Peerless Manufacturing: Like None Other

May.28.08 | About: PMFG, Inc. (PMFG)
In my relentless search for under-the-radar green companies that are actually making money, I came across a 70-year-old company that has been finding more and more users and uses for its filtering and separating technologies. Peerless Manufacturing (NASDAQ:PMFG), based in Dallas, operates in two divisions, a Separation/Filtration Systems segment, and an Environmental Systems segment.
Peerless’ flagship product is its selective catalytic reduction [SCR] system for industrial boilers, which it has dubbed the Green Machine. Industries that use industrial boilers are facing more and more stringent air pollution regulations, and the Green Machine helps them meet their NOx (Nitrogen oxides) emission standards.
Nitrogen oxides are a byproduct spewed into the atmosphere in significant concentrations from several industrial chemical processes. NOx is considered a strong greenhouse gas and according to some reports has a global warming potential 310 times higher than carbon dioxide. In the Clean Development Mechanism countries under the Kyoto Protocol, NOx reduction projects can be used to generate tradable carbon credits.
Peerless’ Green Machine can be integrated into existing boiler controls and provides NOX reductions of 95% or higher, transforming the noxious NOx byproducts into benign components of nitrogen and oxygen.
In March, the company announced that its Environmental Systems segment had been awarded three projects, for a combined value of $5.5 million. The first order was for the design of a turnkey exhaust system at a refinery project in California; the second involves the design and supply of an SCR system with high NOx reduction efficiency at a refinery project in Texas. The third is for the design and supply of SCR equipment for two combined-cycle plants to be located in Texas.

Another aspect of the company that drew my attention was the role Peerless products play in the growing LNG (liquefied natural gas) industry. Peerless products are used at several stages in the liquefaction and refrigeration process of LNG: it makes gas scrubbers, filter/separators, and mist extractors. In LNG plants where gas turbines are used, they make fuel gas conditioning systems.
Peerless’ earnings report for Q3 fiscal 2008 indicates how fast demand for their products is growing. Revenues for the three months ended March 31, 2008, were $32.5 million, an increase of $12.3 million, or 60.7 percent, compared to the same period last year. The company recorded net earnings of $2.8 million, or $.43 per diluted share in the current quarter, compared to net earnings of $982,000 or $0.15 per diluted share for the equivalent period last year. While both segments showed strong growth, the Environmental Systems segment had the biggest increase, of 70.8%, over the previous year.
As air pollution standards become stricter, and demand for LNG as a fuel increases in the future, Peerless, with a world-wide footprint already established in multiple industries and applications, should benefit.
Disclaimer: I have a long position in PMFG