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CWFC delivers solutions that transform businesses [Oil & Gas News](Oil & Gas News Via Acquire Media NewsEdge) CURTISS-Wright Flow Control Company (CWFC) designs and manufactures highly engineered valves, pumps, motors, generators, electronics, systems and related products for complex naval defence, power generation, oil and gas and general industrial applications. Comprehensive range of solutions, parent company synergies, and strong operational performance are its key strengths, even as low order backlog remains a major area of concern.Moderate global economic growth, competition, and rules and regulations could have an adverse effect on CWFC's business, operating results and financial condition. However, growth prospects: industrial valve market, strategic acquisitions, and growing nuclear power market could present ample growth opportunities to the company, says GlobalData in a strengths, weaknesses, opportunities and threats (SWOT) analysis of the company. STRENGTHS Comprehensive range of solutions: CWFC designs, manufactures, and distributes flow control products that cater to the need of nuclear power plants, nuclear equipment manufacturers, hydroelectric energy producers, and the US Department of Defense. Its product portfolio consists of valves, pumps, motors, generators, instrumentation, shipboard systems, vessels, control electronics, and energy production and processing solutions. As a part of its Naval Defense business the company provides nuclear propulsion system components such as valves, pumps, motors and generators. It also offers instrumentation and control systems and equipment for submarine.Tie-down components and valve actuation and control systems are offered to surface ships. It serves the oil and gas processing companies by offering critical process valves (pressure relief valves, safety valves, solenoid, gate, and globe valves, steam valves and coker unheading valves among others), engineered process vessels and advanced valve controls. As a part of its power generation offering the company offers advanced motors, generators, and pumps, control rod drive mechanisms, diagnostic and test equipment, Plate heat exchangers, separation technologies and fasteners among others. CWFC also provides towbarless and conventional aircraft handling systems to the commercial aerospace needs. The company leverages its extensive range of products and services offered to a diverse industry base.Operational performance: The company reported improved operational performance in FY2013 as compared to the previous year. CWFC reported operating income of $116.5 million in FY2013, showing an increase of 47.89 per cent, as compared to $78.7 million in FY2012. This was mainly due to 18.6 per cent increase in revenue amounting to $1.3 million in FY2013.Parent company synergies: The company operates as a business division of Curtiss-Wright Corporation (Curtiss-Wright). Curtiss-Wright has its presence across North America, Europe and Asia. It has manufacturing facilities in California, New York, North Carolina, Pennsylvania and Texas in the US; Canada and the UK. CWFC segment operates 22 owned and 69 leased manufacturing facilities in Canada, Ohio, New York, Pennsylvania, and Texas. CWFC business division serves a global customer base and owns four and leases 50 manufacturing facilities in California, Canada, Oregon, and North Carolina.Its surface technologies segment, formerly, metal treatment business operations are carried out from 72 facilities in the US, Canada, the UK, Western Europe, and Asia. Geographically, Curtiss-Wright classifies its operations into four segments: the US, the UK, Canada and Other foreign countries. In FY2013, the company generated 70.6 per cent of total revenue from the US, followed by, Other foreign countries with 20.4 per cent, the UK with 5.7 per cent, and Canada with 3.3 per cent. CWFC can leverage the strength of its parent company which offers several operational financial synergies.WEAKNESSES Order backlog: A true indicator of business continuity has been strong order backlog. CWFC reported order backlog of $1,059 million in FY2013, showing a decrease of 2.6 per cent, as compared to $1,088 million in FY2012. There were no order cancellations in FY2013, but, a decrease in order backlog means less business generation. The company needs to boost the marketing of its products and services to attain strong order backlog and growth in revenue.OPPORTUNITIES Growth prospects: industrial valve market: The global industrial valve market is intended to grow in near future, ensuring emergence of the industry from adverse impact of the global economic recession. Industrial valve market has witnessed a steady change from the usage of conventional valve types to automatic valves. It is projected that the demand for automatic valves will surpass conventional valves usage due to changes in production process, and upgrades from process industries. According to industry estimates, the industrial valve market will increase at a compound annual growth rate (CAGR) of 4.5 per cent over the next three years, from $51 billion market value in 2011 to $65- $72 billion approximately by FY2015.Some of the key factors to drive demand in valve industry includes, government regulations relating to emission control and diverse process requirements from industries. Lowered cost of separately sold automatic actuators will record an increase in demand from developing countries as compared to regulators and automatic controls with preinstalled actuators. Major end-usage industries for industrial valves include chemical, petroleum refining and petroleum production, which accounts for 50 per cent of the total global industrial valves market. Besides, the oil and gas sector will be the largest customer with forecast expenditures of $8.7 billion and power industry in second with purchases consideration