No. 474

MARKETS

Navigating the New Market Route for High Performance Products and Services

The Industrial Internet of Wisdom (IIoW) will radically change the way high performance products are selected. The opportunities for higher margins and increased market share dictate a unique sales effort.

McIlvaine can provide the tools to help suppliers create the needed sales program.

High performance products are those whose quality justifies a price above the minimum specification. General performance products are sold based on price and service. There is no reason to conduct total cost of ownership analyses.

In the past it has been very difficult to analyze total cost of ownership of various high-performance product alternatives. As a result, high performance products have been sold the same way as the general performance products. The sea change is the new ability of the purchaser to determine the lowest total cost of ownership (TCO). With IIoT empowered by IIoW the corporate buyer will have the TCO for each of the alternatives and make his decisions accordingly. The main role of the sales group will be to make sure the buyer has an accurate TCO.

At companies such as BASF, Rio Tinto, Arcelor Mittal, and Duke Power IIoT and Remote Monitoring is enabling corporate specialists to analyze the performance of every valve, pump, filter, and turbine in the global fleet of plants. IIoW is in its infancy but as it grows it will provide not only the total cost of ownership but the guide to new and better products.

IIoW utilizes the data analytics provided by IIoT and provides the interconnection between end users, suppliers, and subject matter experts to create the TCOs and more importantly create new products with lower TCOs. The interconnections need to be as prolific in IIoW as in IIoT. They include 

• Supplier personnel in each product group and geography interconnecting with peers around each of the 1000 large purchasers of combust, flow and treat products and services (McIlvaine can identify the opportunity for each product for each of the 1000 purchasers)

•  Owner-operator personnel in each plant and in each role interconnecting around processes and products used in more than one of the plants (McIlvaine has a beta site for BHE Energy)

• All players interconnecting with each other in new ways

  • User controlled groups expanding scope to create decision systems and through digital technologies become international (Suppliers with lowest TCO can support and sponsor this activity)
  • Supplier controlled groups focused on total cost of ownership studies (Major HEPA filter competitors combining forces to provide TCO for gas turbine inlet filtration)
  • Associations expanding role to create decision systems and periodic webinars to integrate with annual meetings
  • Individual User programs for suppliers expanding to create IIoW (examples are AEP Bro Forum and the SABIC bi annual conference and exhibition)
    

•  Creation of Subject Matter Ultra Experts (SMUEs). Tomorrow’s experts will master the massive TCO data generated from IIoT. The SMUE will need to be very focused and to continually utilize and help create the decision systems around his specialty.  The suppliers of the high-performance products with the lowest TCO products will benefit from the SMUE validation of their claims.

IIoT is growing up but IIoW is in its infancy. Suppliers have the opportunity to grow along with it. McIlvaine has a program to help them do so. 

For more information contact Bob McIlvaine at rmcilvaine@mcilvainecompany.com or 847-784-0012, ext. 112.

Future of Dry Scrubbing

Here are excerpts on the future of dry scrubbing from the keynote speech by Bob McIlvaine at the DSUA meeting.

Dry scrubbing or semi-dry scrubbing involves technologies and components which are distinct from DSI or wet scrubbing. This technology is used in power, waste-to-energy, and other solid fuel combustion processes.

There is a lower reagent cost than with DSI but a higher reagent cost than with wet systems.  There is no requirement for wastewater treatment. SO₃ removal is higher than with wet systems. The challenge is to minimize lime consumption while at the same time minimizing corrosion and scaling. In the E-Alert we reported successes, such as at Logans Point and Carney, where optimization been achieved thanks to the knowledge of the operators, remote monitoring by Primex, software by OSIsoft and components such as the Fujikin Valve. In fact, this group of actors is contributing to the industry in a number of ways including “capless bags,” which eliminate some of the corrosion issues.

The knowledge, which was demonstrated at the conference, is unique. McIlvaine is talking to DSUA about ways to leverage that knowledge internationally. There were only a few international attendees. One was Joe Wang who heads up dry scrubber engineering for Longking, the Chinese company with 60 percent of the dry scrubber installations in China. There were also attendees from Toyobo in Japan, Thyssenkrupp from Brazil and Rio Tinto from Canada.  McIlvaine is proposing online webinars as a way to provide both continuity and an international reach.

The world market for dry scrubbing is growing robustly while the U.S. market is not. Here are some considerations relative to the future market in the U.S.

Regulatory Considerations 

·         EPA just rescinded its ruling requiring SCR at two PacifiCorp plants.

·         This same action is likely wherever the States have submitted plans to meet regional haze or other pollution reduction requirements and these plans have been rejected by EPA.

