FARMINGDALE, N.Y., Sept. 18, 2014 /PRNewswire/ -- Cemtrex Inc.
announced today that Saagar Govil, Chairman and CEO, has issued the
following letter to the company's shareholders:
September 18, 2014
To the Shareholders of Cemtrex Inc.,
It has been quite a busy year to say the least. This letter is a
bit unorthodox with respect to its timing however we believed that
due to recent developments in our business over the last year it
was important for shareholders to attain a narrative from
management regarding Cemtrex's operations and future plans. From
March to July of this year alone we had a 25% increase in the
number of shareholders of the company. Naturally we felt that
waiting for a letter in January after our annual report was issued
would cause an unnecessary amount of speculation on the part of our
shareholders as to what your management's plans are. In the future
on an annual basis, including at the end of this fiscal year, we
will be sure to accompany our annual report with a letter from
management.
We have now completed three quarters during our latest fiscal
year. Our book value (unaudited) is presently $2,286,000 up from $94,000 in 2012 when current management took
control of the operation resulting in a CAGR of 190%. Our earnings
per share over the last 9 months have been $.05 while our average earnings per share over
the last three years were about $.02.
As many of you are aware Cemtrex recently acquired all the
assets of the ROB Group of companies in October 2013 (this fiscal year, our fiscal year
ends September 30th). In
my 2012 letter I mentioned that we were actively pursuing
acquisition opportunities to grow the company in new areas. We have
been in the environmental technologies and monitoring business for
the past several years. However our ability to create sustainable
growth was often hindered by environmental regulations that were
postponed which were of no control of our own. When industry cries
out that regulations will increase costs and reduce jobs many times
these regulations are kicked down the road. This often resulted in
our goals and objectives not being met in the past. As a result our
plan was to diversify our capital allocation into new areas which
could complement our on-going activities. We believe we can operate
from a position of strength when we have two independent sources of
earnings potential than be solely exposed to the conditions of one
industry.
Our primary criteria were to find businesses we understood and
ones that we felt were available at an attractive price. We spent
close to two years looking for the right opportunity and
subsequently settled on the ROB Group, located near Stuttgart, Germany. The ROB Group was acquired
at approximately $5.6M, half of its
book value at the time and doing approximately $30M in sales in the calendar year of 2013. We
were able to do this deal on extremely favorable terms with low
interest rates and zero dilution. This type of financing for a
company of our size is highly unusual and thus represented a key
factor in us going ahead with the deal. In the future we may not be
so fortunate with the terms to get a deal done, but your management
is careful to structure any terms that could potentially be toxic
to us in the future. We would rather pass on a potentially great
company than take such a risk.
You may be wondering how we were able to acquire such a big
company for a low price. This company was in an insolvency
situation due to a customer defaulting on a large amount of
receivables. Moving forward we now ensure that all orders and
receivables are insured by a major insurer to protect ourselves
from this occurring again. The insolvency situation is now in the
company's history and we have been operating at a profit so far
this year. This is also unusual for companies in an insolvency
situation and you can thank the strong management of Frank
Bittighofer and his team for this success. The team at our EMS
operation is a group of honest and hardworking individuals and it
has been a pleasure to work with them to put the company back on a
path to success. We have a considerable amount of confidence in
their ability to continue growing this operation back to its
previous heights of $60M in revenue
in 2010 and beyond.
Cemtrex now has two distinct operations: Electronics
Manufacturing Services (EMS) & Environmental Products &
Systems (EPS). Our total sales during the first nine months of this
fiscal year was $33,966,686 compared
to $11,138,665 over the same period a
year ago representing an increase of 205%. This was primarily
attributed to the acquisition however our environmental products
& systems division experienced sales growth as well.
We remain cautiously optimistic with regards to our EPS
operations. For our domestic operations we have a sound product
portfolio serving industries that we feel are growing. We have seen
growth in our monitoring and instrumentation sales this year and
think this trend will continue. New Mercury regulations for the
power and cement industry provide us with confidence that the
growth will continue into 2015. Meanwhile domestic industrial dust
filtration systems has demonstrated mixed results; We have seen
stagnation in some industries however we are seeing new demand
related to both the cement market and in oil and gas partially due
to the activity in the fracking market. Regarding our international
business, our feeling is that there remains strong demand in
emerging markets, particularly Asia and the Middle
East. However geopolitical events can influence how this
market plays out and there are many reasons to be guarded at the
moment.
