KEMET's CEO Presents at Deutsche Bank dbAccess 2012 Technology Conference (Transcript)

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 |  About: Kemet Corporation (KEM)
by: SA Transcripts

Sherri A. Scribner – Deutsche Bank Securities Inc.

Hi, welcome everybody to day two of Deutsche Bank’s Technology Conference. I’m Sherri Scribner, the technology supply chain analyst at Deutsche Bank. And I’m very pleased to have with me on the stage here KEMET’s CEO, Per-Olof Loof and the CFO William Lowe. KEMET is going to go though a couple of quick slides, and then we’re going to do Q&A, I’ll start off with a couple of questions, and then I’ll open it up to the audience. So, Per?

Per-Olof Loof

Okay, thank you. Thank you all, thank you for coming. Just a few, we've been given a pretty strict format here as to what we should be doing, so we have few slides and a few points that we are covering in, the rest we’re going to go through during the Q&A.

So, basically let me just cover some of the things that we've been working on and talking about over the last couple of years. And the one is of course the big reception after we've been doing primarily in Europe, over the last couple of years. And the major point here is that, within the next year this will be completed, and a lot of it is underway as we speak and if I go through it, just a little bit and some more color, we have a facility in Finland, and that facility will move into the paper business only, the rest will move elsewhere over the next year or so. And the facilities in the UK are in the process of being closed and that activity is even moving to Skopje and Macedonia or in Évora in Portugal. And also our facilities in Germany will also move into Skopje. The Skopje facility in Macedonia is actually a pretty good story, for us. We thought we should be able to get started there in about May next year timeframe.

We're actually going to inaugurate that facility in a month. So that facility is already up and running, and as we continue this next year we will move more of that in there. So over the next year this is well going to be finished. So, I think you'll be pleased to hear that that’s really on schedule and moving forward.

Also our facility in Italy and in the town of Pontecchio, which is going to be the one place instead of three we have now, and that is also on schedule, and that will be completed by the end of next summer. And that will allow us to move from three facilities in Italy to one, while those facilities are already shut in a time for Monghidoro, and the other two will move into Pontecchio over the next year or so.

So in a year, the Italian activity will be restructured as per the plan that we talked about couple of years ago and the activities that are either moving to Asia or to Skopje and some of the high margin stuffs will stay together, the engineering stuff will stay in Pontecchio in Italy. So the European restructuring efforts is now on its last leg and over the next year or so, it will be completed.

The next point I want to talk about is, effort to do vertical integration within our Tantalum business, and of course, for those of you who follow the company, you’re very well aware of the fact that we have gone through the process of ensuring that we can get material from Africa conflict-free and that process is now well underway. And the whole piece and if you look at this slide, you can see it how you start in the upper left corner and get them the material from the mining in Africa, and that will come those product to this KTaF, the solid looking material that we want to turn into powder in our facility here, actually north of Vegas near Carson City. And that will allow us to manufacture our own powder and control the supply chain totally.

And as we have said in other comments before, by December this year, we will be able to do about 80% of our own of our powder requirement to our own facility, and what we have also said publicly before and that still holds true that that will give us about $10 million benefit on a quarterly basis for that. And then we’re very pleased with how this whole thing is moving forward, the activities in Africa has really been going better than we had anticipated.

And also as our case, our ability to turn the minerals into KTaF or the salt material that is also gone better than anticipated. So we are very happy to see this whole thing moving forward.

As we have communicated and a little ahead of schedule than we previously had talked about. Also as you know as part of this process we have been very engaged in our social responsibility, particularly in this mining contingent and ensuring that we can provide a little bit of a better life for the people there. And you can see some pictures here of the clinics and the schools that we’re in the process of constructing and over the next month or so will be, I shouldn’t say fully operational, but I would say there will be operational to some extent. And you can see what the school has actually look like before and what the hospital looked like before and of course now, it’s a totally different picture for the people, a little bit of singling in northern (inaudible).

The final point is, I want to talk just a little bit about our investment in NEC TOKIN. And as you may, if you have followed the company you now remember that we agreed to acquire 34% economic interest in the organization, and for a 51% voting rights. And we’re still waiting for final approval. We have received approval from the European Union, we are still waiting for Chinese approval.

