This is a news about FOCS reported by Dow Jones News on Nov. 25
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11/25 =Fiberchem Battles Past To Reach Brink Of Profitability>FOCS
By Christopher C. Williams
NEW YORK (Dow Jones)--Like gamblers who leave the Nevada casinos
empty-handed, Fiberchem Inc. (FOCS), a Las Vegas environmental technology
company, hasn't had much luck making money.
But nine-year-old Fiberchem expects its fortunes to change next year.
President and Chief Executive Geoffrey F. Hewitt told Dow Jones he expects the
company to finally become profitable in fiscal 1997 after a recent burst of
sales growth. Fiberchem, which has lost $15 million since 1991 on a paltry $2
million in sales, is relying on a refocused marketing strategy, strong
alliances with major companies and a revitalized balance sheet to turn things
around.
However, Fiberchem, which makes fiber-optic chemical sensors, still faces
tough odds. The company is overcoming credibility problems among customers and
investors that arose several years ago because of problems with earlier
versions of its technology. This led to financial uncertainity, management restructuring and a battered stock - Fiberchem shares lost more than
three-quarters of their value three years ago and have yet to recover. In
addition, Fiberchem must scale the high fence of investor skepticism
surrounding innovative environmental companies, most of which are struggling
to commercialize their technologies.
Fiberchem is betting that fiber-optic sensor technology, which the company
bought from its inventor in 1989, will lead it to profitability. Today
detect petroleum hydrocarbon pollutants in water or vapor. Hewitt saidat
Fiberchem's sensors are more sensitive and designed for more applications than
its primary competition, metaloxide technology. Fiberchem developed a wide
range of products based on the technology, including portable monitoring
systems and digital hydrocarbon probes, geared mainly toward detecting leaks
at underground and above-ground oil storage tanks and monitoring soil and
water cleanup projects.
Fiberchem's first product, a continuous monitoring system, hit the market in
Fiberchem pulled them from the market for re-engineering in 1993, taking aand $500,000 charge. Although management maintained that the sensor technology was
sound, the company took longer than it or investors expected to bring the
second generation of monitoring products to market.
As delays mounted, rumors about the soundness of the technology and the
company abounded. Fiberchem, which had publicly said it expected to break even
in 1994 and to have sales of about $17 million the following year, had to
dramatically scale back projections. Investors turned sour on the stock.
Fiberchem, which had traded around $4 at the height of mounting excitement
about the company in late 1993, sunk to around $1 during the period of
uncertainity in 1994, and hasn't recovered since. The stock's 52-week high is
now 1 19/32.
New management, headed by Chairman Leonard Chill and CEO Hewitt, took over
in March of 1994, replacing the founders of the company and injecting
much-needed product development expertise. The new management also instituted
a five-year strategic plan, which Hewitt hopes will vault Fiberchem's annual
sales to around $100 million by the end of the decade.
In mid-1994, the new management introduced the re-engineered continuous
monitoring system and also unveiled a new portable system. Fiberchem officials
said the company made the second generation of products more ''field
hardened'' - less susceptible to damage and failure due to weather conditions.
Fiberchem also narrowed its marketing strategy, focusing on monitoring
above-ground tanks, analyzing wastewater produced by offshore oil production,
monitoring on-shore waste streams, and producing industrial hygiene products.
The company is also developing a Sensor-On-A-Chip product with Texas
Instruments Inc. (TXN). Among other things, it hopes to sell the chips to the
auto industry for use in breath alcohol ignition interlock devices, which prevent cars from being started or driven by drunk drivers. During 1995,
Fiberchem, to penetrate international markets, also signed several marketing
and distribution deals with companies in Europe and Asia.
Fiberchem said concentrating on these businesses offers the best
opportunities for growth.
''It was a lack of focus that hurt the company before,'' Hewitt said.
