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ITT
Industries
In The News
Associated Press
ITT Taps into Growing Water Market
By BETH DEMAIN REIGBER, Dow Jones Newswires
NEW YORK (Dow Jones/AP) - Water, water everywhere;
but is it good enough to drink or to keep a factory running?
Companies such as ITT Industries Inc. and General Electric Co. help ensure
that it is, and the companies hope to capitalize on the growing global market
of water treatment.
It's a field where tightening environmental regulations and the scarcity
of water will spur demand over the long haul, analysts say.
"People do invest in our industry because they see the water industry as
a steady, predictable, safe investment," said Dawn Kristoff, president of
the Water and Wastewater Equipment Manufacturers Association.
"Water's the one thing there's no substitute for, and we all need it to
live," she said. "It's not going away."
Beefing up water infrastructure in the United States alone could require
hundreds of billions of additional dollars, the Environmental Protection
Agency estimates.
ITT, of White Plains, N.Y., makes products ranging from water pumps to nightvision
goggles, but U.S. Trust analyst Brian Madonick sees the water segment as
the manufacturer's "crown jewel."
"It's my preferred way to play the water infrastructure buildup globally,"
he said. He likes ITT's strategy of offering a complete range of water and
wastewater systems.
"ITT really has, through acquisition, acquired the pieces of the puzzle
you'd really want to have," Madonick said.
Like bigger conglomerate GE, which also recently assembled a water-treatment
arm, ITT may have an edge in the highly fragmented water industry thanks
to its size.
ITT is expanding globally in the sector. Its latest steps were the acquisitions
of Hengtong of China and German Wedeco AG Water Technology of Germany.
The Wedeco deal gives ITT a leader in the fast-growing water disinfection
market, according to Tom Pokorsky, president of ITT's Sanitaire water-treatment
subsidiary. The business should account for roughly 15 percent of the fluid
technology segment's 2004 revenue, which ITT has projected between $2.45
billion and $2.5 billion.
ITT set its sights on expanding in water treatment about five years ago
when it bought Wisconsin-based Sanitaire, Pokorsky said. ITT already was
already a big maker of pumps.
Customers wanted not just some equipment, but a complete water treatment
system from their supplier, he said. The demand sparked ITT's shopping spree,
and ITT has entered new areas such as treatment of drinking water. Now,
ITT is working on digesting acquisitions and making them more profitable.
Schwab Soundview Capital Markets analyst Debra Coy said that along with
expected growth, ITT's water operations can lend balance and be a source
of steady growth. ITT's defense arm has been strong - helping offset a slumping
electronics business last year - but defense is cyclical and growth will
slow down, she said.
GE sees opportunities for $3 billion in water industry acquisitions, though
that is a relatively small part of the overall company.
GE's focus is on water treatment for industrial use, where it's crucial
to have water clean and pure enough for various manufacturing processes,
said GE spokesman James Tierney. A lack of clean water can hamper productivity
and damage assets - for example, if pipes become foul and need to be replaced.
Water-treatment companies also can help businesses meet environmental regulations
by providing equipment and services to conserve water through reuse or ensure
that water that's disposed of is clean, Tierney said.
Tierney and others also point to an outsourcing trend in industrial water
treatment, which has more companies paying outside, specialized operators
to manage their water.
Meanwhile, smaller, niche companies may have a hard time thriving, observers
said, paving the way for consolidation in the industry.
In the case of Wedeco, being a part of ITT gives it access to a major distribution
channel, Wedeco spokesman Ralf Koenig said.
"A small company can stay successful regionally, but will never become a
very big global market leader," Koenig said.
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