During the mid-1980s, the U.S. market for Monitor Technologies' air-pollution monitoring equipment deteriorated so severely that the San Diego-based company was forced to actively pursue foreign sales in Europe and the Middle East.
But prospects for U.S. sales during the 1990s picked up dramatically last week when the Bush Administration carried through on a campaign pledge by promising to enact new environmental legislation.
If the Bush Administration's environmental initiative results in tougher pollution controls, then Monitor will be "a company with the right product at the right price at the right time," according to Larry Selwitz an industry analyst with Newport Beach-based Cruttenden & Co.
Waiting for Controls
Bush's promise to address acid rain and the growing problem of urban pollutants that create smog was good news for Monitor, according to Irving Katz, director of research for Thomas Green/San Diego Securities. "Monitor has always been waiting" for increased pollution control spending to occur, Katz said. "It looks like finally it's going to happen."
But despite Bush's promise to institute stricter pollution controls, foreign sales will, for the foreseeable future, continue to generate a majority of Monitor's revenue during coming years. Europe and the Far East accounted for nearly 80% of Monitor's $11.1 million in 1988 revenue.
The worldwide market for pollution-monitoring equipment hit about $450 million during 1988, according to the McIlvaine Co., a Chicago-based company. However, the market will grow to $700 million by 1993, with more than 50% of the monitoring market occuring in foreign countries.
The Bush Administration's environmental message--if it results in new environmental legislation--will benefit Monitor and its competitors, according to Robert McIlvaine, who tracks environmental spending. Bush's proposed acid rain controls, for example, "will mean (the addition of) a substantial amount of monitoring equipment."
Monitor won't experience "a big spurt in revenue" because of increased global concern about pollution, but it will "enjoy good consistent growth in the 10% to 15% range," Selwitz said.
Monitor reported $282,366 in net income and $3.2 million in revenue for the first quarter ended March 31. It reported $253,221 in net income and $3.2 million in revenue for the like quarter a year earlier. However, last year's first quarter net income was bolstered by a $70,752 extraordinary item.
Monitor's stock, which just months ago traded as low as $4, closed down 37.5 cents on Monday at $7.375. The company's stock recently hit a 52-week high of $8.125.
Mercury Asset Management Group Ltd., a British investment company, recently acquired a 5.2% stake in Monitor. The British company bought 95,000 shares between May 2 and May 9 at prices ranging from $4.87 to $5.38, according to a Securities and Exchange Commission filing. The purchases were made as an investment, and Mercury might acquire additional shares, according to the filing.
Monitor Chairman and Chief Executive Kenneth E. Years on Monday suggested that Mercury's investment was part of the growing, worldwide awareness that mankind cannot continue to ignore environmental problems.
To Years, that growing awareness was underscored by British Prime Minister Margaret Thatcher's recent statement that environmental affairs are one of the "great challenges" of the coming decade. That statement was a bold departure for Thatcher, who has largely ignored environmental affairs during her eight years in office, Years said.
But Years described Thatcher's newly found environmental awareness as only the first level of a three-tier process that must be completed before the English market for Monitor's automated pollution-monitoring equipment expands.
"The rhetoric has to be there," Years said, "But, as important, laws have to be passed and then those laws have to be enforced."
Consequently, while Years welcomed Thatcher's environmental fervor, he doesn't expect the British market to grow until laws are passed and British regulators force companies to spend money on cleaning up the environment.
Analysts tend to agree with Years' analysis. "There is a growing awareness of acid rain, the greenhouse effect and depletion of the ozone layer," Selwitz said. "But Monitor's dilemma over the past few years has been that the funding just hasn't been available to do the monitoring and clean-up."
Monitor is tracking the three-tiered environmental process in other countries.
In Germany--one of Monitor's most important markets--politicians moved beyond rhetoric several years ago when they passed strict laws that call for monitoring equipment to be installed on some 10,000 industrial smokestacks. But Germany's environmental agency has not yet begun to enforce those environmental regulations, in large part because they would make German products more expensive than those in neighboring countries where pollution controls are not yet mandated.
In Taiwan, however, government officials are committed to enforcing the country's strict pollution-control measures. The Taiwanese government has mandated that spending for environmental controls equal 2% of the country's gross national product.
The lapel pin that Years wears underscores the importance of Taiwan to Monitor: The colorful pin bears the symbol of Taiwan's environmental affairs agency, which recently was elevated to a cabinet-level position. "It's happening in Taiwan," Years said. "It's not just rhetoric."
Monitor's dependence upon foreign sales was not an accidental development.
The U.S. market for environmental monitoring equipment was "largely dormant" during the Reagan Administration, according to Paul F. Stenberg, Monitor's air-quality market manager. That sales lull was caused by the "hands-off" policy that the Reagan Administration adopted when it came to increased regulation of business.
Additionally, U.S. companies--including the utilities and petrochemical companies that buy the bulk of pollution-control equipment--simply didn't build a lot of new plants during the past decade.
Consequently, Monitor turned to other nations that were beginning to adopt stricter environmental controls.
Monitor has largely recovered from an aborted entry into the automated visual inspection equipment industry. Monitor in 1985 envisioned the automated inspection market as a way to augment its flagging pollution-monitor business.
However, in August, 1986, Monitor discontinued the automation business, and it since has recorded a $2.2-million provision to cover costs of disposing of the inspection product line. The division was dissolved in 1988.
"We've become strong again," Years said Monday. "We've kept our nose to the grindstone."