Flowserve outlines merger integration spend

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ISSUE 23 NOVEMBER 1997

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ISSN 1359-6128

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FLOWSERVE OUTLINES MERGER INTEGRATION SPE YD Flowserve’s board of directors has approved an approximately US$SS million merger integration programme. Included in the programme are capital investments of approximately US$25 million integration and estimated expenses of US$60 million. Of about US$25 the latter, million is expected to be recognised as a one-time restructuring charge in the fourth quarter of this year. The remaining US$35 million will be incurred over the three-year life of the plan, as required by current accounting rules. Bernard G Rethore, Flowserve’s chairman and chief executive officer, said that a total of 40 projects had been identified to date. They include rationalisations in facility North America and Europe, organisational realignments at the corporate and division levels, procurement initiatives, investments in training, and support for the new Service Repair Division. The company believes the programme will exceed its earlier estimates of US$35-45 million in additional annual operating income at the end of three years. Most of this income is

CONTENTS COMPANY

I

The smooth integration of BW/IP and Durco will be critical to Flowserve’s fortunes. This is very much a value-driven programme

:xpected to be produced by :liminating cost redundancies and the balance by procurement savings and earnings Increases from sales synergies. “We are very pleased with the magnitude of the expected savings and the return on these mvestments in integration,” added Rethore. ‘“The results we expect from this programme reaffirm the value-creation opIportunity we first saw in putting Durco and BWAP together. We are creating a stronger, more cost-effective organisation, which should translate into substantially increased value for our shareholders.” Rethore added that the company is studying additional integration projects and actions that may be announced during the fourth quarter. Operating in 25 countries, with more than 7000 employees, Flowserve produces highly engineered and modular pumps, precision mechanical seals, smart, specialty, and quarter-turn valves and valve actuators, and a range of related flow management services. For further details on Flowserve’s third quarter results, see Company Watch, page 9.

GENERAL WATCH+-9

NEWS l&13,16 FEATURE

and Flowserve is wisely acting quickly to realise cost benefits from the merger. While Elowserve’s confidence in its integration programme is encouraging, the combination of two powerful industry leaders does not automatically guarantee a successful partnership. ??

ITT INDUSTRIES PLANS PROFIT IMPROVEMENT PROGRAMME ITT Industries Inc is launching a company-wide programme designed to improve financial performance. The plan includes a long-term cost reduction programme for the company’s automotive business; an integration plan for the company’s fluid technology business, designed to accelerate the combination benefits of the recent acquisition of Goulds Pumps (see Pump Industry Analyst, October 1997); and the disposition of additional non-core businesses. As a result, the company will take an after-tax charge of US$145.8 million in the third quarter. Annual savings from the automotive restructuring are anticipated to be approximately US$ll5 million by

MARKET

l&l% PEOPLE

PROSPECTS

999. Following these restrucuring actions, employment at he company will be reduced ry approximately 1900. ITT Industries’ third quarter 1997 net income, before spe:ial charges, was US$54.7 milion, up 25 per cent over the ;ame period last year. Sales ram ongoing segments rose to JS$2.02 billion, up from JS$1.97 billion in the third quarter of 1996. After special :harges, the company reported I third quarter loss of US$91.1 nillion. ITT Fluid Technology .eported third quarter sales of JS$504.5 million, up 54.5 per :ent from the prior year, prinarily due to the revenue addi.ion from Goulds. Third quar:er operating income was LJS$42.9 million, up 65.0 per :ent from last year, excluding .he special charge. ITT Fluid Technology has also announced its intention to sell its Barton fluid measurement business. Barton had 1996 sales of US$73 million.

Currency fluctuations are to blame for the US$27 million fall in ITT Fluid Technology’s third-quarter sales, compared with the combined results of Goulds and ITT Fluid Technology a year ago. Disposing of the Barton fluid measurement business is further evidence of the inevitable pruning that the industry is now seeing, following the spate of merger and acquisition activity earlier this year. ??

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Pump Industry Analyst

November

ates, operates private power generation facilities, producing more than 2200 MW of electricity with another 1600 MW currently under development.

