Carmanah CEO sees brighter times for solar demand

By Susan Taylor

OTTAWA (Reuters) - The recession will end, the chief executive of Canadian solar equipment maker Carmanah Technologies Corp likes to say, and the bright light at the end of the tunnel is solar powered.

But the timing of that recovery remains murky, and customers are delaying orders for the solar lights, solar power and solar grid-tie systems Carmanah makes for industrial use.

"Customers are being very cautious, so nobody has canceled any orders and they have not told us they won't be ordering," CEO Ted Lattimore said in an interview.

"As they get their own financial gardens in a row...they're being very careful with when they actually make a purchase. So, if they can delay something, they are doing that."

Carmanah, which slimmed down dramatically before the economy and the stock market sank, recently reported flat first-quarter sales of its key strategic solar products, breaking a 5-year streak of 30 percent growth.

It cut its forecast for full-year sales to C$50 million from a range of C$55 million to C$60 million, reflecting the sale of its roadway sign business, Lattimore said.

The company is still waiting for government stimulus spending on green projects to boost sales and help reverse 2008's painful conditions, when a credit crunch and global recession hurt sector demand.

Punished in the past for disappointing investors, Carmanah's stock has fallen to 85 Canadian cents on the Toronto Stock Exchange, more than 75 percent down from a March 2006 high of C$4.19.

"We remain optimistic that the company should be able to get back on track with its organic revenue growth by next year," Salman Partners analyst Mike Plaster said in a report after the firm's first-quarter results.

But he said there are risks to his forecasts if the economy remains weak for an extended period of time. Plaster has a "buy" recommendation on Carmanah and a target price of C$1.30 a share.

BLOATED FROM ACQUISITIONS

Lattimore, a former telecom executive, has stripped down Carmanah since he took the company over October 2007, complaining it was bloated from too many acquisitions.

"Carmanah was an acquirer from 2003 to 2005 and it actually created most of the problems that the company got into. We spent a good year restructuring," he said.

Lattimore sold some divisions, closed a factory and outsourced work to contract manufacturer Flextronics, He also shuttered warehouses and offices, cut costs and reduced staff to 150 from about 265.

Today the Victoria, British Columbia-based company is debt free, with C$9 million in cash. It plans to spend C$6 million on research and development this year.