John Crane expands further with flexibox bolt-o

ISSUE 30 JUNE 1998 ISSN 1359-6128

JOHNCRANE EXPANDSFURTHER WITHFLEXIBOX BOLT-ON TI Group plc has made a f267 million recommended cash offer for EIS Group plc, the fluid technology and aerospace group and parent company of Flexihox, the international sealing group, and pump companies Plenty and Hick Hargreaves. EIS is a specialist IJKheadquartered engineering comprising Fluid group, Technologies and Precision Technologies. Fluid Technologies includes process plant, fluid seals and power transmission businesses, mainly serving the process industries. Precision Technologies provides products and services to the aerospace and defence markets. In 1997, the EIS Group had turnover of E502.3 million and profit on ordinary activities before tax from continuing operations of &28.2 million. The offer price of s5.0.5 in cash for each EIS share, represents a 46 per cent premium over the closing middle market price on the day prior to

the offer announcement. The directors of EIS are to unanimously recommend EIS shareholders to accept the offer. Commenting on the offer. Sir Christopher Lewinton chairman of TI said: “The acquisition fits very well with Tl’s existing strategy and is an acquisition for growth.” Lewinton described the EIS couplings and fluid technology businesses as “complementary to our John Crane business” and said they would provide further potential for growth through Tl’s global network. Sir Norman Wooding, chairman of EIS, said that they recognised that the approach from Tl, with its largely complementary range of products and markets, significantly increased the opportunities available to EIS. The group began a restructuring programme last year, aimed at creating greater focus in its business. Lewinton said they looked forward to working with the

ABEL EXITS FOOD PUMP BUSINESS

EIS team to continue to drive this strategy forward and to develop the combined businesses.

Despite the share price premium, Tl appears to have

got value for money, with a bid valued at just 93 per cent of EIS’s 1997 sales. While there is some excellent strategic tit between the two groups in terms of sealing and aerospace, there is also some superfluous business activity which will need pruning. The expectation must be that Tl will

select what fits from the chronically diversified EIS and dispose of the rest. In terms of pumps, a decision

Abel GmbH has sold its centrifugal food pump line to Fristam Pumpen. 1 June 1998, From Fristam takes over production, sales and service of the Abel Hygienic Centrifugal Pump System. There were no job losses and the staff involved transferred to simply Fristam’s Hamburg facility, 30km away from Abel’s Btichen site. The pump line will continue to carry the Abel brand name for at least another three years. Fristam, a family company, has concentrated on hygienic stainless steel pumps for more than 50 years. Abel now focuses on membrane and piston pumps.

will need to be made about

Hick Hargreavesand Plenty. In terms of seals, John Crane and Plexibox appear to sit nicely together, despite some overlap. The deal will add approximately E240 million in sales to John Crane Sealing Systemsdivision, which had 1997 annual sales of f411 million. TI’s next move will be worth

watching;

despite

recent aggressive purchasing, there is still money left in the pot for further bolt-on acquisitions. n

CONTENTS GENERAL NEWS I,10,11,13,16 MARKET COMPANY WATCH 7-9 DIVIDENDS 10 SHAREWATCH DIARY 15

PROSPECTS 12 PEOPLE

Abel’s decision to come out of food appearsto be driven more by strategy than by finance. Abel faced the choice of either investing heavily in salesand marketing or withdrawing from the market. Disposing of the line in a clean, friendly deal, allows Abel to devote more resources to its core business,while Fristam expands its product offering and removes a competitor, with minimum effort. l

2-4 COMPANY 14 ECONOMIC

PROFILE REVIEW

S-6 14

system, or transmitted by any form or by any or otherwise w~fhouf the prior permission of the publishers. Readers in the IJSA 1 please see bpe&al regulations listed on back cover.

Pump Industry Analyst

June 1998

tion spawned construction of new high efficiency plants,” said H Kemer Smith, chairman and CEO of Stone &Webster.

CHINESE POWER PLANT TO OPEN IN 2001

HYDRAULIC PUMPS MARKET TO GROW

Westinghouse Power Generation has signed a US$170 million contract to supply equipment to a power plant in China. Westinghouse and its consortium partners, Black and Veatch of Kansas City, and CMEC of China, will design and supply the turbine and boiler islands for the 700MW, two unit, coal-fired Yuzhou power plant in Henan Province. Project construction is expected to begin later this year, and the plant will commence commercial operation in the first quarter of 2001. The project is being financed by the Asian Development Bank. The two 350 MW steam turbine-generators will be built in Westinghouse’s North American factories, and various stationary components and services will be supplied by Westinghouse joint venture partners in China.

The hydraulic power compomarket, nents including hydraulic pumps, is expected to grow throughout the next six years, according to a new market research study. The study, carried out by Frost & Sullivan, found that the market for hydraulic power components has experienced steady growth for the last seven years, and that manufacturers can anticipate opportunities in all of the end-user segments. The study predicts that enduser capital spending is expected to increase the demand for new products, and that product replacement is also increasing. The total US market for hydraulic power components was worth approximately US$6.4 billion in 1997, and is expected to grow throughout the forecast period 1998-2004. According to the study, the major technological trend in the industry is now electronics integration. The study also suggests that, although the hydraulic power component markets are growing, there have been relatively few market entrants in recent years, meaning that participants are increasing their market share, mainly through acquisitions. For further information about the study contact Kathleen Cooney at Frost & Sullivan. Tel: +l 650 237 4385; Fax: +1 650 903 0915.

TWO NEW 265 MW PLANTS IN NEW ENGLAND Stone and Webster Incorporated is to provide engineering, procurement and construction on two planned 265 MW combined cycle power plants. The plants, located in Rumford, Maine, USA, and Tiverton, Rhode Island, USA, feature identical designs and technical solutions. The new facilities are scheduled for commercial operation in the first quarter of 2000, when they will compete in the deregulated market. “We expect a cycle that is somewhat similar to a few years ago in the UK, where the impact of deregula-

CONSTRUCTION BEGINS ON NEVADA POWER PLANT Houston Industries Enova Corp have ground on a US$280 480 MW power plant

Inc and broken million, project

in Boulder City, Nevada, USA. The El Dorado energy project is scheduled to be completed by the end of 1999, and will incorporate state-of-theart combined-cycle natural gas turbine technology. The opening of the plant is expected to coincide with the electricity market in Nevada being opened to competition. “As other states adopt electricity deregulation, El Dorado represents the first of many similar plants likely to be built to sell power on the open market,” said Stephen Baum, chairman and chief executive officer of Enova Corporation.

BP ANNOUNCES MAJOR NEW PLASTICS INVESTMENT BP is to build a state-of-theart polyethylene plant at Grangemouth, Scotland. Work on the new plant will start immediately, with completion and start-up planned for 2000. Initial capacity will be 300 000 tonnes of linear, low density polyethylene per year, rising to more than 400 000 tonnes in line with market growth. The latest advances in BP’s proprietary Innovene technology will be installed, giving BP the flexibility to expand the plant and broaden its range of products to meet market requirements. As a further part of the f500 million development, designed to turn Grangemouth into one of the most cost effective and technologically advanced petrochemical sites in Europe, BP will reconfigure the existing Innovex plant. This will allow it to produce high density polyethylene, as well as the linear low density polyethylene that it already produces.

The new plant will be located next to a 250 000 tonnes per year polypropylene plant. Construction will be concurrent, and the polypropylene plant will be completed in 1999.

NIGERIAN GASTO-LIQUIDS PLANT AGREED Sasol, the South African fuels and petrochemicals company, and Chevron are planning to construct a 20 000 barrel per day gas-to-liquids products plant in Nigeria. The proposed plant would be capable of converting natural gas into synthetic crude oil, which would be further processed into petroleum products, principally high quality, environmentally superior diesel and naptha products. The agreement follows encouraging results from a recently completed commercial and technical evaluation. The proposed plant will incorporate proprietary technologies from the two companies. Chevron will provide its hydroprocessing IsocrackingTM technology, and Sasol will contribute its slurry phase distillate, Fischer-Tropsch technology.

MOTOR OIL BOTTLE RECOVERY PLANT PLANNED Fix-Corp International is constructing its first motor oil bottle ‘demo’ processing unit, and testing of the recy cling operation is to begin in the third quarter of 1998. Late last year, Fix-Corp signed a worldwide licensing agreement with the Federal Manufacturing & Technologies business unit of AlliedSignal Inc, giving Fix-Corp the rights to a process for the separation of motor oil from plastics. The patent for the process has been approved and FixCorp is working to apply the

June 1998

process in a massive cleanup of the environmentally hazardous motor oil bottles. A delivery date for the first demo processing unit is set for 1 July 1998, and four tentative testing sites have been selected in California.

