Osmonics acquires purification products

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dN NDSE/PAkATIOti Ib/DUSTRIE$ 1 1 ? us FILTER BUYS KINETICS

OSMONICS ACQUIRES PURIFICATION PRODUCTS Osmonics Inc has completed the acquisition of Purification Products Co of San Marcos, (PPC), California. Terms of the asset purchase were not disclosed. PPC, a subsidiary of Sybron Chemicals Inc, is an international specialty chemical company supplying the environmental and textile wet processing industries. PPC manufactures a line of reverse osmosis membrane elements and related products for purifying home drinking water and producing high-quality water for other applications. PPC has annual revenues of less than US$5 million. Dean Spatz, Osmonics CEO and chairman, described PPC as an “excellent fit” for Osmonics, adding that Osmonics expected PPc’s line of membrane elements to help to significantly increase its share of the home reverse osmosis market, while better utilizing Osmonics’ membrane manufacturing capacity. Spatz said that Osmonics had the product breadth and application expertise to provide increased support for PPC’s

network of distributors and OEMs. PPC’S cellulose triacetate membrane element business will be relocated to Osmonics’ Syracuse, New York operation, while the thin-film composite membrane element business will be integrated into Osmonics’ Vista, California facility. PPC also manufactures an ultraviolet sterilization unit for point-of-use applications, and a unit that automatically measures silt density index. Both products are expected to be manufactured at Osmonics’ Phoenix location.

Continuing its aggressive acquisition strategy, US Filter Corporation has signed a definitive agreement to acquire The Kinetics Group Inc for approximately US$170 million, plus outstanding debt. Kinetics is a US provider and manufacturer of high purity process piping systems and is also a major US integrator of high purity water, fluid and gas handling systems used in the pharmaceutical, biotechnology and microelectronics industries. Kinetics had revenues of more than US$400 million for the fiscal year ended 30 September 1997. For its third fiscal quarter, US Filter has completed 24 acquisitions totalling US$865 million in annualised revenues. The company said the cumulative purchase price paid for the transactions was approximately US$770 million in cash, stock and assumed debt.

ISSUE 10 JANUARY 1998 ISSN 1365-6937

FLANDERS PLANS NEW FACILITY Flanders Corporation is to open a new manufacturing facility in North Carolina, USA. The new plant, which will produce a full range of Flanders’ mid-range and standard-grade product lines, will be used to meet demand in the Eastern US, along with the company’s current facilities in Florida and Pennsylvania. The unit is expected to be fully on-line by the end of the second quarter. The new facility will be managed by Buddy Mercer, who has more than 30 years of experience in the air filtration industry. Mercer will also manage Glass Fiber Industries Inc, the company’s recent acquisition (see Filtration Industry Analyst, December 1997), which manufactures filter media.

Filtration

Industry Analyst

US$30 MILLION MICROELECTRONICS CHEMICALS PLANT PLANNED Mallinckrodt Baker, a subsidiary of Mallinckrodt Inc, is to build a US$30 million microelectronics chemicals plant at Temple, Texas, USA. The plant, scheduled for completion in December 1998, will supply ultrapure cleaning and etching chemicals to the dynamic random access memory (DRAM) fabrication complex of Samsung Austin Semiconductor in Austin, Texas. The ultrapure sulphuric acid, ammonium hydroxide, isopropyl alcohol and hydrogen peroxide produced by the plant will contain fewer than five parts per trillion in trace metal impurities. The 77-acre site will also house laboratories equipped to detect trace metals to one part in a trillion levels and state-of-the-art environmentalontrols. Samsung America Inc will hold a 20 per cent stake in the plant.

DUPONT AND UMC TO ESTABLISH JOINT VENTURE DuPont Photomasks Inc (DPI) and United Microelectronics Corporation (UMC) have signed a memorandum of understanding to produce photomasks. The agreement involves the investment of US$75 million over the next four years, including the construction of a standalone photomask manufacturing facility in Taiwan. The joint venture, to be named DuPont Photomasks Taiwan Ltd, will also manage and expand UMC’s existing photomask production operations

January 1998

at its wafer foundries in HsinChu City, Taiwan. Both LJMC and DPI will bring technology and expertise to the agreement. “Taiwan is one of the fastest growing semiconductor manufacturing regions in the world,” said J Michael Hardinger, DuPont Photomasks chairman and CEO.

