21 July 2009 00:00 [Source: ICB]
The downturn has hit water treatment firms hard. To buoy revenues, innovative producers are offering solutions that promise increased efficiency and a helping hand to customers through the downturn
DESPITE THE recession, water treatment companies are reporting fresh inquiries for their technologies and buoyant demand. Consumers are having to economize, but appear to acknowledge that they have to speculate to accumulate even in such a difficult trading environment.
The fragility of global markets weakened by recession has made producers even more conscious about cost cutting and efficiency, and increasingly wary of committing to new investment. Production cutbacks, shutdowns and heavily eroded margins now see players deliberate over decisions that would have seemed clear cut a year ago.
Clearly, many operations and plants have been affected, sending a ripple effect throughout the chain and hitting water treatment companies hard.
Nevertheless, the providers of these technologies and chemicals still appear largely upbeat about the future.
"Certainly, this kind of industrial downturn is bad news for everybody, but on a positive note this pushes us as a supplier, and our customers, to find new products and practices," says Harri Kerminen, CEO of Finnish specialty chemical company Kemira.
"Even in this recession, we are putting a lot of effort into research and development activities that I hope in the longer term will bring more effective water treatment processes.
"There will always be a need for clean water so if you're in the water business, then in principle, in the longer term you should have a positive outlook. The question for the industrial side of the business is just how long this recession will last," he says.
Since the market conditions worsened late last year, it's been extremely challenging for companies providing services for both industrial and potable water treatment. Although municipal waterworks continue to perform strongly, providing a stable market, the industrial sector has particularly felt the impact of the credit crunch.
US-headquartered water treatment provider Nalco reported a 13% drop in sales for the first quarter (Q1) of 2009 to $868.4m (€621m), compared with the year before. Net income fell 20.5% to $23.2m, as a stronger US dollar and weakened end-market took its toll.
Kemira's water business also saw demand dip in some industrial segments. However, the firm saw Q1 revenues increase by 11% to €150.7m thanks to decent municipal water treatment demand.
"We've seen an uptick in our water purification business for human drinking purposes. Intuitively, that makes sense because, regardless of the economy, people still need water to drink," says Paul Turgeon, president and chief operating officer of US-based company BWA Water Additives.
NEW PRODUCTS COUNTER LOSSES
"The industrial side, however, has been affected. The usage is still there but plant closures certainly impact your output along the supply chain," Turgeon says. "Volumes are down but there's still demand; in our case, we have been able to launch several new products that have countered some of the losses. We haven't lost customers, and they haven't changed the use of our products - some of them are just using a little less."
Numerous options are available for potential customers from energy and water audits that identify savings opportunities to specialty equipment and chemical applications.
Faced with rising costs and financial uncertainty in the current climate, businesses are starting to reassess their water use and processes, says Mark Eyers, global marketing manager at Netherlands headquartered Thermphos - a manufacturer of phosphorous-based raw materials and water management additives sold under the Dequest brand.
"Customers will look for improved performance of their water treatment chemicals but also will have to consider changing environmental perceptions and legislation," he says.
With a reduction of water treatment demand through production closures, operating downtime and even bankruptcies in the industry, water treatment chemical suppliers will be challenged with having to provide innovative solutions and associated services that are both highly efficient and offer an acceptable environmental profile, adds Eyers.
This view is shared by Erik Fyrwald, chairman and CEO of Nalco. "The [decreased] demand impact that we've seen has been from customers shutting down plants, but there is still an increased emphasis on both cost savings and the need to perform well, and on environmental performance," he says.
Although customers are now erring on the side of caution, a fairly minimal outlay can overhaul the technology and working practices used at a site.
Typical savings can be quite substantial, with potentially 40-70% of water being reused and no additional effluent costs being incurred.
Companies making biodiesel, for example, could reuse as much as 70% of their wastewater because their process effluent is derived from organic matter and by its very nature is amenable to treatment, adds Darren Gurney, project manager for aquaculture and water treatment at Germany's Linde Gas.
"Against a conventional solution, we're looking at something that would use less energy, requires less capital expenditure or indeed needs less space. If it produces a secondary by-product then we're looking to minimize and reduce that too," says Gurney.
Linde Gas is planning a product launch later this year and is currently under way with its first major installation. The oxyMBR - Oxygen Membrane Bioreactor - treatment process uses oxygen and air, rather than air only, to clean waste water.
Another example is Nalco's 3D TRASAR technology, says Fyrwald, which has helped to optimize cooling tower systems and minimize water use since its launch four years ago. Last year, it saved its customers some 63bn gallons (238bn liters) of water and its cooling water application won the US Presidential Green Chemistry Challenge Award.
Nalco has since adapted this technology for an entirely new market to improve the efficiency of boiler systems.
As a result, one US university not only cut energy use but also reduced greenhouse gas emissions by 113 tonnes/year and saved more than two million gallons of fresh water each year.
SAVE WATER, SAVE CASH
Similarly, a paper mill avoided $430,000/day in lost production by minimizing boiler outages, while a power plant was able to schedule its steam system maintenance shutdowns thanks to this technology, saving $700,000 per planned outage and shrinking the restart process from days to hours.
The challenge with any installation is ensuring that changes are planned carefully, so that plant efficiency isn't reduced along with water use. "Even though there are some cost savings, it's of paramount importance that there is no negative impact on the rest of the operations," says Turgeon.
The water that firms want to clean and reuse is usually in the utility section of a plant, supplying steam or cooling, he says. Many players are therefore extremely cautious about making these decisions because they don't want to adversely affect productivity.
Although the first half of the year has been littered with shaky performances by many producers, continued investment and innovation is essential to ensure future growth. Accordingly, the outlook for water treatment firms remains positive.
The water market sector is very resilient because it's driven by factors that are larger than cyclical events such as recession and investment cycles, says Gurney.
"What we're dealing with are global issues that affect everyone and these big issues tend to override recessionary or other factors," he says. "I would suggest that while it's not totally recession proof, water treatment companies will always have some stability compared with other sectors."
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