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As the coal industry and environmentalists butt heads over regulating America's most abundant energy supply, Calgon Carbon's reliance on the much maligned material has transformed the Robinson concern into one of Western Pennsylvania's most prosperous companies.
Activated carbon -- made by baking coal and used to remove impurities from water, air and industrial processes -- accounted for 85 percent of Calgon Carbon's $400.3 million in sales last year. The company reported 2008 profits of $38.4 million, more than double the previous year.
The recession has impeded growth, at least temporarily, according to Chairman, President and CEO John S. Stanik.
He said the municipal drinking water unit, which accounts for about 23 percent of Calgon Carbon's business, has felt the biggest impact as strapped government water agencies delay purchases of activated carbon. Wastewater treatment, which accounts for about 20 percent of business, also has been affected as manufacturers who cut production generate less wastewater.
Ill effects from the recession have been offset by stronger pricing stemming from tariffs slapped on activated carbon imports from China in 2006. While the company's first half profits fell 48 percent to $12.1 million, or 21 cents per diluted share, sales dropped less than 3 percent to $193.7 million.
When the company posts third-quarter results late this month, analysts expect earnings of 13 cents per share on revenue of $102 million.
"We have weathered the storm better than many companies," said Mr. Stanik, 56. "We're hopeful that the third and fourth quarters will be stronger year-over-year than the first and second quarters."
His optimism is based on what he describes as five major opportunities: removing mercury from coal-fired power plant emissions; using ultraviolet light to remove cryptosporidium and other pathogens from water; removing cancer-causing agents formed when chemicals bond with chlorine used to treat drinking water; recycling or "reactivating" carbon, allowing customers to reuse the company's core product; and carbon cloth used to protect military personnel from biological, chemical and radiological warfare.
"We are in a game-changing situation right now," Mr. Stanik said.
How fast these markets develop depends on the regulatory climate, where Mr. Stanik said decisions typically take longer than expected. That poses the risk that Calgon Carbon and its competitors -- including Mead/Westvaco and Siemens Water Technologies -- will invest capital prematurely.
"I believe we've learned over many years not to do that," said Mr. Stanik, who joined Calgon Carbon in 1991 and was named president and CEO in 2003.
PDFThe mercury removal market is a case in point. Federal standards issued by the U.S. Environmental Protection Agency in 2006 would have required U.S. coal-fired power plants to purchase 750 million pounds of activated carbon annually, Mr. Stanik said. Current U.S. demand for the purifying agent is 550 million pounds annually, he said.
But the standards were thrown out last year by a federal appeals court. Mr. Stanik says 16 states are moving ahead on their own, including 14 that will implement mercury removal requirements next year. Once implemented, the mandates will create demand for 160 million to 170 million pounds annually, increasing the current U.S. market by nearly a third, Mr. Stanik said.
Since May, Calgon Carbon has won $35 million in mercury removal contracts from Midwest power plants.
In Pennsylvania, which has more than 30 coal-fired power plants, state mercury emission rules were successfully challenged in court by Allentown-based PPL Corp. The state Department of Environmental Protection is appealing the January ruling by Commonwealth Court Judge Dan Pellegrini.
Mr. Stanik said more than 100 nations hope to reach a global pact on mercury by 2013. "If something like that happened, it would be an incredible, overwhelming opportunity," he added.
To meet anticipated demand, Calgon Carbon restarted a production line at a Catlettsburg, Ky., plant that will provide an additional 70 million pounds of activated carbon each year. Another expansion of the same magnitude is possible, Mr. Stanik said.
"Beyond that, we'll have to go to a brownfield or greenfield facility. We are doing the engineering right now to determine what that plant will look like," he said.
Overseas, China is in the early stages of a five-year effort to purify drinking water, an initiative that would increase annual demand for activated carbon in that country by 350 million to 400 million pounds, Calgon Carbon estimates. The global downturn prompted the company to idle a carbon production plant in China in May. Mr. Stanik expects production to resume by early next year.
Throughout the recession, Calgon Carbon's work force has held steady at about 950. In addition to its Robinson headquarters, the company has production, research and warehouse facilities in the region. It also has plants in Europe, Japan and China.
At a company where employees average more than 20 years of tenure, Mr. Stanik said his 18 years of service puts him "on the young side of things." A native of Harwick, he graduated from Springdale High and earned a bachelor's degree in chemical engineering from Carnegie Mellon University. He worked for Davey McGee, PPG Industries and Dravo before joining Calgon Carbon.
He was promoted after the previous chairman, president and CEO James A. Cederna left to pursue other interests. Mr. Cederna's major initiative was trying to find ways to use activated carbon, which is used primarily in industrial processes, in consumer products. Nine years after the initiative was launched, sales of the consumer products unit fell 25 percent last year to $10.7 million, accounting for less than 3 percent of sales.
"We've had difficulty growing it because of the difficulty for a small company in commercializing these kinds of things," Mr. Stanik said.
The unit has one product with potential: carbon cloth used in respirators for fire and rescue personnel. Calgon has adapted it for military use and has made sales of protective clothing using it to the European military market, Mr. Stanik said. But it will take time to make significant inroads in the U.S. market, he cautioned.
When Mr. Stanik took over, he initiated a comprehensive review of operations. Unwanted units were shed as the company recommitted to expanding its reach in its traditional markets.
"We wanted to get back to the technological innovation and problem solving the company had become known for," he said.
Calgon Carbon's prosperity in recent years -- it was the region's top-performing stock over the two years ended Dec. 31 -- contrasts sharply with its prior performance. A decade ago, directors hired an investment banker to find a buyer for the company, then canceled the sale and eliminated 10 percent of its work force. Further cuts were instituted by Mr. Cederna.
"Everybody here is expected to work hard," Mr. Stanik said. "We push. We are very focused on executing and moving forward."
Len Boselovic can be reached at lboselovic@post-gazette.com or 412-263-1941.
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