·         This means that the cost of operating solid fuel-fired plants in the U.S. will be lower and more predictable over the short term.

·         The less than 40 percent approval ratings for the administration make it at least possible that there will be a change in Congress and the Presidency in 2020.

·         Should a switch be made back to the present policies, it would take several years to impose new emission reduction rules and then require compliance. 

·         It could be 2023 before stricter rules are in place.

Operators therefore have at least six years of predictable operation at the present regulatory level.

Regulatory changes likely 

·         The science changes and regulations can change abruptly and unpredictably.

·         Acid rain was the concern driving the early scrubber installations.

·         In retrospect, the killing of some trees on mountain tops was offset by sulfur enrichment of soil for agriculture.

·         At the time no one understood the fact that SO₂ reacts with basic compounds to form very harmful sub-micron particles.

·         Today the perceived need is for SO₂ reduction to prevent PM_2.5.

·         The new ambient PM_2.5 standards make it very difficult for States to meet them without major SO₂ reductions.

·         When you do the math a ton of SO₂ can cause a whole city to exceed PM_2.5 ambient limits.

·         The question is whether States will really have to meet the limits or will they just be kicked down the road.

Regulations change economics 

• Many DSI installations were selected based on regulatory uncertainty and therefore total cost of ownership over a 3-5 year period.

•  As per the previous section, that operating window is now at least six years longer.

• The lime requirements for DSI are more than for semi-dry or wet scrubbing.

• A total cost of ownership comparison between DSI and other technologies becomes more unfavorable as the predicted life is extended.

• On the other hand, DSI has a unique role in SO₃ reduction in wet scrubbers and could be implemented for that reason.

• Operators have difficult decisions to make regarding the regulations and changes in technology, but they can now accurately predict the total cost of ownership options for the next six years.

Impact of future fuel price changes

·         With the lifting of LNG export restrictions, the price of natural gas will rise to the delivered price in Europe less regasification and shipping cost.

·         Improvements in fracking technology will continue to drive down the cost of oil and gas.

·         However, CO₂ has potential as a fracking fluid and will increasingly be used for enhanced oil recovery.

·         Solid fuel combustor operators near EOR sites have the potential for sale of CO₂.

·         Solid fuel combustor operators near CO₂ pipelines have the potential for CO₂ sales.

There are not likely to be new coal-fired power plants in the U.S. but waste-to-energy and biomass combustion offers a growth market. Improving the operations, including remote O&M at existing plants, is a big potential.

COMPANY NEWS

Thermax Profile

Thermax becoming truly International.

Thermax Ltd. may get a majority of its orders from foreign companies rather than domestic firms in the next 18 to 24 months, its Managing Director M. S. Unnikrishnan told BloombergQuint. 

• Over the last year, the Pune-based company received 49 percent of its projects from overseas, while 51 percent came from India. The scale should lean towards foreign orders, making Thermax predominantly a global supplier, he said in a telephone interview.

• The shift from domestic to global will also provide an opportunity to improve the company's margins. Thermax, however, is more focused on improving the company's topline while maintaining margin, Unnikrishnan said.

• After a slowdown in investment and orders in the capital goods sector in the last three-four years, the industry is now seeing some green shoots, that too from the non-traditional sectors. For example, Thermax is seeing investment “opening up” from the fertilizer sector which has been in a “non-investing mood” since the last eight years, Unnikrishnan said.

• The sentiment towards the steel industry may also improve, Unnikrishnan said, as balance sheets turn from “red to green,” prices start firming up and worries regarding their bad loans start getting taken care of.

• For the 1st quarter of Fiscal Year 2017-18, at the consolidated level, Thermax posted a revenue of Rs. 917 crore, 10.5 percent lower compared to Rs. 1025 crore in the corresponding quarter, last year. Profit after tax for the quarter was down 11.3 percent at Rs. 47 crore (Rs. 53 crore). Consolidated Net profit after company’s share of loss in Joint Ventures and Associate Company stood at Rs. 40 crore (Rs. 49 crore), down by 18.4 percent.

• As of June 30, 2017, Thermax Group had an order balance of Rs. 4944 crore (Rs.4040 crore) up 22.4 percent. Order booking for the quarter, at the consolidated level, was Rs. 1919 crore, up 134.9 percent compared to Rs. 817 crore, last year. (These figures don’t include those of the joint venture companies.) The reduction in revenues is because of the lower order carry forward at the start of FY 2017-18. The improved order balance position is on account of a single large order booked during the quarter from an African business conglomerate. Thermax continues to grapple with the challenges in the core sectors of the domestic economy and the sluggish growth in the overseas markets in which the Group operates. On a standalone basis, Thermax posted a total revenue of Rs.756 core during the quarter, 9.6 percent lower compared to Rs. 836 crore in the previous year. Profit after tax for the quarter was Rs. 32.4 crore, down 28.3 percent from last year’s Rs.45.2 crore. Order balance on June 30, 2017 stood at Rs. 4530 crore (Rs.3653 crore), up 24 percent. Order booking for the quarter improved to Rs.1742 crore (Rs.698 crore), up 149.6 percent.