FRENCH TO PRODUCE PRIVATE POWER IN POLAND

NATIONAL POWER CZECHS OUT

Electricite de France (EDF), the French state-owned power generator, has bought a 55 per cent stake in the ECK heat and power generator in Krakow, Poland for nearly US$SO million. The Krakow plant has four coal-fired combined heat/electricity production units with an overall power rating of 1450 MW thermal output and 450 MW electrical output. EDF has guaranteed future investment and development of the facility, part of which will involve making the plant more environmentally friendly. This deal is the first privatisation in the Polish electricity sector to have been cqmpleted to date and follows new legislation which granted third party access to Poland’s power grid.

The UK electricity generator National Power has acquired a 48 per cent stake in the Czech Republic power company Elektrarny Opatovice (EOP). The flO0 million deal means National Power is now the largest shareholder in EOP, which has interests in seven major cogeneration and heating plants with a total capacity of 825 MW of electricity and 3900 MW of heat. The chief executive of National Power, Keith Henry, said: “It positions us well to develop other opportunities cogeneration for schemes which are expected within two or three years.”

NEW COGENERATION PLANT WILL BE PHILLIPPINES’ LARGEST

A US$700 million state-ofthe-art combined-cycle gas turbine (CCGT) power station is to be built at Staythorpe, UK. National Power, the UK energy generator, and ABB, the engineering company, will jointly develop the 1500 MW facility, which will be fully operational in 2003. Construction is scheduled to begin early next year. The new power station will use ABB’s GT26 advanced cycle gas turbine technology, which should reduce costs and supply up to two million people with cleaner electricity.

A major new cogeneration plant is to be built in Batangas, the Philippines. San Pascual Cogeneration, which is jointly owned by Texaco and Edison Mission Energy, will sell electricity from the new 304 MW plant to the Philippine electric compaNational Power the ny, Corporation. The 1.acility is scheduled to start-up in 2001, will cost an estimated US$400 million and is designed to operate on fuel oil or natural gas. Texaco global gas and power, a unit of Texaco Global Businesses, develops independent power plants world-wide and, with its partners and affili-

NEW COMBINEDCYCLE POWER STATION IN UK

HYDRO PROJECTS STILL HEALTHY The possible collapse of the Bakun hydroelectric project will have little effect on the global market for hydro pro-

jects says report.

a new

market

The World’s Top 50 Power Projects,

from MarketLine International, examines the 50 largest power contracts signed since 1990, assessing the roles of each participant in the project and the risks and returns involved. Twelve hydro contracts of above 1400 MW have been signed since 1990 with a total investment of US$47.2 billion, higher than both conventional thermal and nuclear projects. “Whilst the loss of Bakun would be a setback to all involved, MarketLine would not expect global repercussions from the project’s postponement,” said Jon Lane, industrial research manager. For more information about the report contact Russ Milbum at MarketLine International. Tel: +44 171 624 2200; Fax: +44 171 372 0130.

EASTMAN CHOOSES SPAIN FOR NEW PLANT TheEastman

Chemical Company has announced that its new 1,4-cyclohexanedimethanol (CHDM) plant will be built in San Roque, Spain. The construction of the 27 000 metric ton facility will begin in early 1998 and it could be on-line by the fourth quarter of 1999. Dr Gerald P Morie, vice president and general manager of Eastman’s Speciality Plastics, stressed that the choice of location was made to serve European customers from a local base. “Locating manufacturing facilities close to our customers is an important part of Eastman’s globalisation strategy.” said Dr Morie. CHDM is a monomer used in the manufacture of copolyester plastics, polymers and coating resins. The production of CHDM within the new plant is expected to incorporate an innovative blend of

1997

three CHDM technologies developed by Eastman, Davy Process Technology and TOWA Chemical Industry Co.

ETHYLENE PLANT- US$SOO MILLION CONTRACT AWARDED ABB, the engineering company has been awarded a US$SOO million contract to build a 800 000 metric tonnes per year ethylene plant in Yanbu, Saudi Arabia. ABB will construct the facility for the Saudi Yanbu Petrochemical Company, which is a joint venture between Saudi Basic Industries Corp and Mobil Yanbu Petrochemical Company Inc. Construction will begin later this year, and when completed in late 1999, the plant will produce ethylene using technology developed by ABB Lummus Global.

