Major pump companies are making key changes in personnel, and they are starting at the top.
With at least 12 major companies announcing new executive leadership in the past 14 months, this year’s State of the Industry trend became obvious early. Industry experts say one reason is simply that the old-school executives are retiring. Others say they believe it is driven by companies getting lean and paying more attention to the bottom line. Others insist that companies have fewer acquisitions to choose from so they are looking for executives with sales and marketing backgrounds to run businesses from the perspective of driving growth through exposure and market share.
Whatever the reasons, it’s happening. Some major companies are looking for fresh faces, fresh ideas and fresh perspectives to lead their growth in 2015.
Big changes are not only happening with leadership. In October 2014, Charlotte, North Carolina-based SPX split into two companies, spinning off its flow products division as a stand-alone company with the remaining part continuing as a separate infrastructure company. Meanwhile, in November 2014, oil & gas giant Halliburton announced plans to spend $34.6 billion to purchase its biggest rival, Baker Hughes, uniting the two oilfield service providers. Other companies continue to merge brands and form huge conglomerates. In April 2014, Accudyne was formed after a merger of several brands including Milton Roy, Sullair and Sundyne.
Even though this trend of new leadership is a big story as we enter 2015, rest assured that many companies are sticking with their solid foundation of stable leadership. In another growth strategy, these companies are focusing on new innovation, increased efficiencies and renewed dedication to the end user.
In our annual State of the Industry report, we have direct comments from some of the new leaders of major pump companies. On the following pages, we also have commentary from some of the pump industry’s solid foundation of seasoned leaders.
(since January 2013)
Warren Rupp, Inc.
Growth in 2015 will come while we continue to navigate dynamic global markets. We have seen solid growth over the last two years by driving strategies and focusing on key markets and geographies. Companies will need to continue to be nimble to execute in changing markets. We will continue to develop our talent and teams to identify and execute in the markets that best align our products, channel and end markets.
The unknowns that we are experiencing in markets such as oil and gas require us to leverage the experience we have developed to execute in changing markets. For these reasons, it is essential that we align our efforts to improve commercial productivity for our company, our channel and our end markets.
We are excited about the opportunities and challenges ahead in 2015. Additionally, we are proud at Warren Rupp, Inc., to celebrate our 50th anniversary. We have the responsibility to further the legacy that Mr. Warren Rupp began in 1965. Our product innovation, customer solutions and growth will be based around the need to solve problems for our end users in key markets.
Vice President, General Manager
(since November 2013)
Accudyne Precision Flow, Americas
Crude oil prices and volatility had everyone talking in the second half of 2014 and will continue to be a concern going into 2015. Those companies that are heavily exposed to upstream oil and gas projects are watching prices carefully. However, many projects continue to move forward. Downstream projects seem to be robust and continue to expand. We are optimistic going into 2015 that there will be solid project activity.
A strong aftermarket program is vital to the long-term health of the pump industry. For many years, the industry was all about pumps and spares. Today, most of the large pump companies have dedicated resources focused on aftermarket support that includes everything from product training to spare parts to startup and repair services. Especially with engineered solutions, end users are looking for suppliers who can back up their reliability promise with a comprehensive suite of aftermarket support.
Years of focus by many rotating equipment companies on improving operational efficiency and driving out costs has created healthy balance sheets and strong cash positions. Organizations are realizing they now need to increase investment in commercial activities in the form of robust product line strategy, strong customer support platforms and highly trained and professional front-line sales engineers. Merger and acquisition activity will continue to be a central theme of growth. However, with bottom lines strong, top-line growth has become a focus. Success for pump companies going forward will be dependent on their ability to deliver solutions that drive differentiated value.
The global demand for talent has become a top priority for many organizations as highly knowledgeable and experienced talent retires. Organizations are taken over by new leadership and are challenged to reinvent themselves for the future with a focus on strategies that create value for a future end user who will demand more sophisticated levels of reliability and innovation. New end user engineers coming out of college the past few years are extremely savvy to what is technologically possible and they are looking for solutions that are cutting-edge. Pump companies need to meet this reality with talent that can create and deliver cutting-edge value in a world where technology is evolving rapidly.