One of Fiberchem's former exclusive distributors suggested something else as
well. ''They weren't interested in developing the technology; they were
interested in selling the equipment,'' said Glenn Kaufman, chief engineer at
Houston-based Tanknology Inc. (TANK), one of the world's largest companies
involved in the testing of underground tanks. Tanknology became a distributor
of Fiberchem's products in 1993. Tanknology, however, didn't have much luck
selling either the first- or second-generation of products. That was due
partly to a lack of regulations requiring monitoring of above-ground storage
tanks. But Tanknology also wasn't too happy with the sensors. ''They were
presented as ideal sensors,'' Kaufman said, but Tanknology ''found they
weren't as stable or sensitive as we wanted them to be.'' Tanknology didn't
maintain its relationship with Fiberchem. ''We didn't feel it would be to our advantage,'' Kaufman said.
However, Fiberchem's recent success in signing up some big-name petroleum
customers, such as Royal Dutch Petroleum's (RD) Shell Oil, Amoco Corp. (AN)
and Chevron Corp. (CHV), reflects the growing acceptance of its technology in
the marketplace.
David Jones, an analytical specialist at the refinery operation of British
Petroleum Co.'s (BP) BP Oil unit, said the Fiberchem wastewater monitoring
system he bought last year has ''worked very well, has been maintenance free
and Fiberchem has been good about providing help and information.''
Hewitt said dealing with credibility problems created by the company's past
consumed much of his time during his first year on the job. However, Hewitt
said Fiberchem's ongoing challenge remains overcoming customers' bias against
its small size. The official said many oil companies like the company's
technology but balk at doing business with a company so small.
Consequently, management's main goal has been to sign on strategic partners
with brand names to help the company break into new markets. One of
Fiberchem's most important customers is Shell Oil, which since 1994 has been
the major purchaser of Fiberchem's continuous monitoring systems. Another
significant partner is London-based Whessoe Varec, which has ordered $1.7
million worth of the company's products. The company signed a deal with
Whessoe in June. Last week Fiberchem struck again, inking an agreement with
Alcohol Sensors International Ltd. (ASIL), which will use Fiberchem's
Sensor-On-A-Chip technology to develop products for breath alcohol testing.
fundamentals are making it easy to forget the company's past. Fiberchem has
raised almost $6 million in financing this year, giving the company enough
cash to fulfill its growth plan, which could include acquisitions, officials
said. In addition, Fiberchem's products have been selling, resulting in four
consecutive quarters of record sales. In the fiscal third quarter ended June
30, for example, the company reported revenues almost $720,000, a 125% jump from a year ago.
Saying he expects such quarterly gains to continue, Hewitt said Fiberchem is
looking for at least $7 million in sales for the fiscal year ending next Sept.
30. In the second half of the year, the official said the company should begin
to be profitable and head toward being cash flow positive.
Hewitt also said he's ''pretty comfortable'' with an analyst estimate of net
income of 6 cents a share for fiscal 1997, compared with a projected loss of 9
results in early December. ''The history isn't hurting the growth of the96
business,'' Hewitt said. ''We're now starting to develop credibility.''
And Fiberchem apparently hasn't lost credibility with one large shareholder.
''The company has its act together, the product is sound, and the balance
sheet has never been stronger,'' said John Liviakis, president of Liviakis
Financial Communications, which until January handled investor relations work
for Fiberchem. Liviakis said he received 1.8 million shares of Fiberchem three
years ago as compensation for his firm's services and hasn't sold a single
share. ''I'm very long-term oriented on the stock,'' he said.
Just how long Liviakis and other investors will have to wait before the stock begins to show some strength is anyone's guess. With the stock still
trading below $1, most investors evidently have yet to be convinced of
Fiberchem's viability. Analyst John Raaf of the Red Chip Review, a research
firm based in Portland, Ore., thinks the stock will begin to gain if Fiberchem
continues to grow the top line at a 100% pace. ''Our wait-and-see stance has
taken a few steps toward a more decisive recommendation,'' Raaf wrote in a
recent report.
Although Fiberchem is a tiny company, its struggles to commercialize its
technology mirror the travails of many of the companies in the beleaguered
environmental technology sector.
In a sense, if a company like Fiberchem, which is considered a pure play on
innovative environmental technology, can pick itself off the canvas and build
its business, it won't only boost the company's stock, but may also engender
some excitement among investors for the sector in general. ''I'm a believer
that the company will fulfill the expectations that surrounded it in the early
days,'' said Hewitt.
(END) DOW JONES NEWS 11-25-96
3:22 PM
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