September 2022, No.563

MARKETS

• Holistic Approach to Acquisitions and Organic Growth

  IRON AND STEEL

• Salzgitter Places Large Order With Primetals Technologies for Electric Arc Furnace As Part of Major Green Steel Transformation Program

 COAL FIRED BOILERS

•  Babcock & Wilcox Awarded $42 Million Contract for Installation of Environmental Equipment for U.S. Power Plant

•  Babcock & Wilcox Growth Continues in Middle East & Africa with $18 Million Environmental Upgrade Contract for Power Plant

COMPANY NEWS

•  American Air Filter Co., Inc. Acquires National Air Filter Service Co. of New Jersey

•  ANDRITZ Acquires Environmental Company J. Parpala Oy, Finland

•  Donaldson Reports Fourth quarter sales rose 15.1% compared to fiscal 2021; full-year 2022 sales up 15.9%

• CECO Environmental Reports Record Backlog, Strong Revenue And Net Income Growth, and Update To Full Year Outlook

• GE Announces Second Quarter 2022 Results

• Thermax Group Registers Substantial Growth in Revenue and Order Book in Q1

MARKETS

Holistic Approach to Acquisitions and Organic Growth

 Many  companies take a piecemeal approach to market research and acquisitions. They buy a market report occasionally. Periodically when contemplating an acquisition or strategy change they invest quite a bit.

McIlvaine believes that a continuous holistic and focused approach can generate the highest ROI. This approach is based on:

·                     Detailed forecasts sufficient to set targets for divisions and even individual salesmen

·                     Identification of higher profit future niches

·                     Continuous evaluation of competitor shares and strengths

·                     Analysis of top customers

·                     Identifying the best opportunities through acquisitions or organic growth

The McIlvaine approach is focused but holistic. It covers the entire $750 billion air, water, energy market. But it is focused by using the structure to drill down to the relevant niches.

The structure is clearly defined by an umbrella report which provides an overview and size for each of 27 segments.

http://home.mcilvainecompany.com/index.php/other-services/free-news/news-releases/47-uncategorised/news/1727-nr2712

 There are individual continuously updated reports with analysis by industry and country for each product. Each has market share and acquisition updates.

  Private consulting is available as a supplement or alternative option.

 How to use the service: The holistic approach starts with five year forecasts which identify likely high growth niches.

                                                               The Holistic/Focused Approach

 Details on the products used and the processes allow the user to determine the potential synergy for his company. The analysis of competitor market shares and total cost of ownership is then needed.

 Recent acquisitions provide unique insights into the competitor positioning. Then a list of potential acquisition candidates can be prepared. The attractiveness of an acquisition can be compared to an organic route to pursue the market.

 With this information the company can proceed toward investment.

 For more information visit our website at www.mcilvainecompany.com or  contact Bob McIlvaine at 847 226 2391 or rmcilvaine@mcilvainecompany.com  

 IRON AND STEEL

Salzgitter Places Large Order With Primetals Technologies for Electric Arc Furnace As Part of Major Green Steel Transformation Program

 On August 23rd, German steel producer Salzgitter signed a contract with Primetals Technologies for an EAF Ultimate. With a tapping weight of 220 tons, the furnace will have an annual capacity of 1.9 million tons of steel. It will be implemented at the steel plant in Salzgitter, Germany. Startup is scheduled for end of 2025. World’s largest green steel transformation program Salzgitter is investing in the world’s leading transformation program in the steel sector.

 The Salzgitter Low CO2 Steelmaking (SALCOS) project aims to convert the existing integrated steel plant to green steel production in three stages by 2033. As part of the transformation, two direct reduction plants and three electric furnaces will be built, which will then successively replace the existing blast furnaces and converters. This order for one EAF with Primetals Technologies marks the first step in this process.

 “It underscores our ambition to remain a leader in the decarbonization of the steel industry and to set up the Salzgitter site for the future on a lasting basis. With Primetals Technologies, we have a strong partner on our side – true to our strategy of moving toward a sustainable industry,” said Ulrich Grethe, Head of Steel Production at Salzgitter.

