28 September 2015
by Ben Potter
Geelong wheel maker takes on world
Wheel maker Carbon Revolution plans $100m IPO
Carbon Revolution, a pioneering maker of carbon fibre auto wheels, is planning a $100 million initial public offer in the next two years to fund an ambitious assault on the $40 billion global wheels market.
The company has a fledgling auto wheels business and has just signed an agreement with a top North American aircraft landing gear manufacturer to develop lightweight carbon fibre wheels for use in aerospace.
It aims to lift output at its new $24 million plant at Waurn Ponds near Geelong to 50,000 wheels a year by 2017 and 250,000 by 2020, and build big turnkey plants in North America, Europe and Asia to serve global carmakers.
Carbon Revolution is supplying wheels to Ford Motor Company for the Mustang sports car. It is eyeing aerospace, defence and commercial trucking – where weight and fuel savings can yield huge dividends.
"If things continue to plan, we are probably talking about needing of the order of $100 million at the back end of 2017 or the start of 2018," chairman James Douglas said.
Mr Douglas told The Australian Financial Review the eight-year-old company hoped to hit the sharemarket with a market value of about $300 million, depending on the timing of its initial public offer.
Carbon Revolution is just the kind of company that experts say Australia needs more of to fill the gap left by the collapse of the mining boom and traditional manufacturing.
The owners are determined to keep the company Australian-based – in contrast to many Australian technology firms that have been forced to head offshore.
The company, launched by engineering graduates in a backyard in 2007 and now located on the Deakin University campus at Waurn Ponds near Geelong, has a unique technology that it is already selling to the world.
It makes auto wheels from carbon fibre and resin that are 40-50 per cent lighter than existing alloy wheels.
The lightweight wheels corner more smoothly, are easier on the suspension, boost performance and save a lot of fuel – reducing carbon dioxide emissions and other pollution.
The contract to supply Ford's top-of-the-range Shelby Mustang GT350R is Carbon Revolution's – and the world's – first original equipment deal for carbon fibre wheels.
Chief executive Jake Dingle said the Ford deal had heightened already strong interest from other car makers because of Ford's strong reputation for engineering, creating "a snowball effect".
Before that the company's wheels were sold in the aftermarket for about $15,000 a set to owners of high-performance makes such as Porsche, Audi, BMW, McLaren, Chevrolet Corvette and Lamborghini.
A $40b market
Globally, the wheels market is worth about $40 billion – split among auto, aerospace, defence and commercial vehicles.
"To take a meaningful percentage of those sectors is going to leave us capacity constrained – not demand constrained for a long time," Mr Dingle said.
Each sector needs to reduce weight, fuel and CO₂ emissions, with potential financial penalties for failure under environmental laws.
Mr Dingle said Carbon Revolution expects sales – just more than $10 million this financial year – to triple next financial year with an operating profit in 2017.
Ronal, the Swiss-based alloy wheel manufacturer that disrupted the traditional steel wheels business in the 1960s, saw the potential and chipped in about $20 million, about a third of Carbon Revolution capital, to fund its development.
Carbon Revolution may build its proposed offshore plants, which could cost between $50 million and $100 million, in partnership with Ronal, which already makes 20 million alloy wheels a year.
But first it must complete the "industrialisation" of the manufacturing process it has invented for carbon fibre wheels, something no other manufacturer in the world has been able to do, to cut costs and build volume.
If successful, the float would handsomely reward existing shareholders for taking the risk of backing the company from the outset.
These include founders Ashley Denmead, now engineering and design director, Brett Gas, an executive based in North America, Matt Dingle, chief executive Jake Dingle, who came on board shortly afterwards, Mr Douglas, and family and friends. More recently Acorn Capital, a Melbourne-based "microcap" investor, and Deakin have also contributed capital.
Mr Douglas said the company hoped to be able to announce at least two or three new original equipment deals in the next year.