NAPTHA CRACKER PROCEEDING ON SCHEDULE The planned naptha cracker project in Bataan, the Phitlippines, is moving into its next stage of development. The feasibility study, underway since September 1997, is scheduled to conclude in May this year. So far, the project’s developers have received a favourable soils report, indicating that the site is adequate for the plant, and contains sufficient water supply. Now listed by the Phillippines Board of Investment as a ‘pioneer project’, the Bataan oletin facility will be located in the Greenfield Development Petrochemical and Industrial Park in Mariveles.

RAPID GROWTH FEEDS ALLIANT INVESTMENT Alliant Foodservice, a US foodservice distributor, has broken ground on a US$lI million expansion of its distribution centre in Pboenix, Arizona, USA. Alliant offcials say the expanded centre will nearly double the current facility’s size, to nearly 300 000 square feet. Construction on the project, which will include new freezer, cooler and refrigerated space, is scheduled for completion in mid 1999. Alliant has chosen the Stellar Group. of California, to design and manage construction of the

Pump Industry Analyst

expansion. Mike Brown, market president of AlliantArizona, said that the company is growing so fast, that Alliant is investing in expansions or new gildings in more than 50 per cent of its market areas.

BEVERAGE CAN PLANT OPENS IN COLOMBIA Crown Cork & Seal Company, a supplier of packaging products, and the Colombian Ardila Liille organisation, have jointly opened their new plant near Bogoti, Colombia. The 50/50 joint venture company, Crown Colombiana SA, will produce beer and beverage cans for customers in Colombia and the surrounding region. The new plant, which represents an investment of nearly US$SO million, includes a two-piece aluminium can manufacturing line, with an annual production capacity of 400-500 million cans. The plant is sized to accommodate an additional line as market demand grows.

EIB SUPPORTS SPANISH BOTTLE PLANT The European Investment Bank, the long-term llnancing institution of the European Union, has advanced a loan for ECU30.1 million to VICASA SA to finance the construction of a new plant to manufacture glass bottles and jars for tbe food industry. VICASA SA is a subsidiary of Cristalerfa Espaiiola SA, part of the Compagnie Saint-Gobain group. The new plant will be built at Montblanc, in Tarragona province, and will be fully automated. When it reaches full capacity in the year 2001, its annual output will be 180 million small bottles, 140 million large bottles and 30 million glass jars for the food industry.

UK CHEMICALS OUTPUT FALLS CHINESE JOINT VENTURE TO PRODUCE RESINS Hercules Incorporated, a manufacturer of speciality chemical products, has announced the formation of a joint venture to manufacture hydrogenated hydrocarbon resins in China. Hercules’ partner in the venture is Beijing Yanhua High Technology Co Ltd. a subsidiary of Beijing Yanshan Petrochemical Group Co Ltd. The project is designed to produce 20 000 metric tons of resins, used in adhesive and plastics applications. The project will employ a flexible technology that allows for the manufacture of an array of resins,

INCREASED HELIUM CAPACITY FOR AIR PRODUCTS Air Products and Chemicals is to engineer and install the world’s largest helium liquefier at its facility in Liberal, Kansas, USA. The new unit will be capable of processing more than 600 million standard cubic feet per year, and will more than triple the Liberal plant’s current capacity, to more than I billion standard cubic feet per year. The capacity extension is scheduled to come onstream in the fourth quarter of 1999. It will purify and liquefy crude helium molecules obtained from an adjacent natural gas processing plant. The new helium capacity will be used in a variety of applications. Because of its many unique properties and applications, worldwide helium demand has grown at more than 8 per cent per year, for the past 25 years.

UK chemicals output fell by 0.6 per cent in 1997 according to the latest figures from the Chemical Industries Association. The decrease in output compares with an increase of 4.2 per cent in Western Europe as a whole. The outlook for the UK’s chemical industry in 1998 is also poor. The original forecast was for 2 per cent growth, but this is now expected to be close to zero, reflecting the continued strength of sterling and the weakness of manufactu~ng. This compares with continuing strong growth in Western Europe, although in view of lowering expectations for the UK, the rise in output may be lower than the forecast of 3.5 per cent. Chemical companies were mostly able to preserve the level of export volumes in 1997, though this was at the expense of margins. The level of chemical export volumes was 4.9 per cent higher in 1997, though the overall value of exports fell by 2.8 per cent. Chemicals import volumes rose by 3.3 per cent. Coupled with an overall contraction in domestic demand, rising penetration has ied to weaker home sales, and has pressurised output prices, which remain flat.

MEAD PLANS INVESTMENT IN NEWLYACQUIRED MILL The Mead Corporation, a US paper and forest products company, has acquired a speciality mill in paper Potsdam, New York, and plans to upgrade it. The mill, acquired from the Little Rapids Corporation. manufactures pressure sensitive tape paper, which supports the growth of Mead’s speciahty paper business. Mead ptans

June 1998

Pump Industry Analyst

to invest over the next three years to upgrade the mill’s capacity to satisfy key growing segments of the decorative paper market. The mill will become part of Mead’s Speciality Paper Division, which produces papers for decorative laminates used in countertops, cabinets and flooring, and a variety of industrial applications.

The Sakhalin Energy Investment Company, which awarded the US$40 million contract, is owned by subsidiaries of Marathon Oil, Royal Dutch Shell, Mitsui and Mitsubishi.

scheduled to be completed by late summer 1998. The facility is being developed primarily as a gas conservation plant, to processraw sour gas associated with oil production from adjacent fields. The plant will sweetenthe gas recovered,and also recover a portion of the hydrocarbon liquids in the gas stream.

1997, helped by increasing consumer awareness and the availability of recycling options.

The Pittsburgh, USAbased Steel Recycling Institute, says that recycling rates for steelpackaging, autoCHEVRON STARTS mobiles and appliances all UP NIGERIAN OIL increasedduring the past year. FIELD Steel can recycle rates were more than 60.7 per cent, with Chevron has begun producmore than 1.7 million tons of tion from the Gbokoda oil ALASKAN packaging recycled in 1997. field in the Western Niger EXPANSION TO The appliance recycling rate Delta, Nigeria. BOOST OIL also grew to 81 per cent, with Start-up of this significant more than 46 million appiiPRODUCTION FIRST PHASE OF oil field was achieved through antes recycled. Comparing the the newly installed facilities at PIPELINE The owners of the Prudhoe number of automobiles taken Olero Creek, only two and a Bay Unit, on the North Slope EXTENSION off the road in 1997, with the half years after the field was of Alaska, are to construct number of new cars produced, COMPLETED discovered. Gbokoda is the the largest oil field producshows a recycling rate of 97.6 second of four new fields The first phase of the tion module ever assembled per cent for automobiles, with scheduled to begin production Dauphin Island Gathering in the State. more than 13 million out-ofSystem has been placed in this year under the ChevronThe 2700 ton compressor servicecars recycled. operated joint venture. The service, making it the first module is part of the previousfirst, Opolo, in offshore eastern Gulf of Mexico ly announced Prudhoe Bay Nigeria, began production in Miscible Injectant Expansion pipeline to transport deep February and is currently pro- project. The US$160 million water natural gas production to onshore facilities in ducing 23 000 barrelsof oil per project will add 20 000 barrels day. Crude oil production from Alabama, USA. per day of incremental producWhen complemented by the new Gbokoda field will tion at Prudhoe Bay, by late CAMBREX the second phaseof the expan- increase to 40 000 barrels of 1999, and increase ultimate sion, due for completion this oil per day by the end of this Prudhoe Bay liquids recovery ANNOUNCES NEW summer, the system will have year. “By the year 2000, by 50 million barrels. The proVITAMIN B3 the capability to deliver up to Gbokoda’s output will increase ject will also increase the PLANT 1.1 billion cubic feet per day of the joint venture’s total pro- amount of natural gas that can Cambrex Corporation, a natural gas, to onshore markets duction by more than 85 000 be produced, processedand remanufacturer of speciality barrels per day,” said Richard injected into the’Prudhoe Bay and pipelines. and fine chemicals, is to begin Matzke, a director of Chevron reservoir, from 7.5 billion to 8 construction of a new niaciCarp, and president of billion cubic feet per day. This OIL AND GAS Chevron Overseas Petroleum increasedgas handling capaci- namide (vitamin B3) plant, at its Nepara Inc subsidiary DEVELOPMENT Inc. ty will boost oil production by in Harriman, New York. PROJECT IN 18 000 barrels of oil per day, While the new plant will WORK TO BEGIN by allowing the field operators have approximately the same RUSSIA to produce from a larger num- capacity as the existing faciliON CANADIAN Arctic Pacific Contractors, a ber of wells at any given time. ty, process improvements and joint venture between Fluor GAS PLANT It will also increasenatural gas automation will result in sigDaniel and Brown & Root Novagas Canada Ltd is to liquids production by 2000 Energy Services, has been nificantly lower operating and begin construction of a C$97 barrels per day. selected to provide project product costs.The new plant is million natural gas processengineering and support serexpected to be online by mid vices for a major oil and gas ing project, northeast of Fort 1999. Nepara will also upgrade St John, British Columbia, development project along its distillation facilities to proCanada. Russia’s Pacific Coast. duce a higher purity cyanopyThe West Stoddart project It is anticipated that the STEEL ridine feedstock for the vitaSakhalin II project will include includes a 160 million cubic min B3 plant. The new facility feet per day natural gas proRECYCLING multiple offshore oil and gas will produce high grade prodproduction platforms, subsea cessing plant and gathering CONTINUES TO ucts for pharmaceutical uses, lines; a 69 km, 16 inch natural pipelines, onshore oil and gas RISE food and nutritional product pipelines, onshore processing gas pipeline; and a parallel 6 applications and over the facilities, onshore terminals inch natural gas liquids Steel recycling rates continand onshore infrastructure. pipeline. Construction is ued to show steady growth in counter vitamins.