US CHEMICAL EXPORTS TO SET RECORD US chemical industry exports are on track to reach record levels of around US$70 billion for 1997 says the Chemical Manufacturers Association (CMA). Chemical exports for the first six months of 1997 were up nearly 12 per cent over the year-earlier period said Kevin Swift, director of economics at CMA, and at current rates would reach the record US$70 billion by the end of the year. Total chemical industry sales, Swift said, could reach US$398 billion for the year, The US chemical industry is the world’s largest. It accounts for more than 10 cents on every dollar of US exports and one quarter of total world-wide sales of chemicals and allied products. It is also one of the few US manufacturing industries which contributes to the positive side of America’s bal-

November 1997

mce of payments, with a prolected US$20 billion surplus for 1997.

JOINT VENTURE FOR CHINESE POLYESTER PRODUCTION The Belgian pharmaceuticals and chemical company, UCB group, and the Chinese company Shanghai Sunrise Corp have signed an agreement to develop the production of 7000 tonnes per year of powdered polyester resin in Shanghai, China. The initial investment of BFr360 million includes a pilot installation and a customer service laboratory and the annual turnover is expected to be BFrSOO million. UCB produces polyester resins which are used in paints for the protection of metallic surfaces.

GROWTH AHEAD FOR EUROPEAN PAPER CHEMICALS The pulp and paper chemicals industry in Europe is expected to grow, and is forecast to realise revenues 01 over US$4 billion in 2003, according to a recent markel study. This forecast appears ir the latest chemicals sector market study from intemational marketing consultancy Frost B Sullivan which looked al eight European markets fol hydrogen peroxide, sodium chlorate and coating chemical: used in paper manufacture The report concludes that the pulp and paper chemicals mar ket is a mature market which i: expected to show growth dut to the technological innovatior which will be needed to mab the industry more environmen tally friendly and responsive tc customer demands. For furthe

Pump Industry Analyst

nformation contact Kristina Menzefricke at Frost & Sullivan, quoting study # 3455. rel: +44 171 915 7824; Fax: +44 171 730 3343; E-mail: kristina-menzefricke @frost.com.

USHERS SPENDING g4 MILLION Ushers, the UK brewer, has announced that the $4 million investment programme at its brewery in nowbridge, England is underway. The development, due for completion in the summer of 1998, will increase brewing capacity by an initial 100 000 barrels a year. 18 new fermentation vessels are to be installed in February, which will have the capacity to ferment and condition in excess of 200 000 additional barrels a year, though initial investment is geared to an extra 100 000. Ushers has invested f9 million in brewing over the past five years.

CARLSBERGTETLEY RESTRUCTURING brewing The company Carlsberg-Tetley is to invest around L40 million in its breweries at Leeds and Northampton, England, to efficiency increase and extend capacity. The investment in production is part of a three year plan designed to create a profitable and competitive independent brewer and is accompanied by the closure, or sale, of its remaining three UK breweries at Burton, Alloa and Wrexham.

NEW COCA-COLA PLANT IN CHINA Swire Beverages, the drinks company owned jointly by Swire Beverages and The

( Iota-Cola

company,

has

aopened a new US$4S million

FJant in Dongguan, China. The new non-carbonated t beverage facility is China’s 1,argest at 50 000 square metres Vvith an annual capacity of 11 r nillion unit cases. The investr nent is a joint venture between siwire Beverages, which owns E1.5 per cent, and Dongguan Iluaxin Industry & Commerce (:orp, which holds the remaining 15 per cent. Products from t he new plant, which will i nclude Nescafe and minerEdised water, are to be sold throughout China, where 1.4 tJillion unit cases were sold last )/ear. “With the improvement ()f living standards, consumers in China are increasingly (demanding high-quality prodFarrell, 11cts,” said Mr John Iresident of Coca-Cola China. I

CHEVRON CHIEF WARNS ‘BE RESPONSIBLE’ Ken Derr, the chairman of the 2oard and chief executive off:er of Chevron Corp, the ener:y company, has warned that the sustained growth of the Elobal oil industry must be accompanied by a commitment to cleaner, safer and more sensitive operations. Derr told oil industry leaders at the World Petroleum Congress in Beijing, China, that the oil industry will be performing better than at any time in its history by the year 2000. “We have every reason to believe we stand on the threshold of a great expansion,” he enthused. However, he warned that achieving the predicted growth depended upon the industry’s global reputation. “Our industry is a world citizen with a proud heritage of stewardship over vital resources but we have to do more to prove we’re worthy of that role,” he told the congress.

