State of the Nation

By E. W. Phares II

I am pleased to report that your company continues to do extremely well in spite of the weak economy. Our first quarter was 10% ahead of plan, both in sales and pretax profits. Sales and profits continue well in Canada, however, as reported in the last Tote Notes, our sales are lower than the previous years’ due to the dramatic cutback of one of our major customers. Considerable amount of work is being done to increase sales and new opportunities, especially in the Western Canada area with the tar sands looking extremely promising.

Sales at Penetone were very light during the first quarter. We’re well behind plan for the year and also for 2010. However, new opportunities are beginning to show promise and we fully expect to achieve profit plan by year-end.

Petron had an outstanding first quarter with sales increasing by over 30% compared to 2010. Operating income was also quite strong and close to 20% ahead of last year. All areas are doing extremely well with the exception of the cement and concrete industry which has yet to rebound from the housing and construction recession. Our sales are not only strong in the U.S. but are growing nicely offshore both in Europe, China and India and we anticipate these areas to grow at a faster pace for the rest of the year. We fully anticipate that we will be ahead of plan in 2011.

Although the economy is improving slowly, we anticipate having our company grow at a higher rate than the national GNP due to market penetration and new product introduction.

May I take this opportunity to once again thank every one of you for your hard work and commitment to our company.

Business Dynamics

By Bruce Muretta

It’s been said that the only constant in life is change. This is true in business and especially for Penetone. As customers and their needs change, we must change to meet this dynamic.

We have historically witnessed continual changes in our customers. Primary metal customers, once at the forefront of our markets, suffered years of decline from the increase in supply of cheaper foreign metals. Consolidation of railroad lines often resulted in their economics of buying from one supplier. Although customers are not lost, their demands may decrease because of economic conditions or political and governmental decisions, especially in the military.

Vigilance is required to stay ahead of the curve. Penetone is doing its best by 1) branching into new industries such as the swine market; 2) expanding military accounts to include the Army, Coast Guard and National Guard units; 3) developing new military products (Military Type II cleaners, wipes and aerosol applications); 4) adapting to increasing raw material costs by substituting alternatives (dipentene for d’limonene); and 5) selling deeper to existing accounts and exploring international markets (Pulp & Paper).

As always, this is a joint effort. Mike Bradford, Jim Brooks, Chad Tennant and Charlie Good are working the military applications. Dick Irwin, Phil Figdore and myself are working the swine market. Mike Nelson is abroad quite often pursuing international sales opportunities.

We can never be complacent as change will always be a constant factor of our business.

Official launching of our new website

By Josée Mercure

You’ve all been waiting and it’s finally ready! Our brand new website is officially launched! This new website is much more accessible than the former one because it allows you direct access to all the information you need and is likely to be of interest to you. In addition to having an attractive look and design, the new structure is user friendly which greatly improves navigation and is very useful in helping you find all the information you desire.

The site is divided into several large sections and provides a more direct navigation to points of interest. First, the animation draws attention to the characteristics of the business while offering a slight overview of our business, products and services. Secondly, three icons located below act as shortcuts to the most requested sections of the site which is the corporate side, our fields of activities and products.

In addition to new ergonomics with pages reorganized and restructured, the new site informs you about events and recent news about the company, its products, services or any other relevant records to be processed in regards to sanitation. Whether it is the announcement of a new product, a record deal, a crisis management or any other subject of topical interest near or far from our industry, this section allows you to make regular updates on everything of concern for us.

Finally, at the bottom, there are complementary navigation tools. This section provides direct access to the library of data sheets which are high in demand by many customers.

Major improvements to our site include the search engine and product catalog. They are much more elaborate and do not require secure access. Now all the information about our products and their specifications, data sheets and technical bulletins are easily accessible. All search options are available to find the product that meets the needs by product name, product code, industry or application.