Accudyne Precision Flow’s President, Chris Krieps, realized shortly after taking leadership of the company that headquarters needed to be moved from the Philadelphia area to Houston to get closer to our end user base. The Gulf Coast area of the U.S., which has always been a top pump industry geographic priority, saw tremendous activity and growth in 2014, and we see that continuing well into the future. New signage has popped up all over Houston indicating that other major pump companies are moving parts or all of their headquarters to the area. There are even entire billboards in the area dedicated to recruiting engineering talent. Having a physical location in the Gulf Coast area has become a necessity for getting close to end users in the robust oil, gas and petrochemical sectors.
(since January 2015)
With the ever increasing accessibility of pertinent information, customers are becoming more informed about what suppliers have to offer. This, along with the drive in industry to optimize plant processes, presents a great opportunity for KSB to increase its presence in the U.S. market.
KSB has always had the reputation for producing quality products—products designed under the premise of durability, high reliability and market-leading efficiencies. With the trend to improve plant processes, I believe our message will resonate with customers more than ever before. The challenge will be our ability to connect with the customer and articulate the KSB identity. This is something we will be working hard to achieve in 2015.
(since October 2014)
PSG, a Dover Company
As we move forward into 2015, PSG, a Dover Company, is optimistic about the direction of the global pump market. The latest industry indicators are positive, and global expansion continues to be forecasted through 2017 in key PSG markets—including oil and gas, chemical, food and beverage, and biopharmaceutical. Oil and gas investments from shale gas exploration in North America, the growing middle class in emerging markets, increased food safety regulations in developed countries and a robust capital project pipeline in the chemical industry provide significant growth opportunities for PSG.
PSG recognizes caution must be taken when contemplating the future and establishing strategic direction. Recently announced lower demand forecasts in Europe, Latin America and China, the crisis in Ukraine, and lower crude oil prices create uncertainty in the global pump market and impact opportunities. PSG is confident that with its portfolio of innovative pump technologies it will continue to find growth opportunities in all economic environments by focusing on meeting customer needs in key applications, markets and geographies.
Aris C. Chicles
(since May 2014)
ITT Industrial Process
In 2014, ITT saw another year of growth but also found some of the markets served by our Goulds Pumps, Engineered Valves and PRO Services brands were not as robust as expected. Projects were delayed by a general malaise in the global economy and uncertainty with respect to crude oil prices. There is ongoing project and quoting activity, which is encouraging, but certainly we saw customers’ project timelines pushed back. We see this condition continuing into next year based on slower growth rates in emerging countries, such as China and Brazil, along with a sluggish economic recovery in Western Europe.
This has manifested itself in lower oil and gas pricing and a drop in the per barrel price of oil, which has a number of marketplace repercussions. On one hand, it has an obvious impact on oil and gas companies’ near-term profitability, and therefore on capital spending for products such as ITT’s. On the other hand, the gas and heating-oil pricing drop provides more disposable income to consumers, which in turn drives demand for consumer products such as computers, cars and other items. This creates needs for petrochemical products, benefiting both traditional and shale oil and gas markets. Here we saw the benefits of having a diverse product portfolio.
The emergence of North America as a major international supply source for oil and gas, driven by new technologies accessing previously hard-to-extract deposits, is another significant factor that could not have been foreseen even a few years ago. Furthermore, the organizational structures of oil and gas companies have an effect on market demand. In the current economy, independent oil companies (IOCs) are holding back on capex spending because they need to return timely profits to their investors. National oil companies (NOCs) don’t have that constituency or shorter-term agenda, so NOCs in Venezuela and Russia need to pump more oil volume now to build revenue and profits.
Thanks to significant investments in our facilities in 2014, we are well-positioned globally to meet a variety of market demands. In the U.S., we opened a high-energy pump testing and packaging facility that now serves primarily the Western Hemisphere, including the established chemical and petrochemical markets where we enjoy a leadership position. In Korea, we opened a significantly expanded factory in 2013 to serve the growing Asian, Russian and Middle Eastern markets and are pleased with our progress. In terms of new products, we’re realizing strong demand for the monitoring and controls products that give our customers unique capabilities to reduce energy usage and lower maintenance costs—an offering that makes us more than just an equipment supplier.
We have also developed multistage barrel and pipeline pumps for the oil and gas market and a unique line of hard-metal and rubber-lined slurry pumps for the mining industry.
Currently, mining for hard metals is in a downturn, but mining for potash used in fertilizer is strong, driven by food markets in both developed and developing nations. We have had sizable project wins in this area recently in the U.S., Canada and Saudi Arabia, and these fertilizer operations use a wide variety of pumps including chemical, slurry and axial flow.
