2003 Annual Report - Enerflex

InternationalInternationally, we face the same competitors as in North America. Most significant North American productionequipment and compression fabricators pursue international business. International contacts developed by Pressonand Mactronic over the past ten years have increased the Company’s exposure to international opportunities.Through our Australian subsidiary, Gas Drive Systems, expansion into Indonesia, and the acquisition of LandréRuhaak in late 2001, Enerflex has become a significant player in the international service market.Enerflex is not actively pursuing leasing business outside of North America.Business risksWhile demand for Enerflex’s product and services is largely a function of supply, demand and price of natural gas,many other factors can affect the fortunes of the business either positively or negatively. Enerflex encourages allinvestors to read and be aware of business risks and the Company’s response to them.PersonnelQualified and motivated personnel are critical to the success of our businesses. There are few barriers to entry ina number of our businesses, so retention of staff is essential.Markets and operationsEnergy prices affect Enerflex, as the majority of our customers generate cash flow from both crude oil and naturalgas. The prices for these commodities are determined by supply, demand, government regulations relating tonatural gas production and processing, and international political events. In common with commodity prices, themarket for capital goods required by our customers is both cyclical and, at times, highly volatile.Foreign exchangeEnerflex, a Canadian company, is exposed to foreign exchange risk when it buys or sells goods or services in foreigncurrencies. The company manages most of this inherent risk through a variety of contractual means, but currencyrisk cannot be eliminated entirely. Enerflex has material foreign subsidiaries in Australia, the Netherlands and theUnited States, which expose the Company to changes in the exchange rates for the Australian dollar, Euro, and U.S.dollar, respectively.The cyclical nature of the energy industryEnerflex is structured to be profitable in both high and low periods of the energy cycle. This is done through productbreadth, international diversification and access to a variety of equipment financing methods. Since becoming apublic company in 1993, Enerflex has generated positive cash flow even in challenging times.Enerflex 2003 Annual Report51