June 1998

Pump Industry Analyst

Wicor Inc, USA Profile Wicor, formed in 1980, operates six subsidiaries in two industries: energy and utility services; and pump manufacturing. The manufacturing subsidiaries are Sta-Rite Industries Inc, a manufacturer of pumps, filtration and water processing equipment for residcntial, agricultural and industrial markets worldwide; SHURflo Pump Manufacturing Co, which manufactures small, high-performance pumps and fluid handling equipment for the beverage/food service, recreational vehicle, marine, industrial and filtration markets; and Hypro Corporation, a manufacturer of pumps, accessories and pumping systems for the agricultural, marine, industrial, pressure cleaning and firefighting markets. Outlook Where We’re Growing, How We’re Growing is the main theme running through Wicor’s 1997 annual report. Wicor says it is moving towards creating long-term value for shareholders by capitalising on changes in the energy industry and pursuing global markets through its manufacturing subsidiaries, growing through strategic diversification. Since 1993, Wicor has acquired 10 companies and has entered 17 new markets. As a result, the industries in which Wicor now operates are quite varied, and are affected by a variety of business drivers and market forces. Through plant consolidations, manufacturing process improvements and smart purchasing, the manufacturing group trimmed its operating expenses by about 5 per cent during 1997. Wicor’s international business has increased 67 per cent over the past five years and represented 34 per cent of total manufacturing sales in 1997. The water systems, pool/spa and beverage markets generate most of Wicor’s foreign sales, with Key Figures Wicor Inc

significant business coming from Australia, Middle East.

Europe and the

The Wicor pump manufachlring group’s strategy is to specialise in niches where it can dominate and grow. Key to the group’s 15 per cent annual earnings growth goal are seIective acquisitions in higher growth, higher margin segments, market-driven products and targeted e;lobai expansion. fn his

closing~inthelZWlannualreport,GaorgeEWardeberg, Wicor chairman and chief executive offtcer, notes that “1997 was a year of solid accomplishment that underscores Wicor’s

potential

for growth.

I believe the best is yet to

come”. War&berg’s optimism is encouraging. Wicor is clearly going for growth and further pump-related acquisitions look very much part of the expansion strategy. n Year ended

(US$ million)

1997

1996

1995

1994

1993

Operating Revenues Of Which: Manufacturing Operations

1021.0

1012.6

860.6

867.8

849.5

424.8

409.9

337.8

311.2

274.7

Operating Income Of Which: Manufacturing Operations

94.0

90.7

79.1

66.6

64.0

35.0

26.2

20.2

22.2

17.8

49.5

46.8

39.5

33.2

29.3

Operations

20.1

14.6

11.8

14.3

9.4

Capital Expenditures Of Which: Manufacturing Operations

51.6

51.7

56.2

55.1

51.9

16.4

15.1

13.4

10.4

9.7

3625

3475

3368

3214

3222

Net Earnings Of Which: Manufacturing

Employees

at Year-end

Contact Details Chairman and Chief Executive Officer: Address:

George E Wardeberg 626 East Wisconsin Avenue Milwaukee Wisconsin 53202 USA

Tel: +1 414 291 7026 Web: www.wicor.com

Recent Events The group’s three 1997 acquisitions - Majmar Pompe, Hydrel and Fibredyne - added US$7 million to the year’s sales. Majmar Pompe is an Italian manufacturer of circulator and pressure boost pumps, used in residential and commercial heating systems, and to boost water pressure for tire protection systems, high rise buildings and municipal water supplies. Earnings broke records for the third consecutive year, rising to an all-time high of US$49.5 million. Earnings per share rose to US$2.68, for the second consecutive record year. l

l

June 1998

Pump Industry Analyst

Cardo AB, Sweden Profile

The Cardo Group’s operations are organised into three businessareas:Cardo Door; Cardo Pump and Cardo Rail. Pump products are marketed under the brand names ABS, Scanpump,Pumpex, SCABA, Frings and Lorentzen & Wettre. Outlook

Following the acquisition of the water treatment operations of the German company Frings, last year, Cardo Pump’s product range now includes submersible pumps, dry installed pumps, submersiblemixers, top entry and side entry mixers, and submersible aerators. The submersible aerators, System Frings, now produced and marketed by ABS complete the broad ABS product range for municipalities and industrial applications. Demand in the largest market segment for Cardo Pump, local authority water management, hasbeen helped by general market growth and the expanded sales organisation. For 1997 product deliveriesto the pulp and paper industry were slightly down on the previous year. Demand for small submersible pumps and pumping stations for the building industry is still below levels reported in the early 1990s. However demand for submersible drainage pumps recorded an improvement in 1997. Overall, Cardo Pump’s invoiced sales were SKr2491 million in 1997, up from SKr2347 million a year ago. After adjustment for the effect of exchange rate movements and acquisitions,the increasein invoiced saleswas approximately 2 per cent. Earnings after depreciation rose to SKr290 million from SKr273 last year. Key Figures Cardo Group Invoiced Sales Of Which: Cardo Pump Operating Earnings Of Which: Card0 Pump Average

No of Employees

In 1997, Southeast Asia accounted for approximately 4 per cent of Cardo Pump’s total sales.While Cardo remains uncertain of the impact of the economic crisis in SoutheastAsia on Cardo Pump, it expectsdemand for Cardo Pump’s products in the water supply, wastewater and pulp and paper sectorsto be adverselyaffected. Looking to the future, the company believes Cardo Door and Cardo Pump should continue to show good profitability and that developments at Cardo Rail will principally determine the Group’s short-term earnings trend.

Gardo is clearly aimiq to advance its position as an international exqineering group, If Cardo is to achieveits stated annual volume growth obje&ive of 10-15 per cent, it will need to look beyond organic growth alone. While expansion can be achieved through new product development, increasedmarketing activity and increasedemphasison the aftemxarket,Cat-doPump must focus on strategic company acquisitionsif it is to continue to grow its business.N Year ended (SKr million)

1997

1996

1995

1994

1993

7983

6371

6165

5524

5450

2491

2347

2330

2154

2052

567

651

588

339

248

290

273

247

167

ii8

7377

6179

5700

5725

5982

Contact Details

Presidentand Chief Executive Officer, Cardo AB: Address:

Kjell Svensson Cardo AB, Roskildevagen lB, Box 486, SE-201 24 Malmo, Sweden

Head, Cardo Pump: Address:

Hans Bomeson Cardo Pump AB, Krokslatts Parkgata4, Box 2056, SE-431 02 Molndal, Sweden

Tel: +46 40 35 04 00 Fax: +46 40 97 64 40

Tel: +46 31 83 63 00 Fax:+4631 184906 Web: www.abspumps.com

Recent Events l

l

l

During fiscal 1997, Cardo Pump established salescompanies in Estonia, Poland and Greece.In addition, the salesorganisation was strengthenedby adding representativesin Chile, Malaysia, China, Indonesia and India. In January 1997, Cardo Pump acquired the water treatment operations of the German company Frings. These operationshave an annual turnover of SKr40 million. Cardo Pump sharpenedits focus on service and rental operations during the year, by establishing a separateproduct-line organisation for these activities.

