Environmental Elements Corp.’s stock price has been flat for months, as investors wait and see if the company’s restructuring efforts will succeed.
“There is going to be a transition period, probably a little rough, but in the long term I think it’s a good strategy to get the company moving along toward some growth,” says David Weaver, an analyst with Legg Mason Wood Walker in Baltimore.
EEC of Baltimore provides air-pollution-control services and equipment in North America. Its customers are in power generation, pulp and paper, rock products and metals.
Shares of EEC have been trading in the $1 range for the past six months, closing at $1.63 on the American Exchange Friday.
Until the start of this year, three-fourths of EEC’s business came from large projects like designing and building air-pollution-prevention systems. The rest came from after-market maintenance services.
But EEC has been trying to flip that formula to 70-30.
Mr. Weaver says that’s a good idea, because “if you start to see a slowdown in capital spending in various companies that they service [as large projects], that can really impact [EEC’s financial] results.”
But EEC’s finances are already suffering because of the business transition. For its second quarter the company reported net sales fell 10 percent to $12.22 million from $13.56 million for the like quarter last year. Meanwhile, net losses increased 363 percent to $5.97 million (84 cents per diluted share) from $1.29 million (18 cents).
Fiscal 2000 was not profitable for the company: Its sales fell 18 percent to $55.59 million from $68.03 million the year before and it posted a net loss of $4.5 million (63 cents) compared to its income of $1.27 million (18 cents) in 1999.
At the start of the year, EEC changed its top management. It also cut its staff from about 150 to 100 workers.
“The new management team has been aggressively restructuring the organization and focusing our business,” says John L. Sams, president of EEC, in a statement. “This has required us to make many difficult decisions in the interest of restoring sustainable growth and profitability to EEC in an accelerated time frame.”
EEC’s new orders significantly increased during the second quarter, to $20.8 million from $3.7 million for the like period last year.
Last week the company announced it won a deal with American Electric Power to install its new technology at a power plant in Ohio. EEC also deployed this technology which facilitates nitrogen oxide emissions control at a Southern Energy electric station in Massachusetts in September.
Among other contracts the company won this year are an air-pollution-control maintenance deal with Dominion Generation; and $10 million from Wisconsin Public Service to design and build filters for a pulverized coal-fired boiler.
EEC also got a $4.4 million contract from a leading British utility to install new air-pollution-control equipment on two power generation units at one of its facilities in Britain.