*This partner content was produced by the Financial Times on behalf of Citi Commercial Bank
There is no such thing in life as a sure bet. The same holds true in business, with companies that would seem destined for success often falling by the wayside – from retail groups misunderstanding cultural differences when they move into new regions to tech firms making the wrong call on product innovations. As the author Malcolm Gladwell says in Outliers, “Success is not a random act. It arises out of a predictable and powerful set of opportunities and circumstances.”
Concerned by climate change, investors are showing growing interest in sustainability-based investment opportunities. Many of the businesses helping to support the green economy prove that working towards what’s been dubbed the “triple bottom line” of profit, people and the planet doesn’t mean that you have to sacrifice profit in the pursuit of social and environmental goals. And as environmental, social and governance (ESG) concerns and requirements grow in importance due to increased public attention and scrutiny, there are significant opportunities for companies positioned to address them.
Meeting industry’s environmental challenges
One company that is helping organizations realize their environmental ambitions and, crucially, comply with increasingly stringent regulations, is CECO Environmental Corp. CECO is involved in the engineering, designing, fabricating and installing of systems and solutions that capture, clean and destroy airborne and waterborne contaminants from industrial facilities, as well as fluid handling, gas separation, emissions management and treatment and liquid filtration systems. In other words, they help to clean up the mess that industry creates.
There’s a famous saying, said to originate from Yorkshire, England, that asserts: “Where there’s muck, there’s brass.” Translation: there’s money to be made in tackling dirty or unpleasant jobs. And the continuing global expansion of CECO bears this out, because while many businesses may see ESG requirements as a challenge, they represent an opportunity for CECO.
“We provide solutions to customers to address those needs,” says Peter Johansson, SVP, Chief Strategy and Financial Officer, CECO Environmental. “Let’s face it, very few companies want to invest in pollution controls. Most companies realize the importance of doing so, but want to minimize the cost. So the challenge can be helping them to understand that there's true economic benefit to being a good steward of the environment and putting in the most sophisticated, highest-performing pollution or contamination controls that you can, because there are not only savings in the short run, but there's a long-term benefit to brand, a long-term benefit to your reputation as a company and also a long-term benefit to your relationship with your regulators.”
As a medium-sized company, CECO has seen strong global growth in recent years, driven in part by tighter environmental regulations placed on its customers, as well as closer scrutiny from other stakeholders of those customers’ businesses – but also by changing market trends in industrial operations. For example, Johansson points to the fact that many of CECO’s customers are now reinvesting in the manufacturing base of their respective countries whereas they previously saw globalization as an opportunity to outsource work to lower cost regions.
Return to the source
“You might call it reindustrialization or reshoring,” he explains. “We see it with one of our customers, which needs to process more metals in the US, rather than in countries that sit further from their main operations. Or another client that’s returning electronics production – such as semiconductors – to its US base. Consequently, we’re supporting the build-out of new capacity for customer operations that previously had no US manufacturing base, or had exited it. Shortening supply chains is also linked to this, which often requires investment in exhausted or ageing infrastructure. There are plenty of opportunities emerging where CECO can help with environmental solutions.”
And, as more and more of CECO’s customers require new environmental solutions globally, its business continues to grow, too. This continued international expansion prompted the company to prioritise working with a banking partner that shared its vision. Citi Commercial Bank became one of CECO’s lenders, helping to underwrite the brand’s revolver and term loan facility, and funding the firm’s development by providing growth capital. “Every time we work with Citi, it’s a positive experience,” says Johansson. “They have such a great footprint that they can support our global expansion and help us to pursue larger and larger projects.”
John Burke, Managing Director, Global Head of Business & Professional Services, Citi Commercial Bank, agrees that it’s Citi’s “boots on the ground” capabilities that help customers such as CECO overcome expansion challenges. “We have network banking teams around the world,” he says. “As your business expands into new countries, we have local colleagues that can support you, managing flows, risk, currency fluctuations, local practices, market nuances and more.”
Burke adds that Citi also supports CECO by advising on creative ways to grow its business, and points out that the two firms are a “great fit” for each other, as Citi has been engaging on sustainability and environmental initiatives for more than 20 years and is committed to net zero by 2050. “Citi is keen to work with and support mid-sized companies who play a key role in solving the world’s most pressing challenges and to assist them in capturing opportunities as they manage the transition to a more sustainable future,” says Burke.
“We’re proud to work with CECO,” he adds. “We are excited to see them continue on their growth trajectory and we want to be their global bank of choice to help build a seamless, successful expansion.” Three years ago, CECO’s annual revenue was approximately $310mn; in 2023 it is on track to exceed $525mn and, according to Johansson, they now believe they are “on a firm path to create sustained top-line and bottom-line growth targeting $600mn plus of revenue by 2025 with mid-teen EBITDA margins.”
“High-growth firms need access to high-quality finance,” he adds. “And with Citi on board, the opportunity to grow and create value is virtually unlimited for us as the focus on cleaner, more environmentally responsible industrial operations expands globally.”
All opinions expressed by the participants in this article are their own and do not necessarily represent the opinions of Citi Commercial Bank