Pump Industry Analyst

June 1998

Crane Co, USA

Flowserve Carp, USA 1

Key Figures (USS million)1 First quarter ended 31.3 1998 Net Sales Of Which: Fluid Handling

Key Figures (US$ million)’ First quarter ended 31.3 1997

1998

526.8

467.3

118.0

88.1

Operating Profit Of Which: Fluid Handling

52.4

41.0

9.0

6.1

Income

46.9

35.7

Operating

29.9

22.6

Net Earnings

11.0

10.2

US$O.SS

US$O.50

Earnings per Share: Before Merger Integration Expense After Merger Integration Expense

US$O.65

US$O.49

Before Taxes

Net Income Capital

Expenditures

Net Income per Share (Basic) Net Income per Share (Diluted) 1 Except

per share

Crane Co, the diversitied manufacturer of engineered industrial products, has reported strong results for the first quarter of 1998. The net incame of US$29.9 million is a first quarter record for the company, and an increase of 32 per cent, compared with the US$22.6 million reported last year. Operating profit for the first quarter increasedby 28 per cent, to US$.52.4 million, on a salesincreaseof 13 per cent, to US$526.8 million. Operating margins for the quarter improved to 9.9 per cent of sales, from 8.8 per cent in 1997. Fluid Handling sales increased34 per cent in the

Net Sales

258.3

262.5

Cost of Sales

157.1

158.4

Gross Profit

101.2

104.1

7.4

6.4

22.0

29.3

13.1

16.8

Research, Engineering Development Expense

’ Except 2Combined

data.

quarter, to US$ll8 million, up US$29.9 million from the previous year. The acquisitions of MOVATS and Stockham Valves in 1997 contributed US$23.7 million to the increase. Operating profit increased 47 per cent to US$9 million. Acquisitions contributed US$2.3 million of the US$2.9 million increase in operating profit. Operating profit margins improved to 7.6 per cent of sales, compared with 6.9 per cent in 1997. Margins improved for engineered valves and pumps, but were down slightly for commercial valves due to integration costs. l

19972

and

Income

US$O.44

US$O.41

US$O.32

US$O.41

per share data. results

of BW/IP

Inc and Durco International

Flowserve Corp’s merger integration program continues to impact on the company’s results, though the long-term benefits are evident in the before-merger expenses figures. Earnings before merger integration expenses were US$18.1 million in the first quarter, up 8 per cent over the US$l6.8 million earned in the first quarter of 1997. The company said that this increase would have been 15 per cent had it nor been for divestitures and adverse currency translation effects. Net earnings after planned merger integration expenses of US$7.6 million, were US$l3.1 million. The merger integration expenses were primarily related to facility closures and relocation costs. First quarter sales were US$258.3 million, com-

Inc.

pared with sales of USs262.5 million for the combined companies in the first quarter of 1997. Adversk currency translations also reduced this figure by US% milIioa, which coupled with a US%5 million sales reduction from divestitures, impacted the quarterly salescomparison. Without these events, sales would have increased by

more than 3 per cent. Commenting on the results, Bernard Rethore, chairman and chief executive officer, said, “we achievedrecord first quarter earnings before merger integration expenses in spite of slightly lower sales and a higher original equipment component in the salesmix. This is a positive reflection on the integration program, which is ahead of schedule.” m

Pump Industry Analyst

June 1998

ITT Ind~st~~s Inc, USA

Gardner Denver Machinery Inc, USA

Key Figures (USS mill~on)l First quarter ended 31.3 19982 Total Sales Of Which: Fluid Technology Operating Income from Ongoing Segments Of Which: Fluid Technology Net Income

2166.6

472.4

307.6

140.6

123.0

35.1

23.9

55.6

44.3 US$O.37

per share data.

2 Excludes US$20 million pre-tax gain on the sale of Precision Casting business and other one-time items.

IlT Xndustrieshas reported double digit earnings which Travis growth, Engen, chairman, presideat and chief executive, attributes to the positive actions that the company has taken to improve performance over the last two years. These include the acquisition of Goukls Pumps (see Pump Industry Analyst, April 19971, which is now assimilated in the fluid technology division, and achieving synergies. 1998 first quarter net income was US$55.6 million,

1997

2143.5

Diluted Earnings Der Share US$O.46 Except

Key Figures (US$ rn~il~on)’ Three months ended 31.3

an increase

of 25.5

per

cent over the period in 1997. Operating income from ongoing segments rear;hed US$l4&6 million, up 14.3 per cent, or USs17.6 million, compared with a year ago. Total sales of US$2.14 billion were

Die

down slightly from the carcaning perhd in 1997, due to divestitures and foreign currency translation. The fluid technology businessreported first quarrer operating income of US$SS.l million, up 46.9 per cent from the same period last year. First quarter sales of USN72.4 million were up 53.6 per cent, a direct result of the Goulds Pumpsacquisition.Although the Industrial Pump Group experienced some market softness, and demand in Asia-FaciAc is down, the business overall continues to grow market share. During the quarter, the company received a US%14 million pump contact for a flood control project in Jefferson Parish, Louisiana, USA. I@

1998

1997

Revenues Of Which: Petroleum Products

89.8

66.1

19.8

13.7

Cost of Sales

59.4

44.5

Income before Income Taxes

13.2

9.0

Petroleum Products Operating Earnings

4.4

2.0

Net Income

8.1

5.3

US$O.51

US$O.36

Diluted Earnings per Share US$O.49

US$O.34

Basic Earnings par Share Except

per share data.

Gardner Denver, which manufactures pumps used in oil and gas productio% within its Petroleum Products segment, has reported much improved results for the first quartef of 1998. Ross Centanni, president and chief executive of&er, said that the revenues continued to expand in the first quarter, compared with the previous quarter and with the same period of the previous year, due to revenuesfrom newly acquired operations and increased petroleum product and engineered package shipments. Centanni also commented that the company experienced a slight slowing in demand for its petroleum products, as a result of the declining price of oil, and pointed out that future performance of the segment is de~nd~nt on future prices of oil and natUralgas.

Revenues for the Petroleum Products segment, which also includes well servicing, drilling and simulation activities, increased 45 per cent to US$19.8 million for the first quarter. Incremental revenues from acquisitions generated US%23 million of the US$rj.l million increase in revenues, The remaining increase resulted p~rn~~y from shipment of orders received in 1997, as a result of oil and gas well drilling and simulation. Operating earnings for the Petroleum Products segment increased by US$2.4 m~ilion, or 120 per cent, to US$4.4 million. The company has been abie to leverage its manufacturing operations and obtain significant price increasesin this business segment as a result of the demand far petroleum products. m

June 1998

Pump Industry Analyst

Textron Inc, USA

Cameo International Inc, USA

Key Figures (US$ million)’ Three months ended

Key Figures (US$ million)1 Three months ended 31.3

4.4.1998

29.3.1997

Revenues

2718

2551

Of Which: Industrial

893

785

239

216

95

82

142

125

Income before Of Which: Industrial

Income Taxes

Net Income Diluted Except

Earnings per share

per Share

US$O.85

US$O.732

1998

1997

Sales

151.3

123.4

Revenue

228.1

195.5

Cost of Sales

74.4

62.2

Gross Margin

99.6

82.2

Operating

44.6

31.6

27.6

19.8

US$O.72

US$O.52

Net Income Diluted ’ Except

data.

Income Earnings

per share

per Share data.

2 Restated.

This is Textron’s 34th consecutive quarter of year-toyear income growth, an impressive record, and one which looks set to continue. “Our first quarter performance was driven by solid results in each of our manufacturing segments,” said Textron president and chief executive officer, James Hardymon. Revenues increased by 7 per cent to US$2.7 billion, from US$2.6 billion the year before. Net income of US$142 million was up 14 per cent from US$125 million in 1997. In the Industrial segment, revenuesand income increased 14 per cent and 16 per cent,

respectively. This reflects the contribution from acquisitions and internal growth, combined with ongoing margin improvement. The acquisition of Maag Pump Systems (see Pump Industry Analyst, February 1997) has contributed to the growth achieved in this quarter. “Textron’s consistent growth will continue to be driven by internal growth and balanced by strategic international and domestic acquisitions. Our commitment to balanced growth will be the key to delivering double-digit revenue increasesin 1998,” said Lewis Campbell, president and chief operating officer. n

