CURTISS-WRIGHT Flow Control Company (CWFC) is a flow control related products and services provider. The comprehensive range of products and services offered by the company coupled with its parent company’s robust business operations are the company’s strengths. The inorganic and organic growth strategies adopted by the company to enhance its market position offer great operational scope to the company. However, the increasing competition, and regulations remain a threat to its operations, says GlobalData in a strength, weaknesses, opportunities and threats (SWOT) analysis of the company.
STRENGTHS
Comprehensive range of solutions: The company offers a wide array of products and services to companies operating in markets such as power generation, naval defense, oil and gas, and general industrial. CWFC designs, manufactures, distributes, and qualifies flow control products that cater to the needs of nuclear power plants, nuclear equipment manufacturers, hydroelectric energy producers, and the US Department of Defense. 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 tow bar less 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.
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. Curtiss-Wright’s Flow Control segment operates through manufacturing facilities in 15 countries and in 27 cities throughout the US. Curtiss-Wright’s Control business division serves a global customer base with manufacturing operations located in the US, Canada and Europe.
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. For the fiscal year ended December 2012, the company generated 68.2 per cent of its total revenue from the US region, followed by the UK 7.2 per cent, Canada 3.9 per cent, and other foreign countries 20.7 per cent. CWFC can leverage the strength of its parent company which offers several operational financial synergies.
Improving financial performance: CWFC’s financial performance has been improving over the past three years. For the fiscal years ended December 2012, 2011 and 2010, the company reported total revenue of $1,095 million, $1,060.7 million, and $1,024.8 million respectively. The increase in the total revenue of the company is primarily attributable to the higher and increasing organic sales in the commercial market of 7 per cent, and increased sales from power generation market during the fiscal year 2012.
The company’s total assets have also been increasing continuously over the past three years. For the fiscal years ended December 2012, 2011, and 2010, the company’s total assets stood at $1,417 milion, $1,257.1 million, and $1,102.4 million respectively. The increasing top lines coupled with increasing asset base enhance the company’s presence among the flow control related product providers in the US.
WEAKNESSES
Learning curve issues: CWFC’s slow learning curve related to construction of super vessels is an area of concern to the company. According to the company’s management, it experienced slower than anticipated learning curve during the first two years of its entry into super vessels market, indicating that it needs to enhance its know-how related to the engineering and manufacturing requirements on the super vessels.
In 2012, the company’s operating income decreased by 24 per cent due to higher costs for the construction of super vessels and low orders for capital refinery products and services in oil and gas business. The company’s backlog decreased by $66 million and new orders decrease by $96 million in 2012. Such learning curve issues affected the company’s profitability during 2012 by higher than its anticipated learning curve costs, which increased its start-up costs relative to super vessel business.
OPPORTUNITIES
Strategic contracts: The company considers organic growth strategies such as collaborations and agreements in order to achieve strategic growth. The company recently entered into strategic agreements with several customers. In December 2012, CWFC’s announced that its Scientech business unit entered into a technology assignment agreement with Rosemount Nuclear Instruments (RNII). Pursuant to this agreement both the companies would introduce a continued source of supply and support for the Model 710 trip/calibration system line of instrumentation products. Scientech would be taking over all design, manufacturing and field support activities for the 710 product line from January 2013.
In September 2012, CWFC announced that its Farris Engineering business unit would soon introduce the Farris SmartPRV, a 2600 Series Pressure Relief Valve (PRV) that would be equipped with a Fisher 4320 position monitor. Using this technology PRVs can be monitored in real time by providing immediate feedback during an overpressure event. In July 2012, the company announced that it has entered into an agreement with Candu Energy (CEI) through its Enertech business unit (Enertech) in order to jointly provide passive autocatalytic recombiner (PAR) technology to the companies operating in the nuclear industry in the US and other international regions.
In June, the company’s electro-mechanical division (EMD) business unit signed strategic alliance with Westinghouse Electric Company to jointly pursue and develop the refurbishment of large motors for commercial nuclear power applications in North America. In April, the company’s business unit, Scientech, entered into an agreement with URS Corporation and Paul C Rizzo Associates to jointly provide seismic, flooding, and other external hazard evaluation and probabilistic risk assessment services to nuclear power market. In February 2012, the company’s business unit Enertech signed an agreement with Chalmers & Kubeck to collaborate and provide integrated services and critical components to the nuclear power industry.
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 (Cimarron), a subsidiary of CEHC will become part of CWFC. Cimarron is an oil and gas production equipment manufacturer and designer. 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. Such acquisitions help the company to extend its product lines and cater a much broader customer base.
Growth prospects: 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 2015. 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 pre-installed 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.
THREATS
Global economic scenario: The global economic slowdown and vague recovery scenario are likely to create challenges for the company over the next few years. The global recovery is facing challenges related to tough economic environment in the euro area and weak business environment elsewhere. The growth in emerging economies is also expected to slow down, mainly due to the declining external environment and weak internal demand.
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 defence, power, process and industrial markets. It also competes with engineering companies with similar operations in the naval defence, ground defence, oil and gas processing, nuclear power generation and general industrial sectors. Some of its key competitors include Cameron International Corporation, Circor International, Dresser, Flowserve Corporation and Tyco International.
Rules and regulations: The company and its customers are subjected to numerous rules and regulations. These rules and regulations are subjected to change by local, state or federal governments in countries in which the company operates.
