CUI Global sees plenty of catalysts for growth

Power and electro-mechanical components specialist CUI Global Inc (NASDAQ:CUI) sees plenty of growth catalysts on the horizon.

William Clough, president and chief executive officer of CUI Global, said the electronics industry is in the early stages of a up-cycle that should feed through the markets CUI serves.

The company’s first quarter performance was a mixed bag, with strong sales growth on the power electro-mechanical (P&EM) side offset by lower order-flow on the energy side.

P&EM revenue increased by around 5% year-on-year, but not enough to prevent group revenue sliding to US$17.8mln from US$20.7mln.

The group’s strong presence in the UK meant the top line was hit by the collapse of sterling following last June’s decision by the United Kingdom to exit the European Union.

On the plus side, the P&EM arm’s order backlog at the end of March stood at a healthy US$19.6mln, while the Energy arm’s unaudited backlog was US$14.3mln.

Clough said the Energy division was laying the groundwork for greater adoption of CUI’s gas technology products.

“Business activity in this segment is increasing as prospective customers respond favorably to the value proposition of our GasPT product,” the CUI boss said.

Clough drew attention to recent regulatory changes by the power generation watchdog OFGEM in the UK that have expanded the addressable market for biomethane applications.

“Key reference customers, such as Snam Rete and National Grid, are also helping us to drive more widespread adoption of our gas technology solutions. These and other developments are contributing to an expanding pipeline of opportunities and evidences the gas industry’s growing acknowledgment of our GasPT product as a direct replacement to legacy gas chromatograph technology,” Clough said.

The sales cycles are long, Clough cautioned, but he assured shareholders “we are working hard to convert more of these opportunities into contract awards in 2017.”

Meanwhile, the P&EM business continues to generate steady operating cash flow that helps fund the business development in the Energy division.

“To increase our operating cash flow, we are undertaking a number of initiatives to improve manufacturing productivity and reduce operating expenses. We are also exploring various balance sheet initiatives that can supplement our credit availability. These measures are intended to ensure that we have the financial flexibility to capture the opportunities before us today and execute our growth strategy,” Clough revealed.

The group ended the quarter with cash and cash equivalents of US$3.0mln, down from US$4.7mln at the end of 2016.

The net loss of US$4.9mln was equivalent to 18 cents a share, versus a loss the year before of US$2.7mln, or 13 cents a share.

The consolidated net loss was primarily the result of lower revenue in the Energy segment related to lower sales of gas related metering, monitoring and control systems, including GasPT, lower gross profit margins, and the ongoing amortization of intangible assets related to the Orbital Gas Systems Limited and CUI-Canada acquisitions.

Shares in CUI were down eight cents at US$3.99 in lunchtime trading.

Story by ProactiveInvestors