Doubling up

01 May 2000 00:00  [Source: ICB]

New chairman and ceo Daniel Valot is steering Techip into the new millennium, reports Doris Leblond

Technip has entered the millennium both with a new chairman and chief executive officer, Daniel Valot, and a doubling of size with the integration of KTI/MDEU, acquired from Mannesmann early in 1999. Besides practically doubling sales to E2.78bn, the one-year old subsidiaries have already contributed E9m to the net profits which last year soared 70% to E183m. The workforce has also increased from 6000 to 10000.

Last year was a satisfactory one for the engineering group, the more so as the strong growth it posted was achieved in an economic environment which affected most of its competitors. Project design and construction work remained at a high level and built up a hefty backlog of E3.47bn on 1 January 2000 including E9m for ex-KTI/MDEU. This represents 15 months' turnover with petrochemicals accounting for over E1bn, the highest backlog of all the group's four sectors, which also include refining, oil and gas production, and other industrial sectors.

A major portion of Technip's work is a result of a contract for the $750m Q-Chem petrochemical complex. The contract was signed in October last year with the Qatar General Petroleum Corp and Phillips jv where Technip is in a 50:50 partnership with Kellogg Brown & Root. In the group's overall sales last year, petrochemicals accounted for 17%. There were also several projects in Malaysia and Uzbekistan, and a project in the US for an acrylic plant.

Two further bonuses gave a boost to Technip's income last year. The purchase price of KTI/MDEU was brought down from E192m to E132m after its value was readjusted following an expert audit. 'We were refunded a third of the price paid because Mannesmann had not made sufficient provisions in its contracts and was losing money,' explains Valot. They are now provisioned correctly and goodwill depreciation remains unchanged at an annual E8m. It also means that Technip is left with a substantial cash flow of E149m, largely in excess of its run-of-the mill needs.

The second bonus was a further E57m provided by a reversal of the provision for geopolitical risk rendered obsolete because of greater geographic and client diversification, the group's solid financial base and the sharing of risks through systematic joint venture projects.

KTI/MDEU's contribution to this diversification is both geographic and technological. 'The new affiliates have given us a larger geographic spread and new bases, namely in Germany, the Netherlands, India as well as a solid foothold in the US,' indicates Valot. In the Netherlands the group now has a base of 400 people; in Italy, where Technip is already well established, it now has another office with a staff of 100. The New Delhi affiliate has a workforce hovering between 200 to 300.

The largest base acquired is in Germany with a workforce of 2000. 'Restructuring the new affiliates is now completed,' says Valot. 'It had already started before we took over. All affiliates were involved, but on a much smaller scale than in Germany where there were job cuts of 30% falling from 2700 to 1900 by the end of 1999. But we had a good agreement with the trade unions and the departures were carried out within a restructured company which found other jobs for the people made redundant or else pensioned them off.' Provisions had already been made for the E24m cost of restructuring.

'At the end of the process we have now reached the right size,' notes Valot adding that his group has had a 25-year ethylene partnership with KTI. 'They specialise in furnaces and hot section ethylene,' he points out, 'while Technip has good technology in the cold section.' In ethylene furnaces, KTI has a world alliance with Dow Chemicals to supply all its needs.

Besides ethylene, KTI specialises in hydrogen units and has an alliance with Air Products to supply all of its 'over-the-fence' units in that area. KTI also specialises in sulphur-extraction units.

Besides recurring contracts with Dow and Air Products, KTI has contracts of $90m in the US. Valot says he will use the new Houston base to find new clients in Latin America where the group is already well established, especially in Caracas where it has a base of 300 people. It hopes to develop further in the oil and gas downstream businesses on the back of president Chavez's industrial development strategy for Venezuela. The group is also well established in Colombia's upstream operation, has built a fertiliser plant in Brazil, has a small contract with YPF in Argentina and completed a refinery in Peru.

MDEU's operations are located in Germany and it specialises in the design and laying of onshore pipelines, high pressure pipes for power stations, both in Germany and for export, and underground gas storage. It also has an environmental sector involved in wastewater treatment, pyrolisis and waste disposal processes.

Besides bolstering Technip's technological niches, the new affiliates provide some 300 to 400 small- and medium-sized contracts every year, contrasting with the group's 'turnkey contract' culture. They have, on the other hand, not changed the group's light corporate structure with its increasing low-cost engineering centres worldwide. These currently account for 25% of the total workforce.

In addition to its traditional strict management of both technical and financial risks and the 'controlled' development of its computer/telecom/intranet capacities, Valot is taking the mega-merger challenge in the group's stride. 'We are growing with our clients,' he explains. 'By 2005 our strategy is to double Technip's sales. At the same time we must bolster our non-oil businesses because of the volatility of this sector.' This means developing the life-sciences, fine chemicals and other businesses.

Through its Krebs-Speichim affiliate, the group also serves the fertiliser and pharmaceutical sectors, mainly in France and Italy. 'But this business is a little dispersed. We would like to unify it within a European line,' says Valot. He adds that the group's backlog was already very diversified. Clients range from western oil and chemical companies to national companies of producer countries, joint ventures, and smaller clients in other areas like power stations, cement, etc.

He believes petrochemicals should pick up shortly from the need to build new capacity as the overcapacity situation diminishes. Valot is bullish about all the group's businesses this year as favourable factors multiply: the price of oil for upstream projects, higher growth in Asia, and completion of the large mergers in the oil industry.

With a cash flow that soared 29.5% last year and a sound financial basis, Valot is looking for new acquisitions but not in petrochemicals. 'We are very hefty in this area,' he notes, 'top of the class. We have built 14% of world PE capacities and 8% of PP capacities, we are very strong in aromatics and PTA and we have broadened our range of technologies. I don't see what another acquisition would bring us.'

Chemical contracts won by Technip

A $750m lumpsum turnkey contract awarded to a Technip/Kellogg Brown & Root consortium for the design and construction of the Q-Chem petrochemical complex at Maesaieed in Qatar came into force on 1 October 1999. The complex includes a 500 000 tonne/year ethylene facility, a hexene-1 unit, two PE lines with a total capacity over 450 000 tonne/year, related utilities and offsites.

Technip is carrying out the design and construction of a 255 000 tonne/year PE plant based on Stamicarbon technology at Kerteh in Malaysia. The contract was awarded in November 1999 by Petlin, a joint venture between Petronas, DSM and Polyfin.

In association with Parsons, Technip was awarded a $150m turnkey contract by American Acryl for the design and construction of a complex at Bayport, Texas. This includes a 120 000 tonne/year acrylic acid plant and a butyl acrylate unit, together with related offsites and utilities.

A 50 000 tonne/year caprolactam plant at Shijiazhuang, Hebei province in China, (above) has come onstream. This includes nine process units, utilities and offsites.

Peptisynthia, an affiliate of Solvay that specialises in the synthesis of peptides, awarded a contract in October 1999 for the expansion of its pharmaceutical plant in Brussels, Belgium.

Technip's affiliate Krebs-Speichim has won a E12m contract by Butachimie, a joint venture between Rhodia and DuPont, for project management and engineering services. It will design and construct a hydrocyanic acid facility at Chalampé in France.

Uzbekistan's Uzprommashimpeks has awarded a E60m contract to Krebs-Speichim for the design and construction of a plant, located near Tashkent, to manufacture components for pyrotechnic products from cellulose.

Fauji Jordan Fertilizer's new fertiliser complex at Bin Qasim in Pakistan has been brought onstream. Krebs-Speichim designed and built the DAP unit, the first of its kind in Pakistan, and the granular urea plant.

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