MEXICAN REFINERY GETS US$2.5 BILLION IMPROVEMENTS The Mexican state-owned Petroleos Mexicanos (PEMEX) refinery at Cadereyta in the North of Mexico, is to receive the world’s most extensive upgrading and extension. The mammoth US$2.5 billion project is scheduled for completion in the year 2000, after which it will have the capacity to produce nearly 200 000 barrels of unleaded gasoline, diesel and kerosene each day. The projects include the construction of nine new plants, including a hydrodesulphurised diesel and naptha producing plant and a 480 ton per day sulphur recovery plant. Fourteen other plants, including a refinery producing 155 000 barrels per day of fuel and a 65 000 barrels per day fluidised catalytic cracking plant, will be revamped, modernised and expanded. Simultaneously, four sets of steam boilers, 50 tanks, a refinery plant organised into 29 different units and a 1300 km pipeline will be constructed and integrated. The contract to update the refinery has been awarded to an international consortium led by the South Korean industrial and building systems company Sunkyong, partnered by the German company Siemens and the Mexican construction company Grupo Tribasa.

CHEVRON TO DOUBLE UP IN NIGERIA Chevron has announced it is to spend approximately US$llO million to nearly double the capacity of its Escravos gas processing facility in Nigeria. The newly-commissioned project, which is operated by its wholly-owned subsidiary, Chevron Nigeria Ltd (CNL), in association with the Nigerian National Petroleum Corp (NNPC), will be extended to produce 240 million cubic feet of gas and nearly 17 000 barrels of liquid products a day. The second phase of production is expected to come onstream in late 1999, only two years after the plant exported its first cargo of liquefied petroleum gas (LPG). The Escravos gas project is part of joint efforts by CNL and NNPC to commercialise natural gas produced in association with oil production in Chevron’s Nigerian operations. Prior to the construction of the Escravos plant, gas had been flared at each production site. “The Escravos project is the boldest initiative to end gas flaring in Nigeria. Chevron and the NNPC embarked on this project because of its positive environmental ramifications as well as its economic benefits to Nigeria,” said Dick Matzke, president of Chevron Overseas Petroleum.

PETRO-CANADA DETAILS INVESTMENT PLANS Petro-Canada, the Canadian oil and gas company, is to spend approximately US$1.13 billion in its 1998 capital investment program. A confident Jim Stanford, president and CEO, spelt out the company’s intentions.

“Petro-Canada’s capital investments in the coming year will result in significant progress towards our goal of becoming the preeminent Canadian integrated oil and gas company,” he said. Exploration and development expenditures will account for approximately one-third of the budget, with 300 new oil wells already planned for Western Canada. The existing Newfoundland offshore fields will be developed further with US$300 million, including the drilling of at least nine wells at the Hibemia field. The company plans to bring a major new oil field onstream every two to three years. Approximately US$280 million will be invested in the downstream processes, including US$25 million to expand the catalytic cracker at the Montreal refinery.

FURTHER SUCCESS FOR SYNTROLEUM Syntroleum Corporation’s novel gas-to-liquid (GTL) process is to be used in a commercial scale plant for the first time. The 2500 barrel per day plant will convert natural gas into light and heavy syncrude, which can be further processed into petroleum products. The proposed plant is to be built outside the US, at a location to be announced during the first quarter of this year. Purchase orders are to be issued in the near term for items that could impact on the plant’s scheduled start-up in the third quarter of 1999. Syntroleum has signed an agreement to develop the plant with Texaco and the engineering company Brown & Root. The plant will incorporate the new hybrid multiphase technology (HMX) Fischer-Tropsch reactor that has been developed under a joint development agreement

Filtration

January 1998

between Texaco and Syntroleum, with technical support from Brown & Root and Bateman Engineering. “We expect that this will be the world’s first economical GTL plant,” said Mark Agee, Syntroleum’s president and CEO.

GEORGIAN LIQUID NATURAL GAS PEAKING PLANT A new US$90 million liquefied natural gas peaking facility will be serving the South-Eastern United States by the 2001-02 winter season. AGL Resources and Southern Natural Gas Co, a subsidiary of Sonat Inc, have entered into a letter of intent to jointly construct, own and operate the Etowah plant in Polk County, Georgia, US. Construction will begin in 1999, and when completed the plant will have 3 billion cubic feet of natural gas storage capacity and 4.50 million cubic feet per day of vaporisation capacity.