We expect that to be within reach within the next weeks or months at the latest, so we can get going doing that. And of course NEC TOKIN, if you didn’t know, it’s a wholly owned subsidiary of NEC. And when we move in this process as we have communicated before, we will go through a several year process of ensuring that we can integrate this operation with our company in a very successful manner. And we’re just waiting to get going. So having said that I think I followed the instructions from voucher to the letter and we were going to Q&A session.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Great, thank you, Per. That was very helpful in terms of starting us off. You’ve already answered a number of my questions. so I start off with a big picture question. The economic data really seems to be softened in many geographies. can you give us an update on what you’re seeing geographically from your customers, what you’re hearing on a sort of a global top down level?

Per-Olof Loof

What we have said going into this quarter is that our Q2 ending in a few weeks from now will be about like from the top line, maybe with the possibility of being a little more in that, and we’re sticking with that here. In terms of the different geographies, the U.S. is actually pretty flat or pretty consistent, so our business in the America is actually where doing reasonably, we think. Europe as, I mean I’m not the only one that saying that of course have pricing issues. And we have two big businesses in the U.S. and in Europe, one dealing with the industrial marketplace and of course, that had suffered some, and the other one is dealing with the green energy type of applications, and that as also suffered some and we have suffered with that. So we’ve seen our European business that kind of be somewhat effective.

In Asia, on the other hand, we’ve seen the business grow some, and we are seeing there’s some sectors, which are less bullish in others, but in general, our Asian business are up a bit. So if you look at these sort of the same top line numbers, but they are going to shift between the regions. so Europe is going to be down some, the U.S. is going to be up some and Asia is going to be up some.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. and in terms of further business during the quarter, have you seen any push outs in demand? Have you seen anything really changing from customer perspective?

Per-Olof Loof

We have seen, this is of course, somewhere this is having a big business in Europe.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah.

Per-Olof Loof

That affects that whole picture to some degree.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

We haven’t seen any push outs that of any significant. we are working with our customers as schedule and forecast as best we can. And it’s pretty steady; it’s kind of my view. clearly, many people have expected that the second half of this calendar year would actually start to move up again.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

I think now some pundits say it’s going to take another six months before that happens. So we are kind of preparing for, it’s going to be the solid level and as you can see from what I talked about before, our efforts to restructure our business, to ensure that our cost structure is competitive at current revenue levels, and also our vertical integration activity, which of course that’s the same thing. Those are going forward at full speed to ensure that we can run the business that we’ve had at lower revenue levels, but still profitable?

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. And speaking with the big picture, you guys have three segments where you made connector that the F&E segments around…

Per-Olof Loof

Not connectors, we made capacitors.

Sherri A. Scribner – Deutsche Bank Securities Inc.

I’m sorry, capacitor.

Per-Olof Loof

Yeah. We should make connectors, but we don’t.

Sherri A. Scribner – Deutsche Bank Securities Inc.

I apologize.

Per-Olof Loof

That’s okay.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Capacitors for Tantalum, F&E and Ceramics, between those three last quarters, Tantalum was very strong, F&E probably not surprising, because the exposure you have to Europe there was weak; Ceramics was stable. What are you seeing in those three different end markets for capacitors?

Per-Olof Loof

I think right now the end markets, if you take F&E first. F&E is very European-centric. It is also very industrial-centric. It is also very new energy, green energy-centric. And as you know, the market for green automotive is not moving as quickly as we had anticipated on hope and that is affecting our business, as the industrial side in Europe is of course affecting that business.

So in terms of ceramics, I think that’s stable at a very nice level, we’re very happy with the ceramic performance, it’s very focused into specially or higher margin capabilities, where the market, first of all the margins are reasonable. Secondly, the end demand does not shift as quickly as some of these are the consumer oriented market.

And in Tantalum, I think we're seeing couple of things, first all we’re seeing the strength being maintained. We also see a shift into polymer type capabilities, and I think our shift as we go forward is for moving from as the manganese outside type of capability over to the polymer business is something that, is the positive that’s been going for sometime and we will gentrified and see that process up even more as we go forward.

