Saturday, April 28, 2007
Conforce International (CFRI) conference call
Marino Kulas, CEO
Joseph DeRose, VP of Product Development
CEO started it up.
CFRI has seemed somewhat silent about upcoming news, but activity of Conforce is at an all-time high. Numerous discussions with customers regarding EKO-FLOR.
Also, CFRI is in development of three new products that will be disclosed "in the coming weeks." More applications for EKO-FLOR. Also management enhancements. Transitioning from development to global supplier.
The last few PRs have mentioned new products to be released. The December investor update said that CFRI would disclose these products in February and their launch schedules. When can we investors expect new information on these products.
Immediately after launching EKO-FLOR in December 2006, CFRI started exploring truck flooring as a 2nd major market. CFRI currently has a very high level of contact with trailer companies in North America and Europe. Will be releasing details in the next few weeks. Too early to explain more.
Also there are two additional markets for EKO-FLOR: one commercial, one retail. The retail market "holds a lot of excitement for us...."
How much of CFRI resources are needed to roll out an EKO-FLOR trial? Concerned about the financial strain and dilution. Will the existing terminal business be sufficient to roll out these other businesses.
CEO says: "The rollout will not cause financial strain to the company. The initial rollout is being financed by the terminal operations division. However, [if] the rampup becomes more significant, then additional financial resources are available to the company. I would not be concerned with shareholder dilution anytime in the near future."
Is EKO-FLOR currently generating revenue for the current quarter.
Not currently. Signficant revenue is predicted for fiscal Q3 and Q4 of 2007.
The most recent press release makes your 2007 and 2008 goals sound like we're back to square one. I thought the three phases of testing was already completed and the flooring was now moving into actual sales and marketing. Why are we back to a new round of testing.
[This person doesn't seem to have spent much time watching product development and rollout. There's a big difference between internal testing, industry certification, and customer testing.]
Phase 3 of testing ended in November 2006. The goal was to pass certification. After completing that certification, CFRI began a field trial phase. The goal is to rely on customers who can conduct actual field trials in actual usage conditions [I've found that most beta releases sent to customers are never even used at all]. A single cycle takes several months so these trials will require some time. Containers are complex and a change to a container requires a field trial phase [this is because changes to complex systems are always somewhat unpredictable, regardless of how well you understand them. I've heard all sorts of humorous "stories around the campfire" about all sorts of field failures. My favorite was a demo of a processor chip that, when the clock was stopped and the reset line asserted, the chip would actually catch fire. No matter how much you test something, the field will always throw something unexpected at you. A lot of the business history books in my reading list have examples of things going wrong].
What are the long term limitations on the percentage of overall container market share that EKO-FLOR can attain?
[this questioner is obviously brilliant]
Raw materials are produced in sufficiently large quantities. The factories are compact and energy efficient and can be located close to major markets and raw materials. There's no limit at all. [Really, this question was meant to determine what would be the limiting factor as you crank up market share toward 100%. I wouldn't expect raw materials or the production to be the limiting factor, but rather limits in the market itself: a limit on how many containers simply can't or won't likely use EKO-FLOR.]
What's to stop a larger company from creating their own EKO-FLOR-like product and stealing CFRI's market share?
The most obvious is the patent process. CFRI is currently engaged in this process [From my experience patents aren't always very effective at eliminating competition. Often a company can figure out a way around your patents]. Another is first-to-market advantage. The industry is small and won't bear more than 2-3 types of flooring [good to hear]. Also nondisclosure agreements with customers.
Does the Company know about any current efforts by other companies to develop other composite container floors?
There have been several attempts. Success has been limited by load problems. Also they've been based on oil-based raw materials. EKO-FLOR is significantly less dependent on petrolium. To the best of their knowledge, there is no commercial use of a composite floor at present and EKO-FLOR was the only one being shown and introduced at the Hamburg trade show.
What about bamboo flooring and what are the costs?