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Donaldson’s Fourth Quarter Sales Increased 11.2 Percent, Full-year Sales Increased 6.8 Percent

Donaldson Company Inc. announced fiscal 2017 4^th quarter net earnings of $68.2 million and full-year net earnings of $232.8 million, compared with $59.5 million and $190.8 million, respectively, in fiscal 2016. The 4^th quarter 2017 GAAP earnings per share (EPS)1 increased 15.9 percent to $0.51 from $0.44 last year, and full-year GAAP EPS increased 22.5 percent to $1.74 from $1.42 in 2016.

“Sales remained strong through our 4^th quarter, and benefits from our strategic initiatives combined with improving market conditions in our Engine segment drove a meaningful increase in full-year sales and earnings,” said Tod Carpenter, President and Chief Executive Officer. “

“As we turn to fiscal 2018, we expect the recovery in engine-related end markets to continue, whereas industrial markets are likely to remain uncertain. Although the economic environment is still mixed, we plan to deliver strong earnings growth while also investing in technology development, capacity expansion and customer engagement. We are committed to building on the momentum from 2017, and I am con confident that executing our fiscal 2018 priorities will create long-term value for our stakeholders.”

The 4^th quarter 2017 sales increased 11.2 percent to $660.1 million from $593.8 million last year, reflecting increases in the Engine Products and Industrial Products segments of 17.8 percent and 0.4 percent, respectively.

Fiscal 2017 sales increased 6.8 percent to $2.37 billion from $2.22 billion in 2016. Excluding the negative impact from foreign currency translation, fiscal 2017 sales increased 7.2 percent, reflecting an increase of 11.6 percent in sales of Engine Products, partially offset by a 0.2 percent decline in Industrial Products.

Donaldson expects fiscal 2018 GAAP EPS between $1.79 and $1.93, compared with fiscal 2017 GAAP EPS of $1.74 and adjusted EPS of $1.69.

The company expects full-year 2018 sales will increase between 4 percent and 8 percent from 2017, including approximately 2 percent related to a favorable impact from currency translation and benefits from the acquisitions completed during fiscal 2017.

Sales of Engine Products are expected to increase 6 percent to 10 percent from 2017, reflecting growing sales of Aftermarket, Off-Road and On-Road, partially offset by declining sales of Aerospace and Defense. Fiscal 2018 Industrial Products segment sales are expected to be in the range between flat and up 4 percent from the prior year, reflecting growth in Industrial Filtration Solutions, flat sales of Special Applications and declining sales of Gas Turbine Systems.

Donaldson expects full-year 2018 operating margin between 14.0 percent and 14.4 percent, compared with fiscal 2017 operating margin of 13.9 percent. The company expects 2018 interest expense of approximately $21 million and other income between $5 million and $9 million. The forecast for fiscal 2018 effective income tax rate is between 27.4 percent and 29.4 percent.

Hamon Executes Cost Saving Plans

The Hamon Group decided to downsize, not only to re-establish its profitability but also to have a more variable cost structure. Thanks to this new organization, it will be easier to absorb the large volume swings inherent to our business.

The cost saving plans of 2016 and 2017 will have an impact of €12.4 million in 2017 and of €22.6 million in 2018.

A new Group organization was approved in June 2017 and will be fully effective by year-end. The Group is now organized by region and no longer by business unit with a reduced Executive Committee consisting of the Chief Executive Officer, the Chief Financial Officer, the Chief Sales Officer and the Chief Operating Officer. The objective of this new organization is to simplify the Group structure, to make it more transparent and to improve controls as well as decision-making processes.

The first semester 2017 was characterized by a slow-moving market with many postponed projects. We operate in a sector where large fluctuations from one period to the next are common. The backlog is sizeable which helps us reduce large swings and ensures a relatively stable activity level. The backlog at the end of 2016 perfectly played this role: at equal consolidation scope, revenue of S1 2017 is equal to S1 2016 revenue. The backlog at the end of June 2017 remains very strong which will allow a sustained activity level during the coming quarters.

