Bennett Environmental Inc. , a onetime stock market darling that shrank almost into oblivion, has shown signs of life thanks to a huge soil cleanup contract that is boosting profit - at least for now.
The company reported a profit of $8.9-million in the quarter ended Sept. 30, by far its best result in years. The numbers, released late on Tuesday, propelled the stock to a 38-per-cent gain yesterday, moving it above $1 for the first time in almost three years.
The key to quarterly sales of $10.9-million (up from a mere $16,000 in the year-earlier period) was a contract to clean more than 78,000 tonnes of PCB-laced soil from a storage site near London, Ont.
The contaminated soil, mainly the result of production at an old Westinghouse transformer plant near Pottersburg Creek that closed in the 1970s, is being treated at Bennett's plant in Saint-Ambroise, Que.
Bennett operates its plant intermittently - only when it has enough soil stockpiled to run it for a reasonable period of time. But the Pottersburg Creek contract has kept it going full tilt since the summer, and there's enough material to process for the plant to continue running at least until April.
Bennett Environmental's plant is in Saint-Ambroise, about 30 kilometres northwest of Chicoutimi in the Saguenay region of Quebec. The plant uses a high-temperature incinerator to destroy dangerous chemicals in large batches of soil.
The device consists of a main combustion chamber that vaporizes organic molecules from the soil. That gas is mixed with air and fuel in a second chamber, where even higher temperatures of more than 1,000 degrees prompt an oxidization process that results in decomposition of the material.
The system, which can handle up to 10 tonnes of material an hour, can destroy PCBs, pesticides, dioxins and furans.
It's a big change from the downhill spiral Bennett was facing a few years ago, when business dried up and many thought the company would not survive.
The company was the brainchild of British-born engineer John Bennett, who used his knowledge of oil spill cleanups to create a high-tech incinerator to decontaminate dirt.
In the early years of this decade, Bennett seemed poised to become a huge player as governments and industries across North America moved to clean up old contaminated sites.
But the company, whose stock peaked at more than $28 a share in early 2004, staggered after Mr. Bennett was caught up in a regulatory scandal.
In 2003, Mr. Bennett and the company had unveiled a potentially huge soil cleanup contract in New Jersey. But as uncertainties and disputes over the contract sprouted in the next few months, the company failed to disclose them. When, in July, 2004, it revealed that the contract was not as lucrative as originally suggested, its stock price plunged.
The Ontario Securities Commission and the U.S. Securities and Exchange Commission investigated, and there was a series of settlements and penalties for the company and its executives. Mr. Bennett left, and new management took over under the watchful eye of a large investor, Second City Capital Partners of Vancouver. Second City now holds about 27 per cent of the stock.
The company shrank sharply as some of its operations were sold off, cleanup contracts failed to materialize, and the stock price fell as low as 10 cents.
The positive trajectory Bennett now appears to be following is not just a result of the Pottersburg Creek contract, insists chief executive officer Jack Shaw. He and his team have been working for years to rescue the company by slashing costs and turning it into a lean operation, he said.
Given Bennett's past problems with disclosure of potential business, Mr. Shaw is loath to make predictions about prospects beyond the Pottersburg Creek contract. "We are continuing to aggressively seek opportunities," is all he would say, adding that Bennett could benefit from new federal regulations that force companies to destroy PCB material now in storage. The company is also looking for ways to diversify in the "clean technology space" Mr. Shaw said, although he declined to be more specific.
No analysts currently follow Bennett, although one who has tracked it in the past says the company can generate strong cash flow, and be very profitable, when it is actually processing material at its plant.
The success of the Pottersburg Creek contract is clearly boosting the stock price at the moment, the analyst said, but the crucial issue "is whether there will be future contracts like this one, to replace it when it is done."
Mr. Shaw said he is not overly concerned about the stock price in the short term, as it has proven to be very volatile in the past. "Our stock, being a small cap with a very ugly history, behaves more irrationally than some others," he said.
Yesterday's close $1.26, up 35¢
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