â€˜Environmental control from Howden
Environmental control from Howden Editorial: Roland Douglas Production: Chris Bolderstone
Howden Africa is one of the heavyweight names in South Africa’s engineering sector. Continuously generating positive results and completing innovative projects, the business looks set to expand further over the coming years. CEO, Thomas Bärwald speaks to IndustrySA to explain more…
When Howden Africa released its unaudited interim financial results for the six months ending 30th June 2013, there was a lot to be happy about for the industry leading engineering firm. Operating profit, cash generated from operations and earnings per share were all up, increasing significantly from the same period in 2012. Of course, this news was welcomed by the company which aspires to be Africa’s leading application engineer, providing lifetime solutions in air and gas handling. Back in April 2012, IndustrySA spoke to Thomas Bärwald, CEO and executive director at Howden Africa, and found out that the company had managed to successfully navigate the global economic slowdown and was seeking opportunities across
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South Africa and further afield. This month we speak to Bärwald again and he says that the search for opportunities continues and a big focus for Howden going forward will be with ‘environmental control products’. The interim financial results from June 2013 revealed that in Howden’s Environmental Control division, revenue had decreased to R79 million, a 48.8% decrease on the first half of 2012. The division however, remained profitable with operating profit (EBIT) of R9.1 million. Operating profit margins improved from 8.5% in June 2012 to 11.6% in June 2013 despite the fall in revenue. “In the first half of 2013, we had a small slowdown with environmental control products,” explains Bärwald. “In the second half of the year, we didn’t sell high but we had a significant amount of new
orders which will be converted this year. The opportunities in this sector are huge and we predict a good year for 2014. “This is down to a couple of things,” he adds. “We have expanded the product lines and the service portfolio that we offer to the industry; we are continuously improving our cost base, reducing our cost base and improving our supply margins and overheads and this has resulted in good volumes and excellent results. Cost management has been very important.” The interim results were very positive for certain divisions, namely Fans and Heat Exchangers. The results reported: “Revenue of R691.3 million for the first half of 2013 is 6.8% ahead of the equivalent period in 2012 of R647.1million. The performance of the Fans and Heat Exchangers division was
particularly strong with a 24.3% increase in revenue compared to the first half of 2012.” But with environmental control products, performance across the portfolio has been relatively even with ‘bolt on’ products adding significantly to the service offering. “A lot of the newer products are bolt on products. We have core products and we are now doing more with them; wider scopes of use and different services. We are doing more and more turnkey projects and of course this means not just supplying the core product but also supplying electricals, civil engineering and everything for the entire installation so these kind of bolt on products have improved our trading, our competitiveness and of course our volume,” explains Bärwald. Green products and environmental control
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company profile products are not new concepts. Globally, there has been a focus on these type of ‘clean’ products since the 80’s, although today they are much more advanced, but nevertheless Bärwald says that like any product, they have their ups and downs. “Environmental control is lumpy business. When we get contracts, they are large but they are not frequent. However, environmental control business has been very good for us in the past two years and there is still a lot of good potential in this area. “On the environmental control side of the business we will be seeing a number of contracts come to maturity very soon. I don’t want to name names at this stage but they will be mostly in South Africa.”
CLEAN AIR Anchoring Howden Africa’s venture into the environmental control products is the Clean Air Act which was introduced to South Africa in 2010. This act made it compulsory for companies to manage and monitor emissions and invest in environmental control. Bärwald says that this has created a lot of opportunity for the company as the country still has a long way to go to keep up with the Act.
“We are an ISO 14000 company and we actually have products to clean up big plants and install world class standards of environmental control,” he says. “We are all for this; it has been good to us so far and holds a lot of promise for the future. The country and the continent could still do a lot more just to comply with the new Clean Air Act of 2010. There is an enormous amount of upgrade and compliance work to be done in this regard.” He told us in April 2012 that one of the companies most notable installations for environmental control was a large scale de-dusting plant for ArcelorMittal where the “customer and the community had seen great success in terms of cleaning the plant”. Bärwald also suggests that Howden products will have a genuine impact on the environment across the whole of Africa, saying: “Our advanced environmental control products at large size industrial plants are well suited to help minimise the environmental pollution impact in Africa.”
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(originally from the UK) which is owned by the Colfax Corporation (based in Maryland, USA), African endeavours are very important to all stakeholders. This is no surprise considering the growth figures coming out of African nations. The World Bank expects that most African countries will reach ‘middle income’ status (defined as at least US$1,000 per person a year) by 2025 if current growth rates continue. Countries like South Sudan, Sierra Leone, Ghana, Mozambique and the Ivory Coast were amongst the fastest growing economies in the world in 2012 (real gross domestic product growth rate). For Howden, which opened in Africa in 1952, growth on the continent is inevitable. “There are some key regions in Africa that we want to focus on. We are very much into deep mining and that is big business in Africa. We have been successful in Ghana, Tanzania, DRC and Zambia. “It is certainly one of our strategic intents to grow in Africa, most in west Africa and south-central Africa. “African business is a good part of the Howden business overall. We have grown in South Africa
and the other African countries. Not all African countries contribute a huge amount to the global business but these can often grow faster than the growth we see in South Africa,” says Bärwald. But business on the continent has its challenges and the CEO is proud to say that so far, Howden has been able to offer its services without too much difficulty. “When you want to do business in African countries outside of South Africa, it is an entry level requirement to be able to supply turnkey solutions because the infrastructure can be poor and you have to bring infrastructure with you,” he says. “We use the Howden license so we use all of the same technology that the other global Howden divisions use,” he adds.
A COOL FUTURE With the Fans and Heat exchangers division still proving to be a true industry leader for Howden and the Environmental Control Products division now gathering pace, it seems as though the company is set to extend its dominance of the industry throughout 2014 and beyond. In 2013, Africa was
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company profile the world’s fastest-growing continent at 5.6% a year, and GDP is expected to rise by an average of over 6% a year between 2013 and 2023, according to the World Bank. And with this in mind it seems that the perfect platform is in place for Howden to grow in South Africa and across the border, even though major work on the country’s two new power stations is coming to an end. “We are winding down with Medupi and Kuseli. We have supplied almost everything we wanted to. We were working on some major cooling fans for the power stations,” says Bärwald. “We are still working with ice plants for the mining business, providing underground cooling. We want to supply ice plants worldwide; in fact, we just commissioned one of the largest ice plants in the world. It makes hard ice and will be able to produce 33kg per second.” So, the current position is healthy and the interim results reflect this, reporting: “The trading outlook
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is cautiously optimistic for the Group in the heavy engineering sector of mining, mineral process plants, locomotive fans, aftermarket service, maintenance and in future, the environmental control market.” And Bärwald says that the company will continue to support the development of the economy. “For the last 60 years we have supplied huge amounts of equipment for the power stations and the mines in this country and as these industries grow we will be there to support them further,” he concludes.
“The opportunities in this sector are huge and we predict a good year for 2014”
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