Sherri A. Scribner – Deutsche Bank Securities Inc.

And why do you think this Tantalum capacitor business is so strong right now, what's driving that?

Per-Olof Loof

I think what we're saying is the focus on polymer, which is an outreach goes into applications that are in the technology side, also in the telecommunications area, and we're seeing our telecommunications business, which is basically base station driven, and as the LTE capabilities start to come forward , we should be very nicely positioned with the largest telecom guys going forward. So I think it’s the combination of having the right technology and also being aligned with the right customers. If you have the good technology and the working with good customers usually good things happen.

Sherri A. Scribner – Deutsche Bank Securities Inc.

All right. Thinking about the polymer business, that’s the segment that you’re growing very strongly, I know who your competitors on the Tantalum side, who is doing polymer? are you sort of leaving that or?

Per-Olof Loof

Well, polymer is I mean Sanyo or Panasonic.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

Of course, it’s a big very capable competitor here, NEC TOKIN, who is another very capable competitor and of course, which will have the legendry position going forward as I described and we publicly disclosed in anyway.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

And those are basically, the Panasonic, NEC and ourselves are basically the main drivers on the more complicated, more advanced to polymer capability.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. In terms of the guidance and you touched on this, for the September quarter, you’ve guided revenue to be about flat with the June quarter, typically in the September quarter, you guys see your revenue come down a little bit.

Per-Olof Loof

Yeah.

Sherri A. Scribner – Deutsche Bank Securities Inc.

So better than seasonal for you in that business, is that primarily driven by the Tantalum business? Are there any end markets that are driving that for you?

Per-Olof Loof

At the end, Tantalum, it’s also a little bit up in ceramic, but not down as such in F&E as you could have expected due to its European centric and of course, you have a lot of shutdowns during the summer typically. but I think that’s more driven by the applications that the polymer that is in particular is focused on.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

So I think that drives the growth going forward. And that gives us a lot of hope for the future, because the capability we have are actually aligned with what I think you us, all of us as consumers are likely to want to be seeing going forward.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. And then in terms of end markets, you’ve touched on a couple of segments already industrial in Europe, obviously and green energy, but can you give us a sense of from your perspective what you’re seeing, which of the end markets are better for you, and which are worse?

Per-Olof Loof

Okay. I’ve talked about industrial. So that’s probably that…

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah.

Per-Olof Loof

That’s also a little bit European-centric, and I mean you’re being from Deutsche, you may have a different perspective on Europe. But apart from that, when is Europe going to sort itself out, and is Europe going to go overall for closing. And I think it’s going to take a while to sort this out, but I don’t think it’s going to go off. But I think Europe will continue to be a major source of revenue for us as we go forward.

But I think there are a couple of ones that are important to us, automotive continues to be strong for us. Our automotive focus is to a large extent European, and also here in the U.S., and that continues to bid strong for us. And on the technology side, we’re still kind of waiting to see what happens with the PC business and Ultrabooks and what not.

And so we are a little cagy on how fast that’s going to come and recover. So maybe that will take a little long for that to happen. We are cautiously optimistic about our activity in the telecom side, particularly as we are recently positioned in the LTE side of the business. And we think that’s growing. so the big players in that business are employing clients of ours. So I think we can see some improvements there.

And eventually, the green energy will come back to some, and it’s not going to grow as quickly as people originally anticipated. I think the many of the state funding or government funding that was going on in Europe in particular has ceased to be there. And now of course, it has to stand on its own if you see. But I think it will come back, and I think hybrid automotive is going to be a big market. And it’s going to be a big market for us as well.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay, great, that was helpful. Thinking about your visibility, you have a pretty broad end market that you’re exposed to. Generally, what type of visibility do you have with your customers in terms of the forecasts?

Per-Olof Loof

A large chunk of our customers work on a forecast model with us, and this is of course, necessary, because it actually, it sounds almost funny that it takes a month to make one of these little franchises.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

From start to finish and plan, it could take up to a month to manufacture one of those capability we have. So we need to work on the forecast model. But I think many people have commented that I have listened to that visibility that is weak-ish. we don’t really know what we can see out there, what we see out there and how far we dare to look. So I think what we are seeing now is, yes. This quarter is going to be what we said it is going to be. And I think it’s going to take maybe a quarter or two before we see the end market demand step up and helping us on the top line. But as you can see from what I was talking about before, we’re not relying on the end markets to help us, get the costs in line.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah.

