Business News | Jul 30, 2010

Carmanah Updates Strategic Renewal

Victoria, British Columbia, Canada as part of the previously announced strategic renewal process designed to return the Company to sustained and profitable growth, solar-technology provider Carmanah Technologies Corporation today announced a restructuring of its operations to focus on its sales activities, while continuing to further reduce expenses and improve efficiency and increase EBITDA (Earnings before Interest, Income Taxes, Depreciation & Amortization) results.

"The initiative announced today will enable Carmanah to better serve its customers across its key markets, while improving operational efficiency, controlling costs, and focusing resources on key revenue-producing activities. Management continues to take a measured approach to our business in this year of our transition. The restructuring should allow us to maintain revenues at approximately $60 million and provide a positive EBITDA before restructuring costs in 2008, as stated in earlier guidance. Overall our metrics will improve as we move forward, as a result of the strategic lighting business becoming a bigger portion of the future revenue mix," said Ted Lattimore, CEO of Carmanah Technologies Corporation.

Specifically, the Company is further narrowing its focus onto its strategic businesses by announcing the following actions:

A. Outsourcing Manufacturing to Flextronics International Ltd.

  • To help maximize the efficiency of its supply chain while providing a flexible infrastructure for scalable growth, Carmanah has partnered with electronics manufacturing services provider Flextronics International Ltd. Through this arrangement, the Company will outsource production of its solar technology products to Flextronics’ manufacturing facilities, with access to additional assembly and distribution points around the world. As a worldwide provider of manufacturing services with facilities established in each of Carmanah's key regions, Flextronics provides the infrastructure and economies of scale that can help support and drive growth on a global level.

B. Exit of Tactical Distribution Business

  • To further consolidate operations, the Company will close its US solar component distribution business and California warehouse by September 2008, as well as its Calgary, Alberta office and warehouse by October 2008. Administrative functions from the California and Calgary locations will be moved to the Company's headquarters in Victoria, BC.

C. Move to a More Efficient Regional Geographic Sales Model

  • To increase the efficiency of its sales organization and improve customer service, Carmanah has restructured its global sales force from a vertical-specific format to a regional geographic model. A more versatile regional sales model is expected to create new opportunities for Carmanah sales representatives and customers by making all Carmanah products accessible to all complementary markets. With the new model, each sales representative can now represent the full range of Carmanah products, and cross-sell from suitable product lines to customers across a range of industries.

D. Simplifying and Reducing the Cost of the Organizational Structure

  • Carmanah will also streamline its organizational structure, reducing staff across various departments including the executive team, operations, marketing, and general and administrative departments.
  • The transition to outsourced manufacturing initiated several months ago will be completed over the next six months, resulting in the closure of the Company's Victoria, BC-based "Enterprise" manufacturing facility by February 2009.
  • With the implementation of these initiatives, the Company's employee population is expected to decline by approximately 40% by early 2009 as a result of workforce reductions and attrition. The majority of these reductions, which relate to the production outsourcing initiative, will be started by July 1st, with final reductions, which have already been planned and communicated for required staff involved in the transition of the Victoria, BC manufacturing, Calgary, Alberta, and California facilities, carried out by December 31st.

Based on this restructuring, a provision of approximately $3 million is expected to be charged to earnings over the next several quarters with about half estimated to be recorded in the quarter ended June 30, 2008. This one-time charge includes a $2 million write down of assets and a provision of $1 million for cash payments relating to employee, facility and lease-termination costs.

Carmanah's management believes that based on the successful implementation of these initiatives:

  • there will be no adverse effect on current cash balances from the termination costs;
  • inventory balances will be reduced by a further $6 million by mid 2009;
  • revenues in 2009 will increase by 20% over 2008 adjusted annual projections, taking into account as if this restructuring had taken place at the beginning of 2008 and increase a further 25% in 2010 over 2009 levels;
  • gross margin will be in the 35 – 37 % range;
  • operating expenses will be further reduced by more than $2 million annually starting in 2009;
  • EBITDA will be in the 10% of revenues range in 2009 and 2010.

"This transition, while difficult, is essential to Carmanah becoming a more efficient Company," said Lattimore. "Carmanah has come a long way in recent months — the Company has solidified the Balance Sheet, and achieved a return to profitability in Q1 2008," said Lattimore. "To maintain this positive trend and ensure the long-term success of the Company, we need to adapt to the realities of our competitive global marketplace – we can do this as a more agile and responsive business, by focusing on our core strengths, keeping costs low, and increasing the scalability and efficiency of our supply chain."

For more information on Carmanah Technologies Corporation, visit