"India" A land of diversity, contrast and above all, opportunity for Petron

By Dave Brealey

Our first foray into India was 2007-2009. Sales during the first two years were negligible. We were trying to grow sales in India without having a Petron person working and living in India. It didn’t work.

Servicing the business in India from afar was difficult to say the least; thus the decision to locate a new distributor and indigenous Sales/Service manager with a mentality more in line with our type of business was made in late 2009.

We were introduced to Trade Vision, a group of companies located in Bangalore, Karnataka, Southern India. One of their subsidiary companies, Focus Infra Engineering, was the ideal match for Petron's needs incorporating location, warehousing, potential customer contacts and, probably the most important, commitment to get the job done properly.

Focus was set up as a Petron distributor in October 2009. Sufficient Petron inventory was shipped to the local warehouse setting the ground for our attempt to improve sales in India.

During the same period we began recruiting potential candidates that suited our requirements in a local sales/ service engineer. After exhaustive interviews carried out over the Internet and two different countries, we were successful in filling the position in India. Ramachandran Chandrasekar (Chandra) joined Petron in February 2010 effectively completing the requirements to launch the new initiative in India.

Chandra hit the ground running, the potential was enormous; however, some obstacles posed a problem.

Petron as a brand name was unknown in India and, although we have the required approvals from the main players globally as well as extensive worldwide user lists, local user references were nonexistent. These to the India end users were considered essential before they would entertain a test.

The predominant players in India are Fuchs and Kluber and they have been entrenched in India for many years. To dislodge them would take something special and of course time.

During the first six months, Chandra set out to remedy this situation and what may have seemed daunting in the beginning soon became a success story with some of the major OEM's in India. Chandra was able to get successful tests and conversions in the cement and steel industries. He worked hard managing the distributor, warehouse and training of the distributor’s employees who assisted him in the sales and service to existing accounts.

Chandra has now turned the situation around to the point where major OEM’s in the India cement and power industries now recommend the first fill and continued use of Petron Gear Shield NC on its equipment. This recommendation was also extended to clients looking for alternatives to their present suppliers and problem gearing.

Sales reached budgeted levels during the 2010 year although realistically we are only scratching the surface. Service capabilities allowed for fast reaction times to customer needs and requests showing commitment and professionalism was part of our package. All indications point to sales for 2011 more than doubling those of 2010 with the definite potential for even better results.

By adding more products in India along with increased service capabilities, continued support and increased expansion of locations and personnel by Focus Infra Engineering, Petron and Focus see a bright future with financial benefits for all.

Not Letting It Go To Waste

By Roger Wichner

Petron works diligently to not let anything go to waste. Petron has a dynamic dispo program in which inventory that cannot be used as originally intended for whatever reason is reintroduced back into the manufacturing process. The term dispo means any inventory (raw material/ finished goods) that does not conform to the required specifications. In 2010, 269,736 pounds of inventory was identified as dispo material. Of this amount 264,318 was reworked, certified to be returned to normal inventory or returned to a supplier resulting in a 98% usage ratio. Only 5,418 pounds was identified as waste material that could not be salvaged and had to be disposed of. When you compare the waste pounds to 15,103,353 total pounds produced in 2010 this equates to only .04%.

As good as our dispo program is, it just got better. Recent en-hancements to our dispo program allow our Quality and Technical Department to identify what finished products the dispo can be added to. The system allows Q&T to recommend a dispo be used in up to four different finished products by order of preference. In addition specific instructions can be added as to how to use the dispo in a batch.

Once this finished goods identification is established production assigns the dispo to an upcoming batch. The assigned dispo is added to the pick list of material to be pulled for the batch. If a dispo is not used in the assigned batch a supervisor approval is required, thus improving accountability for using the dispo.

In the past identification, assignment, and picking of dispo material was done manually. Now because of the recent improvements these functions are done through our computer system. This allows new dispos to be processed quicker, providing faster turnaround time in adding the dispos to batches and provides accountability.

Petron is working hard to make improvements in how it handles non-conforming material so that we let nothing go to waste.