JimPinto.com - Connections for Growth & Success
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Good news on the lingering Asbestos problems: No objections had been filed by the Feb. 21 2006 deadline regarding the US District Court's notice of a hearing on Feb. 28 to affirm and confirm the revised Plan of Reorganization for Combustion Engineering. This will put a bad experience behind.
Product segments are: Measurement Instruments (44%); Systems, Solutions & Services (26%); Valves and Regulators (30%). The best know systems are PlantWeb and DeltaV, generating leading market-share for distributed controls.
In CONTROL magazine's list of the "Top 50 suppliers of Process Instrumentation and Controls" (December 2005) Emerson Process was listed as No. 1 for N. America. (Worldwide, ABB was listed as No. 1). For CONTROL's Readers' Choice awards, Emerson Process was once again honored with top ratings in more technology categories than any other company, and also recognized for customer service, with 3 times as many high scores as the nearest competitor.
In 2006, Emerson Process seems to be steadily winning market share over competitors in their primary target markets. They just booked a bonanza with BP International, one of the largest US oil & gas producers. Emerson won a contract for the replacement of aging process automation systems at BP's three largest US refineries, winning over the business from Honeywell and Invensys.
The contract covers 18 units at 3 BP US refineries - Whiting, Indiana; Texas City, Texas; and Carson, California. Combined, these facilities refine about 1 million barrels of crude per day, or about 7% of total US refining capacity. The upgrades are part of BP's ongoing commitment to improving facilities in N. America.
Under this BP contract, new DeltaV digital automation and control systems will be installed in 18 different production units at the BP refineries. The primary installed base system at BP's Whiting and Carson plants is Honeywell. At Texas City, it is Invensys.
Emerson won these projects based on PlantWeb technology, plus a demonstrated ability to handle large projects with engineering services and the quality of local support. Emerson's performance at Shell Deer Park and BP SECCO were also significant factors.
As the main automation contractor, Emerson will be responsible for the front-end engineering design, detailed design, and implementation of the new digital systems. In addition to process automation, networking the systems with intelligent measurement instruments and digital valves will enable Emerson's PlantWeb digital automation architecture, providing a platform that also supports asset management applications to help the refineries optimize performance.
Emerson will work with BP to set the standards, processes and implementation procedures for the upgrade projects. Other control system elements such as field measurement devices and control valves will be replaced as needed.
While reporting a 4% increase in third quarter operating profit and loss for the year Invensys still expects full year (ending March 31, 2006) results to be "in line with market expectations". In the quarter ended Dec. 31, 2005, total revenue increased slightly, to £628M ($1,095B) compared with £595M ($1,038B) for Q3 2004. Operating profit was £48M ($83M) million in Q3, up from £44M ($76M) for Q3 last year. Operating margin, a strong measure of new CEO Ulf Henriksson's focus on efficiency, was 12%, up from 4.9%.
The Process Systems group markets automation technology, including ArchestrA architecture and products under the Wonderware and Foxboro brands. Process Systems saw an upsurge in the key verticals - oil & gas, and energy - and this has helped Invensys to recover.
Process Systems produced 'excellent' results, including profit increase of £14M ($24M) and 17% orders growth. Rail Systems returned to profit growth, and again increased bookings. But the Controls group (which provides systems products and services to industrial refrigeration, appliance, and building automation manufacturers) was weaker. The APV unit made an operating loss, and will inevitably be divested, sooner or later.
The results are "encouraging", but there are too many meaningless qualifiers - "legacy items" remain a burden, "optimistic signs", and "hopeful notes" that "measured recovery is still under way". The results are simply too incremental to be exciting.
Since Ulf Henriksson's takeover as CEO in July 2005, he has focused on financial stabilization and recovery from the effects of acquisitions that had seriously damaged the balance sheet. Ulf says he has "overhauled a management group that was unable to steer the company toward growth." He's right - Invensys had gone haywire, with a succession of managers that drove off all the good people.
Since his arrival, Ulf has remained on message: build a strong team, deliver improved products to customers, remove business inefficiencies. It remains to be seen whether or not his new management team can produce the results which Invensys needs to stay independent. The end of this fiscal year (31 March 2006) will be a key benchmark of progress. Unless Ulf can pull something special out of the hat, it's likely that there will still only be "hopeful notes" and "optimistic signs".
With the industry up tick, Invensys' stock price has inched up to 21.5p, with a market-cap £1.2B ($2.1B) (Fri. 24 Feb. 2006). This is a slight improvement over the 12-13p depths to which it sank during the days of Rick Haythornthwaite, but only a fraction of what it was in under Allen Yurko, the bull-headed autocrat who destroyed this once mighty leader.
I can't tell you how many big VCs and corporate investors have asked my advice regarding this still significant company.
My response: Invensys has a tough row to hoe in this competitive marketplace. If it stays independent, it will never get back to being the leader it once was. At best, if he turns it around, Ulf Henriksson can expect to sell the key pieces (Foxboro and Wonderware/Archestra) for a good premium over where the stock is languishing. Siemens, Schneider, Emerson, GE, and perhaps even Honeywell, are lurking in the wings, waiting. Only a significant sale at a healthy price will give Ulf the prize he wants, and probably deserves.
"Pinto's Points - How to win in the automation business" was published by ISA in Oct. 2005. It covers management topics, globalization, sales & marketing, technology trends & futures, and far-out technology visions. It closes with whimsical humor and Pinto's poetry. It's 270 pages, with 174 "points" in 6 different parts, each introduced by a "luminary".
"Automation Unplugged - Pinto's Perspectives, Pointers & Prognostications" was published by ISA in October 2003, and was the ISA best-seller for 2004. The book includes the best-of-the-best Jim Pinto articles on a variety of automation topics, with a special introduction by Dick Morley, technology guru and father of the PLC. Each of 5 sections is introduced by a noted automation industry personality.
Have you read either (or both) of these books yet? If you haven't, at least take a look at the complete table-of-contents via the web links below. Plus I've provided some links to Amazon.com and other websites where you can buy one or both books online.
Or, you may wish to get an autographed copy (or copies) directly from yours truly (web links below).
"I think the recent news from Ford sums up the situation: A wonderful brand laying off its workers and closing plants because it has failed to lead the way into a beyond-petroleum world. And what does management do besides lay off its workers? They penalize those who drive foreign cars to work, so when management walks out of a Ford building, once again they will be reassured to see all those Ford cars, trucks and SUVs in the lot.
"They'd be better served by looking at the competition!"
"Is it possible, instead, that a nation like Taiwan could have secretly developed and deployed a few nuclear weapons, as South Africa did in the 1980s? If so, I suspect that, instead of a takeover, Taiwan and China will draw closer together, with a relationship that will benefit them both. You see this already happening in the number of Taiwanese who study in China."
"The writing has been on the wall for years - but no one seems to care. I tell my wife daily we are crumbling from within and she agrees. She recently went back into education after raising our kids for the last 15 years as I dragged the family all over as a corporate gypsy - for what? She can not believe the level of poverty in this country she sees first hand working in a Title-1 school.
"Last night on CNN they reported the need for engineers but the kids do not see that as a long term career since they see outsourcing and Government cuts on TV every night. Enough of my ranting - keep up the good work."
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