Company plans to build out its sales force
EARTH (Canada) manufactures an inexpensive, efficient and environmentally friendly product designed to absorb oil for pollution and spill control. CEO Edward Akkawi tells StockHouse of the company plans to build out its sales force and capitalize on evaluations underway by blue chip firms.
Vancouver, BC, April 25 /SHfn/ -- Ten days ago, investors could be forgiven for wondering if it wasn't really Friday the 13th, rather than the 14th. Amid the turbid selling that knocked a trillion dollars out of highflying North American markets, few companies achieved stock price increases. EARTH (Canada) Corporation [V.EAR] found itself among this scarce number, rising 16% to $0.93 thanks largely to a well-timed press release. The company, which manufactures re-usable oil absorbent material for pollution and spill control announced that Kuwait Oil Company (KOC) had seen a presentation highlighting the firm's patented Reusable Petroleum Absorbent (RPA?) product. Based on the response to that presentation, EAR expects negotiations to test RPA in Kuwait will "commence shortly."
The RPA chemical compound was developed in Poland and purchased by Environmental Applied Research Technology House (EARTH) during the mid-1990s. It is a polyurethane-based product that is advertised to allow nearly 100% recovery of absorbed hydrocarbons. Because RPA is hydrophobic, it is also useful in recovering oil that has been emulsified, or mixed with water. Further, RPA can be re-used in up to 100 separate instances, the foundation of the company's environmentally friendly stance.
RPA has applications in a wide market that includes government agencies, manufacturing firms, and oil and oil services companies. Its customer list already includes Ontario Hydro, the Canadian Department of National Defense, and PETROBRAS.
CEO Edward Akkawi told StockHouse that KOC, the official petroleum agency for the government of Kuwait, first called for submissions to treat the oil lakes in that country two years ago. "The treatment is intricate. We believe our product can do well."
While the announcement failed to advertise a contract, the news did serve to bolster investor sentiment, as Kuwait remains a delicate and damaged environment following the 1991 Gulf War. Retreating Iraqi troops had set the oilfields of Kuwait ablaze. An international network of well fire experts extinguished the oilfield inferno far in advance of expectations, yet despite a decade of further work to clean up the wasted desert, untreated oil lakes remain in the country.
When the fires were finally out there were an estimated 200 million barrels of weathered crude oil in approximately 240 surface oil lakes. The KOC web site (www.kockw.com) reports more than 130 of these surface oil lakes have been drained, with over 80 million barrels of weathered crude recovered, but further cleanup remains a pressing need. Safe recovery of the oil would pose tremendous economic benefits, in addition to positive environmental impact.
"The capacity to re-use RPA is what makes EARTH stand apart from its competition."
The news release detailing potential trials for RPA in Kuwait comes close on the heel of a series of announcements detailing wins with companies in Brazil. EAR announced March 14 that PARANA EQUIPAMENTOS, one of the largest Caterpillar [CAT] dealers in South America, had made an order for the RPA filtration system following a three month evaluation period. Two weeks later the company disclosed that a "large multi-national oil company operating in Brazil" had ordered the same filtration system for trials.
At the beginning of March, EAR shares were being exchanged for just $0.19, but endorsements by Brazilian companies sent the firm's stock soaring past the key $1 level. There was a veritable trading frenzy the week of March 13, with millions of shares trading hands. The stock has fallen off from an intraday high of $1.60 set March 14, to trade just shy of the one dollar mark, though volume numbers indicate interest in the issue remains high.
Brazilian oil concern PETROBRAS, the world's seventh largest oil company, placed a $2 million order with EARTH in December 1999. Akkawi says, "When PETROBRAS started buying our product, they made test on our product and 15 other sorbents on the world markets, and it took [PETROBRAS] a year to reach the conclusion that our product is number one." In January, it was able to employ RPA centrifugation equipment and EAR's training services to minimize the effects of a 338,000-gallon spill at the Duque de Caxias refinery on the Brazilian coast near Rio de Janeiro.