CARRINGTON TO DOUBLE PRODUCTION AT COSTA RICA PLANT Carrington Laboratories Inc, the research company, has announced plans to increase production at its bulk manufacturing plant in Liberia, Costa Rica. Over the last 12 months, the company has experienced a 4.5 per cent growth in the demand for raw materials containing natural complex carbohydrates. The carbohydrates, obtained from Aloe vera L, are used in the production of nutritional drinks. The first phase of

the production increase will be the installation of a high speed filling line, scheduled for completion in the first quarter of 1998. The second phase of the planned increase will involve the acquisition and development of additional production facilities. Currently, the company has more than 190 acres under production, and anticipates the need for an added 200 to 250 acres.

VENEZUELAN BREWERY OPENS A new state-of-the-art US$lSO million brewery, featuring the world’s largest bottling line, has opened in Venezuela. The new facility, located IOOkm from Caracas, has an initial annual brewing capacity of 1.4 million hectolitres, which will grow to 3 million hectolitres by the year 2000. The brewery is the first major initiative of the joint venture between Interbrew, the multinational brewing group, and the Cisneros Group, which owns the Caracas-based Regional Brewing Company. “The new brewery is truly state-of-the-art combining the best in technology with traditional brewing practices,” said Hugo Powell, CEO of Interbrew in the Americas.

BHP COAL EXPANSIONS PROCEEDING Contrary to some recent reports, the planned expansions to Broken Hill Proprietary (BHP) Company Ltd’s mines in Queensland, Australia are ongoing. It had been reported that the proposed plans to expand the Peak Downs and Saraji mines had been cancelled, which BHP has denied.

However, BHP Coal is reviewing the scope and timetable of the expansions, including the timing of some parts of the investment. BHP is currently reviewing capital plans across all of its operations in line with market conditions, and to ensure that financial targets are met. However, the A$50 million expansion of the Hay Point port facility is proceeding on schedule, as an integral part of the company’s plans to meet new capacity requirements.

FEASIBILITY STUDY FOR QATAR SMELTER The Norwegian company Norsk Hydro and the stateowned Qatar General Petroleum Corporation have signed an agreement that clarifies the conditions for the establishment of an aluminium smelter in Qatar. The project is subject to further studies to determine its viability and profitability and, depending on the results, a metal plant in Qatar could start production during 2002. The feasibility study is considering two alternative plant sizes: one with an annual production capacity of 200 000 tonnes of primary aluminium, and a second which would produce double that. The estimated total investment costs for the smaller option are approximately US$l billion. The plant would be located in the Ras Laffan industrial city, near the tip of the Qatari peninsula. “Qatar provides us with solid infrastructure, reliable and competitive energy and excellent logistics in terms of the growing markets in Asia,” said Harald Martinsen, of Hydro Aluminium Metal Products.

Industry Analyst

CHINESE COMPLEX CONSIDERED Alcan Aluminium Limited and China National Non-ferrous Metals Industry Corp (CNNC) have announced that they are considering developing an aluminium smelter and power complex at Hejin City, China. The two companies have signed a memorandum of understanding to complete a detailed feasibility study of the proposed project. The smelter would produce 240 000 tonnes of aluminum per year, and take 12- 18 months to complete. The project has received the consent of all relevant government departments and has been approved by the State Planning Commission of the People’s Republic of China, following a successful pre-feasibility study.

SINGAPORE ETHYLENE PLANT PROCEEDS The 800 000 tonne per year ethylene plant that the Kellogg-Chiyoda alliance is developing for Exxon in Singapore has progressed into the detail design and equipment procurement phase. The world scale plant is part of the US$2 billion Exxon petrochemical complex to be located on Jurong Island and is the first major project of the ethylene technology alliance of the MW Kellogg engineering company and the Japanese engineering company Chiyoda. The plant is scheduled to come onstream in 2000 and will supply feedstock for several major downstream chemical plants. In addition to

Filtration

Industry Analyst

the ethylene plant, Kellogg and Chiyoda will work together on the detailed design and construction of a partial oxidation unit and an associated co-generation facility.

