In the energy conservation trend, Thermal Energy targets new markets

Ottawa’s Thermal Energy International Inc. is focused on growth into new markets and sectors, having passed the transition from research to sales.

The Ottawa-based green tech company is known for its technologies that reduce carbon emissions and save companies on energy costs.

The company has three main proprietary products. The GEM condensate return system is a steam trap designed to reduce carbon emissions and reliance on fuel. Its FLU-ACE technology recovers heat and reduces air pollution, and its DRY-REX bioenergy technology turns biomass into low-emission biofuel.

The company recently won “Best Product for Improving Sustainability and/or Reducing Energy” at the 2014 Building Better Healthcare awards. This is for its GEM technology, which was installed at a U.K. hospital.

William Crossland became the CEO of the company in 2009, which is when he says the company’s focus changed from research to sales. He says the company was gaining revenue of about $4 million and losing about $3 million annually before he came on board.

“The first couple years when I was there, it was a turnaround when we were conserving cash, sort of battening down the hatches and trying to preserve the company,” he says, “Now we’re in a phase where we’re actually actively growing.”

The company added David Spagnolo to its board of directors last month. Spagnolo has a PhD in technical engineering, and Crossland says Spagnolo has key contacts in the petrochemical sector and brings a new level of expertise and technical knowledge to the board.

The company finished a very successful 2014 fiscal year, which ended on May 31, hitting company records. It reported a revenue increase of 60 per cent, to $13.2 million, from $8.2 million in the previous fiscal year.

In the fourth quarter, the company’s revenue increased by 151 per cent to $4.7 million compared to $1.8 million in the same period a year earlier.

For the year, net income was $634,000 compared to a net loss of $2.8 million in 2013. In the fourth quarter of this year, there was net income of $697,000 compared to a net loss of $2.7 million in the same period a year earlier.

Cash flow was negative $1.4 million in 2013 and rose to a positive $1.3 million in the 2014 fiscal year.

The company attributes much of this success to a handful of large contracts in the food and beverage, pulp and paper, and hospital sectors.

The contracts increased its FLU-ACE heat recovery systems sales by 77 per cent and the GEM Condensate return systems sales by 37 per cent this year compared to the fiscal year for 2013.

Thermal Energy’s stock price has fluctuated between five and 14 cents per share over the past year. On Dec. 3, it was 7.5 cents per share.

Despite a good 2014 fiscal year, the company’s results for the first quarter of fiscal 2015, which ended Aug. 31 of this year, reflected a different story.

Revenue fell by 23 per cent to $1.2 million, from $1.5 million in the same quarter the previous year.

This affected gross profit, which fell to $703,000 from $970,000 year-over-year, a 27.5 per cent drop.

Thermal Energy’s first quarter net loss also deepened year-over-year from $359,000 to $668,000.

Its order backlog is worth approximately $3.1 million as of its last quarterly report.

The timing of large orders, depending on the length, can affect how costs and profits are reflected in reports. This affected its first quarter, but is expected to be less of a difficulty as the company has large plans to expand into new markets.

Crossland says there are two prominent growth strategies in the works.

The first is to continue to develop sales and distribution in key markets. This is being done by hiring people in territories not yet covered by the company’s representatives. These locations include Germany, France, the Gulf Coast in the U.S., northwestern North America, and the Middle East.

“Our penetration is very, very low, so there are lots of opportunities to grow in each of those key markets,” says Crossland.

Its other strategy is to market sector by sector and repeat business with existing customers. This includes the pulp and paper, pharmaceutical, food and beverage, chemical, and oil and gas sectors. The company will ensure its has marketing experts in each of those sectors.

Looking to the future, Thermal Energy plans to expand into sectors in other markets such as Korea, Japan, and China. It will also add new products to its list.

In fall 2013, the company hired two sales recruitment agencies. Over the past 12 months, it has hired seven sales and marketing staff, including a senior marketing professional.

Shortly, the company will launch a new corporate website, which will have an updated look, be more sector-specific, and show more customers and case studies.

Bill Eggertson, executive director of the Canadian Association for Renewable Energies, says renewable energies – natural resources that can replenish themselves such as trees, solar and water – are better options for the environment. He says many industries will continue to rely on traditional energy for many years to come while technologies to reduce oil and gas emissions are important.

He said most companies don’t see Thermal Energy’s technologies as a necessity, but it’s an attitude that’s changing because the government or environmental damage will cause them to.

“Until everybody either understands what climate change and environmental damage is, or we get a regulatory regime that says, ‘You don’t have to care, but, you pollute the environment, and we’re going to nail you with fines,’ at that point, their services and products become extremely valuable,” Eggertson says.