Despite the positive impact of the cost saving programs, EBITDA is negative at €-10.8 million (2016: €-12.4 million). On one hand, the organization structure is not fully adjusted yet to a revenue level of €210 million for a semester as the cost saving programs initiated in 2016 and 2017 had a very limited impact in the first half 2017 (their full benefit will be visible in 2018); on the other hand, the first semester was negatively impacted by specific issues encountered in the finalization of certain contracts. The Group took the necessary measures to avoid such deteriorations in the

For the Air Quality System, most bookings are recorded in Asia and India. The Indian market is very promising and a number of major decisions are expected there during the second semester. AQS has also a strong presence in Asia where interesting opportunities are developing. On the other hand, here are less perspectives in Europe for the moment.

The management of the business unit is confident that bookings will reach a good level for the year. The low level of bookings is due to delays in the conclusion of contracts. EBITDA was negatively impacted by the evolution on two major contracts. Management is following up on this and is initiating actions to resolve these issues.

FLSmidth Introduces New Air Pollution Control Technology at TÇMB Turkey

New FLSmidth Airtech fabric filter and ESP technologies enables customers remotely monitor and analyze filter conditions.

FLSmidth Airtech released product updates for its fabric filter and ESP technologies at the 14th edition of TÇMB International Technical Seminar & Exhibition in Antalya, Turkey, October 10-13, 2017.

The new generation of FLSmidth SmartPulse Controller^® continuously optimizes and controls the operating conditions of a cement plant’s fabric filters. It is integrated with an Internet of Things -based solution that remotely monitors and analyses filter conditions.

“We are very proud of introducing the new evolution of the SmartPulse Controller, specifically conceived to help our customers to operate their plants in compliance, and reducing operational costs. It will make our filters even more autonomous, helping plant operators to focus on the areas that need more attention.” explains Henrik Vittore Pedersen, Airtech Global General Manager.

Fabric filters DuoClean™ DC2 and DC8 updates include an innovative octagonal shape resulting in a compact, modular filter design providing powerful emission-reduction capabilities at reduced CAPEX. In addition, Airtech is showcasing its latest catalytic filtration technologies Catmab™ and Cataplexic^® for in a single step solution removing NO_x, NH₃, VOCs and dioxins/furans as well as particulate matter.

For ESPs, PIACS^® DC4 adds to the family of FLSmidth's electrostatic precipitator controllers. FLSmidth has developed PIACS DC4 with unique and powerful features enhancing the customers’ user experience and remote service while securing low emissions.

ABB to Acquire GE Industrial Solutions

ABB announced the acquisition of GE Industrial Solutions, GE’s global electrification solutions business. GE Industrial Solutions has deep customer relationships in more than 100 countries and an established installed base with strong roots in North America, ABB’s biggest market.

GE Industrial Solutions is headquartered in Atlanta, GA, and has about 13,500 employees around the world. In 2016, GE Industrial Solutions had revenues of approximately $2.7 billion, with an operational EBITDA margin of approximately 8 percent and an operational EBITA margin of approximately 6 percent. ABB will acquire GE Industrial Solutions for $2.6 billion; the transaction will be operationally accretive in year one. ABB expects to realize approximately $200 million of annual cost synergies in year five, which will be key in bringing GE Industrial Solutions to peer performance. As part of the transaction and overall value creation, ABB and GE have agreed to establish a long-term, strategic supply relationship for GE Industrial Solutions products and ABB products that GE sources today.

B&W Provides Update on U.K. Renewable Projects

Babcock & Wilcox Enterprises, Inc. reported that it has identified a structural steel issue at a renewable energy project in the United Kingdom. Management believes that the issue is the result of an engineering error by a subcontractor, and work has been stopped at the project pending further investigation. Additionally, while the issue has not manifested itself in other projects, the company has proactively stopped work at two renewable projects in the United Kingdom that have similar engineering designs.

“We are working diligently to assess the situation. Keeping in mind that the safety of our employees and subcontractors is our top priority, we chose to stop work temporarily at all three projects,” said Jimmy Morgan, Senior Vice President of B&W’s Renewable segment. “We presently expect the total cost impact to the first project will be in the range of $10 to 15 million. We also presently expect the total cost impact to the other two projects to be below that amount. These estimates do not take into account possible recoveries from third parties, which we intend to actively pursue.”

CIRCOR to Acquire Colfax’s Fluid Handling Business from Colfax Corp. for $855 Million

CIRCOR, a leading provider of flow control solutions and other highly engineered products for markets including oil & gas, aerospace, power, process, and general industrial, announced that it has signed a definitive agreement to acquire Colfax Fluid Handling (CFH) from Colfax Corp. for approximately $855 million including cash, newly issued CIRCOR shares, and the assumption of pension plan liabilities linked to the CFH business. The acquisition will expand CIRCOR’s product and service offering while strengthening its position as a leading provider of flow control solutions. The combination results in estimated pro forma combined revenues of approximately $1.1 billion based on the trailing 12 month results as of June 2017.

