CET Environ Sees 1998 Profit After 6c/Shr Loss In '97
By CHRISTOPHER C. WILLIAMS
Dow Jones Newswires
NEW YORK -- Like other environmental companies, CET Environmental
Services Inc. (ENV) has absorbed the heavy blows of a slumping cleanup
market. Unlike many, the company is still standing.
"The business is reflected in our bottom line," said President and Chief
Executive Steven H. Davis, noting the $4 million his environmental
engineering and construction services company lost over 1996 and 1997,
when a government contract was delayed.
The loss threw the small Englewood, Colo., company into a restructuring
in 1996 that began to bear fruit in the second quarter of last year.
Bolstered by cost-cutting and an estimated $400 million contract
backlog, CET expects to report a profit this year, after posting a loss
of $347,290, or 6 cents a share, for 1997.
In a recent filing with the Securities and Exchange Commission, CET
revealed that it had technically breached a $10 million working capital
loan agreement that required it to post annual profits of $500,000
beginning last year.
Chief Financial Officer Rick C. Townsend said the company signed an
amendment to the agreement at the end of March, making the $500,000
million profit requirement effective this year. "We're comfortable we'll
achieve that," he said.
On the revenue side, Davis has a "conservative" growth estimate for 1998
of between 20% and 30% from 1997's $54 million. "We are looking for a
strong year," he said.
CET, which was formed in 1987, generates revenue from three areas -
industrial services, including remediation and in-plant maintenance;
federal government programs; and waste water services.
To keep profits flowing, the company is focusing on the water treatment
business, which is more profitable than its other businesses. "We want
to be a significant player in the water business," Davis said.
That will be a tall order. Several other companies are thirstily eying
this promising sector, which is dominated by giants such as U.S. Filter
Corp. (USF). However, CET is trying to keep away from the bigger boys by
looking to buy mom-and-pop operations generating annual revenue of about
$3 million.
Like other companies in the business, CET offers industrial and
municipal clients a complete package of services, meaning it will
design, operate and finance water treatment facilities. It began its
push in November 1995 and now operates more than 90 water and waste
water treatment systems. In the next year, the company expects to ink
three to four full-service contracts, according to Davis.
CET expects its first privatization project, a $10 million, 20-year
contract to build and run the waste-water treatment plant for Keystone,
S.D., to be up and running in 18 months.
President Davis said the company's water operation, which is exceeding
management expectations, could pump out 40% of overall revenue in 1999,
up from an estimated 20% this year and 8% in 1997.
The bulk of CET's revenue comes from its industrial-services business.
Fast-growing in-plant services, along with waste-water treatment, is an
important focus for growth for the company, according to Davis.
Remediation services account for most of the industrial-services
division's revenue. This long-suffering business, Davis said, is getting
healthier in certain markets, such as Southern California and the Gulf
Coast. CET said it faces less competition there, as bigger remediation
companies merge or exit the industry.
Half of CET's revenue represents government-related work, mostly for the
Environmental Protection Agency. The company wants to lower government
work to 40% of revenue this year and about 25% by 2000.
Another market CET is eying is the cleanup of abandoned industrial
sites, called brownfields. The niche business brought in 5% to 10% of
overall revenue last year. That level should remain the same this year,
the official said.
To fund its acquisition program, CET, which uses cash to buy companies,
may seek "additional capital in the near future," according to Financial
Chief Townsend.
-Christopher C. Williams; 201-938-5219; christopher.williams@cor.dowjones.com |
