State of the Nation

by E. W. Phares II

In spite of the very sick economy, our company did quite well in 2009. Although our sales were below plan and last year, our consolidated pretax income was dramatically improved over 2008.

Our sales for the year were approximately 5% behind plan, but pretax income was 46% ahead of plan and nicely ahead of 2008.

Continued tight cost control, outstanding purchasing of our raw materials and containers, and limited expenditures in capital projects resulted in the fine pretax income.

The most major negative impact during the year was at Petron due to the very weak sales in both cement and mining industries. We have noticed, however, an increase in the last 60 days in the iron ore industry and expect a reasonable rebound in 2010. The cement industry is extremely weak and we fully expect 2010 will see little improvement.

Penetone is doing quite well, when one considers the economy, and our sales to the pulp and paper, military, and pipeline continue ahead of plan. Our industrial segment is quite light due to the automotive, steel and general malaise of the business environment. 2010 does look more promising.

Canadian sales and profits have improved dramatically due to the recent award in the tar sand field with Encana. They have converted all of their waste product cleaning to us and this is generating a considerable increase in both our sales and profits. This new account was a major factor in the dramatic increase in sales and profits in the 4th quarter and was the primary factor in our achieving such excellent pretax operating income. The supermarket and DeLaval sales are doing well, however the industrial segment, especially in Ontario continues to be quite weak. 2010 however looks to be a continued improvement over last year.

In spite of the continued weak economy our selective position in specialty markets continues well and we fully anticipate that 2010 will be a good year.

I would like to take this opportunity to wish each and every one of you profound thanks for your contribution.

Recession has Impact on 2009 Sales

By John McHale

Petron has consistently set new sales and profit records for the past 8 years; unfortunately 2009 brought an end to that streak. Petron was not immune to the worldwide recession, nor did we think we would be, but we underestimated the severity of the recession's impact when we did our profit planning for 2009.

For 2009, Petron saw its revenues fall 25% from prior year and our net income was 13% less than 2008. Although the final numbers came in less than plan and prior year, it could have been much worse. We only have to look around us to see friends and family members who were laid off and businesses that closed their doors.

Petron did not have to make any major personnel reductions. We did not freeze or reduce salaries. In fact we continued with merit increases based on performance. The 401k matching continued unabated and we made capital expenditures as needed to help prepare ourselves for future growth.

Although 2009 was not stellar compared to the record setting last 8 years, Woody is very quick and proper to point out it was still our 5th best profit year ever at Petron. I won't bore you with all the mind numbing details of how bad the recession was (or still is) but in the iron ore industry the amount of tons of iron ore shipped on the Great Lakes to the steel mills was at a low not seen since 1937—that's a long time.

I am very proud and pleased to report that we have continued our reportable lost time injury record. We have now gone 10 years and 4 days without a reportable lost time injury at Petron.

We have seen a slight uptick in sales and pounds produced at Petron over the past 3 months and we feel this is the start of a turnaround. We now know that the iron ore industry is getting back on its feet and most North American and Brazilian operations will be operating at or near full capacity for the remainder of 2010.

Copper is now in the $3.30 per pound range after hitting lows of about $1.45 per pound. This increase in copper price has brought about a resurgence in the copper industry. Gold has not taken a breather and it is selling at over $1,100 per ounce.

The one area that still remains weak is the cement industry and, by all forecasts, is expected to remain slow until late 2010 or even 2011.

Petron continues to develop and grow its core business in targeted mining regions throughout the world. We are adding additional personnel in India and China in the first quarter of 2010 to augment and service that growth.

We will be manufacturing several new products at Petron in the first quarter of 2010 that have annual sales in excess of 2.5 million pounds.

We are excited by what we see happening at Petron in 2010 and the lessons we learned in 2009 will help us to be more efficient and productive in future years.

Petron Shovel Business Expands

By Gerry Enroth

Petron sales representatives have been working very hard this past year to expand our shovel open gear lubricant business and our efforts are paying off. Several new major markets have been opened globally. Pierre Castagne was successful in gaining a shovel open gear lubricant evaluation at a mine in British Columbia. Product performance, service, and focus on customer needs, all played an integral part in the conversion of the remaining two shovels. This success story is much more significant than the gain of three shovels. It has given us a reference point in Canada to highlight our products and services in our endeavor to expand our business at other Canadian mining companies.

