Increasing Refinery Capacity

Graham's (GHM), one of our top stock picks, recent earnings report gives a good indication of the potential growth in the build out and enhancement of refineries and refining capacity worldwide. In addition, as refiners continue to rack up profits, one can only expect that these companies will spend more cash on refinery capacity upgrades and enhancements. All in all, these trends will continue to benefit Graham's bottom-line leading to solid gains in the stock price.

William C. Johnson, President and CEO of Graham Corporation commented, "The sales potential for our condenser and ejector systems is significant and reflects expansions and facility enhancements in oil refineries and petrochemical production plants worldwide. Based on industry-wide backlog trends of engineering and procurement contractors, which manage refinery and petrochemical projects, as well as industry growth expectations indicated by the record number of shipyard orders for large crude oil and other oceanic vessels, we anticipate market demand could be sustained for several years. Based on our review of industry publications, we believe that there are over 100 global refinery and petrochemical projects planned for development over the next five years."

Mr. Johnson added, "Our strategy for growth is to maximize the opportunities of the current cycle and to increase our market share in the Asian and Middle East regions. We believe our core competence is in our ability to engineer vacuum systems and see the potential to expand this expertise in Asia. The growth of Asia and the Middle East regions provide excellent opportunities for Graham."

From the company's 10Q:

Increased ejector sales were primarily a result of oil refinery revamping and expansion activities. The latter activity is largely due to the growing utilization of “sour” crude oil (as opposed to “sweet” crude oil) as the core raw material for refinery processes and compliance with new regulations related to clean fuels and capacity additions. The need to increase capacity in the petrochemical sector is being driven by greater worldwide demand for and consumption of oil and natural gas by-products.