OTTAWA — January 2010 — If they’ve done it before, they’ll do it again, but for now executives at Thermal Energy International Inc. are steering the company away from the unknown.

“The strategy is just to be very focused on what we’ve done and where the low risk is,” said Bill Crossland, Thermal’s president and chief executive officer.
That means working in familiar markets with customers Thermal has dealt with in the past, and applying products only in ways that have been proven to work — no experimenting.

This is part of the Ottawa-based technology firm’s last-ditch plan to reduce costs, boost sales and keep the company afloat.

Thermal designs industrial systems that recover wasted energy and control greenhouse gas emissions. It operates internationally with a subsidiary in the United Kingdom, a joint venture in China and projects across North America.
Despite scoring lucrative contracts at home and abroad over the past several years, the company can’t seem to pull its sales above its costs.

Thermal reported a 23 per cent jump in sales for its 2010 first quarter ended Aug. 31, up to $1.3 million compared to $1.1 million a year ago — but it wasn’t enough to turn a profit. Losses rang in at $570, 530, just 7.3 per cent less than last year’s $616,086 loss in the same quarter.

Thermal’s deficit at the end of the quarter was a whopping $24 million. The company’s shares are currently trading at seven cents per share.

Cutting costs

Late last year it looked like Thermal was poised to take off after securing $15 million in equity financing from investors and acquiring Gardner Energy Management (GEM), a successful UK-based company that markets a highly-efficient steam trap.

Then along came the recession and a drop in oil prices, which grounded the demand for Thermal’s products in the manufacturing sector.

Now that economic conditions are improving, the company is reducing its operating costs and chasing opportunities presented by stimulus packages targeted at the green centre.

Thermal has also appointed a new globally-focused management team and is marketing GEM and other products under the Thermal Energy banner, in North America, Europe and Asia.

Now it’s focusing on sales instead of science.

“For a long time this company was involved in a lot of research and development, which is all very good, but we’ve got good products now. They’ve got a lot of successful applications,” said Crossland.

“We’ve got to figure out where it works well and then do it again.”

The downside to an emerging market

Cutting research and development, however, could lead to trouble for Thermal as the market for green technology grows.

Ian Lee, professor of strategic management and international business at Carleton University, said there’s always a danger — especially in the emerging green manufacturing sector — that other companies will develop new technologies that “leapfrog” Thermal’s products.

“The reality is that if you’ve been losing money steadily then you don’t have a lot of strategic options,” Lee said.

Thermal’s financial track record could also pose problems for the company as it attempts to sell its products.

“Whenever you’re buying a complex product where there’s a lot of after-sales support you want to know that the company is going to remain in business and be around to service that technology,” said Lee.

Even so, Crossland says the company’s shaky financial history hasn’t been a problem for potential customers in the past.

“If they believe in the product and we can convince them that the product works they’re not really as concerned about how financially viable we are, they just want the product.”
Crossland said Thermal’s steam trap, in particular, is a product that doesn’t need aftercare.

“It’s a low maintenance, last forever type product,” Crossland said. “So if they buy that steam trap from us it will last 20 years and they don’t really need us ever again.”

Thermal has offered energy-saving products since the early 1990s that technology experts say will be in incredible demand in the near future.

“Thermal Energy was and is a company ahead of its time,” said Carmi Levy, an independent technology analyst based in London, Ontario.

The time is not quite now, Levy said, but it’s coming.

“During a recession that has deferentially battered the manufacturing industry, there aren’t a whole lot of companies out there that can afford this kind of technology or are willing to make that kind of bet when they’re simultaneously losing huge amounts of money and laying off countless employees,” he said.

And even before the recession hit, Levy said, green investment didn’t resonate with manufacturers because energy prices weren’t through the roof.

No one doubts the technology

“But in the post-recession manufacturing business environment, companies will be looking far more aggressively for opportunities to save money on operations.”
Levy believes they’ll turn to green technologies to save on energy costs and to prepare for future international carbon-reduction agreements. He said Thermal is finally reaching the point where the world actually cares significantly about what it’s offering.

“What they need to do is position themselves at the forefront of this new green wave,” he said.

“They need to message prospective customers on why they are market leaders in this area,” Levy said.

“For as much business difficulty as the company has had through its history, no one doubts that they’ve created excellent technology.”

He said the post-recession demand for energy-saving solutions is something that the company, if it plays its cards right, will be able to convert into market momentum.

“But clearly it needs to get on that green wave and it needs to ride it for all it can.”
Crossland and the Thermal team are readying for the wave by keeping costs low and marketing efforts in high gear.