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Franklin Electric Co Inc, USA
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Energy Recovery Inc, USA
Franklin Electric Co Inc, USA
Key Figures (US$ million) Three months ended 31.3 2015 2014
Net Revenue
5.9
3.9
Cost of Revenue
2.5
1.7
Gross Profit
3.3
Operating Expenses Of Which: General and Admin Sales and Marketing
Key Figures (US$ million) First quarter ended 4.4.2015 29.3.2014 225.7
231.4
2.2
Net Sales Of Which: Water Fueling
179.2 184.6 46.5 46.8
11.4
6.0
Cost of Sales
154.2
153.3
6.3
2.0
Gross Profit
71.5
78.1
2.4
2.5
Selling, General and Admin Expenses 55.2
52.0
2.5
1.2
Restructuring (Income)/Expense
0.5
0.1
Loss from Operations
(8.1)
(3.7)
15.9
26.0
Net Loss
(8.3)
(3.7)
Research & Development
COMMENT In the first quarter of 2015, Energy Recovery Inc reported a net loss of US$8.3 million, largely due to non-recurring legal and CEO transition expenses as well as continued research & development investment in growth initiatives. This compares with a reported net loss of US$3.7 million in the first quarter of 2014. Total revenue increased by 50% to US$5.9 million in the current period, from US$3.9 million in the first quarter of 2014. The increase in revenue was primarily due to increased OEM shipments of US$1.9 million, slightly higher aftermarket shipments, and slightly higher oil and gas revenue attributable to the commissioning of the IsoGen™ turbo-generator for Saudi Aramco, the company’s first commercial installation of an energy recovery device in the oil and gas industry. Neither the first quarter of 2015 nor the first quarter of 2014 included any mega-project revenue. Recently appointed Energy Recovery president and CEO 8
Pump Industry Analyst
Operating Income Of Which: Water Fueling
19.4 29.2 9.6 9.1
Net Income
20.0
17.4
Net Income Attributable to Franklin Electric Co Inc
19.8
17.0
COMMENT Joel Gay said: “We continue to execute on a reloaded strategy for Energy Recovery, including the rationalization of our markets and geographic focus, the overhauling of our go-to-market strategy and the implementation of austerity measures. While we are still in early phases of execution, we expect that our efforts will position the company to produce quantifiably meaningful results in the coming quarters. Although our cost structure benefited from austerity, a number of nonrecurring expenses offset the impact of otherwise healthy revenue and gross margins during the period.” Energy Recovery is continuing to make progress with efforts to commercialise its products in larger markets such as oil and gas and chemical processing, with the recent installation of its first energy recovery device into a Saudi Aramco gas processing plant, and the initiation of field trials for the VorTeq™ fracing solution with partner Liberty Oilfield Services. n www.energyrecovery.com
At US$225.7 million, Franklin Electric Co Inc’s first quarter 2015 sales were down 2% on the 2014 comparator, while organic sales were up 1% excluding acquisitions and the impact of foreign currency translation. Without the currency effects and lower Pioneer branded mobile pumping equipment sales for upstream oil and gas development, organic growth was 4%, led by the Water Systems businesses in a number of developing regions. Fueling Systems posted 5% organic growth, another record quarter. Water Systems sales were down about 3% in the first quarter of 2015 to US$179.2 million. Excluding acquisitions and foreign currency translation, Water Systems sales were flat. Water Systems sales in the US and Canada decreased by about 10% on a year earlier, with mobile pumping equipment sales declining by about 50% due mainly to reduced demand in the oil and gas end markets. Sales of groundwater pumping equipment slipped 6% while sales of surface water pumping
equipment increased by about 4%. Water Systems sales were up 21% in Latin America and 4% in the Asia Pacific region but slipped 3% in the Middle East and Africa and 11% in Europe. Fueling Systems sales decreased 1% to US$46.5 million, but were up about 5%, excluding foreign currency translation and acquisitions. The Fueling Systems sales growth was primarily from fuel management systems and pressure pumping systems partially offset by a decline in sales of dispensing systems and storage tanks. Operating earnings were well below the company’s expectations and guidance due to the strengthening of the US dollar and the lower price of oil. To recover operating margins, Franklin Electric has taken pricing actions, is controlling fixed costs and is using its global sourcing network to reduce input costs. Franklin Electric purchased the remaining minority shares of Pioneer Pump during the quarter (see Pump Industry Analyst, March 2012). n www.franklin-electric.com