Of course, the world’s geo-political picture continually changes and countries such as Russia, Brazil, Argentina and Venezuela are experiencing significant turbulence affecting their economies and currencies. However, the fundamentals of these and other markets, including China and the Middle East, remain very promising. China, for example, is moving from a developing to an emerging middle-class economy and will need housing, plastics, food and cars—this will drive production of petrochemicals, paints, resins, plastics and other manufacturing needs that we will equip. Emerging markets require energy and metals, and the longer-term outlook is decidedly bullish for businesses serving them.
President, Process Industries and Drives Division
(since October 2014)
Siemens believes that America’s manufacturing expansion will continue in 2015, with most sectors of manufacturing participating in the growth. Low energy costs and the ever-increasing productivity of the American workforce will continue to favor investments in American manufacturing for the foreseeable future.
And that investment is increasingly happening. With average capacity utilization above 77 percent, more companies have begun to put their historically high cash reserves to work to modernize existing installations and begin new greenfield sites.
Siemens views each of these investments as opportunities for manufacturers to incorporate capability for more speed, flexibility and productivity for the future. Today it is possible to digitally connect the manufacturing enterprise as never before.
Such opportunities add a new dimension to the so-called skills gap that most of our companies are already dealing with at some level today. This means that emphasis must also be placed on welcoming new skill sets into our factories and increasing the training on new skills for existing employees.
DeLancey W. Davis
President, North America Water Systems
(since June 2012)
At Franklin Electric, we see domestic growth opportunities in the residential, light commercial and some agricultural markets. Globally, we’re anticipating growth in a variety of channels, especially in Latin America and Asia. New product growth will continue to be a significant driver, particularly energy-efficient systems.
Economic stability in many foreign markets will continue to be an issue in 2015. In the North American markets, the biggest issues revolve around drought conditions in the West and any pumping restrictions that may arise in response to those conditions.
Housing trends are positive, and the economic indicators appear to be heading in the right direction. We are excited about new product opportunities in solar, artificial lift and control systems generally.
Franklin Electric has and will continue to invest heavily in research and design facilities, new product development and engineering resources, as well as make capital improvements in our facilities. We continue to investigate acquiring companies that are accretive and provide product portfolios and expertise that will enhance our overall customer offering.
(since March 2014)
The single biggest trend going on in the pump industry right now is a focus on energy efficiency. It is being driven by regulations in the industry as well as the needs and demands of our clients. Most people do not realize that about 7 percent of the total cost of the energy space is tied to water management, which is an exciting opportunity for us.
We see a return to growth in North America as we see some of the stalled municipal spend beginning to vault. There is a lot of pent up infrastructure rebuild in the U.S. that needs to be dealt with, and we are beginning to see growth in our backlog pretty significantly in that part of the world. Europe continues to be amongst challenges both in terms of political and macro-economic issues, but we see continuing growth in our pump business there as well. We look at regions such as the Middle East and China, South America and India not so much as low-cost manufacturing bases anymore. It is really a matter of how we support growth in these markets by being global.
As many people know by the launch of Pumps & Systems MENA, there is a tremendous appetite for technical knowledge and expertise in this region. I am so excited about what we are doing there because it is not just localization of manufacturing capabilities; it is also localization of research and development (R&D) and engineering resources. Most of the water solutions around the world today are being developed in regions that are facing scarcity and other issues.
We are continuing to do more things as a company to become more lean in our processes and be more efficient as a company. There are opportunities to be faster, smarter, more agile and, therefore, more cost efficient. This will continue to be a cornerstone of our story as a company. But at the end of the day, we are here to grow this company.
One of the things that drew me to Xylem is the ability to marry social value creation with economic value creation. People hear me talk about this a lot. I believe companies need to be here for a higher purpose than just making money. There is no greater place to do that than in the water space.
Growth is a big deal for us. We have struggled with growth, in general, as an industry in the past three to four years. Now we are beginning to see opportunities to accelerate that. First and foremost, we want to accelerate profitable growth. There are four different areas we are focusing on. One is growth in emerging markets and the investments there. Second, we want to expand our presence in the industrial use of water. We are building what we are calling an industry-vertical market. We are mapping the needs of our customers to understand the gaps in what we offer today and how that affects R&D priorities and acquisitions.
We are also focusing on increasing our innovation, and we have increased our investment in that area. Those are the priorities. Many Pumps & Systems readers know we have some of the best pump brands in the world. We are proud of them and will continue to invest in them. We are equally excited about expanding our testing and treatment capabilities. We have the broadest offering in the water industry, and we are not done yet. We are finding that our customers around the world, especially in these emerging markets, really gravitate toward an integrated offering. We combine the power of data and information along with the pumps.
