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John S. Stanik, the chairman, president and chief executive officer of Calgon Carbon Corporation (CCC - Analyst Report) has decided to hang up his boots after 21 years of service. Mr. Stanik cited personal reasons for his retirement but he will remain in his current positions until his successor takes over. Calgon Carbon’s Board plans to appoint a new CEO by the end of the third quarter this year.

The next person to head the company will have a challenging task of keeping costs under control, a problem Calgon Carbon faced in the first quarter this year. He or she will also need to sustain the top-line growth achieved by the company in the previous quarter.

Calgon Carbon’s revenues jumped roughly 10% from the prior-year quarter to $136.6 million in the first quarter of 2012. The bump in revenues was driven by improved demand for activated carbon product and services, increased sales of ballast water treatment systems and ion exchange equipment.

Revenues from equipment sales and consumer products displayed massive growth, jumping almost 77% and 37%, respectively. The company has identified these segments as its revenue drivers. The person who takes over from Mr. Stanik will thus have Calgon Carbon’s growth drivers laid out.

However, the challenge comes in the form of escalating costs. Calgon Carbon’s gross margin shrunk to 31.3% in the first quarter from 33.3% in the year-ago period. The company had to contend with higher plant maintenance expenses, unfavorable mix and raw material inflation in the first quarter.

Moreover, the company might see more challenges thrown its way due to a potentially worsening economic situation. Calgon Carbon is focusing on improving its margins and Mr. Stanik’s replacement will have to address the issue of rising costs if the company is to achieve its target.

The company sprung a positive earnings surprise of 16.67% in the most recent quarter, posting earnings of 14 cents a share as against the Zacks Consensus Estimate of 12 cents. However, its performance has not been reflected in the share price, with Calgon Carbon’s stock losing approximately 11% of its value since the turn of the New Year.

In addition, the stock trades perilously close to its 52-week low. Hence, the next person to lead the company will have the task of steering it through its cost problems and deliver value to shareholders.

We currently have a long-term Neutral recommendation on Calgon Carbon. The company, which competes with MeadWestvaco Corporation (MWV - Analyst Report), holds a Zacks #3 Rank, which translates into a short-term Hold rating.

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