Cameo believesthat its first quarter figures for 1998 reflect the strength of the company’s market position, and its successfulfocus on growth markets. Both the first quarter revenues and net income are records. The revenues of US$228.1 million are 17 per cent higher than the US$195.5 million reported in 1997, and the net income of US$27.6 million is 39 per cent higher than 1997’s US$19.8 million. Cameo’s revenues from markets outside the US increasedto 70 per cent of revenues,compared with 66 per cent in the corresponding quarter of 1997. The operating income also increased, to more than 19 per cent of revenues, compared with 16 per cent in the first quarter of 1997. Revenues increasedin each

of Cameo’s geographic market segments compared with the first quarter last year. South America continued to be the most rapidly growing geographic market, while other intemational areas also had strong double-digit revenue growth. On a product line basis, the revenue was led by Reda’s electric submersible pump business. Sadly, Gary Nicholson, chairman and chief executive officer (CEO), died suddenly on 11 May. Gilbert H Tausch, member of the board of directors and former president and CEO of Cameo, will serve as chairman and CEO, on an interim basis. A special committee has been formed to search for a permanent CEO. n

Pump Industry Analyst

June 1998

come for the first quarter of the year has been much as expected, with operating profits much in line with last year. New order bookings are reported to have held up well Flowserve Corporation has and have been running at the announced an agreement in same level as last year, despite principle to acquire the some slippage in the timing of PCC EXPANDS assets and certain liabilities major contract awards. This is FLUID of the Valtek Engineering expected to correct itself later Division of Allen Power MANAGEMENT in the year. Announcing that Engineering Limited, from the disposal of Eimco mining BUSINESS WITH Rolls-Royce pk. process business would be TBV ACQUISITION The Valtek Engineering reflected in the group’s half Division has been the British Precision Castparts Corp- year results as an exceptional many of oration has acquired the gain, Lord Weir said that they licensee for Flowserve’s Valtek control business of TBV, a Worcester, continued with an active invesvalve products, with exclusive Massachusetts-based manu- tigation of possible acquisition territorial rights for portions of facturer of ball valves and opportunities. Confident that Europe, the Middle East and pipeline i~trumen~tion. TBV manufactures engi- overall progress will continue, Africa. The businessproduced profits remain likely to be salesof approximately US$ZO neered ball valves in aero- weighted towards the second million in 1997. Terms of the space-grade alloys for severe half of the year,addedLord Weir. pending transaction were not services,suchas fluid managedisclosed. Closing is expected ment of hydrofluoric acid, and QUALITY by the end of June and is sub- instrument installation details, ASSURED AT ie custom-engineered transmitject to the completion of due ter units mounted in pipelines ITT FLYGT diligence and the negotiation for accurate readings of flow, of definitive contracts. All of ITT Flygt AB’s 10 Bernard G Rethore, temperature, etc. The compa- Swedish facilities are now Flowserve chairman and chief ny’s markets include the chem- IS0 14001 certified. executive officer, said the ical/petrochemical, process, Last year, the ITT Flygt and pharmaceutical industries. acquisition would be an impormain manufacturing plant in “Our strategy of acquiring tant step in Flowserve’s effort Sweden became the first plant niche businesses that are to expand its global market of its kind to be certified immediately accretive and share in control valves and according to IS0 14001 and well-positioned for growth EMAS, the Eco-Management intelligent flow control solucontinues with the acquisition and Audit Scheme. The tions. While Flowserve already of TBV,” said William C remaining nine locations in has a number of manufacturing McCormick, chairman and Sweden have now achieved and service facilities in Europe chief executive officer of IS0 14001 certification by Det supporting its valve product PrecisionCastpartsCorp. Norske Veritas(DNV). lines, acquiring the Valtek The new acquisition will “It is only natural that our product licensee from Rolls- operate asTBV Newman’s Inc, products, which play such a Royce, added Rethore, would a unit of PCC Flow fundamental role in environallow Flowserve to work Technologies Inc. headquarmental and particularly waterdirectly with their current tered in Houston, Texas. PCC related protection issues, customers and build closer Flow Technologies is a major should live up to and follow relationships. division of PrecisionCastparts national and international rules Flowserve produces and COlQ. and regulations with regard to services a broad line of valve their manufacture,” said Leif E products, from manual and WEIR Ql RESULTS Carlsson, ITT Flygt’s presiautomated quarter-turn valves dent. “In fact, our ambitions IN LINE WITH to automatic control valves, are higher than those required LAST YEAR nuclear valves and valve actuaby laws and regulations,” tors. In addition to its Valtek Lord Weir, chairman of the added environmental manager, control valves and intelligent Weir Group plc, told share- Magnus Enell. systems, Flowserve’s valve holders at Weir’s annual genWork to certify the total products are sold under the eral meeting that the out- Swedish operations for IS0

FLOWSERVE SET TO ACQUIRE EUROPEAN CONTROL VALVE LICENSEE

Accord, Anchor-Darling, Atomac, Automax, Durco, Kammer and Sereg trade names. The company currently operates valve manufacturing plants in France, Germany, Italy, Switzerland and the USA.

14001 has been underway since December 1996. Once the groundwork for an effective system had been established, the necessary IS0 14001 documentation, implementation and education were undertaken by ITT Fly&s own personnel. ITT Flygt AB is the worlds leading m~ufac~rer and supplier of submersible pumps and fluid handling technology, The ITT Flygt main manufacturing plant in Sweden is certified according to IS0 9001, IS0 14001 and registered according to EMAS. The company is representedin over 120 countries and had a 1996 turnover of around SKr4.2 billion. ITT Flygt has 3700 employees and is part of I’IT Fluid Technology Corporation, a wholly-owned company within ITT Industries, which is listed on the New York, Midwest, Pacific, London, Frankfurt and Paris Stock Exchanges.

NEW VERSION OF ITALIAN VALVE DIRECTORY ISSUED The new edition of the Italian Valve and Fitting Manufacturers’ Association’s (AVR) directory is available, by request. AVR membership covers more than 80 Italian manufacturers of bronze and brass,cast iron and forged steel valves and fittings for industrial, domestic uses and water supply. These companies employ 14 000 people, and have a combined yearly turnover of approximately L5500 billion, of which 60 per cent is exported. For further information, contact AVR at Via Battistotti Sassi, 11/b - 20133 Milan, Italy. Tel: +39 2 73971 Fax:+3927397316 E-mail: [email protected]

June 1998

UNITED DOMINION SELECTS BEST NEW PRODUCT United Dominion Industries Ltd’s Best New Product of the year award has been won by a revolutionary software developed by program, Advanced Industrial Technologies, a manufacturer of fastening equipment and process control devices for automobile assembly lines and industrial processes. The Windows-based software monitors and controls precision fastening applications and provides a platform interactions for seamless between a large number of industrial control products to create an integrated shop floor control and data collection network. Fourteen United Dominion business units submitted entries in the competition, and four products were nominated. Unit presidents and other key managers selected the winner from the final four. The other nominees were the BOMAG multipurpose compactor, a specialised trench compactor; Waukesha CherryBurrell’s universal gear pump, a high-speed rapid cleaning gear pump for use in the automotive paint industry; and a Flair condensate separation system designed to reduce disposal problems associated with oily water drained from compressed air systems.

TI BIDS FOR JAPAN MARINE TECHNOLOGIES TI Group, the global specialised engineer, has launched a public offer for the remaining 49.86 per cent shareholding in Japan Marine Technologies (JMT). TI currently owns 50.14 per cent of the shares in JMT, which is publicly quoted on the Over the Counter stock market in Japan. TI is offering Y580

Pump Industry Analyst

per share, and assuming full acceptance, the maximum consideration payable will be Y2.8 billion. As at 31 December 1997, JMT had net assets of Y3.1 billion, sales of W. 1 billion and pre-tax profits of Y398 million. The offer is subject to relevant regulatory approvals and has the support of the board of JMT. An increased shareholding will enable Tl to accelerate the growth of its marine division by providing a stronger foothold in the Far East. JMT has a close working relationship with TI’s marine division and Lips, the leading marine propulsion business, in which TI recently acquired a 30 per cent stake (see Pump Industry Analyst, January 1998). JMT is a manufacturer and supplier of specialised seals and bearings to the world’s shipbuilding industry and other industrial applications. TI acquired its majority stake in 1991.

ABS SUPPLIES SHANGHAI’S NEW AIRPORT ABS Pumps International is to supply rain water and waste water pumps to Shanghai’s new Pudong International Airport. The order consists of more than 30 large pumps of the VUP and AFP types. The VUP pumps will be used for rain water pumping to protect the airfields from flooding. AFP sewage pumps of different sizes will be installed for the complete waste water treatment handling. According to Ake Bengtsson, regional manager of ABS Pumps International in Singapore, ABS was chosen as the supplier due to a combination of support, personal contacts and superior products. The first phase of Pudong International Airport is scheduled to be completed in 1999 with a capacity of 20 million

passengers, 126 000 flights and 1.3 million tons of cargo per year. When all three phases are completed in 2005, the airport will occupy more than 30 km2, have four parallel runways, 800 000 sq m of terminal buildings and an annual capacity of 70 million passengers and 5 million tons of cargo.

