Environmental Elements Corp., an engineering and project-management boutique focusing on the pollution-control business, reported second-quarter earnings yesterday that underscored the continuing turnaround of a company with a 50-year history in Baltimore.
EEC said it earned $346,000, or 5 cents a share, for its fiscal second quarter, which ended Sept. 30, compared with profit of PTC $28,000, or break-even per share, for the same three months last year.
Revenue jumped 81 percent for the quarter to $20.8 million this year compared with $11.5 million last year.
"We're a small company, we're scrappy and we're coming back," said James B. Sinclair, chief financial officer of Environmental.
EEC designs air pollution-control equipment primarily for power plants and pulp paper mills. Though it farms out the production work -- mostly to firms in the Baltimore area -- it maintains a heavy research-and-development effort and often manages the equipment installation.
It focuses on the upgrading or modernization of plants in North America and on new plants in such countries as China, India, South Korea, Russia and Brazil, Sinclair said.
Pollution control -- long an issue in developed economies such as the United States -- is becoming more important even in emerging markets that are trying to upgrade their manufacturing industries. In China, for instance, Sinclair said that 25 percent of deaths that are not from natural causes are related to lung problems -- suggesting that the environment needs improvement.
EEC owes its genesis to Koppers Co., the Pittsburgh-based industrial company, became a separate division in the 1970s and was taken private as a separate company by management in 1983. The firm went public in 1990 but has struggled in recent years because of high costs and a strategy that lacked focus.
After several restructurings -- which slashed the work force from 400 to about 150 people now -- and a strategy that focused on specific geographic markets and niches, the company has reported seven consecutive quarters of positive operating income and its executives believe the turnaround is finally at hand.
EEC shares closed yesterday at $2.625, up 18.75 cents each. It has closed as low as $2.4375 and as high as $6.875 in the past 52 weeks. The stock traded for more than $20 in 1990.
Sinclair said EEC is looking for a joint-venture partner with domestic and international muscle that would be willing to infuse working capital needed to fuel growth and lend some marketing firepower -- while allowing the Baltimore company to maintain its independence.
For the six months that ended Sept. 30, EEC said it earned $553,000 or 8 cents per share, compared with $42,000, or a penny a share, in the year before. Revenue for the six months rose 47 percent to $37.3 million from $25.4 million a year ago.
In addition to good growth in a couple of key markets, EEC has managed to control costs, making sure that overhead costs -- about 10 percent of sales -- grow at a rate that is less than the growth rate for sales, Sinclair said.
The order backlog -- business in the pipeline that is one measure of the health of a company -- grew 27 percent to $50 million compared with $37.3 million a year ago.
However, new orders decreased 70 percent during the quarter to $5.4 million, from $17.7 million a year ago. Sinclair said that was a troubling trend, but noted that the company is not ready to hit the panic button yet: EEC is still quoting a lot of business even though orders in the important power plant and waste-to-energy generator markets have been "soft," according to E. H. Verdery, chairman and chief executive officer.
"We are encouraged by our quotation activity and expect improvement during the second half of the year," Verdery said in a statement.
Pub Date: 10/28/98