical fiber is used primarily for aircraft brake pads. In 2007, Zoltek controlled 85% of the market share for aircraft brake pads.
The aerospace industry is becoming increasingly dependent on carbon fiber composites, which are lighter, stronger, and cheaper than conventional metals. When the aerospace demand cycle is in its upswing, the biggest companies in the carbon fiber industry shift their supplies toward this increase in demand. Zoltek benefits by supplying to the commercial aircraft brake pad market, which will have shortages as the bigger companies take on higher-cost applications, specifically larger aircraft parts. As long as aircraft orders from the aerospace industry continues to surpass 1,000 per year, Zoltek will be able to profit from shortages in the commercial market. In 2007, Zoltek had 85% of the market share for aircraft brake pads, the primary application for its Pyron fibers.
The global wind industry installed close to 20,000 MW of wind energy in 2007, and global investment in renewable sources of energy is expected to continue to rise. In the US alone, 5,244 MW were installed in 2007, more than double the amount installed in the previous yearl this accounted for about 30% of the entire new power-production capacity in the U.S. that year. Furthermore, the wind industry is expected to grow to 240 GW of total installed capacity by 2012.
The material of choice for the production of wind turbine blades is carbon fiber. Zoltek plans to benefit from the growth of the wind energy industry by supplying it’s Panex fibers for this application. In 2007, Zoltek signed multiyear contracts with three large wind turbine producers, including the two largest producers in the world. In May of 2007, Zoltek agreed to supply $300 million of carbon fibers to Vestas over five years. In August of 2007, the company agreed to supply $142 million of carbon fibers to Gamesa, the world’s second largest producer of wind turbines. In June of 2007, Zoltek also agreed to supply $30 million of carbon fibers to German-based DeWind Incorporated over three years. 
Due to strong demand from the aerospace industry, the price of carbon fiber is very high, up to 30 times that of steel. In early 2008, the price of steel was about $1000 per ton. While strong demand will drive prices up, it is also expected to drive increases in production, which will eventually bring prices back down. The output in 2010 is expected to be 53,000 tons.
The leading carbon fiber companies include:
Zoltek has 85% of the commercial aircraft brake pad market.
|Zoltek (ZOLT)||$150.88 |
|Cytec Industries (CYT) Engineered Materials Division||$669.8|
|Mitsubishi Rayon Co., Ltd. – Carbon Fibers & Composite Materials, Membranes and Others||$944.7|
|SGL Technologies – Carbon Fibers & Composites Unit||$257.18|
|Toho Tenax Co., Ltd.||$246.52|
|Toray Industries Inc (TRYIY) – Carbon Fiber Composite Materials Segment||$780.43|