{"id":4243,"date":"2016-12-20T09:05:27","date_gmt":"2016-12-20T14:05:27","guid":{"rendered":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=4243"},"modified":"2017-11-18T11:22:17","modified_gmt":"2017-11-18T16:22:17","slug":"shareholders-grumble-despite-thermal-energy-success","status":"publish","type":"post","link":"https:\/\/www.cusjc.ca\/ottawainsight\/?p=4243","title":{"rendered":"Shareholders grumble despite Thermal Energy success"},"content":{"rendered":"

Increased sales and foreign investments led Ottawa-based clean-tech company, Thermal Energy International Inc. (TSX-V: TMG) to bounce back from its worst fiscal year on record in 2015, to nearly doubling its revenue in 2016.<\/span><\/p>\n

\u201c2016 was a very successful year for us, up significantly more than 2015. Although, 2015 wasn\u2019t exactly a stellar year,\u201d Thermal Energy chief executive officer (CEO), William Crossland told shareholders at the company\u2019s annual general meeting on Nov. 28. <\/span><\/p>\n

The company\u2019s revenue of $12.4 million in 2016 substantially improved from $6.8 million in 2015. However, the most recent quarter that ended on Aug. 31, the first of 2017, wasn\u2019t as positive. Revenue of $2.1 million was lower than the $2.5 million of the previous year. But a decrease in the cost of sales led to a profitability increase of $372,867 as the quarter<\/span> achieved a loss of $79,730 compared to last year\u2019s loss of $452,597.<\/span><\/p>\n

Livio Filice, a shareholder with Thermal Energy, explained he\u2019s happy with his investment in the clean-tech market. <\/span><\/p>\n

\u201cI think they\u2019re in the right space at the right time. Energy efficiency is becoming the new fuel. A lot of money, a lot of capital is flowing into it,\u201d he said. <\/span><\/p>\n

Thermal Energy sells products to industrial facilities that re-use waste heat, providing environmental sustainability and savings. Its products include GEM steam traps, FLU-ACE – direct contact condensing heat recovery and Dry Rex –\u00a0 <\/span>a low temperature biomass drying system.<\/span><\/p>\n

Shareholder questions<\/h3>\n

Despite posting positive results, not all shareholders are happy. At the meeting, Crossland received questions about the sales staff not selling enough, a lack of partnerships and the low stock price at $0.11 on Dec. 2. The stock hit its 52-week high on Oct. 7 at $0.23 and its 52-week low on Sept. 13 at $0.035. Crossland responded by saying it\u2019s unrealistic to expect the company\u2019s growth rate to improve drastically overnight. <\/span><\/p>\n

\u201cI understand people\u2019s frustration, and I think a lot of the long-term shareholders bought into something that wasn\u2019t actually reality,\u201d Crossland told the meeting.\u00a0<\/span><\/p>\n

The discontent is nothing new for the company. Thermal Energy was started by Thomas Hinke, CEO until his dismissal in 2005 after being accused of violating security regulations and withholding material information from company executives and the board. That led to a lawsuit settled in 2011. The dysfunction in the management resulted in losses year-after-year. <\/span><\/p>\n

In 2009, Thermal Energy revamped its staff, replacing numerous existing management and board members. The result has been steady growth since. <\/span><\/p>\n

\u201cOver the long term, since 2009, which is really when this board and this managing team came in, we\u2019ve grown the company,\u201d Crossland said.<\/span><\/p>\n

Marketing outside Canada<\/h3>\n

Thermal Energy has an annual compounded growth rate of 18 per cent since 2009\u2014 tripling in size. Part of the growth can be attributed to foreign marketing as opposed focusing on sales at home.<\/span><\/p>\n

\u201cCanada has not been a good market for us,\u201d Crossland said. \u201cUntil about a year ago it hasn\u2019t had an interest.\u201d <\/span><\/p>\n

Crossland said key areas to focus on for future growth, include the mid-western U.S., the Caribbean and Germany. <\/span><\/p>\n

Julia Flynn, chief financial officer, said foreign investments in the United Kingdom also benefited Thermal Energy this past year. This was because of the weakening pound sterling compared to the Canadian dollar following the late June Brexit referendum.\u00a0<\/span><\/p>\n

However, not all the overseas ventures have been a success. In 2012, Thermal Energy attempted to tap into the Chinese petrochemical market, supporting Cyheat Energy Technology Inc. The project was backed by the Canadian government, as it received funding from the ISTP, a funding agency providing money for product development in multiple countries. <\/span><\/p>\n

Robert Triebe, chief operating officer at Thermal Energy, said the company developed and designed the products and the Chinese partners, Cyheat Energy, hosted the system. However, the deal never panned out. <\/span><\/p>\n

\u201cUnfortunately the company we were connected to; they\u2019re barely operating\u2026 So we\u2019re looking at bringing the system back here and testing it locally,\u201d Triebe said. <\/span><\/p>\n

Flynn said the most recent venture with China was a good investment because of the funding. However, China is not a prioritized market for the company, as it is focusing more on the home markets of North America and Europe. <\/span><\/p>\n

But government investments could also shape the future of the company. With the Liberal government under Justin Trudeau taking an active role to combat climate change, Triebe said he is optimistic this may increase Thermal\u2019s sales.<\/span><\/p>\n

\u201cIf there\u2019s a significant amount contributed to the project by the government, the project has not just a slightly better chance of going forward\u2014it almost makes the project go forward,\u201d he said. \u201cSo if the Trudeau government starts announcing incentives to contribute to energy efficiency, yeah, we should see a substantial business.\u201d\u00a0<\/span><\/p>\n

Few competitors<\/h3>\n

However, energy efficiency is currently at risk with president elect, Donald Trump stating he will pull the U.S. out of the Paris climate agreement, a United Nations Framework Convention on Climate Change to cut down emissions by 2020. Crossland said he isn\u2019t worried as he believes individuals will do their part. <\/span><\/p>\n

\u201cWhether it\u2019s China to improve the air quality, India to control some of the severe weather, everyone has their own self-interests to battle climate change,\u201d he said.\u00a0<\/span><\/p>\n

When questioned about competition in the market, Crossland explained there are few competitors in the field of heat recovery. The main challenge is convincing customers to invest. <\/span><\/p>\n

\u201cGenerally most of the business we do, we don\u2019t compete with anybody,\u201d Crossland said. <\/span><\/p>\n

One company mentioned by a shareholder was International Wastewater Systems, however, Crossland said it specializes in wastewater heat recovery, whereas Thermal Energy focuses on steam. <\/span><\/p>\n

Despite the recent year\u2019s success, Thermal Energy\u2019s revenue has fluctuated over the past six years. Through that there has been steady growth, with zero debt and a decreased reliance on mega deals\u2014orders worth more than $2 million in revenue, which at one time kept the company afloat. <\/span><\/p>\n

Not all shareholders were pessimistic. Filice believes the direction of the economy means investments in clean technology will pay off. <\/span><\/p>\n

\u201cAs of right now, the company is significantly undervalued so for it to take off at any point would be a given,\u201d he said. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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