Per-Olof Loof

We are heavily focused on the restructuring activities in Europe, which I said now will be finished, and coming into its last leg, and also on the (inaudible) which are two very important pieces of the KEMET puzzles to get us to what we need to get. But of course, finally as we get into the working with NT, and getting the NEC TOKIN operation be part of that, I think that’s going to also be a great generator of capability and revenue and margins as we go forward.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Thinking about those lead times, and how long it takes to actually build a capacitor? what type of inventory levels are you seeing right now? I mean your past comments have been that we have been working through some of the inventory. Do you feel that inventory levels are now stable? is there drop shipping going on or what are you seeing on the distribution channel and then inventory levels in general?

Per-Olof Loof

Inventory levels in distribution have come down and have now sort of stabilized. So what’s their inventory – we’re shipping into them what they’re actually shipping out. So that thing has stabilized. I think there are still some inventories to be worked out of the European industrial market is seeing it in our end users. So that still probably may have another quarter or so to work itself out. But I think the unbalanced or the imbalance we saw in the inventory situation there, a couple of quarters ago, I think to a large extent were to sort out now.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. Do we have any questions from the audience? I want to make sure we get everybody. Okay, I’ll keep going. you’ve touched on briefly Per, the restructuring actions. And in last quarter, you announced a new restructuring program. you’ve been in the process of restructuring that F&E business, and you also touched on it in this slide. The new restructuring actions, are those primarily related to F&E or is it some of the other segments and can you update us on that?

Per-Olof Loof

Yeah. We said we’ll be going to restructure some additional activities, some of it’s related to F&E and some of it is not.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

And it’s just a continuing rapport of ensuring that we would take competitive on a cost basis and what we have – what we did announce a month ago or so, it’s in full swing and we believe that will be fully done by the end of the fourth quarter or so. And I think we said from the $24 million, I think that’s a number here.

William M. Lowe, Jr.

On an annualized basis, $16 million and approximately…

Per-Olof Loof

The $16 million...

William M. Lowe, Jr.

In this fiscal year, yeah…

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah, okay, great. And F&E that restructuring process has been going on for a couple of years now, a piece of that was moving production to lower cost regions. And then the other piece, which you highlighted in the slide was Macedonia and consolidating…

Per-Olof Loof

Macedonia is low-cost too.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

So Macedonia is our best cost.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

Macedonia is a small country in the Balkan of course right, and their cost levels are competitive to China even better.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. And once you’re moving some to Mexico.

Per-Olof Loof

We’re moving some to Mexico. we’re moving some to [Farjestaden].

Sherri A. Scribner – Deutsche Bank Securities Inc.

[Farjestaden], okay.

Per-Olof Loof

We are moving some to Indonesia, which is also basically done.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

And then there is some additional that’s moving to China. So what’s left to do is the restructuring, the movement of – the moving of capability from the UK to our facility in Portugal.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

The moving of capability from Italy to Macedonia, the rest is already done. And over the next year or so, that will be completed. Over the next year, it will be completed not or so, it will be completed by the end of next hour. And then there are some that is also moving into China from the UK in particular. So there are a number of pieces, but Macedonia, the investment in Macedonia was really in the – an effort to ensure that we had additional good cost situations in Europe. And of course, Macedonia is not very far, it’s very near, it’s not very far from Thessaloniki, is a big port and it’s not a main highway going into Europe. In Europe we're concentrating our logistics efforts in the Czech Republic in the mechanical board, in early German boarder and Skopje (inaudible), it’s just a straight shot. It’s not a 20 minute drive, but it’s a day and a half maybe.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

So, it’s vary, the Skopje is very nicely situated and we've been very pleased with the capability we’ve been able to find. And we're actually looking to increase our presence in Macedonia. We are finding that the people there have great language skills. We can actually take some other activities that we’re doing, rest of the Europe actually move with that.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay and most of that will be completed in by the end of…

Per-Olof Loof

In a couple of months. The Skopje thing will be completed in the next six months or so.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay great. Let’s talk a little bit about pricing trends in the channel in this weak demand environment, what have you seen in terms of pricing for tantalum capacitors, ceramic, F&E business.

