By Samus Prasla
Carmanah Technologies has become the manufacturer and supplier of solar LED lights and solar power systems that are durable, dependable, and a cost effective energy alternative. The Company has managed to grow its business with little shareholder dilution, and some strategic acquisitions should make for a bright future.
In Canada, we are seeing rising temperatures and shifting snowfall patterns, primarily due to increasing greenhouse gases in the atmosphere. Our electricity sector has generated 85 Mt of CO2 in 2013. In order to reduce CO2 from electricity, the government of Canada has banned construction of traditional coal-fired electricity units and put an emphasis on clean electricity. Therefore, moving towards alternative energy sources such as renewable is important. These alternative renewable sources include wind, hydro, solar, and biomass energy. Carmanah Technologies Corp. (TSX: CMH) has become the manufacturer and supplier of solar LED lights and solar power systems that are durable, dependable, and a cost effective energy alternative.
Individual customers as well as businesses use energy for different purposes and most of this energy does not come from renewable sources. In order to make use of renewable energy, Carmanah manufactures products that are powered by solar energy. The Company’s products are used in a variety of industries, such as airfield and helipad lighting, marine aids, obstruction lights, outdoor lights, traffic beacons, mobile power as well as providing solar EPC services.
In 2013, Carmanah underwent a significant restructuring process. With the appointment of John Simmons as CEO and Michael Sonnenfeldt as Chairman of the board, the Company’s core values and operating methods have changed. As part of the sustainable measures, management replaced the ERP system in order to realign business process and reduce ongoing operating costs at a sustainable level. The team also replaced the CRM system, which will focus on future changes towards sales strategies. It took two years to implement the entire restructuring process, costing $0.74 million. The end result has been, so far, remarkable because annual revenues surged 169% in 2014, while total operating expenditures came in at $12 million, similar to 2013.
From 2008 to 2012, Carmanah’s revenue had fallen to $26 million annually, due to an overall decline in Department of Defense spending, uncertainties in the Feed-in-Tariff (FIT) program, and an absence of large-scale projects. But in 2013, with the appointment of a new CEO and 40 talented professionals, the Company raised revenues to $43 million in 2014. Gross margins, meanwhile, increased from 31.4% in 2011 to 34.7% in 2014. Carmanah’s stock price has soared more than 100% during the past 52 weeks to its current price of $5.36 and now has a market cap of about $132 million, primarily due to a reduction in the cost of solar panels, the acquisition of Sol Inc. and an increase in government contracts, such as the Feed-in-Tariff (FIT) program.
Carmanah has expanded its Illumination segment by acquiring Sol Inc., a manufacturer of solar powered outdoor lights in Palm City, Florida. This acquisition will help the Company achieve economies of scale in the solar outdoor lighting market. In 2014, Sol’s operations contributed $5.5 million in revenue. As well, Carmanah recently completed its acquisition of the Sabik Group of Companies, which had revenues of EUR17.7 million and EBITDA of EUR2.7 million in 2014. Sabik provides lighting for marine navigation as well as offshore wind turbines.
In order to operate a sustainable business, companies have to align expense according to its business needs. Carmanah has reallocated research and development dollars to current product lines important to its business while increasing sales and marketing expenditures, which should support its overall bottom line. Carmanah has also managed to grow its business with little shareholder dilution, having just 24.5 million shares outstanding.
