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Summer 2008 · Vol 20, Number 3 In This Issue
We have now completed the first half of fiscal 2008 and I am very pleased to report that we have had a fine start. However, before I get into the details, I want to personally apologize to John McHale and his Petron team on incorrect facts in my report of the first quarter. Petron sales were, in fact, slightly ahead of budget and well ahead of the prior year. Further, that income was ahead of last year. Petron team, please accept my apologies for the incorrect input. Now to the State of the Nation report for the first half. Sales for the first half for the company were ahead of plan and well ahead of last year. Our pretax operating income was also ahead of plan and well ahead of last year. All divisions contributed to a strong first half and in spite of the perilous economic conditions, the second half has started very well. Penetone has had a nice turnaround from the first half of 2007, with our sales having improved by over $550,000. Pretax income is close to $100,000 and a turnaround from last year of over $150,000. All market areas in Penetone are doing extremely well with continued strong contribution from the military and nice growth in our sales to the Pulp and Paper industry with new accounts being garnered. In spite of the weak economy, we anticipate that Penetone will continue this strong showing in the second half of the year. West Canada had a very good first half with sales improving over $1,000,000. Our pretax operating income was also ahead of plan, and well ahead of last year. Sales to supermarkets, swine industry, and DeLaval continue strong across the board. R&M sales in Western Canada to the tar sands market have improved dramatically. The introduction of our new product for hydrogen-sulfide removal has been accepted enthusiastically and has caused outstanding improvement. Petron continues its outstanding track record with sales close to $1,400,000 ahead of last year and well ahead of plan. Our pretax income is slightly behind plan, but nicely ahead of 2007. All market areas of Petron continue well with considerable increase in sales offshore both in South America and in China. The forecast for the year continues to be optimistic for our sales and profit. The single largest responsibility that all operating managements have is combating the large and frequent cost increases that have affected each division. Although the economic forecast for the second half is gloomy, we are optimistic that we will continue to increase both our sales and pretax profit. I’d like to take this opportunity to thank each and every one of you for your continued commitment and hard work during these very difficult economic times. West Penetone Enjoys Record 1st Half Thanks to growth in nearly all of the markets in which we sell, the company experienced record sales and bottom line results in the first half of the year. After a number of years where industrial sales were slipping, we have seen a marked reversal of the trend this year (sales up by 15%). While all regions in the country are showing growth over the previous year, Western Canada had a very strong half thanks in large part to our success in introducing degassing products in the petrochemical/tar sands sector. The supermarket segment did very well also (sales up by 11%) as we continue to introduce new products and our largest customer, Sobeys, continues to expand nationally. We are currently in the middle of launching our new marketing program with this very important customer. The barn segment was also up nicely (+48%) with new customers coming on board and the introduction of water treatment products. Operating profit followed sales growth and is up by 13% for the 6 month period. The last half of the year will certainly have its challenges as numerous and significant raw material cost increases will have a short term impact on our margins. On the positive side significant opportunities remain as we are launching a line of gel products, our new "green" line and degassing products for the petrochemical sector. Many thanks to all for your efforts in achieving these fine results. International Mining Knows No Boundaries Petron is well-past the halfway point for 2008 and the global mining markets refuse to show any sign of a slowdown. Historically, the mining industry is the last to feel an economic slowdown and to respond to economic rebounds. As long as China and India continue to keep demand for commodities well ahead of supply, the mining industry will continue to expand their efforts in response. Our new business manager in China, John Hu, has a background in the lubricants business which is a perfect fit for our plans to expand China. Petron will start to market our flagship products under the Petron label which will allow us to expand our business well beyond the two products that ExxonMobil/China has successfully marketed for two decades. The mining industry will expand in numerous regions of northern China and we feel these new mines will offer opportunities that our years of experience can service effectively. John is currently in the process of setting up distributors and warehouses in key areas where Petron products and services have the highest percentage of opportunities. Our recently hired manager for the International Mining Division, Mark Giese, has a strong background in mining and mining related lubricants and gives us a nice fit to expand our global distributor business. Mark will work from his home in northern Minnesota and soon be traveling to all corners of the globe on behalf of Petron. Mark will be working with our newest distributors in India and Ireland as well as our established distributors in Chile, Peru and South Africa. Add to this his work with our global marketing partner, ExxonMobil, and his directive to build a network of Petron distributors in China, and it’s easy to see that Mark has more than enough to keep him busy for a very long time. Brazil continues to provide opportunities for Petron. The introduction of our Hi-temp lube for furnaces in the iron mining industry is moving forward with two tests underway in the state of Espirito Santo. Brazil offers the largest market for growth with this unique product and we look forward to the challenges of capturing this business. Brazil will also be home to a new Petron distributor that will assist us in expanding the product base in this mining rich country. 2008 is shaping up to be a very good year for Petron and with the addition of new employees and new distributors we look forward to maintaining many years of continuous growth. No need to remind anyone of the rising costs for energy or food. The cost escalation spirals throughout the economy as companies raise prices to maintain profit margins. Penetone/Petron are especially impacted as a majority of our raw materials are hydrocarbon based and surfactant based. Passing along cost increases may appear to be a simplistic, direct exercise, but much planning is required. Specific product costs magnitude and timing must be anticipated. In turn, these factors serve the basis for price increase implementation to our customers. The price increase process involves:
Adjustments can be made in the workplace and in our personal lives to offset these rising costs. Conservation is a key component of cost reduction - consolidate driving trips, car pool, fuel-efficient cars, planned material usage and frivolous spending. To avoid feeling the full impact of cost increases, self-discipline and some lifestyle changes may be required. With the second quarter ending in May, sales for the Western Industrial Division (formerly R&M) were up 10.9% over plan and continuing into the third quarter over plan by 16.9%. The slump in western Canada appears to be over with rebounding commodity prices driving the economy and, while industry in general is doing well, the WID is capitalizing on a long term goal; the Oil and Gas industries acceptance of ROC 40. We have been working on this for some time now as ROC 40 was introduced some years back. In the last quarter and continuing into the third the WID has completed two major shutdowns with Syncrude and Suncor out of Fort McMurray, AB. These two shutdowns went extremely well resulting in new opportunities and widespread industry acceptance of ROC 40. Being an established player in this market segment is key and now realizing further market share is a matter of getting out there and spreading the word. Currently, a new marketing brochure is being drafted and printed and strategies planned for other markets in Ontario, the east and, longer term, the U.S. ROC 40 could be a company changing product as the leading competitor’s product sold tens of millions in recent years. Once established nationally the sky is literally the limit. Some new faces have joined our team in the last few months, James "Pat" Freeland has taken a post as our new shipper/receiver and Randy Zich has taken over in Northwestern Alberta; and I have transferred to Edmonton to head up the Western Industrial Division as General Manager. The remainder of 2008 continues to look very positive despite recent price increases. A continued ramping up of oil/gas activity will spurn many spin-offs for our industry as the year progresses. 2009 is supposed to be by many accounts a banner year with record activity levels for the Oil/Gas sector of the market. It is a very exciting time to be associated with the West Penetone Team. I have been attending Principles of Management classes at MRA – Institute of Management and one of the most important facts I have learned is that many managers do not train their employees adequately. Here are some tips I have learned as to how to be a better trainer: What to be trained – Before you train the employee have a clear idea as to what you are going to train. Prepare to train - Clearly document any instructions and expectations on how the job is to be done or what the finished job will look like. The instructions should break down the job step by step, be clear enough to understand and easy to follow. Demonstrate how to do the job – Using the instructions show the employee how to do the job. You show and tell, they watch and listen. The goal is to get to the point where they show and tell, you watch and listen. Feedback – As you are training get feedback from the employee to make sure they understand what is expected and what you are trying to get them to accomplish. Just because an employee says they understand does not always mean that they do. Ask questions which will help you to determine that they do in fact understand. As they are learning provide feedback, positive and corrective, so that the employee knows if they are following the instructions accurately. Train more than once – On average it takes seven times to train a person how to do a specific task before they become competent. Take the time to instruct the employee again and again and do not assume that showing them how to do something once or twice is enough. Follow up – Even after an employee is trained follow up with them and review their performance just to make sure that there are no problems or need for additional training. I have added these tips in my training and have found positive results. Not that I do everything right the first time, but I am learning. Petron Corporation is proud to announce that we are celebrating our 40th year anniversary of being in business. In 1968, Petron Corporation was founded by two enterprising visionaries, Art Klenner and Bill Buck. They started Petron based on the principle of quality specialty products for niche applications, coupled with superior service. Today, that principle remains a key value and a cornerstone to our success. Petron was sold in 1982 to the Penetone Corporation and became a member of the West Chemical Products family. What started as a very small regional company serving the metalworking businesses in Milwaukee and the taconite mines in the UP of Michigan has now grown to a worldwide business serving the mining sector on every continent where mining occurs. We hold the lion’s share of open gear lubrication on mills in the US and Canada in the taconite/copper/gold and cement markets. We are gaining an ever increasing percent of market share in the shovel business each year. We are proud to list many major OEM’s in mills and kilns as some of our strongest supporters. The size and scope of Petron has grown dramatically over the past 40 years but what has not changed is the focus we give the customer and how we respond to customer needs and concerns. Thank you to all of you who have had a hand in helping Petron grow and succeed over these last 40 years. Your help is greatly appreciated and we look forward to working with you for decades to come. |
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Petron® Corporation ISO 9001:2000 Certified
Tel: 262-797-4680 |