“CFH’s differentiated product offering enhances our ability to provide critical flow control solutions, and expands our presence into new markets.”

Under the terms of the agreement, CIRCOR will pay $542 million in cash, issue approximately 3.3 million new CIRCOR shares to Colfax representing approximately $163 million in value, and assume global pension plans with a net liability of $150 million on a pre-tax basis. Upon closing of the transaction, Colfax will own approximately 16 percent of CIRCOR. Colfax has agreed to certain restrictions on the transfer of shares, including a six-month lock-up.

Calgon Carbon Announces Agreement to Be Acquired by Kuraray

Calgon Carbon Corp. and Kuraray Co., Ltd. announced that their respective Boards of Directors have unanimously approved, and the parties have entered into, a definitive merger agreement under which Kuraray will acquire Calgon Carbon for $21.50 per share in cash, which equates to an equity value of approximately $1.1 billion, and a transaction value in excess of $1.3 billion, including Calgon Carbon’s net indebtedness. The transaction remains subject to customary closing conditions, including regulatory approvals and approval by Calgon Carbon stockholders. The parties are targeting a closing by the end of December 2017. The acquisition will be completed through a merger of a newly-created subsidiary of Kuraray with and into Calgon Carbon, with Calgon Carbon as the surviving corporation.

While this acquisition will enhance Kuraray’s growth strategy and global presence in activated carbon and filtration media, it intends to operate Calgon Carbon as a separate subsidiary of Kuraray. The companies will align the organization and operation for optimal customer support from Calgon Carbon’s world headquarters in Pittsburgh, PA. Kuraray and Calgon Carbon have complementary products and services, and the combined organization will continue to focus on the highest quality activated carbon and filtration media products, equipment and services for customers around the world. The combination will strengthen Kuraray’s focus on contributing to human health, and the sustainability of the environment through innovative and high-quality products around the world.

Wärtsilä to Acquire Puregas Solutions

Wärtsilä has reached an agreement to acquire Puregas Solutions, the Sweden based provider of turnkey biogas upgrading solutions. Puregas is a leading player in its field with subsidiary companies in Germany, Denmark, the U.K., and the USA. The company utilizes a unique CApure process to convert raw biogas to biomethane and renewable natural gas. The transaction is valued (enterprise value) at SEK 280 million (€29 million) with an additional maximum sum of SEK 70 million (€7.3million) to be paid based on the performance of the business in the coming year.

The acquisition will provide Wärtsilä with added equipment and expertise in biogas upgrading, and will complement well the company’s existing position in the biogas liquefaction market. In the larger context, Puregas Solutions’ offering is in close alignment with Wärtsilä’s own gas based technologies, and the merging of the two companies will expand Wärtsilä’s overall reach in the gas value chain.

“We are acquiring a company with technical know-how, good references, and a strong market position. It provides us, therefore, with a good platform to expand our offering and support our customers with complementary biogas upgrading and liquefaction solutions,” says Timo Koponen, Vice President, Flow & Gas, Marine Solutions.

The renewable natural gas market is closely aligned to Wärtsilä’s core business in gas solutions, and is expected to achieve solid growth going forward. In 2016, Puregas Solutions’ turnover was SEK 200 million (€21 million) and the profitability level was good. The company currently has about 40 employees.

Purafil and Nanjing LvTong Environment Protection Technologies Partner Together for China Consumers

Purafil announced LvTong as their exclusive online distributor in China. Purafil and LvTong have combined their expertise and experience to bring the best air purification products available to consumers. This partnership builds upon company strengths in the marketplace to improve the quality of life.

LvTong is a veteran of the communications sector in China, constantly improving the quality and development of online communications, social media, and websites. Weibo, a social media site, has over 600 million registered users. Their commitment to caring for their customers led them to seek the best solution for improving indoor air quality in China.

Since 1969, Purafil is a global leader in the molecular air filtration industry. Every day, Purafil protects thousands of people, processes, and environments throughout seventy countries with patented air filtration systems. Revolutionary air purifiers remove dust and other particulates, fumes, odors, 230+ gases, viruses and bacteria from the surrounding environment.

“Combining the strength of Purafil’s innovative technologies with LvTong’s online communications and expertise in eCommerce provides a unique benefit for consumers,” said James Mash, President and CEO, Purafil. “Our partnership creates easy access to healthier air.”