DERLAN INDUSTRIES ANNOUNCES CONTRACTS TOTALLING C$5.2 MILLION Corporation EG of Monterrey, Mexico, part of Derlan Industries Limited, has won a C$5.2 million contract for the delivery of fire service pumps to Pemex of Mexico. The pumps will be installed on offshore drilling platforms in the Bay of Campeche. Mexico, beginning in the last quarter of this year and ending early in 1999. The

Securities LLC and ING Barings Furman Selz were the placement agents for the notes. The company will use substantially all of the proceeds to reduce existing bank indebtedness. After application of the note proceeds, the company will have approximately US$140 million of available borrowing capacity under its US$200 million Bank Credit Agreement. Daniel W Duval, president and chief executive officer of Robbins & Myers Inc, stated: “The issuance of the Senior Notes, coupled with the successful public offering of US$65 million in convertible subordinated notes in 1996, provides us with an appropriate capital structure and the financial resources to continue to grow our businesses.”

TI’S TRADING AHEAD OF LAST YEAR

Sir Christopher Lewinton, chairman of TI Group plc, has told shareholders at the annual meeting in London that the Group has made a ~~~sa:,~ze~R”~~c~p~~~good start to 1998 with tradthe USA. Derlan Industries is a ing ahead of last year. He commented: “‘After the Toronto Stock Exchange-listed first four months, we are on global industrial corporation, plan, results are ahead of last manufacturing products for the year and order books remain aerospace, semiconductor and strong. John Crane, Forsheda, pump industries. Bundy and Dowty are performing well and will generate conROBBINS & tinued organic growth which, MYERS ISSUES coupled with a continuing successful bolt-on programme, US$lOOMILLION will accelerate the growth of OF SENIOR NOTES the Group.” Robbins & Myers Inc has Sir Christopher told sharesold US$lOO million of its holders that the Group’s policy Senior Notes to institutionof investing in its four world al investors in a private leader businesses was continuplacement. ing. “We invested around f 120 The Senior Notes were million in 1997 and we anticiissued in two series, Series A pate that 1998 will not differ much from this level of investin the principal amount of ment. In addition, we have US$70 million due 1 May 2008 and Series B in the prininvested some f300 million in cipal amount of US$30 million bolt-on acquisitions and we due 1 May 2010. The Notes have significant further balance sheet capacity to pursue have a weighted average interest rate of 6.8 per cent. other opportumties,” disclosed NationsBanc Montgomery Lewinton.

Pump Industry Analyst

FLOWSERVE IN US$lOOMILLION SHARE REPURCHASE PROGRAM In reporting continued progress on its merger integration program, Plowserve has announced that its board of directors has approved several actions to enhance shareholder value, including a US$lOO million share repurchase program. Bernard G Rethore, chairman and chief executive off% cer, said they were very pleased with the merger integration program and optimistic about the company’s future prospects. Specifically, he cited ahead-of-schedule progress in achieving merger integration benefits, customer enthusiasm for Flowserve’s unique strategy, growing confidence in the capabilities and cohesion of the new organisation, and excellent long-term business fundamentals. As a result, Rethore said the company is taking steps to develop an improved capital structure to take advantage of its strong franchise. These improvements are targeted at establishing the necessary resources to support future growth and ensuring a focus on increasing value for shareholders. The planned change in Flowserve’s capital structure includes the initiation of a US$lOO million share repurchase program, the establishment of short- and long-term credit ratings, and the filing of an initial US$250 million public debt shelf registration to provide enhanced capabilities to fund internal and external growth opportunities. “The share repurchase program and plans for additional credit availability demonstrate our strong confidence in the company’s future and the opportunities to grow our business,” noted Rethore. Purchases under the share repurchase program will be

June 1998

SHAREWATCH made on an open-market basis at prevailing market prices. The timing of any repurchases will depend on market conditions, the market price of Flowserve’s common stock, and management’s assessment of the company’s liquidity and cash flow needs. Based on current prices, completion of this repurchase program would reduce the number of outstanding shares by about 8 per cent. Repurchased common stock will be added to the company’s treasury shares. Flowserve also announced several additional steps that are being taken to augment its strategic capabilities and build further business in pumps, valves and seals, as well as its service capabilities. In addition to reaffirming the company’s commitment to expanding its service network, the board approved an additional investment to establish a new corporate learning center to provide product training for both employees and customers. Rethore also noted plans to present a major worldwide information system program to the board in July. He said this multi-year program is expected to provide significant additional cost savings and operational efficiencies for Flowserve.

CRANE RENEWS SHAREHOLDER RIGHTS PLAN Crane Co’s board of directors has adopted a new Shareholder Rights Plan, effective at the close of business on 27 June 1998. The Shareholder Rights Plan replaces the company’s existing plan, which was adopted in 1988 and expires on 27 June 1998. The new plan includes provisions similar to those in the prior plan. The rights under the plan will be evidenced initially by each share of the company’s com-

mon stock, and will be triggered when a person or group acquires beneficial ownership of 15 per cent or more of the common stock, without prior approval of the company’s board of directors. The rights will expire on 27 June 2008. Crane is a diversified manufacturer of engineered industrial products and the largest American distributor of doors, windows and millwork.

WICOR ANNOUNCES 2-FOR-1 STOCK SPLIT Wicor’s board of directors has approved a 2-for-l split of Wicor’s common stock. New shares to be issued as a result of the stock split have been distributed at the end of May to shareholders of record on 14 May 1998. The stock split increases the number of shares outstanding to approximately 37.3 million. In making the announcement at the company’s annual shareholders meeting, George Wardeberg, Wicor’s chairman and chief executive officer, said that Wicor stock had been performing very well, climbing close to US$SO per share recently. He said they believed the steady appreciation in the stock price reflected Wicor’s record of continuing growth and strong earnings. The 2 for 1 stock split was an indicator of Wicor’s confidence in its future and in its strategy for diversified growth. Wardeberg felt the split would also help to widen the distribution of Wicor’s stock and bring the price into a range that was accessible to more investors. In connection with the stock split, Wicor will increase its authorised shares of common stock from 60 million to 120 million. Wicor also declared its regular quarterly dividend of 43 cents per share on a pre-split

basis. The dividend is payable on 29 May 1998, to shareholders of record on 8 May 1998. The current annual dividend rate is US$l.72 per share on a pre-split basis. Wicor is a diversified company operating six subsidiaries in two industries: energy services and pump manufacturing. They are Wisconsin Gas Company, Wicor Energy, FieldTech, Sta-Rite Industries, Corporation and Hwo SHURflo Pump Manufacturing Company.

GRACO ANNOUNCES STOCK PURCHASE FROM FOUNDING FAMILY TRUST Grace Inc has entered into an agreement with its largest shareholder, the ‘Rust under the will of Clarissa L Gray, to purchase from the Trust 5.8 million shares of Grace common stock, at a price of approximately US$32.91 per share, or a total of US$190.9 million. This price represents a discount of 5 per cent from the average closing price of Grace stock over the 10 trading days ending 15 May 1998. Grace intends to use current available cash and arrange bank tinancing to fund the stock purchase. The stock purchase is expected to be completed in July 1998, subject to the completion of financing arrangements and other customary conditions. After completion of the transaction, the Trust will own 993 642 shares of Grace stock, representing approximately 5 per cent of the remaining outstanding shares. David A Koch, Grace chairman and a trustee of the Trust, and his wife Barbara G Koch, own an additional 578 848 shares. George Aristides, chief executive officer, described the repurchase as a “positive development” for Grace’s shareholders.

June 1998

US FINALIST SELECTED FOR JUNIOR WATER PRIZE A Reading, Pennsylvania high school student, Brett DePoister, has been nominated by ITT Industries and the Water Environment Federation (WEF), as this year’s US finalist for the International Stockholm Junior Water Prize. DePoister’s research consisted of fieldwork, lab tests and analysis to determine the effects of common pesticides and toxins found in the world’s water environment on frog embryos. Specifically, he studied the effects of zinc, which is commonly found in water sources located near battery plants, and diazinon, which is a common pesticide used by farmers and gardeners to kill leaf-eating insects. Sponsored nationally by ITT Industries and WEF, and globally by ITT Industries, the International Stockholm Junior Water Prize was established to engage and support the interest of young people in water environment issues at the regional, national, and international levels. The prize, now in its fourth year, is awarded annually to high school students who have contributed to water conservation and improvement through outstanding research.

