Axion International, a “green” company specializing in manufacturing heavy and light infrastructure components made from recycled plastics, announced the acquisition of a new distribution license for a patented flame retardant developed by Rutgers University of New Brunswick, NJ. The new fire retardant enables easier application to materials, especially plastics.
The patent (USPTO 7,851,536), which was issued last December to inventors Nosker, Nosker, Lynch, and Mazar, cites as one of its main features the heat-absorbing nature of the invention, acting to reduce a plastic’s flammability. Much of the heat is absorbed through what’s known as an endothermic chemical reaction; a further amount of heat is physically absorbed by water produced during the chemical reaction, producing steam.
Axion’s new Rutgers license cuts two ways, allowing it to not only market the coating throughout the Western Hemisphere’s lucrative flame-retardant coatings market but also to use it on its own infrastructure plastics. A chief advantage of the new retardant is that it can simply be sprayed onto a material, unlike most other retardants which must be embedded into a material.
Over 1.7 million metric tons of flame retardant are used each year, with the global market for flame-retardant chemicals valued at approximately $4.1 billion in 2008, according to a report published by Massachusetts-based market research firm BCC Research. This same report estimates the global flame retardant market to increase to $6.1 billion in 2014, at a compound annual growth rate (CAGR) of 7%.
Axion can be expected to leverage the new Rutgers license into capturing a growing market share of the infrastructure materials business, since marketing the coating will give the company expanded entry to new buyers and revenue sources. With this agreement, Axion now has the capacity to approach clients with solutions that not only include the purchase of new Axion products, but also treat existing products to render them non-flammable to extend the material’s lifespan and, ultimately, save the client money.
The company has already this year demonstrated prowess in acquisition of government infrastructure contracts from Calgary to the USA to Morocco. The Calgary (Alberta, Canada) is a continuing story in which the local rail authority has accepted Axion test materials for its railroad “sleeper” ties, so far proving to be of positive worth. In the USA, in cooperation with 3D Global Solutions, the company was awarded a contract with Beale Air Force Base in Northern California. Further expanding the Axion global footprint, a Moroccan contract was completed earlier this year with the national railway and its success bodes well for expanded sales with the North African country.
In private activity, the company is scheduled to deliver an initial order of railroad ties to Alcoa, Inc.’s Australian Wagerup refinery by late April.
The risk-reward calculus for any investment is always tentative, but for a number of real-world reasons Axion does appear poised to grow and its stock along with it. In the USA alone, major infrastructure is well known to be in need of replacement and repair: bridges, railroads, and piers all need fixing. Homebuilders, in a crunch from foreclosures, are looking for ways to cut costs (Axion also makes boards); and state and local budgets are especially strained and looking for ways to get the job done cheaper and in a more “green” manner.
Axion’s scalable and configurable materials, combined with its new flame retardant license from Rutgers, make it a strong candidate for future growth. While not necessarily a conclusive measure of value, the ratio of Axion’s present enterprise value ($27.64 mil) to its market cap (34.72 mil) shows a .796 figure, implying room for substantial growth in any company with serious prospects. By comparison and using the same metric, Weyerhaeuser (NYSE:WY), a company in a similar sector, shows 1.27. True, Weyerhaeuser has been on a strong upward march since the second quarter of ’09, while Axion has tended to range, but a key difference is that as a much newer company, Axion has spent much of that time becoming known in its market. The new global economic conditions may well translate into greatly increased market share and share price as Axion continues to execute its corporate strategies.
More information on Axion can be found on the Company’s website at www.axionintl.com