Calgon Carbon Corporation
) has landed a contract with the city of Scottsdale, Arizona, to
offer its reactivation services for granular activated carbon (GAC)
used as drinking water treatment. The value of the ten-year
contract will be based on the amount of reactivated carbon spent
annually, which is expected to be around 6 million pounds.
Scottsdale uses GAC to remove organic compounds from the water,
which reduces the formation of potentially harmful byproducts. This
is in compliance with the U.S. Environmental Protection Agency's
(EPA) Stage 2 Disinfectants and Disinfection Byproducts rule which
defines the maximum levels at which disinfection byproducts are
allowed to be present in drinking water. The city, which has been
using reactivated GAC for many years, expects to realize meaningful
savings from the Calgon Carbon contract.
The Scottsdale contract represents the second ten-year reactivation
services contract for Calgon Carbon in Arizona in 2012. The
company, in March, inked a contract with the city of Phoenix.
Calgon Carbon is setting up a reactivation facility in Gila Bend,
Arizona, to support the requirements of these cities. The facility,
which is expected to come on line in 2013, will have a reactivation
capacity of roughly 25 million pounds a year.
Calgon Carbon's strategic initiatives position it for significant
growth in the longer term. The company's reactivation facilities
have remarkably supported its growth and have established its
presence in several markets. The global demand for reactivation
services is expected to climb as regulations for water quality
strengthen around the world.
Calgon Carbon has also reduced its exposure to rising coal costs
by identifying new sources of supply and a variety of coals that
are effective in the manufacturing of its high quality products.
CALGON CARBON (CCC): Free Stock Analysis Report
MEADWESTVACO CP (MWV): Free Stock Analysis
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While healthy sales gains and strategic initiatives adopted by the
company are expected to usher in benefits in the longer term, we
remain concerned about the economic challenges that the company
might face this year.
Calgon Carbon, which competes with
) among others, currently retains a Zacks #2 Rank, which translates
into a short-term (1 to 3 months) Buy rating. We have a long-term
Neutral recommendation on the stock.