Wahlco Environmental Systems Posts $1.1-Million Quarter Loss

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Wahlco Environmental Systems, citing a slowdown in pollution control equipment orders and greater operating costs from recent acquisitions, said Friday it lost $1.1 million in the first quarter, even though its revenue rose 36%.

The manufacturer's loss, which amounted to 6 cents a share, contrasted with a profit of $899,000, or 5 cents a share, for the same period a year earlier. Revenue for the Irvine-based company rose to $21.5 million from $15.8 million.

Sales of Wahlco's flue-gas conditioning equipment grew 40% last year after Congress passed tough new amendments to the Clean Air Act. The equipment costs between $1 million and $3 million, much less than other systems that utilities have used to remove particles from emissions.

Still, orders have slowed recently because the new federal standards have stimulated competition. Utilities now have more options to consider, including less expensive pollution control systems, said Mark Matheson, an analyst with Cruttenden & Co. in Irvine.

"Some of these utilities are probably saying: 'Hey, we have to have a comprehensive program and not just buy what comes at us?' " Matheson said.

"You probably have some significant confusion out there," he said. "There is a proliferation of (competitors) even though most of them are probably smoke and mirrors. In the long run, that could help Wahlco."

Wahlco recently took steps to capture the low end of the market. Earlier this week, the company announced that it will buy the technologies and assets of Field Services Associates Inc. of Shelton, Conn., which has similar patented equipment that costs less than Wahlco's.

Even with the quarterly loss, "we remain confident that our products and services are strategically positioned for future growth," company President Henry Huta said in a statement.

During the quarter, Wahlco's expenses rose by $3 million because of several recent acquisitions of European firms, as well as additional investment in sales and marketing. More than half of Wahlco's sales are outside the United States.

Matheson expressed hope that the acquisitions "will come together and they will have some synergistic cost-cutting."

The company's stock, traded on the New York Stock Exchange, has fallen from a high of nearly $15 a share to $7 recently.

San Diego Gas & Electric Co. owns 80% of Wahlco's stock. The rest of the shares are traded publicly.

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