ENVIRONMENT ONE DELIVERS RECORD FIRST QUARTER Environment One Corporation (E/One) achieved record first quarter revenues of US$5.4 million, up 19 per cent from US$4.5 million in the first quarter of 1997. Net income from operations increased 1.56 per cent to US$372 000, up from US$145 000 in the same period in 1997,

Pump Industry Analyst

with diluted earnings per share of US$O.OL? compared with US$O.O3 in the first quarter last year. According to E/One’s president, Steve Ardia, the company’s merger into Precision Castparts Corp is expected to be completed by mid-June (see Pump Industry Analyst, April 1998).

CHANGES AHEAD FOR VALVE SECTOR Valves and actuators are gaining importance in the process industries, due to increased end-user demand for more efficient, technologically advanced equipment. As manufacturers strive to develop automated control devices to meet customers’ needs, companies are begin-. ning to wonder about the longterm impact this trend towards automation will have on the valve industry. According to research conducted by Frost & Sullivan, US Markets for Industrial Valves and Actuators in the Process Industries, revenues for the total market were estimated at US$2.7 billion in 1996, and by the year 2003, should reach US$3.2 billion. The key market trends in the valve and actuator industry are end-user demand for more customer service and for new product applications. When replacing a valve or valve system, endusers prefer an automated control device that integrates well with their plant design. Also, with the strict EPA regulations, many older valve types are becoming obsolete, so the main growth is coming from the replacement of worn valves with new technologies. The application of microprocessor electronics is an important breakthrough because it provides more intelligence to the valve. This new technology should be able to monitor and

automatically adjust itself as process conditions change. Another technological trend is the use of new materials for enhancements. Manufacturers are using new alloy materials for valve bodies and special fluorocarbons for valve body liners to provide better sealing and longer valve life. Frost & Sullivan sees price competition and acquisition as the major competitive threats to smaller market participants. The report finds that several major manufacturers have grown significantly by acquiring companies with good reputations for high product reliability, good distribution channels and industry niche recognition. According to Frost & Sullivan, another major opportunity for growth is offshore production operations, which allow manufacturers to cut their lead time when supplying their products to international markets. For the purpose of this study, Frost & Sullivan has divided the US market into three segments: multi-turn valves; quarter turn valves; and actuators and control valves. This report looks at market size, growth rates, market trends, competition, strategies, and an end-user analysis for each of the major segments and for several subsegments. Report # 5752-12, published in March 1998, is priced at US$2950. For further details, contact Frost & Sullivan. Tel: +I 6.50 961 9000: Fax: +I 650961 5042.

BAKER HUGHES AND WESTERN ATLAS TO MERGE IN US$SS BILLION DEAL Baker provider

Hughes of products

Inc, and

the ser-

vices for the oil, gas and process industries, and Western Atlas Inc, a provider of seismic, wireline logging and reservoir information services, have announced a merger agreement, creating an oiltield technology and services company with the capability to offer fully integrated reservoir management from exploration through production. Under the terms of the definitive merger agreement, which was unanimously approved by each company’s board of directors, Western Atlas’ stockholders will receive 2.4 shares of newly issued Baker Hughes common stock, for each Western Atlas common share, subject to adjustment. Based on Baker Hughes’ closing price on 8 May 1998, the transaction would be valued at approximately US$5.5 billion. The combined company, which will retain the Baker Hughes name, is expected to have 1998 revenues of approximately US$6.5 billion and 36 000 employees worldwide. The company’s headquarters will be based in Houston, Texas. Max L Lukens. chairman, president and chief executive officer (CEO) of Baker Hughes, who will be chairman and CEO of the combined company, said that the combination brings together best-inclass products and services that are world leaders. According to Lukens, the merger is expected to generate approximately US$135 million in consolidation benefits in the first year. The transaction is expected to be completed by the end 01 Baker Hughes’ fiscal year and is subject to stockholder and regulatory approvals, mcluding expiration of the applicable waiting period under the HartScott-Rodino Act, and other customary closing conditions

Pump Industry Analyst

June 1998

PEOPLE l

l

l

Lord Weir is to retire later this year as chairman of the Weir Group. The Weir board has invited Sir Ron Garrick, currently chief executive of the Group, to take his place. Lord Weir, who has spent more than 40 years with the Group, will become honorary president, on his retirement as chairman. The search for a successor to Sir Ron is underway. Roger Fix, former president, John Crane Mechanical Seals, North America, has become chief executive, John Crane Mechanical Seals. In his new role Fix assumes global responsibility for all TI mechanical seals businesses, including recently acquired the Safematic and Seal01 businesses. Fix is an intemational manager who has worked all his career in the global process industries. Since joining TI in 1996, he has led the development of John Crane in North America. He will re-locate to the UK later this year. John Cousins continues as managing director, John Crane Marine. Both Fix and Cousins will report to Bill Laule, chief executive of Tl Group. John Potter has taken up the new role of group director, manufacturing and quality at TI Group. In this position he will be responsible for implementing lean manufacturing and world class quality initiatives across TI’s four business groups, John Crane, Bundy, Forsheda and Dowty. Potter, a main board director, was previously chief executive of John Crane. Gavin Borland has been appointed a director of Strachan & Henshaw, part of the Weir Group. Borland will have responsibility to develop the aftersales service and support aspects of Strachan & Henshaw’s material handling business. He joins from sister compa-

Weir Engineering Services, where as general manager, he led the team set up to break into the emerging total maintenance business sector, mainly in the oil, water and power industries. By taking part in Weir’s pilot board secondee scheme introduced last year (see Pump Industry Analyst, November 1997), Borland is already familiar with Strachan & Henshaw’s business based in Bristol, UK. Effective 15 May 1998, Krister AhIstrSm has been elected chairman of the board of A Ahlstrom Corporation. Ahlstrtim has been vice chairman of the board since February 1998, when Juha Rantanen became president and chief executive officer of the Ahlstrom Group. Charles M Osborne, president and chief operating officer of Grace Inc, has resigned effective 31 May 1998. Osborne will remain on the Grace board of directors, where he has been a member since 1995. The company has started the search for a replacement. Ingersoll-Dresser Pump Company has named Paul Schultz vice president, sourcing and George Tabback has been named chief information officer. In his new role, Schulz will be responsible for IDP’s worldwide strategic sourcing initiatives. He will report to Fred Hadfield, president and chief executive officer of IDP. Schultz comes to IDP after 26 years with Allied Signal, where most recently, he oversaw global commodity management. Reporting to Joseph J Kachurak, vice president and chief financial officer, Tabback assumes responsibility for planning and managing IDP’s information technology resources and capabilities. He joins IDP from IngersollRand.

ny

l

l

l

ECONOMIC GDP in the 15 EU Member States rose by 2.6 per cent in real terms during 1997, according to revised estimates by Eurostat, the Statistical Office of the European Communities in Luxembourg. EUR-11, which covers the 11 EU Member States participating in Economic and Monetary Union (EMU), and includes Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal and Finland, rose by 2.5 per cent in real terms last year, Data are broadly in line with first estimates issued in March. In both cases, growth in the fourth quarter was 0.6 per cent up on Q3, compared with 0.7 per cent between Q2 and Q3, while both were up 3.0 per cent on Q4 1996. Eurostat says these results are due mainly to a rise in private consumption in the last quarter of 1997. The EU trade surplus, which was 2.6 per cent of GDP, was down slightly because of slower growth of exports. The EUR-11 surplus was higher at 3.4 per cent of GDP. USA GDP change between Q3 and 44 1997 was 0.9 per cent, compared with 0.8 per cent between the previous two quarters. There was a 0.2 per cent fall in Japan, which had seen a 0.8 per cent rise in Q3. The net effect on G7 was a slowdown to 0.5 per cent, from 0.7 per cent in Q3. Annual growth, 1997 on 1996, was 3.8 per cent in the USA, 0.9 per cent in Japan, 3.8 per cent in Canada, 2.8 per cent in Australia and 0.7 per cent in Switzerland. All Member States with available data recorded growth between the second two quarters of last year. There was acceleration in Sweden (2.2 per cent), Denmark (1 .l per cent), the Netherlands (0.9 per cent) and Germany (0.5 per cent). Others, says Eurostat, showed “a more or less pronounced

REVIEW tendency towards a sIowinI down”. A number of Membe States consolidated their trade surpluses during the year; the Netherlands, for example stood at 8.2 per cent of GDF Others continued to enjo] good surpluses but remainec down on 43: Sweden still hat a surplus of 9.5 per cent 0 GDP and Finland recorded i surplus of 8.8 per cent. On11 the UK continued in the red a - 1.8 per cent of GDP.

