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Carmanah looks to its past to build its future

Sep 08 2012

Carmanah Technologies may never again be a $60-million company, but the man at the helm of the Victoria-based manufacturer of solar-power products and systems is digging into the past in a quest to re-establish it as a world leader.

Bruce Cousins, Carmanah's CEO, said there has been a renewed focus on getting back to basics within the company as it attempts to deal with recent mediocre financial results and several years of underperformance.

Most recently, Carmanah posted a $1.5-million loss in the second quarter of this year as it saw revenue dry up - falling to $6.1 million from $10.7 million in the same quarter of 2011. And its share price, which once hovered between $3 and $4, has languished between 35 cents and 60 cents for nearly two years.

Cousins, who is about to celebrate one year as CEO, dismissed the suggestion that underperformance is the new normal for a firm that was once a pacesetter in the solar world.

"The new normal, if there is one, is for Carmanah to be recognized as a world leader in self-contained signalling products - it's what we're good at," he said. "In the last couple of years, bluntly, we have taken our eye off the ball a little bit. We were distracted by outdoor lighting, which we saw as a massive opportunity. The reality is it didn't play through for us."

Cousins said the company has switched its focus.

"I'm feeling really good. There's been tremendous focus on product development," he said. "We have been so heavily focused on outdoor lighting in the past that our signalling business, the heritage of Carmanah, suffered dearly."

The result was a loss of the competitive advantage they held by early entry into the signal light space, and their early products grew long in the tooth.

"We are correcting that quickly," he said, noting they have launched new signalling products geared toward pedestrian safety and the oil-and-gas sector as well as a new 24-7 flasher.

They have also made significant headway on a new generation marine light to be launched early next year.

"It's great groundwork for re-establishing and revitalizing our signalling business," Cousins said.

But getting back to what built the company will go only so far in improving Carmanah's financial performance.

Cousins said the company should start to see improved revenue from its grid-tie business later this year now that certainty has returned to the market.

That certainty comes as a result of the Ontario government sticking to its commitment to renewable energy and making more modest cuts than expected to the rate the government would pay for power provided to the grid by companies that have installed equipment like Carmanah's.

"Last year, grid-tie was 25 per cent of our business," Cousins said. "It's meaningful, so we will make up some of the first half in the second."

There are still negative factors the firm can't control.

The company has relied heavily on U.S. government spending in the past, and those purse strings have been tightened considerably. General economic uncertainty has also slowed demand for solar products.

Cousins says the company has done the hard work over the last several years to pare down the size of the firm - there are now about 70 employees where there were once 260, and manufacturing has been contracted out - and its costs have been trimmed while improving productivity.

He is quick to quash any suggestion the streamlining process was geared toward showcasing Carmanah as an attractive acquisition target.

"Frankly, we are being streamlined and focused for success as a company. Does that go part and parcel with a potential sale?

Well, time will tell, but that is not the underlying intention here," he said.

Indeed Carmanah appears to be preparing to expand. It recently raised $1.8 million through a nonbrokered private placement of nearly four million shares. The money is tabbed for small acquisitions, product development and working capital.

"Do I see us being [a $60-million company] there again? Absolutely not. We will be very thoughtful and focused on markets that we go after. We are going to stay true to our core strengths and build on that and exploit that fully," he said.

As for Carmanah being undervalued by the market, Cousins said that will remain until they start producing results and establishing some momentum.

And that's where he expects the new focus on the basics will take them.

On Friday, Carmanah's share price closed at 38 cents, down one cent. aduffy@timescolonist.com