BOC GROUP WINS US$l BILLION CONTRACT i consortium led by BOC, he UK-based industrial gaso group, has won a US$l bilion contract to build the vorld’s largest nitrogen genoration complex near Ciudad lel Carmen, state of Zampeche, Mexico. The facility will produce 200 million standard cubic ‘eet per day of high purity, ligh pressure nitrogen using he equivalent of 400 MW of :lectrical generating capacity md four massive air separation mits, each of which are bigger hen any previously construct:d. The consortium, made up If BOC (30 per cent), tiarubeni Corp of Japan (30 )er cent), Westcoast Energy ‘nc of Canada (20 per cent), ,inde AG of Germany (10 per :ent) and ICA Fluor Daniel ‘ram Mexico (10 per cent), will supply nitrogen to the :xploration and production lrrn of Mexico’s national oil :ompany, Petroleos Mexicanos. The nitrogen will be supplied :hrough approximately 50 miles of onshore and offshore 3ipeline and injected into the Cantarell offshore oil field.

ELECTRONIC COMMERCE IN THE PETROLEUM INDUSTRY Petroleum companies and their suppliers are being encouraged to adopt electronic commerce, the paperless exchange of business transactions, as quickly and efficiently as possible. The American Petroleum Institute (API) has announced that Harbinger Corporation of Atlanta, US, a provider of electronic commerce (EC) and electronic data interchange (EDI) services, has been selected to encourage and coordinate its introduction. “Petroleum companies and the entire industry have much to

Pump Industry Analyst

gain by using EDI strategies and practices,” said Kendra Martin, manager of API’s Electronic Commerce and Information Technology. For more information about the use of EC in the petroleum industry contact Mike Drews, API electronic commerce associate. Tel: +1 202 682 8590; Fax: +1 202 962 4730; E-mail: [email protected].

AMOCO AND BRIDAS MERGER ANNOUNCED A merger between the oil companies Amoco Argentina and Bridas Corporation will result in the new company being the second largest producer of oil and gas in Argentina. Amoco and Bridas have announced a strategic alliance which, pending definitive agreements, will include the relative,assets of both companies in the Southern Cone of South America. Bridas and Amoco Argentina have both been operating successfully in Argentina for nearly 40 years and the combined daily production from the new company will be over 140 000 barrels of oil equivalent.

POCO TO SPEND EXTRA US$50 MILLION Poco Petroleums Ltd has announced that its capital budget for 1997 has been increased by US$SO million to US$550 million because of continued exploration success. The additional capital will enable Poco to drill approximately 25 more wells during the last two months of this year, allowing the momentum of the exploration programme to continue into 1998 without interruption.

November

INDONESIAN GAS RESERVES CONFIRMED ARC0 (Atlantic Richfield Company), the global energy company, has announced provable and probable reserves in excess of 13 trillion cubic feet (TCF) of natural gas in support of a major liquefied natural gas (LNG) project in Irian Jaya, Indonesia. The development plans call for LNG production to begin around 2003 and further exploratory drilling is planned to assess the ultimate potential of the area. 13 TCF equates to approximately 2 billion barrels of oil and is one of the largest discoveries of natural gas in recent years, and may even be extended by an additional 6.5 TCF of possible reserves. Leon Codron, president of Atlantic Richfield Indonesia Inc, said; “ARC0 and our partners will drill more wells to certify additional reserves for a multipletrain LNG project - the first of its kind in Indonesia.” In recognition of the project’s size and economic importance to Indonesia, President Suharto named the project “Tangguh” (signifying strength).

