Lydall CEO expects demand boom for filtration material used in N95 masks and indoor systems beyond the pandemic

Lydall CEO Sara Greenstein on Friday told CNBC’s Jim Cramer that the company is working with the Biden White House to help replenish the national stockpile of personal protection equipment, and she expects demand for specialty filtration products to be greater beyond the pandemic.

The Manchester, Connecticut-based company makes specialty filtration material that is used in N95 respirators and surgical masks, items that are especially critical for health-care and frontline workers during a health crisis.

Greenstein said in a “Mad Money” interview that President Joe Biden’s administration is “actively pursuing efforts” to build a strategic stockpile.

As part of his first actions after taking office last month, President Joe Biden invoked the Defense Production Act to bolster supply chains for PPE to refill U.S. inventories. Lydall last summer received a $13.5 million federal contract under the previous administration to increase domestic production of meltblown air filtration media, a fabric component in N95 respirators that’s made to shield germs.

The company expanded capacity to meet demand for materials, with one line up and running at full production and sold out “for the foreseeable future,” Greenstein said. Two more lines are expected to be up and running by the third quarter, she said.

The increased production allows Lydall to make enough material for 140 million N95 masks each month, up from about 21 million per month roughly a year ago. The company has said the U.S. will need about 2 billion respirators per year. Demand for surgical masks and other consumer masks are expected to remain elevated beyond the pandemic.

“We fully anticipate that national stockpiles around the globe, including here in the U.S., will need to rebuild and replenish, which is why we expect strong demand for well-made PPE through at least the end of 2022,” Greenstein said.

Lydall is also a supplier of thermal and acoustical products, including for buildings and auto end markets. The $622 million company, which has been around for 150 years, reported $764 million of revenue in 2020, a nearly 9% decline from the year prior.

Making supplies for PPE has been Lydall’s main focus the past year, but indoor and outdoor air quality products will be a big driver of business post-pandemic, as it was prior to Covid-19.

Specialty filtration is an important component for the expanding indoor air quality market and a shift to higher efficiency filtration is only expected to accelerate if new and stricter standards are put in place around the world, Greenstein said.

As companies bring employees back into the office, it will create an estimated $3 billion market alone, Greenstein said, adding that another $15 billion market will emerge as buildings are brought up to new codes going into place.

“The demand for higher-performing specialty filtration solutions will dwarf the demand that we’re seeing today for PPE,” she said.

Prior to the coronavirus pandemic, Lydall’s revenues grew double digits in 2017 and 2018 before rising 6.6% to $837.40 million in 2019. The company reported net income of more than $70 million the past two years, though it was posting net income of at least $20 million going back to 2014.

Lydall shares rose 4% Friday to $34.83 at the close. The stock is up 16% through the first two months of the year, extending its gains after rising 46% last year.