 Several factors played a role when Salzgitter choose Primetals Technologies as supplier. A sound reference base with several recent successful EAF projects, low consumption figures of the technologies involved, and competence in project management were three main factors.

 The scope of supply includes engineering, supply, and construction. "Primetals Technologies is pleased to support Salzgitter AG's decarbonization projects with the installation of a highly efficient EAF. With our Green Steel technology, we enable low CO2 steel  Primetals Technologies, Limited A joint venture of Mitsubishi Heavy Industries and partners Chiswick Park.

 Special features EAF Ultimate is part of Primetals Technologies new generation of electric steelmaking equipment. It is characterized by short tap-to-tap times, fully automated operation, and advanced control systems. The Salzgitter EAF features dust removal systems, a heat recovery system, a water management system, electrical compensation for grid stabilization and material handling for alloying materials and additives. It will also include Level 1 and 2 automation and the LiquiRob robot system. The heat recovery system will convert much of the waste heat into steam which is then fed back and used in other production units.

 Part of an extensive digitalization package, the condition-monitoring system ALEX will identify potential incidents before they occur. The tailormade Lomas off-gas analysis system determines all relevant values of the off-gas composition to ensure higher availability, reduced energy consumption and increased safety measurements. Massive CO2 emission savings The SALCOS project will replace a coking-coal-based steelmaking process with a new hydrogen-based route. This is expected to save around 95 percent of the annual CO2 emissions of around 8 million tons.

 COAL FIRED BOILERS

Babcock & Wilcox Awarded $42 Million Contract for Installation of Environmental Equipment for U.S. Power Plant

 Babcock & Wilcox announced that Babcock & Wilcox Construction Co., LLC has been awarded a contract for approximately $42 million to provide construction and installation services for an environmental upgrade project at a U.S. power plant.

“We have significant experience and expertise in large environmental installation projects to help the U.S. power fleet continue to operate cleanly and efficiently,” said B&W Executive Vice President and Chief Operating Officer Jimmy Morgan. “BWCC is a single-source supplier of a full range of field construction, construction management and maintenance services and our customers can count on us to execute projects on schedule and with intense focus on delivering a finished product that meets every expectation.”

 BWCC’s project scope includes the modification of the plant’s environmental equipment to optimize the plant’s operation.

 As with all BWCC projects, safety and finishing each day incident- and injury-free will be a top priority.

 “BWCC has a strong history of performing high-quality work and executing U.S. environmental projects safely,” said BWCC Vice President and General Manager Mike Hidas. “We look forward to delivering this critical upgrade project to our customer.”

 Babcock & Wilcox Growth Continues in Middle East & Africa with $18 Million Environmental Upgrade Contract for Power Plant

Babcock & Wilcox (B&W) announced its B&W Environmental business segment has been awarded a contract for approximately $18 million to provide advanced environmental equipment to reduce emissions for a power plant in Africa.

B&W Environmental will design, engineer and provide manufacturing support to upgrade 24 electrostatic precipitators (ESPs), which will be used to significantly reduce particulate emissions. B&W Environmental will also provide technical support during construction and commissioning.

B&W Environmental has extensive experience with both dry and wet ESP technologies, and has installations in a wide range of applications, including power generation, waste-to-energy, cement production, chemical manufacturing, oil & gas, pulp & paper, steel manufacturing and more.

 COMPANY NEWS

 American Air Filter Co., Inc. Acquires National Air Filter Service Co. of New Jersey

 American Air Filter Co., Inc. dba AAF International, a global leader of air filtration solutions for over 100 years, has acquired National Air Filter Service Company of New Jersey, one of the oldest and largest full-service air filtration management companies in the United States.

 "This is an exciting announcement for us that we believe will yield important benefits for our customers and our vendors while ensuring the continuity of our business and relationships," said Don Borghoff, President and Owner of National Air Filter Service Company of New Jersey. "This acquisition symbolizes our intention to deliver more value to our customers while providing them with the same great service they have come to expect," Borghoff added. This change in ownership is effective August 29, 2022.

 ANDRITZ Acquires Environmental Company J. Parpala Oy, Finland

 International technology group ANDRITZ has acquired J. Parpala Oy, a major player in the maintenance and repair of environmental equipment for industrial production and power generation plants in Finland. The company was founded in 2011 and operates sites in Kokkola and Kaskinen.