Per-Olof Loof

I think the pricing has sort of normalized, I don’t think you’re not seeing heavy pricing action, but of course we're also not seeing opportunity to raise price as much.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

But it's not been ridiculous, and I think pricing is just as relatively stable.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. And then tantalum ore is a big in for cost for you specifically of course, on the Tantalum side, Tantalum has gone through periods of being relatively high, I think it sounds like tantalum ore has gone up a little bit, what are you seeing downturns with tantalum pricing and how hard is it for you to passed on to customers.

Per-Olof Loof

It's difficult to pass it on, and the reason we’re doing is vertical integration of course, if we can control our destiny, and we believe that what we're now doing, by the end of this calendar year in the month of December, we will, we believe that we will have the opportunity to actually source about 80% of our tantalum powder needs from our own supply chain.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

And it’s probably going to stay there, I mean it’s – the rest is Specialty Powders, as you know our specialty applications and so forth. So we will continue to have good relationship with other powder supplies, about 80% of the powder sold, will actually be made in Carson City, Nevada.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. And you showed that nice slide. I’m sorry, can you wait for the mike, or do you have mike? Sorry, up front?

Question-and-Answer Session

Unidentified Analyst

Just a quick question on that comment where are you at now to start soon and the $10 million quarterly benefit that you had talks about, is that already in the financial results, or is that you expect it after December when you get to the 80%.

Per-Olof Loof

No it’s not in, its going to be in Q4 full. But it’s going to happen in December.

William M. Lowe, Jr.

The numbers we talked about for this fiscal year would be and you only a couple of million dollars probably in this quarter that we’re going to end in September. In addition this was compared to our first quarter, so that’s starting on – jumping our point is first quarter June numbers. In the December quarter we said to be approximately $7.5 million savings and then to your point of the $10 million full run rate at $10 million a quarter in the fourth fiscal quarter in March 31. And expected an annualized number is going to be about $40 million.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Any other questions. Per, you showed the next slide in the deck the four different processes to get to the tantalum and that you are vertically integrating. I know you’ve got the mines you are working on in Congo and Australia now. You’ve got the.

Per-Olof Loof

Not Australia, not Australia.

Unidentified Analyst

I thought in the last call, you were talking about Australia you are opening up that mine.

Per-Olof Loof

No, no, no. We covered (inaudible) mines in Australia.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

So they used that as the source for there and we buy some powder...

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

Okay. But in terms of what we have focused our efforts is…

Sherri A. Scribner – Deutsche Bank Securities Inc.

On the Congo…

Per-Olof Loof

In Congo and other parts of Africa and also in Latin America.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

So our main effort has been really to ensure that we can utilize the capabilities that exist in the Congo in terms of the content of the minerals.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

So that has been and as you may know, the 1502 part of the Dodd–Frank Act.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

Have not been propagated yet, and it was nice to see that KEMET was actually mentioned eight times in the document.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah.

Per-Olof Loof

That was not really the objective of this exercise could be mentioned in that document. But it was sort of nice to see. That said, they used us as an example for how you can actually conduct business geographically and ensure that people can get paid, can get a good job. at the same time, we can actually deliver capability to our customers at a price they choose.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay, yeah. And it’s very interesting what you’re doing there with the schools and building out the infrastructure?

Per-Olof Loof

I mean, we can’t deal with all of Africa, all of Congo, but this little village, these 10,000 people in this little village, I believe we can definitely change their quality of life. It’s absolutely nice.

Sherri A. Scribner – Deutsche Bank Securities Inc.

So going back to that four pieces of the vertical integration, you’ve got the mines. You’ve got the powder business in Nevada. Are there any pieces that you’re missing in those four?

Per-Olof Loof

No. We have the mine.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah.

