1. Market for NaClO3
1.1. market share
1.1.1. 85% to paper & pulp
1.1.2. 15% to other chemicals
1.2. sales during 1970s
1.2.1. Exhibit 3
1.2.1.1. 1970: 220,000tons
1.2.1.2. 1970~1974: g≈8.6%
1.2.1.3. 1975: -12%
1.2.1.4. 1975~1979: g>10%
1.2.1.5. 1979: 435,000
1.3. demand
1.3.1. pulp
1.3.1.1. expected: g∈(8%~10%)
1.3.1.2. projected: g∈(3%~4%)
1.3.2. other
1.3.2.1. expected: g∈(8%~10%)
1.4. capacity
1.4.1. Exhibit 3
1.4.1.1. 1970~1979: <70%
1.4.1.1.1. tight market+cost↑ → price↑ → profit margin↑
2. Market Competition
2.1. late 1979 existing
2.1.1. 55% domestic capacity & 59% southeastern market
2.1.1.1. 4 dominant chemical companies
2.1.1.2. paper & pulp companies
2.1.1.3. 2 specialized companies
2.1.2. Exhibit4、5
2.2. 1980 planned
2.2.1. Union: 40,000-ton plant
2.2.1.1. expected selling price in 1979: $420 (15% on return)
2.2.2. Lou: 35,000-ton plant
2.2.3. when balanced, price+margin expected to ↑
3. American's Plant
3.1. operating profit
3.1.1. Exhibit6
3.1.1.1. 1974~1979 profitable
3.2. capacity: 4000 tons per year
3.3. manufacturing cost
3.3.1. electric power: 55%~60%
3.3.1.1. increase from $.019 in 1977 to $.025 per KWH in 1979
3.3.2. variable materials: 20%
3.3.3. labor and maintenance: 20%
3.3.3.1. capital expenditures increase from ($200,000,$500,000) between 1973 and 1979 to ($475,000,$600,000) in future due to env. regu.
3.4. equipment: graphite electrodes
3.4.1. consume graphite
3.5. research & development
3.5.1. use metal electrodes
3.5.1.1. reduce power needs by ≈30%
3.5.1.2. eliminate graphite use
3.5.2. use laminate metal
3.5.2.1. reduce power needs by (15%,20%)
3.5.2.2. eliminate graphite use
3.5.3. 40% complete
3.5.4. pilot plant scheduled for March 1980
3.5.4.1. one-time cost of about $2.25 million
3.5.4.2. depreciate for 10 years
3.5.5. installation scheduled for December 1980
3.6. proposed sale
3.6.1. profitable: Exhibit7
3.6.2. evaluate American's plant: Exhibit8
3.6.2.1. prices: increase 8% per year
3.6.2.2. power costs: increase 12% per year
3.6.2.3. selling expenses: reduce by marketing through existing sales force
3.6.2.4. depreciation charges increase
3.6.2.5. technical support provided
3.6.2.5.1. pay costs
3.6.3. fund the $12 million entirely with debt capital
3.6.3.1. $8 million in 15-year bonds
3.6.3.1.1. 11.25% interest rate
3.6.3.1.2. $800,000 a year since the sixth year
3.6.3.2. $4 million notes payable
3.6.3.2.1. 11.25% interest rate
3.6.3.2.2. equal amounts over 5 years