This business transaction further strengthens ANDRITZ’s air pollution control activities in Finland, making it the leading service provider for inspections, maintenance, mechanical upgrades, spare parts, and workshop repair activities related to filters, scrubbers, flue gas ducts, fans, conveyors, and other equipment in operation between the boiler and the stack. ANDRITZ will offer these services to various industries, such as pulp and paper, biomass, ferrous and non-ferrous metals, chemical/fertilizer and other segments.

 The company runs a workshop for environmental repairs and a warehouse for quick dispatch of spare parts, thus enabling close proximity to customers and quick response times on all customer requests.

 Donaldson Reports Fourth quarter sales rose 15.1% compared to fiscal 2021; full-year 2022 sales up 15.9%

Donaldson Company, Inc. reported fiscal 2022 generally accepted accounting principles (GAAP) net earnings of $101.1 million in the fourth quarter and $332.8 million for the full year, compared with $84.3 million and $286.9 million, respectively, in fiscal 2021. Fourth quarter and fiscal 2022 earnings include $3.4 million of charges related to the conflict in Eastern Europe. Full-year fiscal 2021 included $14.8 million of restructuring charges. Fiscal 2022 GAAP earnings per share (EPS) were $0.81 in the fourth quarter and $2.66 for the full year, compared with $0.66 and $2.24, respectively, in fiscal 2021. Fourth quarter and full-year 2022 adjusted EPS were $0.84 and $2.68, respectively. Full-year fiscal 2021 adjusted EPS were $2.32.

“In fiscal 2022, Donaldson eclipsed $3 billion in sales, delivered record profits despite the challenging operating environment, and returned $281 million to our shareholders through dividends and share repurchases,” said Tod Carpenter, chairman, president and chief executive officer. “While focusing on near-term execution, we also strengthened our position for long-term growth through strategic investments including acquisitions, particularly in Life Sciences, research and development, and capacity expansion.

 “Our demonstrated agility through recent macroeconomic and geopolitical uncertainty gives me confidence heading into fiscal 2023. Looking forward, we anticipate continued high levels of demand, pricing carryover tailwinds and the stabilization of some inflationary pressures to more than offset currency translation headwinds and overhanging supply chain challenges. Based on these dynamics, we are forecasting another year of record sales and earnings as we build on our long history of delivering value to customers and shareholders.”

 Operating Results

Fourth quarter 2022 Industrial Products segment (Industrial) sales increased 10.1%, led by Gas Turbine Systems (GTS). GTS sales increased 38.5%, benefitting from the timing of replacement part sales in EMEA. Industrial Filtration Solutions (IFS) sales grew 13.5% year over year resulting from strength in the industrial dust collection business including new equipment and replacement parts, and Process Filtration sales. Special Applications sales declined 16.6% year over year, mainly due to Disk Drive sales weakness stemming from the COVID-19 shutdowns in mainland China.

Fourth quarter 2022 operating income as a percent of sales (operating margin) of 14.5% was flat to the prior year. Adjusted operating margin, which excludes charges related to the conflict in Eastern Europe, was 14.9%, an improvement of 40 basis points from 2021, as gross margin pressure was more than offset by operating expense leverage. Gross margin was 32.8%, or 32.9% on an adjusted basis, compared with 34.4% in the prior year as higher input costs offset pricing benefits. Operating expenses as a percent of sales was 18.2%, favorable by 170 basis points compared with 19.9% in 2021 due to leverage on higher sales. Adjusted operating expenses as a percent of sales was 18.0%.

 Fourth quarter 2022 interest expense was $4.0 million, an increase compared with $3.1 million in 2021, driven by higher debt levels and interest rates. Other income was $3.4 million, a decrease from $5.0 million in 2021.

Fourth quarter 2022 effective tax rate was 21.4% versus 26.0% in 2021, primarily due to an increase in net discrete tax benefits.

In the fourth quarter, the Company paid $28 million in the form of dividends and $17 million for share repurchases. For the full year, Donaldson paid $110 million in the form of dividends and $171 million for share repurchases.