exceeding $7.2 billion. Demand for automatic valves is expected to grow than that of conventional valves, as process manufacturers strive to improve efficiency.Inorganic growth strategies: CWFC has been adopting inorganic growth strategies such as mergers and acquisitions since its inception in order to expand its operations. In November 2012, CWFC parent company Curtiss-Wright acquired Cimarron Energy Holding Company (CEHC). Pursuant to this acquisition Cimarron Energy, a subsidiary of CEHC will become part of CWFC. During the same period, Curtiss-Wright acquired AP Services (APS), one of the leading suppliers of fluid sealing technologies to the nuclear and fossil power generation markets. This acquisition would combine APS as a part of CWFC.In April 2012, the company acquired the Versatile Measuring Instruments and Lisle-Metrix product lines of Amidyne Group for about $7 million. These two product lines serve the companies operating in the commercial nuclear power market. In January, the company acquired Advanced Engineered Products (AEP). AEP is one of the leading suppliers of nozzle dams and other products and services to nuclear power industry. In December 2011, Curtiss-Wright Corporation acquired the assets of Anatec International and Lambert, MacGill, Thomas (LMT). Anatec and LMT provide testing and inspection services for commercial nuclear power plants. These businesses will become part of Curtiss-Wright's Flow Control business segment. This provides an opportunity to expand into additional international nuclear plants and OEM services and develop new innovative technology solutions. More recently, Curtiss-Wright Corporation's industrial division announced the acquisition of the valve division of Engemasa Engenharia E Materiais of Sao Carlos, Brazil. The division will be aligned with Curtiss-Wright Industrial's Farris Engineering business unit to create Farris Brazil Industria de Valvulas.Such acquisitions help the company to extend its product lines and cater a much broader customer base.Strategic acquisitions: The company acquires related businesses which complement its existing businesses and enhance its geographical presence. In line with this, in October 2013, CWFC acquired the assets of Ovalpath for approximately $3 million in cash. Ovalpath, a start-up software company, has developed a proprietary software platform used in mobile-device based applications serving the commercial nuclear power market. This acquisition will allow CWFC to offer powerful, scalable applications to its customers in the nuclear power industry. In September 2013, the company acquired the assets of Gulf33 Valve Pros for $4 million in cash. The acquisition of Gulf33 complements CWFC's recent diversification into the upstream oil and gas market. In March 2013, CWFC acquired 100 per cent shares of Ph?nix Holding for approximately €82 million in cash.This acquisition allows CWFC to expand its severe-service valve franchise in the chemical, petrochemical and power markets in Western Europe, China, India and Russia.Nuclear power market: According to the International Atomic Energy Agency (IAEA), as of December 2012, 67 nuclear reactors were under construction and 437 nuclear power reactors were operating, with a total generating capacity of 372.1 GWe. IAEA estimates that the growth of nuclear energy to be around 23 per cent to 100 per cent by 2030. Most of the growth is expected from the countries in the Far East where there are operating reactors. As of January 2013, there were 247 research reactors in operation. Due to the growing shortfall in energy and rising fossil fuel prices, many countries are looking at nuclear power as an alternative to diversify their energy supplies. The key factor driving such demand for nuclear power is the lack of emission of any greenhouse gases by nuclear plants.CWFC offers products and services to nuclear power plants, DOE sites, US National Research Laboratories and engineering firms engaged in commercial nuclear generation related activities. Offering innovative solutions addressing the needs of the nuclear market would enhance its earnings capability.THREATS Competition: CWFC operates in an industry which is categorised as a highly competitive. It competes with companies offering flow control related products and services to the companies operating in the defense, power, process and industrial markets. It also competes with engineering companies with similar operations in the naval defense, ground defense, oil and gas processing, nuclear power generation and general industrial sectors. Some of its major competitors include Cameron International, Circor International, Dresser, Flowserve Corporation, and Tyco International, among others. Many of the company's competitors are established players and they have access to substantial resource base. As most of them have longer operating history, greater brand recognition, established customer and supplier relationships and greater financial resources, it becomes difficult for the company to compete with them.Moderate global economic growth: According to the OECD's May FY2014 Economic Outlook, the global economy is expected to continue expanding at a moderate pace over the next two years, but policymakers must ensure that instability in financial markets and underlying fragility in some major economies should not derail growth. GDP growth across the 34-member OECD is projected to accelerate from 1.2 per cent in FY2013 to 2.2 per cent in FY2014 and 2.8 per cent in FY2015. The world economy, by contrast, will grow from 2.8 per cent in FY2013 to 3.4 per cent in FY2014 and 3.9 per cent in FY2015. The pace of the global recovery is weaker largely as a result of the worsened outlook for some emerging economies. Moderate growth in global economy may impact the performance of businesses across the world. (c) 2014 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (Syndigate.info). |