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Graham takes Goldilocks approach

Graham Corp. is keen on its growth prospects, but it is not getting swept away.

The Batavia-based manufacturer entered its current fiscal year in April buoyed by its largest-ever backlog of orders, and forecasts its sales will rise 10 to 15 percent this year.

Graham, which makes products such as vacuum pumps, heat exchangers, ejector systems, sees positive signals from the booming oil refining and petrochemical industries that accounted for about two thirds of its total $65.8 million in sales last year.

James R. Lines, Graham's president and chief operating officer, said Thursday the company wants to take advantage of the surge in business while keeping its long-term expenses in check.

"We want to capitalize on the strong demand, but not saddle the business with a high fixed cost [so] that when the demand wanes, we have a higher fixed cost," Lines said, following Graham's annual meeting on Thursday. The company employs 265 full-time workers.

Graham officials during the meeting noted that just a few years ago, from 2000 to 2004, the company's markets were stuck in a slump. Business has picked up significantly since then, leading to 2007 fiscal year profits of $5.8 million, up 61 percent from the year before. Still, company leaders are cautious about how much they will expand production capacity.

Christopher Carosa, who runs the Bullfinch Funds' Greater Western New York Series mutual fund, which owns a small stake in Graham, said that measured approach to growth is appropriate.

"That's key they're mindful of that, because you never know when the price of oil is going down," Carosa said.

Graham should continue to benefit from higher oil prices worldwide, he said.

"The success of a company like Graham implies that the oil extruders in particular are investing capital to try to find more oil," he said.

Those projects create opportunities for companies such as Graham, he said, as well as additional opportunities in the future to service those facilities.

Lines said Graham outsourced about 13 percent of its production hours last year, and he expects a similar figure this year. Meanwhile, the company has taken steps to increase its efficiency, to maximize in-house production, he said.

"Because there's so much demand for what we build, we're trying to satisfy as many customers as we can," he said. "But in general, there is more demand than we have capacity."

Exports account for about 50 percent of its business, thanks to projects in places such as Asia and the Middle East. Lines expects that percentage of exports to remain steady for the next couple of years, but he said five or 10 years from now, exports could be 60 or 70 percent of its business.

Graham's stock closed at $27.13 per share on Thursday on the American Stock Exchange, down 97 cents.


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