Company

Carmanah sells road sign unit

Thursday, February 12, 2009

Carmanah Technologies has sold its illuminated road sign business to Alabama-based Temple Inc., saying it wants to continue to focus on solar-powered LED lighting.

The sale comes hard on the heels of Carmanah's massive restructuring last summer, which involved cutting its workforce by 40 per cent, closing its Saanich manufacturing plant and realigning its sales and distribution networks.

According to CEO Ted Lattimore, that restructuring plan was designed to allow the company to focus on solar-powered systems, and the recent sale simply takes it a step further.

In an interview, Lattimore said the company is determined to make innovation and performance in solar-powered LED lighting its "core and reason for being."

"When you do that, you look at the non-solar parts of our business and ask does that make sense long-term?" he said, noting the road-sign division was a profitable enterprise. "But if we are not going to invest in it, protect it and we're not going to focus on it, maybe what we're better to do is divest it and use the money for research and development for other parts of the business."

Carmanah has committed to spending about $6 million this year on research, and though Lattimore would not divulge a sale price, he said the sale would help defray some of those costs.

Salman Partners, one of the financial analysts that follows Carmanah, suggested the net proceeds of the sale would be less than $1 million, but called it a positive step. In its analysis, Salman Partners said the sale was consistent with Carmanah's commitment to narrow the product offering and refine the corporate focus back to its core, higher-margin product lines.

Under the agreement, Temple, which has been in the traffic-control business for 56 years, gets all product inventory, associated marketing material, and customer and vendor lists. Carmanah will assist with the manufacturing and sales-support functions through a 90-day transition period.

On the ground at Carmanah, the sale means two employees who worked on art and graphics within the division will be out of a job.

The job losses are slight as the production of the signs was already being outsourced.

"Having said that, in the last three months, we've hired 12 engineers, two sales people, one of them a manager in Paris and a new marketing person, so in this economic crisis we are a big employer," said Lattimore, who remains bullish about Carmanah's future.

"We certainly like what we've got -- we are almost exclusively strategically based now," he said, referring to the focus on its core business.

Lattimore, who noted there remain profitable, non-core divisions within the company, would not rule out further moves to streamline the company.

"We have a couple of tactical businesses which are contributors, but we are not expecting anything significant coming," he said.

Carmanah's share price (TSX:CMH) closed down a penny at 70 cents a share.