BWA Water Additives plans growth and acquisition

Smooth sailing

15 April 2009 00:00  [Source: ICB]

BWA Water Additives finds its niche to be profitable even in the economic downturn

THE CHEMICAL industry is awash in declining revenues, but if US-based BWA Water Additives is any indication, water treatment may prove to be one of those charmed markets that pass through the global economic storm unperturbed atop buoyant sales.

Since leaving the Chemtura fold in 2006, BWA has achieved annual revenue growth of about 20%, and the year ahead is unlikely to be any different, says Paul Turgeon, president and chief operating officer.

Indeed, he expects the growth to continue for the foreseeable future, and he is maintaining his prediction that the company will double its sales to between $250m-$300m within the next five to seven years.

"We are still on a 20%/year growth trajectory based on new products and growth in the water purification market," Turgeon says.

Revenues at the US-based supplier of water-treatment chemicals totaled about $130m (€96m) in 2008.

In part, the growth will result from continued expansion in the water purification market, which contributes 40% of BWA's revenues, says Turgeon. About 100 water purification plants will be coming on line over the next 12-18 months in Australia, India, China and the Middle East.

"The economy can uptick or downtick, but people still need to drink water," he notes. "Those are all infrastructure projects."

The industrial segment, which comprises oilfield as well as cooling systems and boilers, accounts for the remainder of BWA's revenues.

The company's optimistic growth projections also stem from BWA's strong product portfolio, which has expanded continually since the company was sold by US specialty chemical producer Chemtura in 2006.

Turgeon says BWA's new product development is targeting four major trends driving demand for new products bringing dramatic performance improvements: water scarcity; water reuse; severe service performance requirements; and public health and safety.

BWA's biocide Bellacide 350, which is three to six times more effective than alternatives, is an example of such a product, he says. And though the product has only been on the market for two years , a second-generation version of Bellacide 350, which offers five to 10 times greater effectiveness, is already in the works and on target to be launched in the next 12-18 months.

BWA's revenues in the US and Europe have not escaped the effects of the current recession, he acknowledges. However, growth larger than expected in Asia-Pacific and the Middle East and of new products has made up the difference, Turgeon says.

All AHEAD FULL
BWA is not retrenching in the face of the global recession. On the contrary, it is looking for acquisitions, Turgeon says, pointing to the strong backing of Bahrain-based Seera Investment Bank, which bought BWA from Close Brothers Private Equity in September.

Turgeon expects BWA to make more than one acquisition within the next 24 months. The acquisitions could extend BWA's product lines, bring new intellectual property or provide a new regional focus, he says.

"We're not looking for companies that do more or less what we do," he noted. "We want there to be strategic, knock-on growth potential." BWA also continues to hire. Staff numbered 35 when BWA became independent not quite three years ago, but today there are roughly 100.

None of these employees is in manufacturing, as BWA does not own any manufacturing facilities, instead outsourcing all production.

Two-thirds of BWA's production is supplied by former parent Chemtura from four facilities in the US and Europe.

Turgeon says there was never any worry that Chemtura, which recently filed for bankruptcy protection under Chapter 11, might leave BWA short of supply. As soon as the company went private, it developed secondary and tertiary sources for all of its products.

"Chemtura have a clear reorganization path. They are still running their assets and supplying product well, and it's clear they will continue to do so for the near-future," he says. "The Chapter 11 bankruptcy filing actually removed uncertainty. Pre-bankruptcy, we didn't know what was going to happen."

Under Chapter 11, companies can continue to operate while receiving protection from creditors. Chemtura filed for bankruptcy on 18 March.

"Ever since we were sold by Chemtura, one of our goals was self-sufficiency," he says. "We've developed secondary and tertiary suppliers and now source material from 18 different plants worldwide," Turgeon says.

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By: Clay Boswell
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