This spring, EARTH achieved Official Certification from Environment Canada's eco-labeling program, the Environmental Choice Program. The firm adds this certification to a previous endorsement as an environmentally conscious product by the Canadian government's Environmental Technology Verification program. ETV conducted stringent tests to ascertain RPA's efficacy as an absorbent on multiple re-uses. The trials showed that after 30 cycles, RPA bundled into a cloth pillow picked up approximately 95% of the average weight picked up during the first five re-uses. In its granular form, RPA was about 79% effective after 30 cycles.
The capacity to re-use RPA is what makes EARTH stand apart from its competition, says Akkawi. Re-use, one of the three Rs in the environmental triumvirate - reduce, re-use, recycle - means that RPA makes a double contribution in contamination cleanup. Other companies "clean the oil [?] and then they burn it and cause another contamination in the atmosphere with fumes. Or they put it in a landfill and we leave the problem to our children and grandchildren to take care of our mess," says the CEO." Of course, after 100 uses RPA must also be incinerated - its advantage is reducing contamination from the disposal of the sorbent.
EARTH has recently relocated to a building triple the size of their previous quarters. Akkawi says the firm plans to move its RPA manufacturing to Canada from its current Polish locale. The company is undergoing a restructuring as it shifts its spending focus to the sales and marketing side of the business. Representatives are working on behalf of the firm elsewhere in the world, including the very busy Brazil- and Kuwait-based agents. In Canada, EAR will increase its 12-member staff with the addition of a direct sales team. "We are going to increase our sales force to cover Canada as our first step and then we are going to go down south [to the US]."
The firm continues to expand its product offering as well. "We are working on a different type of filtration, which is continuous flow without manual work." A prototype will be made within a few weeks, and EAR expects the product will eventually find an important role combating oil spills.
The usual procedure for cleaning up oil spills at sea, Akkawi explains, is to place containment booms around the spill area. Skimmers pump oil and water into tanks aboard ships, and once the oily water has settled in the tanks, the oil will float to the top. Oil in these tanks is skimmed and transported to shore separately from the oily water. EAR's existing filtration system has been deemed ideal for oil spill situations for its simplicity. Using the EAR system, oily water can be filtered on board the ship, and once cleaned, put back into the ocean or lake. Oil recovered during the filtration process could be mixed with unspoiled oil, or recycled and used as combustion fuel in a variety of applications.
It costs about $300 per barrel using traditional mop up methods to combat oil spills, while Akkawi says that EARTH can do the same job for about one tenth of that cost, and still claim a profit.
The CEO says he expects to reach break-even status by the end of the current fiscal year, June 30, or during the first quarter of next year. It has not yet made a profit, but reports for Q1 and Q2 of this fiscal year show a dramatic increase in revenues. At the end of the first quarter, ending September 30, 1999 EAR reported revenues of $5,130. It posted losses of $211,537, or a penny a share. Three months later, at the reporting of second quarter finances, the company showed revenues of $308,509. Losses had increased to $295,877, still a penny a share.
Akkawi is relatively new to the chief executive's office. He was appointed president and CEO April 6 after serving several years as the chief operating officer. Previously, he was CEO and co-founder of one of the largest construction companies in Saudi Arabia. Akkawi also developed desalination plants and water and sewage treatment infrastructure when he was General Manager of Siemens [SMAWY] Saudi Arabia.
Akkawi says that evaluations of EARTH's products are underway with a number of blue-chip firms. He mentions a European multinational, and a positive recommendation from a consultant to the Minerals Management Service of the US Ministry of the Interior - the government branch handling contracts for oil spill cleanups. "Many companies are testing our product now and we hope with time we will put the news in the market with orders, which will be coming soon. We are not dealing with penny companies, rather with blue chip companies."
If the company can fulfill its promise and deliver a number of large contracts the stock price will likely be buoyed by the news. RPA has multiple applications, and is appealing to firms who wish to improve their efficiencies and environmental profile. However, the lead times to contracts are long in the industry, as companies require intensive testing in advance of any purchase. Akkawi says his company provides a cheap and efficient incentive to work toward stronger support of environmental laws that are bound to become stricter. |