WEST AUSTRALIA NAMES PLANT SHORTLIST The Western Australia State Government has shortlisted six potential developers of a proposed A$lS billion petrochemical project. The Pilbara Petrochemical Plant (PPP) will be based on ethane contained in natural gas from an associated gas project, and will:produce more than A$1 billion worth of products each year. The shortlisted developers are: BP Chemicals, a unit of British Petroleum Co; South Korea’s Hanwha Chemical Corp; Samsung General Chemicals Co; ICI Australia Ltd; Krupp Group and a joint venture between Dow Chemical Co and Shell International Chemicals Ltd, a unit of Royal Dutch/Shell Group. “We will be looking to these companies to develop a world scale integrated petrochemical project with interdependent links to add-on chemical projects,” said Western Australia resources development minister Colin Barnett. The preferred developer is expected to be announced in the coming months.

MTBE PLANT FOR SAUDI ARABIA The world’s largest grassroots MTBE (methyl tertiary butyl ether) plant is to be built in Yanbu, Saudi Arabia. Neste, the Finnish oil, energy and chemicals company, the Saudi company Alujain Corp and Ecofuel of Italy have signed a joint venture agreement to develop the plant. Costing in the region of US$400 million, the plant is

January 1998

expected to have a record capacity of 900 000 tons a year when it is completed in 2000. MTBE is a high octane, oxygen rich gasoline component used in cleaner gasolines.

NAPTHA CRACKER IN PHILIPPINES Bataan Olefin and Polymer Corporation (BOPC) has announced plans for a grassroots naptha cracker at Bataan in the Phillippines. The new plant will be the anchor unit for a developing industrial complex and will supply feedstock to polypropylene, polyethylene and other petrochemical plants located nearby. The cracker is expected to be onstream by early 2001. BOPC development partners include Sumitomo Mitsubishi Corp, Carp, Kellogg Development Corp and Profinda Holdings.

BASF CONTINUES EXPANSIONS The BASF group has announced plans for a new plant in Korea and further expansions to its chemical plants, at a variety of locations. BASF Korea Ltd, a fully owned affiliate of BASF AG, and Mitsubishi Chemical Corp have signed an agreement for the construction of a 1,4butanediol and tetrahydrofuran production plant. The plant, with a capacity of 50 000 metric tons per year, will be constructed in Ulsan, Korea and will go onstream in 1999. This new development is accompanied by investment in some of BASF’s existing European plants. The production capacity for butylamines at Ludwigshafen, Germany is to be increased by 5000 metric

tons per year, doubling the total capacity when the expansion is complete by the third quarter of 1999. “This expansion is a reaction to the growing demand for amines worldwide,” said Dr Dietrich Lath, head of BASF’s intermediates division. Further expansion is also planned at its ethanolamine plant at Antwerp, Belgium, with capacity being increased by 35 000 metric tons a year. This expansion should be completed by mid-1999, and will raise the annual production of the plant to 85 000 tons per year.

HERCULES ADDS CAPACITY IN HOLLAND Hercules Inc, the chemical company, has announced a US$6 million investment at its resins plant in Middelburg, the Netherlands. The investment will enable the construction of a centrally located dispersion unit which will add capacity and introduce advanced process and product technology. The new unit should be operational by early 1999. “The new facility in Middelburg will allow us to expand our leadership position in Europe and the US and to take advantage of emerging markets,” said R Keith Elliott, chairman and CEO.

BP ENTERS NEW MARKET BP Chemicals is to enter the global market for 1,4butanediol (BDO) with a new production plant. The preferred site is BP’s existing chemical complex in Lima, Ohio, US, and final approval for construction, predicted to start by the end of 1998, will be based on further studies. Initial capacity will be 140 million pounds per year,

with additional infrastructure in place to’allow ease of expansion to 260 million pounds. The plant, scheduled for start-up in 2000, will be based on new technology developed by BP and the German company Lurgi OlGas-Chemie. “BDO is a growing business that will need new capacity using the best, most cost efficient technology,” said Gary Greve, president of BP Chemicals.

