whats happening?, page-5

I think the message is really clear on this. They listed this company on the basis of the QHL process. Truth is it was more an idea than a functioning production method. It clearly had promise, but they really had nothing to sell.

The aviation industry is conservative and it had a production method for composites that worked and was safe. All the existing manufacturers had invested heavily in those production methods so a new technology was always going to struggle. If you have already sunk millions into autoclaves that are generating income and profits under long term supply agreements where is the incentive to invest in something else (particularly a new technology with associated risks). And as I said, QHL was peddling an idea that needed to be adapted.

The fact that QHL itself transformed from a technology provider to a parts manufacturer using the old technology is proof that sale of the QHL process was not going well and was many years off. Indeed the only contract that they have is for producing parts using autoclave technology. We have seen nothing in the way of QHL process sales. Though we are told that we now have a new machine that is ready for integration in manufacturing!

What I find hard to understand is the lack of traction of the QHL process in areas that dont require aviation standards. Bikes, golf clubs, cars and aftermarket gimmicks all use composites these days. And there has been a massive increase in composite manufacture and use in the auto area where there must have been a corresponding investment in autoclave technology. What's been the problem there? We even partnered with a major auto engineering company to focus on adoption in that sector. Apart from the fanfare of that agreement years ago, we have heard nothing in relation to that ever again.

All hope now rests on the Vector project in the US which is still years off. The logical inference to date is that the QHL process is theoretically good, but practically a dud. Over 6 years so many have kicked the tyres, yet no one has taken it home - its a wallflower!

As it stands now, QHL is a beneficiary of Australia's defence spending. It is winning opportunities from the Govt industry participation requirements. This is good and it should deliver something back to shareholders over the longer term. For mine, the QHL process is the sleeper in the pack which might yet deliver.