OCCIDENTAL ACQUIRES BILLION BARREL FIELD Occidental Petroleum Corporation has acquired the Elk Hills Oil Field, California, USA with estimated reserves of 1 billion barrels of oil equivalent, from the US government’s Department of Energy. Obtaining the Elk Hills field for US$3.65 billion will immediately increase Occidental’s net domestic production by 46 000 barrels of oil per day and 93 million cubic feet of gas per day. Both are rise under expected to Occidental’s ownership to 80 000 barrels of oil and 300 million cubic feet of gas per day.

“This field will be producing for more than 30 years,” said Dr Ray Irani, Occidental’s chairman and chief executive officer.

SHANGHAI AND PHILLIPS LOOK TO EXPAND Shanghai Petrochemical Company and US Phillips Petroleum Company have entered into two letters of intent which will form the basis for negotiation regarding future production expansions. The first letter of intent sets out a joint agreement to conduct a feasibility study on a proposed benzene ethylenebutadiene polymer (k resins) which would be sited at Jinshanwei, Shanghai and would produce 45 000 tonnes annually. The feasibility study is expected to be completed by the end of next year. The second letter of intent set out the joint agreement to carry out preparation work for the expansion of the polyethylene production capacity of the, jointly owned, 100 000 tonnes per year plant which is currently under construction. This plant is expected to commence production in the first half of 1998 and both companies will continue discussions and finalise the increase in the polythene production facility.

CONDEA EXPANDING ALCOHOL PRODUCTION CAPACITY Condea, the chemical group of the German oil, gas and petrochemical company RWEDEA, has iinalised plans to expand its worldwide alcohol capacity by 120 000 metric tonnes by the year 1999.

1997

The capacity extensions will take place at the company’s manufacturing facilities at Brunsbuttel, Germany, Lake Charles, Louisiana, USA and Augusta, Italy.

PROPYLENE/POLY PROPYLENE FACILITY PROCEEDS Marathon Oil Company and Epsilon Products Company have executed definite agreements to develop polymer grade propylene and polypropylene facilities at Marathon’s refinery in Garyville, Louisiana, USA. Project engineering is underway and the plants are expected to be operating by late third quarter 1999. Marathon is to build a 800 million pounds per year purification facility to produce the propylene and Epsilon will construct a UNIPOL polypropylene facility, also producing 800 million pounds per year.

INDONESIAN POLYPROPYLENE PLANT Salim Chemicals and Amoco Chemicals Asia Pacific, a subsidiary of the oil company Amoco Carp, are working on a joint feasibility study to develop a 200 000 ton per year polypropylene plant in Merak, Indonesia. The new plant is expected to start-up in early 2001 and will employ Amoco’s gas phase impact co-polymer technology. It will be associated with the Salim-BP cracker project which will supply a secure source of propylene feedstock. Both companies have signed a Memorandum of Understanding to develop the plant, which will supply Indonesia’s rapidly growing film, injecting moulding, automotive and consumer goods manufacturers.

November 1997

Pump Industry Analyst

Blue Circle Industries plc 84 Eccleston Square London SWlV 1PX UK Tel: +44 17 1 8283456 Chairman: Christopher Tugendhat Group Chief Executive: Keith Orrell-Jones KEY FIGURES (f million) Year ended 31.12 1996

1995

1994

Turnover Of Which: Continuing Operations Discontinued Operations

1814.8

1774.6

1779.8

1678.8

1814.8

1766.0 8.6

1735.5 44.3

1610.5 68.3

Operating Profit Of Which: Continuing Operations Discontinued Operations

304.9

286.3

264.7

198.4

304.9

283.9 2.4

262.9 1.8

196.9 1.5

18 538

18 690

19 690

20 629

Average No of Employees

Operating Profit (f million) By Class of Business 1996

1995

244.3

241.5

Heating

35.0

17.1

Bathrooms

24.6

27.0

Property

11.9

3.3

Heavy Building Materials

Other

(10.9)

(2.6)

Total

304.9

286.3

By Geographical

Area 1996

1995

United Kingdom

87.8

82.4

Mainland

35.6

26.9

Europe

United States

75.3

63.5

Chile

43.1

45.5

Africa

24.7

31.6

Asia

38.4

36.4

Total

304.9

286.3

1993.