(since January 1989)
Different markets have different needs. That has always been the case. Today, however, markets are becoming less homogeneous, more demanding and often schizoid.
The municipal water market bidding process is designed by governments to prevent cronyism, graft and favoritism. Yet contractors can force prices down and even redesign plants with significant deviations from the bid specifications to drive down prices. Conversely, more restrictive rules like those imposed by the American Water Works Association (AWWA), National Science Foundation (NSF) and individual states are becoming more common. A case in point is the Pennsylvania Iron and Steel Act, which may be in conflict with international treaties.
In the food industry, sanitarians are driving more stringent requirements within 3A and EHEDG, even on pumps that are manually cleaned. The strict requirements of American Petroleum Institute (API) 676, 610, 675 or 682, demand some difficult manufacturing requirements on flatness of baseplates, hydrostatic testing and documentation.
It happens almost weekly that a customer requests an “API pump that is really not API,” because they realize the expense of full compliance.
When external engineering firms get involved, they will hold manufacturers to the letter of the law after purchasing departments, OEMs or systems suppliers had bid down the prices. Bad luck for the poor bidder who was not privy to all of the specifications and nuances inherent with the project.
This bipolar attitude by users is forcing pump suppliers to become either conglomerated vendors of commodities or industry specialists. The “lowest cost producers” will probably win out because seldom are the purchasers the same people or even the same company as the users.
More regulations, more restrictions, more quasi-governmental organizations make it more difficult to provide equipment will have less competition, less service and, in the end, increased whole life costs for users.
In general, we see 2015 continuing to be weaker for aftermarket services. There have been significant changes in all of our key markets—power generation, nuclear and oil and gas. We view these changes as being opportunities for Hydro’s services. There is a greater emphasis on design, to improve pump efficiency and to reduce total cost of ownership. Older plants are closing. But those plants remaining are investing in projects that can contribute sustainable cost savings that will improve both the way they operate their plant and their bottom line performance.
As an example, plants are interested in pump testing and the application of new technologies, such as 3-D printing, to parts manufacturing and training programs that can result in more effective plant operation.
In other words, we see some movement from first cost low price as the key buying criteria from management while at the plant level first cost is the major influence. Bridging this gap is a challenge. We also see solid opportunities in the international market where customers’ aftermarket needs have been underserved.
(since June 2014)
We want to pioneer technologies that improve the quality of life for people. U.S. sales account for about 15 percent of our business, and our goal as a company is to reach $1 billion in revenue by 2020. To do this, we plan to focus on people, particularly in the building sector, and increase our ability to develop localized solutions.
We continue to work with the U.S. Department of Energy on standards of efficiency, and we want to raise the bar for future standards. When you think of sustainability, people often think of solar panels and windmills. Solar panels are visible, and windmills are almost a sculpture in the landscape. Pumps are hidden away and you don’t see them. But they contribute more to sustainability than anything.
The Middle East market is very interesting and significant. They are building huge metropolitan cities in the middle of the desert, and water is a very important commodity. The commercial building market in the Middle East is huge and it is growing.
There is as much building activity in one city in the Middle East as there is in some entire countries. The growth potential in the next five years in that region is significant.
(since July 2014)
CRANE Pumps & Systems
Although we are seeing a flat market in 2014, CRANE Pumps & Systems (CP&S) has been able to continue our growth above market in 2014. We have been pleased with our ability to transition our new product development platforms into products that are already in stock with our channel partners. Our prepackaged fiberglass lift stations and growth in our end suction product offering have been tremendous in providing our channel partners a complete solution set.
In addition, we have experienced further improvement in our lead-times, which are helping our customers meet their commitments. In short, 2014 has been a great year, and we look forward to continuing this in 2015.
Following a flat market growth in 2014, CP&S’ forward-looking market indicators are showing moderate growth across all of our market segments.
In addition, CP&S is planning to continue our growth above market averages through our new product development introductions and other key strategic initiatives.
Although we are seeing growth in all market segments, the biggest challenge I see is in the municipal markets where there has been constrained spending due to budget cuts. With municipal infrastructures continuing to age, we will need to help the local government officials understand the need and value to move forward with new technologies.
As we look forward, CP&S will continue to work with engineers, builders and municipalities on creating opportunities to advance the technology in pressure sewer systems and designs.
