Solar lighting pioneer Carmanah Technologies Corp. – one of Canada's oldest "green tech" firms – may finally be turning around after almost two decades of stagnation, losses, and several CEO changes.
New backers, new executives and a corporate restructuring appear to have put the Victoria-based company back on an upward trajectory.
Carmanah's stock, which had been on a decline since early in 2006, finally bottomed out late in 2013 and has moved upward since then. In the past month alone, it has risen around 25 per cent.
Carmanah, which at one time had significant manufacturing operations of its own, now gets contract manufacturers to make its products. Its devices – sold around the world – generate electricity from solar cells, store the power in batteries, then run LED lights at night. Carmanah devices light pathways, mark airport runways and are used in marine signalling and for traffic beacons. The company also installs rooftop solar-power systems, and sells solar chargers for recreational vehicles and trucks.
Carmanah reported three consecutive quarters of profits in 2014, after many years of mostly losses. And in preliminary year-end numbers released this week, the company revealed that 2014 revenue rose by a whopping 68 per cent to $43.5-million (U.S.). While some of that came as a result of an acquisition, underlying growth was also strong.
Chief executive John Simmons said the turnaround is a result of a reorganization that put discipline into the company and focused on profit. "The structure and organization of the business was such that it was never able to get out of first gear," he said in an interview.
Mr. Simmons became CEO in 2013 after he and other Carmanah investors – including current chairman Michael Sonnenfeldt – shook up the board and took seats as directors and managers.
One of the key changes Mr. Simmons made was to eliminate the independent "silos" that ran each of its business lines – something that was impractical in a small company. Now, planning, distribution and product development are done centrally, while sales and marketing remains with each product.
The other fundamental change was to shift the corporate culture toward profitability, Mr. Simmons said. That, for example, means sales people are now compensated for their contribution to the bottom line, and not through commissions on sales. And all employees qualify for stock options.
He also noted that members of the Carmanah board – who have participated in all the recent private placements to raise funds – own more than 60 per cent of the firm' shares. Everybody in the company, at all levels, "is aligned with shareholders," Mr. Simmons said.
Veteran clean-technology analyst MacMurray Whale, of Cormark Securities Inc., said Mr. Simmons had a "strong vision of what was wrong with the company," and his efforts appear to be working, unlike the failed restructuring plans initiated by earlier CEOs. "The previous management team was just too timid in making cuts, and didn't understand where they needed to focus the company, and what to focus it on, and how to compete," he said.
Mr. Whale, who had followed Carmanah years ago but dropped it when the prospects appeared bleak, resumed his coverage in December with a "buy" rating.
But Mr. Whale feels that momentum can only be maintained if Carmanah aggressively acquires competitors – a strategy it should be able to pursue in a fragmented industry. It is an "industry ripe for consolidation," Mr. Whale said, although the company will likely have to issue more stock to take advantage of those opportunities.
Carmanah has made one major acquisition recently. Last summer it bought Sol Inc., a Florida-based company that makes solar-powered outdoor lights. Sol's Florida manufacturing operations are being shut down, and the products are being integrated with Carmanah's own.
Mr. Simmons said there is lots of room for "organic" growth in the company, but acquisitions will also be key if they are done prudently. There are many solar lighting businesses globally that are privately held, and some will come up for sale, he noted, but the company will be opportunistic and only buy things that make sense and add to profitability.
While Carmanah is debt-free and had $11-million in cash as of Sept. 30, "we don't have the resources to make significant acquisitions," he said.
Increasing revenue and generating profit is crucial to beefing up Carmanah's financial resources, and proving the wherewithal for bigger purchases, Mr. Simmons said. "The first step was to stop losing money."