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advanced technological developments. Strategic agility is
important to manage those market imbalances.
Industry Consolidation
In February 2011 we completed the acquisition of KB Alloys,
LLC (“KB”), the leading producer of aluminum master
alloys in the United States, with production facilities in
Kentucky and Washington, USA, and China. This is a transformational
acquisition in the aluminum alloy market. We
combine our aluminum master alloy business in the United
Kingdom, Brazil and China with KB and thereby establish
a clear market leader with global reach and a strong
presence in China. We believe this move to be low risk as
we are very familiar with the products, people, markets,
technology, customers and suppliers.
Engineering Systems
An important metric for our heat treatment series, global
automotive demand for fuel efficient vehicles, is improving,
and that includes the North American market where our
services are especially critical to the industry.
In addition to order backlog, an important metric that we
follow closely at ESD is the universe of active outstanding
quotes in which ESD has participated. A certain percentage
of this universe will ultimately be converted into firm
orders and eventually revenue and cash flow. As backlog
is more of a short term indicator, total quotes outstanding
are a measure of healthiness in the medium term. The
trend of the universe of total quotes outstanding is a good
barometer for how ESD is likely to perform over the next
few years. While we do not publish the total volume of
the outstanding quotes, the universe presently exceeds
$2.0 billion and has experienced a double digit percentage
increase over the past twelve months.
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This increase in quotes is reflected in the increase in
order intake pictured above. The second half of 2010
produced the first positive book to bill quarters since
early 2008. The order intake and quotes are fairly welldistributed
amongst the specialty steel, super alloy,
titanium and solar industries.
While external factors such as overall macroeconomic
health and demand in specific geographic or industry
sectors influence the size of the universe of outstanding
quotes, factors related specifically to ESD’s capabilities
not only influence this pool, but more importantly impact
the conversion of quotes into firm orders. ESD has over
2,000 furnaces installed worldwide and processed more
than a million parts requiring high wear resistance heat
treatment in its Own & Operate unit. Such an extensive
installed base of reference accounts builds on ESD’s
credibility, facilitating to securing orders across a spectrum
of geographic markets. In addition, the continuous
investment in new products and technologies in selected
niche markets provides ESD with a distinct competitive
position, making it the engineering firm of choice in most
of its markets.
We have made several investments in certain technologies
that we expect will enhance ESD’s growth in the near term.
Here are a few examples:
• Heat Treatment: Conventional automotive gear manufacturing
concepts rely on the separation of different
operations such as soft machining, heat treatment and
hard machining. We have developed a new furnace
module called SyncroTherm ® which synchronizes
heat treatment with machining, permitting a one-step
process versus a multiple-step process. Not only does
SyncroTherm ® offer significant cost reductions, but
also provides a more homogenous, higher quality
treatment of parts versus traditional methods. ESD’s
combination of material science and furnace technology
provides a truly disruptive technology in the mass
production of certain automotive parts. This heat
treatment technology is a key component of the fuel
efficiency improvements in the transportation industry.
• Solar: We have developed crystallization furnaces
capable of using much larger crucibles, resulting in
approximately 30% lower operating costs per kilogram
of silicon and therefore lower cost of solar energy. Also,
with the acquisition of the Mono2 technology from
BP Solar, we will offer an upgraded line of furnace
systems to produce monocrystalline-like ingots using
traditional multicrystalline furnaces that will provide a
higher sunlight to electricity conversion rate at lower
cost per watt.
We have also launched several initiatives in the electron
beam (Blade Runner line smart coaters for turbine
blades), primary melting of specialty steels with vacuum
induction, secondary melting of large ingots and featuring
parallel withdrawal systems, and precision casting for
titanium-aluminides used in aerospace engines.
Social Responsibility
Alongside our financial goals, our three core sustainable
development objectives of being responsible stewards
of the environment, meeting or exceeding regulatory
standards and being a valued contributor to the local
economies and communities in which we operate
continue to guide us.