CECO Environmental is a global leader in the highly fragmented air pollution control market, with many well recognized brands. As an integrated set of 16 different companies, CECO can provide an end-to-end solution for even the most-complex process-driven air pollution issues. We view the company’s capability to provide complete solutions as its chief competitive advantage over other industry participants, many of which provide a narrower scope of products or services to only one or two specific end-markets.
Over the last few years, the consolidated company (CECO and Met-Pro) has reported a low- to midsingle-digit organic revenue growth rate (accounting for intentionally discontinued business). Future growth drivers include an increasingly stringent regulatory environment, further expansion of business in China, growing exposure to the natural gas industry, and a more-sophisticated sales strategy. We expect these drivers to support mid- to high-single-digit organic revenue growth, in line with the average growth rate expected for the overall air pollution control industry. Management expects acquisitions to add four to five points to the growth rate annually.
The recent acquisition of Met-Pro increased CECO’s revenue base by nearly 70% and enhanced the company’s capabilities in emissions control, product recovery, and filtration; it also added high-margin fluid-handling products to the portfolio. We believe many investors underestimate the benefits associated with this acquisition, including cost synergies and cross-selling opportunities.
CECO Chief Executive Officer Jeff Lang has 30 years of experience in industrial and energy-related industries. When he joined the company in 2010, Mr. Lang implemented an “operational excellence” program by focusing on margin enhancement and exiting noncore businesses. This program has had a dramatic impact on EBITDA margins. Mr. Lang’s focus has now shifted toward a sales excellence program, in an effort to boost organic revenue growth and aftermarket product sales.
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