MOD0 INVESTS IN QUALITY The Swedish pulp and paper company MoDo is to invest SKrl.2 billion in measures to improve product quality. MoDo Paper will invest some SKr300 million in its fine paper and pulp operations, including a biological treatment plant at the Pont Sainte Maxence paper mill in France. Holmen Paper, which produces newsprint and magazine paper, is receiving SKr500 million, of which SKr200 million will be spent on the modemisation of a paper machine at the Braviken newsprint mill, Sweden. The Input of high quality pulp to a similar paper machine at the Hallsta paper mill, Sweden, will also be improved with a SKr90 million project.

POTLATCH EXPANDS PLANT CAPACITY Potlatch, the diversified for2st products company, has announced a significant expansion to its oriented strand board (OSB) plant at Cook, Minnesota, US. The US$62 million investment will increase the Cook alant capacity to 435 million square feet per year, from theIurrent 244 million square Feet.

Filtration

January 1998

Industry Analyst

Ahlstrom Corporation Profile Ahlstrom is a privately-owned paper and engineering company. It supplies systems and equipment to the pulp and paper industries worldwide, and it manufactures specialty papers and converted products. Analysis Ahlstrom’s operations continue to develop smoothly and during fiscal 1996 showed satisfactory performance, with most business groups exceeding their targets. Net sales for the group totalled FM1 1 821 million, which is slightly less than the figure reported for 1995. Income before taxes and extraordinary items amounted to FM626 million, and net income dropped to FM122 million. The Ahlstrom Paper Group improved its earnings significantly during 1996, and it reported pro forma sales of FM6582 million. In addition, its strategic position within Ahlstrom grew through the acquisition of the French companies Sibille-Dalle and Sibille Tubes. Ahlstrom’s aggregate net sales for 1997 are estimated to reach FM 15 billion, with the Paper Group accounting for nearly half of this figure.

Performance from the Filtration business, which is part of the Paper Group, was satisfactory, with net sales amounting to FM971.8 million. The engine filter market experienced positive growth, and turnover was especially strong in the US. Asia continued to be a highly competitive frontier, and sales levels in South America, after the Louveira filter-paper mill in Brazil had completed its first year of operation, were better than the company had expected. Despite the difficult market situation, the BLkerlund & Rausing Group reached prior year’s level of earnings, while the operational result from the Ahlstrom Machinery Group was satisfactory, but earnings were burdened by large extraordinary expenses because of the decision to withdraw from the production of recycled pulp in the US.

’ Except per share data. Contact Details President and Chief Executive Officer: Address:

Krister Ahlstrom PO Box 329 Etaeldesplanadi 14 FIN-00101, Helsinki Finland

Tel: +358 9 503 911 Fax: +358 9 503 9709 Website: http:Nwww.ahlstrom.com

Recent Events Filtration activities expanded into South America with the purchase of a mill in Louveira, Brazil. Ahlstrom Alcore and Ahlstrom Glassfibre joined Ahlstrom Paper to form the Ahlstrom Paper Group. Ahlstrom Paper Group fully acquired Sibille-Dalle and Sibille Tubes. The Advance Alcore Ltd core plant in Thailand, in which Ahlstrom Paper Group holds a majority share, was l

l

inaugurated,

Filtration

Industry Analyst

January 1998

Japan Vilene Co Ltd Profile Japan Vilene Co Ltd manufactures range of industrial applications.

dry-laid and specialty nonwovens for use in air filters, medical products, clothing, cars and a

Analysis During fiscal 1997 Japan Vilene concentrated on expanding its business by cultivating new business areas, developing new products, and by stepping up production outside Japan. These efforts were not in vain because the company increased net sales by 1.6 per cent, to X54.7 billion, after four years of continuing decline. However, tough competition in many product areas impacted on pricing levels, and the company found it difficult to raise consolidated operating profit. Operating income dropped Y127 million from a figure of Y2.8 billion reported in 1996, and mainly because of a V250 million loss Key Figures Japan Vilene

Co Ltd

Year ended

Net Sales Operating

Income

Net Income/(Loss) Net Property,

on write-down of securities and a Y950 million provision for loss on investment, the company had to register a net loss of V204 million. Sales of the company’s air filters climbed 8.4 per cent to YlO 855 million. This increase was brought about by the solid demand for main-line, general-purpose disposable filters and building air-conditioning filters. Sales of equipment and room filters also rose. Industrial and car materials sales fell by 4.2 per cent and 1.4 per cent respectively, while sales of apparel, and medical and consumer materials showed a growth of 1.0 per cent and 7.9 per cent.