Fiscal 2023 Outlook

Donaldson expects fiscal 2023 EPS between $2.91 and $3.07, compared with 2022 GAAP and adjusted EPS of $2.66 and $2.68, respectively. Full-year 2023 net sales are projected to increase between 1% and 5% versus the prior year, including benefits from pricing of approximately 6% and a negative impact from currency translation of approximately 4%. The impact of currency translation is expected to be similar for both the Engine and Industrial segments.

Industrial sales are forecast to increase between 3% and 7% versus the prior year, with high-single digit growth in IFS. Industrial dust collection, both new equipment and replacement parts, and Process Filtration sales are expected to continue the momentum seen in fiscal 2022. GTS sales are projected to be up low-single digits. Special Applications sales are forecasted to be flat versus the prior year as APAC market weakness is expected to continue to weigh on sales, particularly in the first half of fiscal 2023.

Donaldson expects fiscal 2023 operating margin to improve to between 14.5% and 15.1%, compared with reported and adjusted operating margin of 13.4% and 13.5%, respectively, in the prior year. Gross margin expansion, resulting mainly from pricing to offset moderating cost inflation, is projected to drive the operating margin expansion.

The Company expects fiscal 2023 interest expense of approximately $17 million, an increase versus the prior year, due to increased debt levels and interest rates. Other income is forecast between $9 million and $13 million. Donaldson’s fiscal 2023 effective income tax rate is projected to be between 25% and 27%.

The Company expects fiscal 2023 capital expenditures between $115 million and $135 million, and free cash flow conversion is projected to be between 110% and 125%. Donaldson expects to repurchase approximately 2% of its outstanding shares during fiscal 2023.

Eastern Europe and Restructuring Charges

In the fourth quarter of fiscal 2022,in response to the conflict in Eastern Europe, Donaldson recorded $3.4 million of charges related to write-offs of remaining outstanding receivables and customer-specific inventory, as well as restructuring charges related to the closing of Donaldson’s sales office in Russia. Previously, the Company announced additional actions taken including complying with all sanctions and ceasing direct product shipments into Russia and Belarus.

In the second quarter of fiscal 2021, the Company initiated activities to further improve its operating and manufacturing cost structure, primarily in its EMEA region. These activities resulted in the Company incurring restructuring expenses, including $14.8 million in severance.

CECO Environmental Reports Record Backlog, Strong Revenue And Net Income Growth, and Update To Full Year Outlook

 CECO Environmental Corp. reported its financial results for the second quarter of 2022.

Highlights for the Quarter and Recent Corporate Developments*

·         Orders of $113.5 million, up 33 percent; Record Backlog of $289 million

·         Revenue of $105.4 million, up 34 percent

·         Net income of $4.4 million, up $4.1 million; non-GAAP net income of $6.4 million, up $3.3 million

·         Adjusted EBITDA of $10.6 million, up 63 percent

·         Company announces senior management transitions

·         Company increases full year financial outlook

*All comparisons are versus the comparable prior year period, unless otherwise stated.

Reconciliations of GAAP (reported) to non-GAAP measures are in the attached financial tables.

"We delivered strong results in the second quarter and are pleased to share that we increased our backlog to new record levels while driving sales growth of more than 30 percent and EBITDA growth of more than 60 percent.  We also repurchased more than $4 million of shares in the quarter as we systematically execute our capital allocation strategy that includes both M&A and share repurchases," said CECO Chief Executive Officer, Todd Gleason.

Second quarter operating income was $5.7 million, up 171 percent when compared to $2.1 million in the second quarter 2021. On an adjusted basis, non-GAAP operating income was $8.7 million, up 85 percent when compared to $4.7 million in the second quarter of 2021. Net income was $4.4 million in the quarter, up $4.1 million compared to $0.3 million in the second quarter 2021. Non-GAAP net income was $6.4 million, up $3.3 million compared to $3.1 million in the second quarter 2021. Adjusted EBITDA was $10.6 million, up 63 percent compared to $6.5 million in the second quarter 2021. The Company repurchased $4.3 million shares in the second quarter as part of the previously announced $20 million share repurchase program.