Blue Circle Industries plc is the parent of an international group of companies whose core businesses are the manufacture and sale of heavy building materials and heating and bathroom products. The heavy building materials operations are located worldwide while the heating and bathrooms businesses have strong positions in the UK and other major European markets. The Group aims to grow its core lnlsmesses through organic growth and acquisitions. The heating division, which accounted for 30 per cent of turnover during 1996, is one of Europe’s largest manufacturers of central heating products. The main brand names are Potterton and Myson in the UK; Thermopanel, MMA and LVI in Sweden; FinimCtal, Chappee and Ideal Standard in France; and Brotje in Germany. Key products for the division include radiators, boilers, gas fires, water heaters, pumps, valves, thermostatic controls and towel warmers. According to Blue Circle, during 1996 Myson Pumps enjoyed excellent markets and improved its financial performance. New investment in the production line for Myson Pumps at operations in King’s Lynn has created expanded capacity to improve service. 1996 saw the first phase of a major restructuring programme at Blue Circle Heating, which has resulted in a turnaround in the division’s financial performance. Centres of excellence in manufacturing and engineering have been created, streamlining the management process and improving communication throughout the division. ??

Pump Industry Analyst

November

Pentair Inc, USA

Crane Co, USA

KEY FIGURES (US$ million)

KEY FIGURES (US$ million) Three months ended 30.9

Quarter ended 30.9 1997

1996

Net Sales

482.1

Cost of Goods Sold

339.8

294.9

42.7

35.6

22.2

18.6

Operating

Income

Net Income

410.9

Nine months ended 30.9

1997

1997

1996

Net Sales Of Which: Fluid Handling

534.8

481.1

100.5

91.6

Operating Profit Of Which: Fluid Handling

54.2

45.0

8.9

6.7

Net Income

31.4

26.9

1997

1996

1315.5

1140.2

Nine months ended 30.9

Cost of Goods Sold

918.3

802.9

1997

1996

Operating

118.8

101.1

1520.9

1383.8

62.1

52.2

Net Sales Of Which: Fluid Handling

290.7

275.8

Operating Profit Of Which: Fluid Handling

146.5

122.6

22.4

17.4

83.3

67.2

Net Sales

Income

Net Income

Net Income

Pentair Inc has reported net income of US$22.2 million on net sales of US$482.1 million for the three months ended 30 September 1997. This represents an 18.6 per cent earnings per share gain over third quarter 1996 net income of US$l8.6 million, on net sales of US.%411.O million. According to Winslow Buxton, chairman and chief executive officer, Pentair’s North American businesses are generally achieving their performance goals. Results from Pentair’s water products businesses compared favourably with those of the third quarter of

1996. Following the completion of the General Signal Pump Group acquisition in August, Pentair started to integrate the acquired brands into existing pump business, FE Myers. Although Pentair originally expected the Pump Group acquisition to be slightly dilutive to 1997 earnings, it is now expected to be neutral in 1997 and accretive in 1998. Pentair announced in October that it is exploring strategic alternatives for its Layne & Bowler pump business, including a possible sale (see Pump Industry Analyst, October 1997). ??

Crane Co’s Fluid Handling sales for the quarter ended 30 September 1997 rose 10 per cent and operating profit increased 34 per cent in the quarter compared with the prior year. North American valve operations made significant contributions to both the sales and earnings growth. MOVATS, which was acquired in April, contributed US$7.6 million to sales in the quarter. Additionally, shipments

of cast steel and quarter turn valves were higher. The increased sales volume coupled with manufacturing efficiencies and reduced selling expenses led to the improved results. This improvement was tempered, however, by adverse product mix in the UK valve operation. Profit margins improved to 8.9 per cent of sales from 7.3 per cent at this stage a year ago. ??

November 1997

Pump Industry Analyst

Precision Castparts Corp, USA

Sundstrand Corp, USA

KEY FIGURES (US$ million)’ Three months ended 28.9.1997

KEY FIGURES (US$ million) Three months ended 30.9 29.9.1996

Net Sales

318.1

244.9

Cost of Goods Sold

248.2

193.2

20.7

13.3

US$O.SS

US$O.64

Net Income

Net Income per Common Share

Six months ended 28.9.1997

29.9.1996

Net Sales

635.1

410.9

Cost of Goods Sold

497.3

327.3

40.2

24.6

US$1.67

US$1.19

Net Income Net Income per Common Share I Except per share data.

