Company

Solar LEDs power up Carmanah sales

Monday, August 10, 2009

Carmanah Technologies Corp. has lit up the parking lot at NASA and now aims to light up streets all over the world with its foray into solar-powered LED street lighting.

And with billions of street lights scattered all over the globe and government infrastructure stimulus expected to come through, early signs of wider sales are positive.

Ted Lattimore, Carmanah chief executive, said the company's strategic sales jumped 20% in the second quarter from a year earlier, largely the result of the introduction of its EverGEN outdoor lighting, a product that attracted the attention of NASA.

"We've never seen anything like that before," Mr. Lattimore said regarding the increase. "That's a brand new product for us that is creating a heck of a lot of sales."

The move into street lighting opens a $1-billion global market for the Victoria-based company, which also develops solar-powered LED products for the niche marine, aviation and hazard markets.

Rupert Merer, an analyst at National Bank Financial, said Carmanah's new direction was a sensible strategic move.

"If they can bring this technology down to a cost point, then it opens up the parking lot and street lighting markets and it could be a big home run. I think that's what really underlies our 'outperform' target on this stock," he said.

The company posted a $1-million loss in the second quarter Monday, up from a loss of $400,000 a year earlier, mostly on the back of foreign exchange losses as the loonie rose 9% in the quarter.

Mr. Merer said the results, which were in line with expectations, showed the company's balance sheet remained in good health.

Carmanah holds no debt and almost doubled its cash holdings to $10.2-million compared with a year earlier.

Overall sales were at $9.3-million, down $6.4-million from the previous year, largely due to the discontinuation of some low-margin products. However, strategic sales, which include the new product line, jumped almost 20% to $7.3-million.

Carmanah shares slid closed Monday at 83¢, down 4¢ on the TSX.

Sara Elford, a strategist at Canaccord Capital, said the rise in strategic revenue, gross margins and cash were all positive for the company.

"I expect overall growth to resume in 2010, as Carmanah starts to gain traction in outdoor general illumination," she said.

Since Mr. Lattimore became chief executive in 2007, the company has stripped away its less profitable, non-core businesses, such as solar panel distribution, to focus specifically on solar-powered LED lighting, an area that could hold great growth potential as governments around the world initiate infrastructure stimulus projects amid a push for cleaner and more energy-efficient development.

As a result, the company has stuck to its $6-million investment plan, which primarily aims at developing more efficient means of transferring solar power through to the LED lights, which need little energy to operate.

"Everytime we can improve this, we open up a bigger part of the globe," Mr. Lattimore said. A 10% increase in system performance equates to a 300% increase in the size of Carmanah's global market because it allows products to be effective in areas with lower sunlight density.

Its research has already begun to pay off with the slated release of a more efficient EverGEN product set for release in the first quarter of next year.