In the second quarter, the Company completed the acquisition of Compass Water Solutions, based in California, USA and Western Air Duct, a company based in the United Kingdom. Combined, the companies generated 2021 full year sales of approximately $15 million and each delivered double-digit EBITDA margins.

"We are extremely pleased with our year-to-date results which have included orders growth of approximately 55 percent, record backlog up more than 35 percent and revenue growth up more than 30 percent through the first half. We have closed multiple strategic acquisitions that add new capabilities and market opportunities to our industrial air and industrial water platforms, and those acquisitions are already performing very well against their operating targets," added Gleason 

The Company updated full year 2022 guidance to $375 to $400 million in revenue, up approximately 19 percent at the midpoint year over year. The Company updated its full year adjusted EBITDA to reflect a range starting at $37 million and the high-end exceeding $40 million, up more than 50 percent at the midpoint year over year.

"Our revised outlook reflects our continued confidence that we expect to deliver outstanding results through the year. We remain in excellent position to drive strong double-digit sales and income growth while also maintaining our focus on capital allocation," concluded Gleason.

GE Announces Second Quarter 2022 Results

GE announced results for the second quarter ending June 30, 2022.

GE Chairman and CEO and GE Aerospace CEO H. Lawrence Culp, Jr. said, “The GE team delivered a strong second quarter with growth in orders, revenue, and profit, as well as positive free cash flow. Aerospace was a key driver of our performance this quarter as the industry recovery builds momentum. In higher-margin services, GE delivered double-digit revenue growth, with Aerospace up 47 percent compared to last year.”

GE is on track to create three independent companies and announced the new branding of GE's planned future companies:

Energy Transition: secured an order for 9HA combined cycle power plants in Vietnam, the first HApowered plant in the country. 

Orders of $4.0 billion decreased 16% reported and 13% organically, driven by lower heavy-duty gas turbine and aeroderivative equipment orders at Gas Power. Services orders also declined, due to lower Gas Power contractual outages.

Revenues of $4.2 billion decreased 2% reported but increased 4% organically*. Equipment increased with higher aeroderivative unit shipments. Services was flat on an organic* basis as strong transactional services growth in Gas Power and Power Conversion offset lower Gas Power contractual planned outage volume. Segment margin of 7.6% expanded 60 basis points reported and 30 basis points organically.

hhgggghGas Power margins remained resilient from improving price structure to address inflation, as well as aeroderivative and transactional services volume growth, offsetting services mix headwinds. In Steam, margins continued to improve significantly as the business becomes more services focused. Power is set up well to grow profit in 2022 and GE is reaffirming its outlook in the segment for low-single-digit revenue growth, $1.0 to $1.2 billion of operating profit, and margin expansion.

 Thermax Group Registers Substantial Growth in Revenue and Order Book in Q1

For the first quarter of FY 2022-23, Thermax Group posted a consolidated operating revenue of Rs. 1,654 crore (Rs. 1,052), up 57%. Profit after tax (PAT) stood at Rs. 59 crore, up 40% as compared to Rs. 42 crore in the corresponding quarter of FY 2021-22.

As on June 30, 2022, the order balance for the quarter was Rs. 9,554 crore (Rs. 6,109 crore), up 56%. Order booking for the quarter was 36% higher at Rs. 2,310 crore (Rs. 1,696 crore). The performance was driven by strong order inflow from diverse sectors, including refineries, steel, power, and chemicals. In addition, Thermax witnessed an upward trend in demand from sugar/distilleries and paper & pulp industries for green offerings.

On a standalone basis, Thermax Limited posted an operating revenue of Rs. 947 crore during the quarter, 33% higher as compared to Rs. 710 crore in the corresponding quarter, last year. Profit after tax for the quarter was Rs. 24 crore (Rs. 31 crore) down 23%. The profitability was impacted due to the increased commodity and freight costs in the Chemical segment. Order booking for the quarter was 102% higher at Rs. 1,707 crore (Rs. 843 crore). Order balance on June 30, 2022, stood at Rs. 6,981crore (Rs. 3,642 crore), up 92%

During the quarter, Thermax concluded a major order of Rs. 522 crore for utility boilers and associated systems for a petrochemical complex in Rajasthan. 

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