Bamboo has been around for years now and acceptance is about 1% market share. The selling prices are comparable to plywood. Cost isn't known. Bamboo is limited by available and capacity to manufacture. It's a cellulose product and has the same issues as plywood: prone to decay in the presence of water, porous material absorbs stains and odors, difficult to clean, requires treatment for microbes and insects and it's only partly effective. It doesn't survive the 12-13 year life expectancy of a container. EKO-FLOR eliminates all of these issues and is expected to last for the duration of the container's life.
Since certification, only Oceanex has been announced as a customer. IR said the product basically sells itself [remember, allocation!]. Concerned!
CFRI can't disclose much about this due to confidentiality and trade secrets. CFRI is working with a some of the largest companies in the world and there's a great deal of enthusiasm. So much so that they've had to fast track the highway trailer application due to a great deal of interest.
As simple as a container looks, it requires significant industry infrastructure changes to adopt a new product [this makes sense to me considering the people involved in putting stuff into containers and dealing with a new type of flooring, the methodology for this is surprisingly involved]. This is a crucial step and CFRI is involved with the customer. A typical sales cycle with the largest container companies are 6-8 months. The trailer sales cycle would be greatly accelerated. There will be announcements in the coming weeks.
What is the cost of EKO-FLOR in a 20ft or 40ft container.
Can't say too much, but EKO-FLOR will command a small up-front premium. CFRI can demonstrate that EKO-FLOR will actually save customers money over the service life and add performance and versatility to the fleet.
Will CFRI actually do the manufacturing?
CFRI will direct and control the production through well-established manufacturers [this is another example of where it helps a lot to have gone through that process in the real world, even if it's an unrelated product].
Any dilution in the near or far future?
There are no immediate plans for dilution. However, over 3 to 5 years, CFRI could do manufacturing for the retail application. If that requires funds, CFRI could do some sort of offering.
Has CFRI filed for the NASDAQ bulletin board listing?
The intent is to trade on the bulletin board by May 2007 based on required documentation. They expect to be delayed by 6-8 weeks.
Can the Company provide any details on the situation with the apitong plywood market? Any anecdotes about quality or price changes? Are there any clear long term trends in supply?
"...the best way I can describe the supply situation with apitong plywood is to use the word that is used within the industry, which is crisis. The market broadly knows that, at present, the availability of large diameter apitong logs has been drastically reduced. As a result, the very thin veneer that has to be cut from those logs in order to create the individual plys in the plywood has become smaller and they've become weaker. Overall, the availability of the apitong itself is very limited and that's force the use of inferior wood species in combination with the apitong. As a result, the prices for the plywood have moved higher while the product quality has actually weakened." Also the apitong plywood is not expected to survive even half of the 12-13 year life of a container. Also, logging is destroying the tropical forest environment.
What does this new flooring do that the old flooring didn't do? Why would a container manufacturer switch?
50 years ago, they adopted the tropical plywood. Today the supply and quality is diminished. People today have a better understanding of the harm caused by this particular type of logging. All of this supports the "crisis" word for the market.
EKO-FLOR is a stronger material. It's very consistent from day one on. It extends the life of a container. It can be reused and recycled at the end of life. CFRI is confident that EKO-FLOR will be more cost effective after just a few years of use.
It's been several months since the Hamburg conference and word is that the concept has not been well received. This is clear from the lack of substantial firm orders to date. Why has EKO-FLOR failed?
In addition to what's already been said, EKO-FLOR has been well received. The few independent media sources have said this. Similar, but different, industries are looking into EKO-FLOR. Details will be disclosed very soon. There has been enormous interest on various fronts. They've already taken action on some of these fronts.
If apitong is so bad and EKO-FLOR is so good, why does EKO-FLOR command a "small" premium and not a gigantic one?
No dilution for a normal rollout. That's good news, but it probably means a slow rampup.
They say the market will only bear 2-3 types of flooring, which makes some sense. People working with containers can't be expected to deal with a large variety of floors. I would suspect each would have different requirements and methodologies.
I continue to own the stock.