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Calgon Carbon Wins Water Contract

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Calgon Carbon Corporation announced that it has won a contract worth $12.4 million from the Los Angeles Department of Water and Power (LADWP), the second largest water provider in the U.S. Per the contract, the company will supply Sentinel ultraviolet disinfection systems (UV) systems for the Los Angeles Aqueduct Filtration Plant (LAAFP) and the Los Angeles Reservoir (LAR).

According to the contract, 14 Sentinel Chevron ultraviolet reactors and other equipment is set to be deployed at the Los Angeles Aqueduct Filtration Plant and 15 Sentinel UV Systems at the Los Angeles Reservoir. The Sentinel Chevron reactors can disinfect as much as 600 million gallons of water a day without chemicals and the UV systems can disinfect 650 million gallons a day without chemicals.

With this project in place, LADWP customers will also be protected from water borne pathogens. The project will also ensure reduced usage of ozone and chlorine. This project is Calgon Carbon’s second big contract in California, following the San Francisco Public utility Commission’s Tesla treatment facility that opened last year.

A few weeks ago, Calgon Carbon released its third-quarter 2012 results. The company incurred a loss of $4.5 million or 8 cents a share in the quarter compared with a profit of $14.5 million or 25 cents a share a year ago. Excluding a restructuring charge of $8 million, the Pennsylvania-based pollution control company earned 6 cents a share in the quarter, which missed the Zacks Consensus Estimate of 12 cents.

Revenues dipped 5.6% year over year to $135.5 million, and missed the Zacks Consensus Estimate of $143.0 million. Currency translation had a negative impact of $3.2 million on sales, stemming from a stronger dollar.
Calgon Carbon remains confident in its ability to balance the need for future investment with its responsibility to provide short-term returns.

Despite some challenges, the company expects to continue to capitalize on its growth opportunities. The company’s healthy sales gains and strategic initiatives will be beneficial in the long term.

We, however, remain concerned about the economic challenges that the company might face in the remainder of 2012. Moreover, escalating costs remain a headwind.

Calgon Carbon, which competes with MeadWestvaco Corporation , retains a Zacks #4 Rank that translates to a short-term (1 to 3 months) Sell rating. We currently have a long-term (more than 6 months) Neutral recommendation on its shares.

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