EXCHANGE RATES AGAINST THE US DOLLAR Date: 15 May 1998

COUNTRY

RATE

Australia

A$l.59

Austria

Schl2.53

Belgium

BFr36.76

Canada

C$l.45

China

Yn8.28

Denmark

DKr6.78

Finland

FM5.41

France

FFr5.98

Germany

DMl.78

India

Rs40.56

[taly

L1756.45

lapan

Yl34.08

Malaysia

Rt3.74

Netherlands

Fl2.01

Norway

NKr7.49

Philippines

Peso39.75

Singapore

S$l.64

South Africa

R5.08

South Korea

Won1437.50

Spain

Ptal51.18

Sweden

SKr7.74

Switzerland

SFr 1.48

raiwan

T$33.44

l’hailand

Bt38.88

JK

f0.6 1

LISA

US$l .oo

5cu

ECLJ0.90

Pump Industry Analyst

June 1998

Tel: +1499 845 2924 Fax: +I 409 845 1835 E-mail: joanne@turbo-Iabtamuedu

WPecwe

FoIhtex Asia ‘98 Cantact: HQ Pte Ltd, 150 South E~R~~,#l3-~1~~~ Bridge Road, #13-BEFook Hai

29-30Septmber

~~~~~,S~~~~#8727

TeBwd,UK Pumps & Systems‘98 Contact: BPMA, The McLamn Building, 35 Dale End, Btrmingham

Tel: +65 534 3588 Fax: +6S 534 2330 Fax:+bS5342330 E-mail: [email protected],sg

34 7LN, UK

Tel: +44 121 200 1299 Fax: +44 123 200 1306 E-mail: [email protected] Web: http://www.bpma.org.uk

f@wm~

Pumps and SystemsAsia ‘98 Contact: HQ Link Pte Ltd, 150 South C3mact: Ikldge Road, Cl 3-N Fook Hai Building, Sin@pnO58727 Tel; +65 534 3588 Fax: +65 534 2330 E-m&i: [email protected]

21-24Skytm&er

Ho chi ImnIl city, vie1st htdochina International Exhibition t Conference on Pumps, Valves,Pipes Contact: HQ Link Fte Ltd, 150 South Bridge Road, #13-01 Fook Hai Building, Singapore 058727 Tel: +65 534 3588 Fax: +65 534 2330 E-mail: [email protected]

-,USA 27thTurbomachinery Symposium Contact: ‘Bubomachhmry Laboratory, TexasA&M University, College Station, Texas 77843-3254, USA

ORDER FORM FAX TO: PRIORITY ORDERS DEPARTMENT +44 (0) 1865 843971 EC Resident customers (not UK) please note VAT may apply

DELIVERY

PLEASE

Name:

ENTER

MY

ORDER

FOR

. .. . . SUBSCRIPTION(S)

TO:

[PIP 15+B l] Pump Industry Analyst (12 issues) ISSN: 1359-6128 @ US$502/&308*/NLG874 per subscription EC Resident customers (not UK) please add VAT at your national rate or state your VAT number below: l

My company is VAT registered. Registration number: .

PlusVAT@ . Total payable: US$ l

.....

. .

.

Note: Price is inclusive of postage and handling for all orders paid by credit card or cheque. Invoices without prepayment will additionally be charged for postage and handling costs.

l

Payment enclosed (please make cheques/eurocheques payable to Elsevier) Please charge my Access/Mastercard/Barclaycard/Visa/ American Express/Eurocard (delete as applicable)

Cardholder

name:

.. .

Card number: Expiry date: Signature: ,.. _.._......_ l

Please invoice me

Company purchase order no:

‘Today’s date: . . . . . . . . . . . . .._...........

Please print or attach your business card

.................................. ..............................

Position: Dept: . Organisation: Address:

.........

........................................

Fax: ............................. Nature of business: ....... RETURN

[JT:]

..................................

State: ............................................. Post/Zip code: .............. .Country: Tel: ...............................................

%

PAYMENT

l

ADDRESS

...........

. ..

................ ....................

.[SIC: ]

TO:

Priority Orders Department, Elsevier Trends Division, PO Box 150, Kidlington, Oxford OX5 1AS, UK Tel: +44 (0) 1865 843842 Fax: +44 (0) 1865 84397 1 E-mail: [email protected] or (USA orders only) Orders Department, Elsevier Trends Division, 660 White Plains Road, Tarrytown, New York 10591-5 153,USA Tel: (914) 524 9200 Fax: (914) 333 2444 CUSTOMER PLEASE

NUMBER

CIP153

QUOTE ON ALL ENQUIRIES

Pump Industry Analyst

DAVID BROWN IN STRATEGIC REVIEW David Brown Group is embarking on a wide-ranging strategic review, following the US$64 million purchase, last November, of Union Pump Company, one of the leading pump suppliers to the North American oil, gas and petrochemical industries (see Pump Industry Analyst, December 1997).

II

June 1998

the new global sales o rganisa- ( integration tion has taken an order from and system diagnostics,” said China for products from both Bernard G Rethore, Flowsources. David Brown says serve chairman and chief execthat none of these sales would utive officer. “The resulting have been made by either comtechnologies will deliver inpany on its own. creased plant operating time, Chris Cook, chairman, improved process efficiencies commented: “In a strong perand reduced maintenance costs formance, each of our three to our process industry businesses grew profit, genercustomers.” ated good operational cash Markos Tambakeras, presiflows and made real progress dent of Honeywell Industrial in the Group’s strategy of Automation and Control Business, said they were structurbecoming global to encompass the rapidly changing market ing the alliance so that engicontractors and conditions,” adding that at a neering time of much adverse comend-users could source intementary on UK engineering grated solutions through a sinprospects, it was especially gle contact and streamline propleasing to report another suc- ject implementation. cessful year for David Brown. The strategic business The company described alliance is an expansion of an the acquisition of Union Pump earlier joint project, the inteas “the outstanding developgration of Valtek’s “StarPac” ment of the year” and said that intelligent valve technology this move established David with the Honeywell EquipBrown as one of the worlds ment Health ManagementTM top five in the API pump marsolution, announced in Octket, measured by market share ober 1997. This solution puts and global reach. valve and process health analysis directly into vatv~ for FLOWSERVE AND unnrecedented ( formance. HONEYWELL set to be e FORM GLOBAL other nort

The company has engaged Schroders, the investment bank, to assist with the review, to consider whether the objective of establishing strong, global positions for each of its businesses, and shareholders’ might be better interests, served by an even further sharpening of its focus. For the year ended 30 January 1998, Group turnover was f191.9 million, up from f181.8 million a year ago, while pre-exceptional profit before tax was f19.2 million, up 6 per cent. Reorganisation costs for businc :sses- acquired . . penoa * gave rise to an m me excentional charge of E2.7 milL lion. This, together with anoth- ( ---------er exceptional c:harge of El.5 ALLIANCE -:I,:,-. ^- c..,., rrioooli ~11 ~rudl settlement of a Flowserve Corporation and contractual dispute dating back Honeywell Inc have formed a to the mid 1980s. reduced global strategic business profit before tax to E15.0 milalliance. lion, down from f17.2 million According to the compaa year ago. Cash flow from operations increased by 41 per nies, the alliance is designed to merge best-value automation cent to f18.2 million. Profit technology with industry leadgrowth in all three businesses was reported, with pumps up ing expertise in flow control technology. The alliance teams 28 per cent. Honeywell Industrial AutoThe acquisition of Union Pump Company has been a mation and Control with Flowmajor landmark in David serve’s Flow Control Division Brown’s development and the and its line of Valtek control valve products. Honeywell and synergy benefits have already Flowserve will work together been confirmed. The Group on a worldwide basis to pursue has already won an order from one of Union’s major cuscomplete automation projects that include measurement transtomers for David Brown barrel pumps for a Californian refinmitters, process control systems, ery, while the Group’s intemacontrol valves and asset maintional sales presence has tenance, and undertake joint secured a contract from product development efforts. Norway for Union reciprocat“The immediate impact ing pumps. At the same time, of this alliance will be the

---r------’

‘11.V

“1

11”,

ucts, incl mechanica At53

ALI

PUMPETEKNIKK

;:;

Expanding its r\-a-mli-me im Norway, ABS h; business of P Nord. Located

in )delhu

WPC~ nf

Narvik, Pumpetl resented ABS ir number of ye; addition, ABS complete cove Norwegian marl offices in Fredrikstau, n Kristiansand, Stavange Melbu and a head offi Sandvika, near Oslo. The markets served by AI Norway are waste water and clean water handling, process industries and building services.

I

41