Precision Castparts Corp has established four new earnings records in the second quarter of fiscal 1998, reporting the highest sales, gross margin, earnings before interest and taxes, and income before taxes of any quarter in the company’s history. The acquisitions completed in fiscal 1997 and 1998 contributed approximately 45 per cent of the 30 per cent increase in sales. The gross margin on these sales was a record US$69.9 million, or 22 per cent of sales. The company also achieved a record earnings before income tax of US$39.0 million, or 12.3

per cent of sales, and record pre-tax income of US$34.5 million. “The aerospace busi. ness has led our strong performance over the past yea or more,” said William C McCormick, chairman ant chief executive officer o: Precision Castparts Corp “Our Structurals division experienced a particulari) good quarter, and we pro ject a healthy aerospace business through the nex fiscal year, based on wha we can see right now. Le me hasten to add, however that our acquired businesse are continuing to grow ant make positive contribution to the bottom line.” ??

Net Sales Of Which: Industrial Operating Profit Of Which: Industrial Incoming Orders Of Which: Industrial

1997

1996

433

371

181

175

96

64

34

28

405

387

179

176

Nine months ended 30.9 Net Sales Of Which: Industrial

1997

1996

1262

1110

555

554

Operating Profit Of Which: Industrial

238

178

94

88

Incoming Orders Of Which: Industrial

1397

1177

557

552

restructuring Excluding charges and the one time gain, Sundstrand’s Industrial segment saw third quarter 1997 sales increase US$6 million to US$181 million on third quarter 1996 sales. Commenting on the results, Robert H Jenkins, chairman and chief executive officer, said that overall, Sundstrand experienced mixed results in its Industrial business in the third quarter. Good results at Sullair and Milton Roy were offset by production constraints at Falk and lower volumes at Fluid Handling. Sundstrand anticipates that Falk will be over its

production problems by the end of the first quarter of 1998 and that Fluid Handling will begin to see revenue growth in the fourth quarter. The outlook therefore for the remainder of the year continues to be for flat to slightly up revenue growth, with an operating profit margin in the 16 per cent range. The company repurchased 230 700 shares of its common stock during the third quarter and 205 900 shares to date in the fourth quarter. So far during 1997, the company has repurchased 1 061 712 shares of its common stock. ??

November 1997

Pump Industry Analyst

Textron Inc, USA

Environment One Corp, USA

KEY FIGURES (US$ million) Third quarter ended

KEY FIGURES (US$ ‘000) Three months ended 30.9

27.9.1997 Revenues Of Which: Industrial

2508

2248

584

554

Income before Income Taxes

230

207

Income from Continuing Operations

138

120

Nine months ended 27.9.1997

28.9.1996

Revenues

7726

6846

Of Which: Industrial

1864

1635

Income before Income Taxes

693

607

Income from Continuing Operations

408

354

double-digit Reporting increases in earnings per share and net income, Textron Inc has announced record third-quarter financial results, marking the company’s 32nd consecutive quarter of year-to-year income growth. Third-quarter earnings per share from continuing operations rose 16 per cent to US$O.81 per share. Income from continuing operations increased 15 per cent over year-ago levels to US$138 million,

1997

1996

Revenue

6977.2

6033.8

Cost of Sales

4126.4

3876.2

735.8

367.6

28.9.1998

Net Earnings

Nine months ended 30.9 1997

1996

Revenue

17 227.9

15 307.2

Cost of Sales

10 819.1

10 446.1

Net Earnings

1319.1

927.6

Environment One Corp has posted third quarter revenues and operational eamings increases of 16 per cent and 63 per cent respectively from 1996’s third quarter as a result of record unit shipments for Environment One Corp’s GP 2000 Sewer System pump and strong generator condition monitor

by a number of factors including growing needs for community sewers, reflected by the release of more record grinder pump orders and by a continued strengthening of the E/ONE Sewer System Distribution Network. Increased order activity for generator condition monitors drove the Detection Systems business growth. Stephen V Ardia, chairman and CEO, said that the outlook for the fourth quarter appears good and is moving above the trend. Ardia added that continued growth in sales volume and increases in productivity are allowing Environment One to raise its 1997 earnings expectations into the upper 40 per cent growth range over 1996 profits. ??

