By JASON BOOTH
Staff Reporter
Dames & Moore Group was once focused mainly on cleaning up the toxic messes created by heavy industry. But the 60-year-old engineering firm is changing its ways.
“It was clear to us that the environmental business was plateauing,” said Art Darrow, Dames & Moore’s chief executive. “So we clearly had to move into other areas in order to grow.”
Slowdown in the environmental engineering business caused earnings to stagnate through most of the 1990s.
Between 1994 and 1997, earnings per share hovered between 91 cents and 98 cents despite a 76 percent increase in revenues.
As a result, the company’s stock has remained weak. Last week, it was trading at about $14, compared with its offer price of $20 when the company went public in April 1992.
Recently released results, however, show some improvement.
Net income for the three months ended March 27 was $4.3 million (24 cents per share), compared with $1.9 million (10 cents) for the like period a year earlier. Revenues were $180.9 million, up from $167.1 million.
In order to reduce its dependence on the environmental engineering business, Dames & Moore has been on a buying spree in recent years, snapping up engineering firms that specialize in other fields.
Its latest purchase is Austin, Texas-based Radian International LLC, a manufacturer of industrial “scrubbers” that remove the toxins from the fumes released by factories. The $117 million deal is expected to be completed in the next couple of months.
“It’s a very significant acquisition for several reasons,” said Paul Zofnass, president of New York investment consulting firm Environmental Financial Consulting Group.
With the Radian acquisition, revenues will increase to the $1 billion level, up from $370 million in 1994. Zofnass said the increased revenue will help the company stay competitive.
“One year ago, of the 20 or so environmental engineering firms in the U.S., only five had revenues over $1 billion,” said Zofnass. “Today, only four are under a billion.”
The Radian acquisition also will help broaden Dames & Moore’s product line. While the market for scrubbers like the kind Radian makes flattened out in the United States, there is a growing demand overseas, Darrow said.
“With global warming and international agreements on air pollution, industries all over the world are paying more attention to air quality,” Darrow said.
Another area benefited by the acquisition is chemical management. Dames & Moore will design a chemical delivery system for clients in the petrochemical, pharmaceutical and manufacturing sectors. Once the system is built, Dames & Moore will procure, deliver and store the chemicals needed for the client company. Once the chemicals are used, it will then remove and dispose of the chemical waste.
In recent years, the company has become more active in the planning of major infrastructure projects. It managed the design and construction of the Metro Green Line rail system, linking Norwalk and El Segundo.
The company has also jumped into the demolition business with the purchase of L.A.-based Cleveland Demolition Co.
While Dames & Moore has offices in 29 countries, the impact of the Asian economic crisis has been limited, said Darrow. That’s largely because East Asia accounts for only around 5 percent of the company’s revenues, he said. Most of the company’s overseas projects are currently in Europe, where the economy remains robust.
“The bad news is that everything (in Asia) is in a go-slow mode. So a lot of major projects have been slowed down.”