Most recently, we have been testing on two shovels at a mine in Labrador. The evaluation is going very well and we hope to convert the remaining six shovels in the near future. There are other prospect accounts we are working on within Canada and look forward to more shovel tests and conversions in the coming months.

Mexico is another major new market recently called upon. A new gold mine in Mexico tested our shovel open gear lubricant on two of four shovels. Our strategy remains the same whether in Canada, Mexico, or China... provide a proven, excellent performing product, support the product with unparalleled service, and focus on customer needs. This approach has proven successful once again and all four shovels are now on Petron. Armando Munoz is making regular service calls to support this new customer and help train employees in the field of lubrication.

China has also been added to the Petron shovel list recently, with many exciting new prospects for Dave Brealey and John Hu to call upon.

We are very optimistic regarding continued growth in Petron shovel business worldwide.

Thriving in Strained Times

By Jean Richard

With 2010 already upon us, it's appropriate that we take one last look at 2009. Overall the year was quite positive. In spite of all the doom and gloom predicted at the beginning of 2009 West Canada finished nicely ahead of the previous year. Sales were up by 21.4% and the bottom line was up by 90.1%.

The industrial segment, and more specifically Western Canada, had a very strong year thanks to the acquisition of a new account (Encana) during the last quarter of the year. The balance of the industrial market however suffered significantly as plant closings, filings for bankruptcy protection, and a severe drop off in drilling in Western Canada all lead to very soft sales in our traditional industrial base. We expect to see some improvement in 2010 albeit at a limited pace.

The supermarket segment had another good year with sales increasing by 4% over the previous year. However we will definitely see a reversal of this situation in 2010 as Sobeys tendered their sanitation program in 2009 and while the final decision remains to be taken, we expect a significant drop in sales and financial contribution due to price concessions required to hopefully keep this valued customer.

Food/Barn market also had a strong year. Gross sales were up by 17.2%. The Quebec and Western Canadian markets continued at a strong pace but Ontario was a disappointment as we failed to get the foothold we had anticipated. It is our intention to re-focus on the Ontario market in an effort to get our share of sales.

No doubt 2010 will hold its share of challenges but we remain in a good position to benefit from a recuperating economy and strong positioning in our traditional markets.

I would be remiss in not thanking all of our employees for their efforts and support in 2009. It was greatly appreciated.

Best wishes to all of you and your families for continued health and success in 2010.

Company loses two giants

By Bruce Muretta

After 36 years and almost $24M in sales, Jim Mobley has hung up his spikes. During his career, Jim combined excellent product knowledge, great people skills, tenacity, honesty and total customer commitment to achieve stellar results. Jim was instrumental in establishing the pulp and paper business for Penetone, especially in the Memphis area. We will all remember Jim as a true gentleman who was always kind and considerate to all. Personally, I will miss Jim's counsel and friendship.

For 33 years Miles Glantz has flawlessly handled West's legal matters. These included product liability suits, mergers and acquisitions, environmental issues, personnel actions, contract agreements and corporate resolutions. Everyone who has dealt with Miles has known what a wonderful "mensch" he has been. Miles always had time and genuine concern for all people. I always felt a sense of strength and stability from one of my closest friends at West. Miles will be greatly missed.

It seems fitting that these two gentlemen should leave at the same time. The Company has truly lost two pillars of integrity, strength and class.

2009 Employee of the Year Award Recipients

Denis Fortin: Sales Over the last couple of years Denis has grown the Farm market in Quebec from virtually nothing to a million dollar market. He has established himself as a source of reference for the customers in this market and is currently establishing new opportunities in the greenhouse market.

Mike Butler: Operations In September our Western division obtained an extremely large account and our manufacturing needs doubled overnight. Through hard work and a lot of ingenuity, Mike and his team succeeded in meeting demand while continuing to satisfy our regular customers and keeping costs under control.

Antoine Alonzo: Administration In spite of the fact that Antoine has not completed his second year at West, he has made numerous improvements in accounting procedures and controls at West Canada. By implementing these cost saving measures Antoine has helped in reducing our cost structure.

President's Award

Paul Hayden - In spite of a very tough market in the oil patch in 2009 Paul has lead his team in the development and application of gas scavengers culminating in the acquisition of a huge account. As a result, the Western Division had a record year in sales and operating profit. The potential in this new segment is significant and Paul has undertaken steps to develop new opportunities in the degassing market. In recognition of this accomplishment, Paul was awarded the prestigious President's Award.