Per-Olof Loof

And basically what you do is, for a metric ton of stuff, you dig out. We will actually through a water process, so give it to kind of life to a mineral that we actually transport assets. Three kilos leave the Congo, the parcel leave the Congo. That will go to a K-Salt the chemical facility that further reduced that into something we can finally make powder out of. And that goes to a facility in South Africa.

Sherri A. Scribner – Deutsche Bank Securities Inc.

And is that not owned by you?

Per-Olof Loof

That’s not owned but it works only for us.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

And we’re working on other ways and ensuring that we have all further capability to make the K-Salt. And then that K-Salt, which is then about one kilo or two pounds is then transported to [Miranda] and then we make a pound of powder of that. So metric ton one pound of powder, I mean that’s a good ratio.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. So you’ve really got that whole chains lined up through your agreement.

Per-Olof Loof

Yeah. And that’s what allows us, when we talked about the savings that we are looking at, it’s not just from one of these, it’s from all of these. And of course if the tantalum powder or the tantalum minerals the pricing structure actually becomes even more favorable, it will help us too, of course.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah. And so thinking about that vertical integration do any of your competitors have that vertical integration and how much of an advantage is that for you?

Per-Olof Loof

We don’t think, so I think other of our competitors that are having conversations, who have facilities in Congo in particular. But I think in terms of this whole chain, I don’t think to my knowledge we are the only ones who are doing it.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

It has taken us two years to get here.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

It’s not something that you wake up one morning and (inaudible).

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah, I know it’s a long process. And then sort of the other big thing you’re doing is the NEC TOKIN joint venture. And you gave detail on the structure of that and how that rolled through. With NEC under your belt over the next couple of years, what type of share do you think you’ll have in the Tantalum market and how well this have positioned you?

Per-Olof Loof

It’s a little difficult to be very specific on that. But I think it will position us well particularly in the polymer business. So that’s going to be good for us as we go forward and we’re still going to have strong competitors, got a product annually, there’s formal competitor and we’ll continue to be. and Samsung is another one. And there are other people that coming into this business, so this is going to be in competitive environment, but I think our capability now is going to improve, not just by the fact that NEC TOKIN has customers that we can benefit, but also they have capability. and even before, we split the two companies together, we can benefit from capability, Sherri.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Yeah.

Per-Olof Loof

And so that we see that as a big benefit, and many of you may not know there’s, but when we started our polymer activities, maybe 10, 15 years ago, we did that with a help of its utility. So we actually licensed their technology. so there are a lot of people that know each other within our two technology organizations.

Sherri A. Scribner – Deutsche Bank Securities Inc.

Right.

Per-Olof Loof

And of course, we are well aware of what their business and their capabilities are?

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay. And just to clarify that first piece, the joint venture that has not been closed yet, you expect it to close by this quarter?

Per-Olof Loof

We still have the Chinese…

Sherri A. Scribner – Deutsche Bank Securities Inc.

Chinese, okay.

Per-Olof Loof

In the short time as to give us clearance…

Sherri A. Scribner – Deutsche Bank Securities Inc.

Okay.

Per-Olof Loof

But we expect that momentarily, we’ve not had any “difficult questions”.

Sherri A. Scribner – Deutsche Bank Securities Inc.

From them?

Per-Olof Loof

From them.

Sherri A. Scribner – Deutsche Bank Securities Inc.

And NEC TOKIN was impacted by the Thailand flooding last year.

Per-Olof Loof

Yeah.

Sherri A. Scribner – Deutsche Bank Securities Inc.

How is their recovery coming and getting things back to normal?

Per-Olof Loof

That the plant is, they had a huge facility. And they had about 4,000 people there, and they now have new fields of – we serve a lot of people now that they have in their facility and they are starting production, so it start to come up and of course it will very well covered from an insurance perspective, so this is sort of from a cash perspective and this is working well. So I think what they have been able to do and from what our [condenser] team, where I can see things going. I think they will be able to come out stronger, by focusing in on the capabilities that are on the market…

Sherri A. Scribner – Deutsche Bank Securities Inc.

Great do we have any additional questions from the audience? I think we’ll wrap it there. Thank you very much.

Per-Olof Loof

Well thank you very much, I appreciate it.

William M. Lowe, Jr.

Thank you.

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