-1

and revenues grew 12 per cent to US$2.5 billion. In terms of Industrial, revenues and income increased 5 per cent and 12 per cent. respectively. The increaser were principally due to the acquisitions of Bunton Maag Pump Systems, Maaf Italia SpA and Burkland. Ir addition, results benefltec from improved perfor mance in the fastening sys, terns and contractor too business. ??

S&S.

Revenues totalled nearly US$7 million in quarter three, up from US$6 million in the same period last year. Net operational income was US$735 809 in the third quarter, up from USS4.51714 during the same period last year, an increase of 63 per cent. Total income increased 100 per cent in the period, due to a third quarter 19% note receivable write-off. Demand for the company’s products was fuelled

November

Pump Industry Analyst

1997

Franklin Electric Co Inc, USA

Flowserve Corp, USA

KEY FIGURES (US$ million) Third quarter ended

KEY FIGURES (US$ million) Third quarter ended 30.9

27.9.1997

28.9.1996

1997

1996

Net Sales

85.6

79.4

Net Sales

281.8

271 .O

Costs and Expenses

75.9

70.7

Cost of Sales

174.4

165.1

6.1

5.6

5.6

4.8

Net Income Nine months

ended

27.9.1997

Merger Transaction 28.9.1996

Net Sales

225.7

215.2

Costs and Expenses

202.6

193.5

14.6

13.7

Net Income

Research, Engineering and Development

.

Expense

Net Earnings

7.1

18.2

Bookings

279.6

267.3

Backlog

296.8

283.0

Nine months

larly in Europe where it has established again once global competitiveness. In the previous quarter, Franklin Electric announced the signing of a defini. tive agreement to sell Oi’ Dynamics Inc to Baker Hughes Inc. The sale bar just been completed (set General News, page 13). Lawson said the corn. pany plans to grow bott domestically and interna, tionally through a balance of internal new busines: development and acquisi tion. Franklin Electric is the world’s largest manufactur er of submersible electric motors and a leading pro ducer of engineered spe cialty motors and electroni products for residential industrial and municipa applications. ??

ended 30.9 1997

1996

Net Sales

845.0

813.0

Cost of Sales

512.2

491 .o

Research, Engineering and Development

16.9

15.7

Merger Transaction

10.2

Expense

Net Earnings

Motor manufacturer Franklin Electric Co Inc has reported third quarter net income of US$6.1 million, an increase of 9 per cent from US$5.6 million for the same period a year ago. William H Lawson, chairman and chief executive officer, said he was pleased with Franklin’s third quarter results. Sales and earnings were above the prior year which was also a strong quarter. Lawson added that it was worth noting that operating earnings and net income increased at a faster pace than sales and that this was achieved through improvements in productivity and cost control in its operations worldwide. According to Lawson, Franklin’s momentum internationally continues to improve, particu-

10.2

48.7

50.3

Bookings

869.6

851.3

Backlog

296.8

283.0

Flowserve Corporation, the industrial flow management company formed in July by the merger of BW/IP Inc and Durco International Inc, has announced third-quarter 1997incomeof US$l7.3 million, compared with combined income of US$18.2 million for the two companies in the third quarter of 1996. These results are in line with Flowserve’s revised estimates announced in September (see Pump Industry Analyst, September 1997). At the time, the company attributed the decline to temporary weakness in the chemical pump business, especially in Europe, and a slowdown in order rates in the industrial valve business. Third quarter sales of US$281.8 million increased

four per cent over the: US$27 1.O million reportec 1 in the third quarter of 1996. Nine month sale: s of US$845.0 million wen e four per cent above thee US$813.0 million in sale S in the same period last year ., despite adverse current: Y translation effects due to tb e strength of the US dollar Currency effects reduce1 ; sales by US$35 million, o r three per cent. The company also an nounced a five per ten It increase in quarterly book .ings to US$279.6 millio, compared with US$267. I million in the third quarte :r of 1996. Nine month book :ings of US$869.6 millio n were two per cent abov e the prior year’s nin e month bookings crf US$SS 1.3 million. ??