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Countries worldwide are gradually lifting lockdown restrictions. However, the battle against this pandemic is not over. Even as the growth in global cases continues to slow, infectious disease experts warn a resurgence of the coronavirus could occur in the fall.

The rapid spread of this novel coronavirus exposed deficiencies and vulnerabilities in health care systems, in particular the lack of an adequate supply of personal protective equipment for front-line workers.

Newmarket, Ont.-based AirBoss of America Corp., whose share price has skyrocketed nearly 60 per cent year-to-date, is a company that addresses these needs. AirBoss is a leading North American custom rubber compounder with products that serves the automotive, defence and first-responder markets through its three reporting segments – AirBoss Defense Group, rubber solutions and engineered products.

AirBoss is a turnaround story. On March 10, the company reported its 2019 year-end results with EBITDA (earnings before interest, taxes, depreciation and amortization) higher year-over-year, reversing a downturn that had been in place for several years. This positive earnings momentum remains on track with the Street forecasting EBITDA to climb to US$61-million in 2020, up from US$32-million reported in 2019.

Driving this growth is a recent contract win in response to the coronavirus crisis. On March 31, the company announced it had received an order from the U.S. Federal Emergency Management Agency for personal protective equipment, including 100,000 Powered Air Purifying Respirator systems for front-line workers along with 600,000 filters and accessories in a deal valued at more than US$96-million. With a roughly 100-day delivery schedule, shipments of the product are already well under way. This is a significant order. To put this in context, the consensus estimate for total sales in 2020 is US$423-million.

Additional contracts in this space could follow given that protective products are in high demand, keeping the company busy providing quotes to inbound calls. “Quite frankly, we haven’t had time to do any outward marketing,” chairman and chief executive Gren Schoch said in an interview. Mr. Schoch said he believes that multiple jurisdictions, from municipalities to countries, will require a stockpile of emergency supplies in the future. “I think if [the virus] did come back and governments didn’t have emergency stockpiles, they would be crucified.” The company also manufactures protective gloves, face shields, decontamination shelters and ISO-PODs, which enable contagious individuals to be isolated and transported without exposing health care workers to the coronavirus.

As well, the stock has a number of potential catalysts from its new defence products. Mr. Schoch highlighted the company’s gas mask, used mainly by the military but also by police forces, with the potential, he says, to generate a number of “very large" contracts. Another product that he believes has strong sales potential is a blast gauge. This product contains sensors worn by an individual that monitor a person’s exposure to shock waves, with the aim of preventing brain injuries and post-traumatic stress disorder. “We have been trialing this product for three years, principally with the U.S. military, where it’s in the last phase of a major testing program.” If a contract with the U.S. Department of Defence is struck, this could represent “a very large recurring business” for the company.

However, investors should note that patience may be needed as contract wins take time to be reached and are not guaranteed.

A longer-term objective is to diversify the anti-vibration business within the engineered products business segment. Currently, the majority of these components are used in trucks, SUVs and minivans. Management targets a 50/50 revenue split between automotive and non-automotive within four years by expanding into sectors such as agriculture, construction and mining.

In addition to earnings growth, the company offers investors a stable dividend. While a lot of companies are cutting or suspending their dividends in order to conserve cash during this pandemic, Mr. Schoch said that the company has no plans to change its dividend policy given its conservative balance sheet and growing EBITDA. AirBoss pays its shareholders a quarterly dividend of seven cents a share, yielding just less than 2 per cent.

The company is expected to report its first-quarter financial results after the market closes on May 13 and will be holding its annual general meeting the following day.

Mr. Schoch is a seasoned businessman. He was the founder of Petromet Resources Ltd., which was sold to Talisman Energy Inc. in 2001. He also co-founded another energy company, Aurora Oil & Gas Ltd., which was sold to Baytex Energy Corp. in 2014. When asked about his exit strategy for AirBoss, a company he founded in 1989, he remarked, “Well, I am not looking to exit yet. I don’t believe in selling companies that have large growth opportunities ahead of them.”

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