Piston Machinery Limited (ASX:PZM) Chairman, Dennis Trlin, discusses the company’s upcoming IPO, key markets and growth plans.
Jessica Ellerm: Hello. I'm Jessica Ellerm from the Finance News Network. Joining me today from soon to be listed Piston Machinery Limited (ASX:PZM) is Chairman Dennis Triln. Welcome, Dennis.
Dennis Triln: Thanks, Jessica. It's great to be here today.
Jessica Ellerm: First up, can you start with an introduction to Piston Machinery?
Dennis Triln: Piston Machinery Limited (ASX:PZM) is a leader in the cast iron manufacturing industry in China, and our focus is on manufacturing cast iron air conditioning componentry as well as cast iron automotive componentry. The company dates back to 2007, where it was established in the Guangdong province in China. Since then, we've grown to have over 500 employees. We have four automated manufacturing lines, and annual production capacity in excess of 100 million units.
Jessica Ellerm: Thanks, Dennis. Can you tell us more about the markets you sell into, starting with the air conditioner rotary compressors business?
Dennis Triln: Well, that market is a market in which we currently have a 15% market share at the moment. We're one of the top three players in China in that space. The market's currently growing at around 3.9% per annum. I think it's important to know we have a very strong brand recognition in that sector. Some of our customers include Panasonic, Toshiba and Mitsubishi.
Jessica Ellerm: And can you tell us more about the commercial motor vehicle components business?
Dennis Triln: That's a new business that was started a couple of years ago. The automotive industry's the largest purchaser of cast iron components. At the moment there's a lot of Chinese manufacturers in the car industry in China in addition to global manufacturers who are setting up in China. Ideally, we'd like to increase our output in that division by up to 80%, and we can see a real opportunity to capitalise on the trends in that market.
Jessica Ellerm: Now to your IPO, how much are you looking to raise and where will the funds go?
Dennis Triln: Well, we've just launched a prospectus. We're issuing 50 million shares at $0.40 per share to raise $20 million, which is our maximum subscription on the offer. Our minimum subscription is $15 million. Use of funds will be used to improve capacity and quality across both business units to increase our R&D efforts and for working capital purposes.
Jessica Ellerm: And where can investors find more information?
Dennis Triln: They can go to their broker or AGC Capital Securities, and I'll point out the offer closes on 10th November.
Jessica Ellerm: Turning to financials, can you provide us with a snapshot of the company's current position?
Dennis Triln: Last financial year, the 2016 financial year, we had exceptional growth. We had revenues of over $53 million., EBIT of around 12.9%. We've seen a steady decline in our operational cost since 2015, and I think that'll be a key focus of the business going forward. And on our cash balance post IPO, assuming the minimum subscription, we'll have at least $12.4 million in the bank.
Jessica Ellerm: And a more general question -- what are the demand drivers in the cast iron components manufacturing business in China?
Dennis Triln: Well, some of the key demand drivers at the moment include urbanisation, increased housing sales, improved standards of living. I think it's also important to note that we're located in the Pearl River Delta region in China, which is regarded as the most dynamic industrial region in China and it's also where the automotive cluster is located.
Jessica Ellerm: Last question, Dennis. What is the focus for the next 12 months and the longer term?
Dennis Triln: Well, in the air conditioning business, we want to improve capacity and volume and quality going forward, we want to improve our automotive products range, and we want to invest in new equipment and facilities to secure the long-term growth of our business.
Jessica Ellerm: Dennis Triln, thanks for the introduction and good luck with the IPO.
Dennis Triln: Thank you. Thanks, Jessica.