Plant and Equipment

Total Assets

31.3 (u million)’

1997

1996

1995

1994

1993

54 719

53 842

54 624

59 982

66 685

2677

2804

2806

2292

3891

(294)

614

615

439

1414

21 657

22 894

23 832

23 630

23 892

64 459

67 372

67 363

68 474

71 222

Net Income/(Loss)

per Share

Y(2.81)

Sr8.48

Y8.49

sr6.06

w9.52

Total Stockholders

Equity

31 865

32 744

32 724

32 537

32 803

Number

of Employees

1270

’ Except per share data. Contact Details President: Address:

Shozo Iwakuma Vilene Building, Chiyoda-ku Tokyo 101 Japan

14-5 Soto-Kanda

2-chome Tel: +81 3 3258 3333 Fax:+81332583325

Recent Events With its German partner Freudenberg, Japan Vilene established and started anew production company in Suzhou, the People’s Republic of China, to develop its business in the inter-lining market in Asia. The Vilene-Freudenberg partnership also set up a company in the USA to produce nonwoven head-liners for the automotive industry. The company’s factories in Tokyo and Shiga received IS0 9001 certification.

l

l

l

Filtration

January 1998

MFRI Inc, USA

Pall Corp, USA

Key Figures (US$ million)’ Third quarter ended 31 .lO

Key Figures (US$ million)’ First quarter ended

Net Sales Gross income

Industry Analyst

Profit from Operations

Net Income Net Income per Common Share

1997

1996

28.5

25.3

7.3

6.2

1.9

2.2

Research

and Development

14.2

13.1

0.9

1.2

Earnings

before Income Taxes

25.6

25.9

18.4

17.3

1.11.97

2.11.96

US$O.18

I Net Earnings

US$O.26

Earnings

Nine months ended 31 .lO

’ Except per share data.

1997

1996

Net Sales

84.5

70.3

Gross Profit

21.8

16.3

Income from Operations

5.8

5.3

Net Income

2.8

2.7

Net Income per Common Share ’ Except per share

data.

per Share

1 Healthcare

121.6

126.9

II

Filtration

Industry Analyst

January 1998

Met-Pro Corp, USA

Sutcliffe Speakman plc,

Third quarter ended 31 .lO

Six months ended 30.9

Net Sales Income

before Taxes

Provision

for Income Taxes

Net income Earnings

per Share

16.3

16.3

3.0

2.6

Operating

1.2

1.0

1.9

1.6

Profit on Ordinary before Taxation

US$O.26

US$O.22

Income Provision

1

Profit

1997

1996

47.0

44.7

Profit for the Period

I Chemicals

Net Income

1 Except per share data. Earnings per share for the period ended 31 October 1996 were adjusted to reflect the three-for-two stock split which occurred on 8 July 1996.

2.9

2.5

2.7

1.9

2.1

20.0123

f0.0135

Turnover by Industry Segment Six months ended 30.9

before Taxes for Income Taxes

2.7 Activities

Basic Earnings per Ordinary Share

Nine months ended 31 .lO Net Sales

1

’ Except per share data.

1997

1996

18.1

19.3

1

Filtration

January 1998

Flanders Corp, USA

United Dominion Industries Ltd, USA

1

Third quarter ended 30.9

Net Sales Gross Profit

I-Operating

Income

Net Income Earnings Primarv

39.3

14.5

9.5

3.9

3.2

1.5

2.2

0.9

Third quarter ended 30.9

I 1

1997

I Gross r

Profit

Operating

Income

Net Income Earnings Primary

per Share,

I Sales Operating

US$O.O5

Income

Net Income Net Earnings per Common Share

Nine months ended 30.9

Net Sales

1997

Cost of Sales

per Share, US$O.lO

Industry Analyst

1996 II

441.3

357.6

316.4

248.2

36.1

33.8

26.7

24.3

US$O.60

US$O.54

il

I

1996

100.5

40.7

25.4

10.4

7.3

3.4

4.8

2.2

Nine months ended 30.9 I

1997

I I

Sales Cost of Sales

Operating

Income

Net Income

1 Except per share data. l Except per share data.

1996

1160.1

1044.0

825.8

738.2

96.3

90.9

111.2

57.5

I