CP&S has been preparing for growth throughout the last three years. We have been making significant investments in new product development upgrades and innovations, as well as in infrastructure and intellectual capital.
These investments are key to enable growth while maintaining our customer service commitments. In addition, we have robust processes in place to drive internal and supply chain readiness so that we can respond to our customers’ needs and the ever-changing market demands.
Mission Communications LLC
Mission Communications specializes in water and wastewater, alarming and monitoring services. Municipal governments across the nation have found Mission’s business offerings an attractive alternative as their officials struggle with limited budgets.
We have grown nicely during the recent recession and are excited about the future.
In addition to budgetary constraints, water and wastewater utilities face multiple challenges. The aging workforce, Environmental Protection Agency (EPA) regulations, extending equipment life and security are a few of them.
Technology is advancing faster than ever in all areas. We recently expanded our engineering team to capitalize on the newest technologies and methods.
Mission’s business offerings put us in a unique position to assist utilities in addressing their challenges faster and less expensively than they can by themselves. We really help utilities do more with less.
(since May 2013)
Viking Pump delivered one of its strongest years on record in 2014. The momentum will carry the organization well into 2015 and is driven by strategic and tactical actions put in place during the past few years. This, coupled with the vertical market performance in the chemical and oil and gas sectors, delivered outstanding organic growth.
While there is momentum going into this year for Viking Pump and many other industrial companies in North America, several unstable economies around the world will continue to impact industrial companies much like they did in 2014. It is my opinion that the companies that excel over the next few cycles will focus on a few key initiatives.
First, to take advantage of high-growth regions as well as capturing market share in slower growing regions, companies will need to invest in their commercial teams and processes. Making an investment in channel management and key accounts teams makes a positive difference in providing value to our customers. In addition, interrelated go-to-market processes that align an organization’s capabilities to the needs of the end user will provide valuable solutions.
Also, superior talent will make the difference in any company’s ability to achieve their goals. For Viking, building great global teams is job No. 1. This focus starts directly within global organization and extends to its go-to-market partners. I believe you will see manufacturers continue to focus on talent acquisition and accelerating the development of their associates in 2015.
President, Diaphragm & Dosing Pumps
IDEX continues to see solid pump sales growth, providing confidence that our core end markets are stable and that we are well-positioned going forward.
We are seeing some volatility in our energy and chemical business in some regions. However, these fluctuations are offset by the strength and reinvestment in North America.
To leverage these market dynamics, we continue to more tightly align our organization around our core business to exceed the expectations of our customers and maximize these growth opportunities.
I am approaching my new role similarly. My goal is to create businesses that are well-positioned to identify and take advantage of focused opportunities globally. We have a strong portfolio of brands in the diaphragm and dosing pumps platform—Warren Rupp, Sandpiper, Pulsafeeder, Versamatic, OBL and Trebor, to name a few.
We will build upon the strong legacy of these brands, continue to innovate for our focus markets and deploy the IDEX Operating Model to build great businesses for our customers, team members and shareholders.
(since November 2010)
BLACOH Fluid Control
If you are hoping for an inside track on market growth expectations for 2015 or slam-dunk stock tips, you may be disappointed. My tea-leaf-reading capabilities are only as good as yours. But I can tell you this: BLACOH has had another banner year thanks to a great team.
The major uptick for the year was fueled (pardon the pun) by the oil and gas market. We are expecting more of the same in 2015, combined with a strong push into nexus between the water and energy segments.
While the U.S. has experienced a measured recovery, we have used its timing to our advantage with strategic investments made in new plant equipment and machinery. Additionally, we have expanded our distribution network across the board, and it has been paying off. Internationally, Asia and Europe have been stable, and we see some encouraging signs of growth ahead. Despite turmoil in the Middle East, we have been able to expand our presence and grown nicely in that region. Though we have fared well in South America, we don’t have the same confidence for that region for the year ahead due mainly to a number of political factors.
This has been an interesting year for industrial pump and fluid-handling companies. That sector of the market has been able to attract new leadership talent from outside the industry. New blood can be a good thing, but we may be entering a period of slight instability with less experienced executives at the top. This can also create some good opportunities for others. It is also fair to say that a few companies are seeing a drain in experienced talent in their ranks, which can be painful for the end customer if they are not replaced swiftly and with the right people. We anticipate another great year. We have been working hard on some exciting new projects and look forward to bringing those to market in 2015.
See the second part of this article here.