June 2015
Energy Recovery Inc, USA
Franklin Electric Co Inc, USA
Key Figures (US$ million) Three months ended 31.3 2015 2014
Net Revenue
5.9
3.9
Cost of Revenue
2.5
1.7
Gross Profit
3.3
Operating Expenses Of Which: General and Admin Sales and Marketing
Key Figures (US$ million) First quarter ended 4.4.2015 29.3.2014 225.7
231.4
2.2
Net Sales Of Which: Water Fueling
179.2 184.6 46.5 46.8
11.4
6.0
Cost of Sales
154.2
153.3
6.3
2.0
Gross Profit
71.5
78.1
2.4
2.5
Selling, General and Admin Expenses 55.2
52.0
2.5
1.2
Restructuring (Income)/Expense
0.5
0.1
Loss from Operations
(8.1)
(3.7)
15.9
26.0
Net Loss
(8.3)
(3.7)
Research & Development
COMMENT In the first quarter of 2015, Energy Recovery Inc reported a net loss of US$8.3 million, largely due to non-recurring legal and CEO transition expenses as well as continued research & development investment in growth initiatives. This compares with a reported net loss of US$3.7 million in the first quarter of 2014. Total revenue increased by 50% to US$5.9 million in the current period, from US$3.9 million in the first quarter of 2014. The increase in revenue was primarily due to increased OEM shipments of US$1.9 million, slightly higher aftermarket shipments, and slightly higher oil and gas revenue attributable to the commissioning of the IsoGen™ turbo-generator for Saudi Aramco, the company’s first commercial installation of an energy recovery device in the oil and gas industry. Neither the first quarter of 2015 nor the first quarter of 2014 included any mega-project revenue. Recently appointed Energy Recovery president and CEO 8
Pump Industry Analyst
Operating Income Of Which: Water Fueling
19.4 29.2 9.6 9.1
Net Income
20.0
17.4
Net Income Attributable to Franklin Electric Co Inc
19.8
17.0
COMMENT Joel Gay said: “We continue to execute on a reloaded strategy for Energy Recovery, including the rationalization of our markets and geographic focus, the overhauling of our go-to-market strategy and the implementation of austerity measures. While we are still in early phases of execution, we expect that our efforts will position the company to produce quantifiably meaningful results in the coming quarters. Although our cost structure benefited from austerity, a number of nonrecurring expenses offset the impact of otherwise healthy revenue and gross margins during the period.” Energy Recovery is continuing to make progress with efforts to commercialise its products in larger markets such as oil and gas and chemical processing, with the recent installation of its first energy recovery device into a Saudi Aramco gas processing plant, and the initiation of field trials for the VorTeq™ fracing solution with partner Liberty Oilfield Services. n www.energyrecovery.com
At US$225.7 million, Franklin Electric Co Inc’s first quarter 2015 sales were down 2% on the 2014 comparator, while organic sales were up 1% excluding acquisitions and the impact of foreign currency translation. Without the currency effects and lower Pioneer branded mobile pumping equipment sales for upstream oil and gas development, organic growth was 4%, led by the Water Systems businesses in a number of developing regions. Fueling Systems posted 5% organic growth, another record quarter. Water Systems sales were down about 3% in the first quarter of 2015 to US$179.2 million. Excluding acquisitions and foreign currency translation, Water Systems sales were flat. Water Systems sales in the US and Canada decreased by about 10% on a year earlier, with mobile pumping equipment sales declining by about 50% due mainly to reduced demand in the oil and gas end markets. Sales of groundwater pumping equipment slipped 6% while sales of surface water pumping
equipment increased by about 4%. Water Systems sales were up 21% in Latin America and 4% in the Asia Pacific region but slipped 3% in the Middle East and Africa and 11% in Europe. Fueling Systems sales decreased 1% to US$46.5 million, but were up about 5%, excluding foreign currency translation and acquisitions. The Fueling Systems sales growth was primarily from fuel management systems and pressure pumping systems partially offset by a decline in sales of dispensing systems and storage tanks. Operating earnings were well below the company’s expectations and guidance due to the strengthening of the US dollar and the lower price of oil. To recover operating margins, Franklin Electric has taken pricing actions, is controlling fixed costs and is using its global sourcing network to reduce input costs. Franklin Electric purchased the remaining minority shares of Pioneer Pump during the quarter (see Pump Industry Analyst, March 2012). n www.franklin-electric.com
June 2015