Recovery stays in the pipeline

The market environment would remain difficult in the current year, not least because of increasing pressure on prices in project business areasMarket recovery and a return to strong growth remains very much on the distant horizon, according to some of the leading suppliers of fluids handling equipment - both from a UK and international perspective.

“Investments are still sluggish, but we are seeing a small increase in equipment refurbishment,” reports Axflow UK managing director Tony Peters, who sees UK business remaining flat, but with a weak sterling helping equipment exports. Another positive, he said, is the need to improve energy efficiency, which looks set become increasingly important over the next five years.

Peters describes business in the food sector as “steady”, with prepared foods ever more popular and leading to manufacturing demand. Environmental flood pump refurbishments have helped AxFlow’s business grow, while oil & gas is also showing signs of a pick-up.

On the downside is the tendency for blue chip companies to delay invoice payments, according to Peters. The trend, he says, “strangles the whole supply chain and extinguishes entrepreneurial company start-ups, which in turn gives the blue chip companies fewer customers - surely a stupid circle.”

Pumps and valves maker KSB, meanwhile, expects order intake and sales revenue to stay at prior-year levels in 2010, but is not ruling out a slight decline in performance. In the first two months of 2010, it said, figures were still below those of the previous year, though it continues to have a high level of orders in hand worth about a billion euros.

For 2009, KSB posted a 5% drop in sales to Euro1,892.8 million and orders down 11% overall to Euro1,934.0 million, as the global economic crisis left order intake considerably lower for pumps and valves used in building services or industrial processes.

The market environment would remain difficult in the current year, not least because of increasing pressure on prices in project business areas, according to Dr Wolfgang Schmitt , chairman of the German group.

Despite this, KSB has reported some significant recent orders, including: five giant main cooling water pumps for a new 1,200 MW heavy-oil fuelled steam power station in Rabigh, Saudi Arabia; four large water pumps for a pump station in Abu Dhabi; and 24 large waste water pumps for a pumping station in Mexico (see p40).

First quarter order intake at Sulzer Pumps, meanwhile, fell 13% to CHF427.0 million. The oil & gas market remained weak, while the demand from the hydrocarbon processing industry was stable. For 2010, the division anticipates lower order intake than in the previous year, said Sulzer, which does not anticipate a quick recovery in its key markets.

Record investment planned in water infrastructure

The UK water industry is set to make record investments in capital equipment, infrastructure and operational activities over the next five years, according to IMS Business Information Services. However, it warns, many suppliers are likely to miss out by not being up to speed with the opportunities on offer. For the period April 2010 to March 2015, water companies in England and Wales have committed to a £22.1bn capital expenditure, with a further £2.5bn scheduled to be spent in Scotland and £564m in Northern Ireland during the same period, a new IMS report estimates.

“What this level of investment means is that suppliers into the sector, the manufacturers of the equipment needed to maintain the water and sewerage infrastructure in the UK, are in for a profitable few years,” commented Elaine Coles, author of the report.

Water utilities, however, face some tough challenges throughout the industry’s next investment cycle, AMP5, the study noted. Companies, it said, will be obliged to invest at agreed levels in a range of improvements to water treatment and supply, while facing tight restrictions from industry’s watchdog OFWAT on the amount they can charge customers.

Nevertheless, AMP5 should provide “excellent opportunities for growth” for suppliers of goods and services to the water industry, reckons the IMS report, titled ’Selling into the UK Water and Wastewater Treatment Industry 2010- Key Drivers and Opportunities’.

Significantly, though, many companies that could be benefiting from the investment are failing to capitalise on the market opportunities. Although all water companies have to make detailed plans about their investment and procurement public, many suppliers simply don’t know how to approach the market or fail to understand the tendering systems.

“Despite the current economic conditions, the UK water and wastewater sector has one of the country’s most significant investment programmes firmly in place,” concluded Coles. “Manufacturers and consulting engineers could and should be making more of the opportunities presented to them.”

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