Acquisitions
We believe in both organic and inorganic growth. We naturally
treasure organic growth when it is achievable. Industrial and
manufacturing businesses often require significant capital
investments to achieve above average organic growth. As a result we
prefer to broaden our perspective when it comes to each dollar we
invest in our operations. While we are confident that within the
industries in which we operate each dollar invested will yield
strong organic growth our objective is to grow as quickly as
possible. In our opinion utilizing this dollar to buy another
business instead of trying to push more organic growth can be
equally beneficial or better in certain instances when you buy the
right company at the right price. We feel that the ROB Group
acquisition is a perfect example of this.
In short our goal is to grow swiftly while maximizing our return
on equity for our shareholders. As a result we are satisfied with
either organic or inorganic growth. We are public for this reason.
Often times we see microcap companies that seem to float along year
after year with no strategic purpose. In our opinion if you are a
microcap company and you choose to remain public, you had better be
aggressive and take advantage of the public market. I'd like to
emphasize the point however that for us growth is growth, however
it comes. We are not a "one mouse-trap" company and nor do we have
any desire to be one. As a result our organic growth may vary year
to year but we strive for strong consistent average organic growth
of 15% annually. Ultimately, as long as every dollar retained and
used by the company is creating at least a dollar of market value
above market rate than we are doing a satisfactory job. It will not
matter whether this value is organic or inorganic.
Earlier this year we announced that we entered into a Letter of
Intent to acquire a wastewater treatment and biogas technology
company. This company is similar to our existing EPS operation in
terms of the nature of the business and we feel it would add
significant value. This deal has not yet been consummated and we
will make the appropriate announcements as progress is made.
With respect to the companies we are looking for we are
primarily focused on acquisitions that will complement our existing
operations well. We are presently trying to find companies that can
add additional strategic or competitive value to either operation.
However should a new opportunity present itself in a technology
industry we like, understand, and see potential in, it is
possible we may pursue it. We prefer businesses with 1) favorable
long term economic characteristics; 2) attractive purchase price
when being viewed from private ownership; 3) operations in
markets and industries we feel we understand; and 4) readily
apparent methods for us as owners to help facilitate higher growth
and profitability.
In general our present philosophy is to have a controlling stake
in any acquisition we make. While we are aware of the fact that we
are not experts in any business we acquire we prefer having the
ability to select the management team and influence the direction
of the business particularly with respect to the use of cash. We
regularly pursue companies that are in distressed situations.
However we acknowledge that we are not miracle workers and that
there should be significant conviction on our part to justify
getting into a turnaround situation. We understand that this is a
tremendously difficult task and will only pursue these
opportunities when we are satisfied with the potential risks.
Miscellaneous
We are currently trading Over-The-Counter and we realize that
this can hinder our visibility to many investment communities and
deter a large swathe of institutional funds from investing in us
that would be available to us if we were on a major exchange.
However, we are confident that when we are approximately doubled
from present size with respect to either revenue or earnings it
will make sense to undertake steps for an up-listing.
We will do our best in being straightforward in these letters to
you when reporting on our business activity, focusing more on the
facts and our philosophies rather than any speculation as to our
prospects or providing lofty projections. We would prefer the
results speak for themselves and create a track record of doing
what we say we are going to do. We know that you have more
than 13,000 companies you can choose to invest your money in and we
have to compete for your money the same as anyone. Often times the
CEO and Board of Directors of public companies own a small fraction
of the company and as a result corporate actions are not always in
tune with rewarding the shareholders. In our case with over 70% of
Cemtrex's stock in management's hands, we treat your money as if it
is ours, because as you can see we have a lot of skin in the
game.
As always please feel free to email investors@cemtrex.com or
call the company for any questions you may have. Sometimes we
cannot always be as candid as we would prefer in our responses due
to disclosure policies but we will continue to make a best effort
in updating shareholders about our on-going activities to avoid
undue speculation.
It is an exciting time for our company and we are eager to
continue building on our recent progress.
Sincerely,
Saagar Govil
Chairman & CEO
About Cemtrex, Inc.
Cemtrex, Inc. (OTC: CTEI) is a diversified technology company
that provides a wide array of solutions to meet today's industrial
challenges. Cemtrex, through its wholly owned subsidiaries provides
electronic manufacturing services of custom engineered printed
circuit board assemblies, emission monitors & instruments for
industrial processes, and environmental control & air
filtration systems for industries & utilities.
www.cemtrex.com
Safe Harbor Statement
This press release contains forward-looking statements. Actual
results could differ materially from those projected in the
forward-looking statements as a result of a number of risks and
uncertainties. Statements made herein are as of the date of this
press release and should not be relied upon as of any subsequent
date.
For further information, please contact:
Saagar Govil
Cemtrex, Inc.
Phone: 631-756-9116
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SOURCE Cemtrex