Zoltek is Set for Carbon Fiber Boom
Aug. 3–An improved outlook for carbon fiber has Zoltek Cos. on an upswing.
The Bridgeton-based company says demand is up for its product, and it’s ramped up stalled operations to increase capacity.
And if the stock price picks up, the company will consider a second stock offering to raise capital and expand its facilities, Founder Zsolt Rumy said.
Zoltek stock closed at $11.36 Tuesday in Nasdaq stock market trading, down 3 cents, and has hovered in the low teens for months, after trading for $19.63, an historic high, on Jan. 19.
The company has hired 150 employees to restart its plant in Abilene, Texas, where the continuous carbon fiber is produced. That facility had been idle for four years.
Zoltek also is adding production lines at its plant in Hungary, where acrylic and carbon fibers will be produced for European customers.
“We’ve operated without profits for years, but we’re hoping the fourth quarter will be profitable this year,” Rumy said. “If Abilene runs smoothly, we should be turning a profit this year.”
Zoltek has struggled in recent years to find commercial markets for carbon fiber, a high-strength synthetic product that can be used to make lightweight, heat- and corrosion-resistant composite material.
The bulk of the business comes from supplying carbon fiber used in jet brakes to aerospace companies. But Zoltek also has sought a wide range of other uses for carbon fiber, from automotive frames to insulation, windmill blades and as reinforcement in pre-cast concrete.
Zoltek was forced to restate earnings for fiscal 2004 and this year’s first quarter, when it discovered an error in its accounting of convertible debt and warrants issued by the company.
The company restated earnings for the first quarter, ended Dec. 31, to a loss of $29.9 million compared with its earlier report of a $3.5 million loss.
Zoltek posted a loss of $22.4 million during fiscal 2004, ended Sept. 30, compared with the $16.7 million loss previously reported, according to the restatement.
The company has been using a form of convertible debt financing and warrants, which allow loan holders to convert the debt to common shares. The warrants allow investors to buy shares at prescribed prices.
A second public offering could enable the company to raise the equity to expand its operations, providing Zoltek’s stock price ticks upward.
“To the extent the company can get a fair market price, a second offering doesn’t dilute the ownership value, but it can be a way to get the financing and cash a company needs,” said Tzachi Zach, an assistant professor of accounting at Washington University.
Zoltek’s wind-energy business has driven sales in recent years. The company recently signed a contract to become an exclusive provider to Vestas Wind Systems A/S of Denmark, the world’s largest maker of wind turbines. The contract projects sales of $80 million to $100 million over three years.
While Zoltek waits for its share price to respond, Rumy said, the company is encouraged by the increased demand for its product.
“We’ve gone from trying to stay alive to huge growth,” he said. “We’ve found that our strategy was right but the timing was wrong, and it’s been a struggle to get the company back up again.”
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