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HOME arrow Manufacturing arrow Keronite fundraising to support push into key markets arrow Registration
Keronite fundraising to support push into key markets
Written by Lautaro Vargas   
Wednesday, 12 March 2008
Keronite’s chief executive says the company’s new £1.2 million fund raising will allow it to maintain the momentum it needs to support its continued expansion into the powerful emerging economies under difficult global market conditions.

Speaking plainly about the challenges needed to maintain a difficult corporate balance while pushing through new state-of-the-art materials technology to major international OEMs, the Cambridge firm’s CEO, Lars Olrik, also said it was on course for its target of providing an acceptable return on investments by 2009.

The £1.2m funding was led by Azini Capital with support from RAB Special Situations Fund and RAB Innovations Fund as well as some existing investors. Olrik said it would allow the company to offer the support its current growth required and enough production support capability for customers.

Another funding will be required in June 2008 to support further business expansion, either into new sectors such as the biomedical industry or new geographic regions.

“It’s a hell of a commitment, taking on the big companies,” said Olrik, whose business is focusing on the big blue chip companies. “We are looking at the growth of the materials industries in China, India, the Middle East, Russia, Brazil and Mexico, emerging markets where energy and labour rates are affordable.

“Building successfully in China is a massive challenge, as is the Middle East. Also, we are a capital goods sales firm, which means we will eventually feel some of the pressure of the price of the dollar, high oil and commodity prices. Let’s not kid ourselves, it’s bloody hard work.

“We are 25-30 people and must not vastly overextend ourselves, it’s about how fast we can run without getting ahead of our curve and burning bridges.”

Keronite’s patented surface treatment technology – Plasma Electrolytic Oxidation (PEO) – is used to convert the surface of light metals into an extremely hard, crystalline ceramic oxide with outstanding properties in terms of resistance to corrosion and wear, which enables manufacturers to reduce costs and improve performance through the wider use of aluminium and magnesium.

China supplies around three quarters of the world’s magnesium and Keronite recently won a contract to lease two semi-automatic production lines to a Hong Kong firm.

“It is essential that Keronite has a strong presence in this market as more and more Western manufacturers shift production to the East of take advantage of the abundance of local raw materials and low labour costs.

“The Middle East is also an area attracting a lot of attention at the moment, particularly as far as aluminium is concerned. Recent investment in new smelting capacity across the region is benefiting from low energy costs and this is driving demand for local downstream processing.

“Keronite is the only PEO supplier active in the Middle East at the moment and has recently been approved for the offsets programmes both in the UAE and Saudi Arabia.
“It is expected that these programmes will open up a number of new possibilities in a variety of industries, including architecture, oil and gas and aerospace and defence. We are  hoping to see at least one Keronite production line installed in the region before the end of the year.”

Olrik says Keronite is also about to break into Japan and then Malaysia and will have its first facility in Mexico by the end of the year, all of which needs capital support.

Turnover has increased (2006: £2.8m, up £1.3m), but so have pre-tax losses (2006 loss increased £1.8m to £3.3m), but Olrik expects to be around break even this year and profitable soon.

He added that a stock market IPO – as previously planned – was no longer the exclusive option with trade sales and mergers, particularly with Far East companies, distinct potential alternatives.

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