Fast Growth for Water Treatment Technologies due to World-wide Water Shortage
Fast Growth for Water Treatment Technologies due to World-wide
Water Shortage
Clorox, Hendrx, ITT, and Siemens Identify Opportunities in Point
of Use Systems and Waste Water Treatment
Fei Wang, www.Water-Stocks.com January 2006 Water is a booming
business. According to an English publication Global Water
Intelligence, worldwide annual industry revenues are estimated
at $420 billion, with the United States accounting for around
$100 billion. This number is expected to grow as water becomes
scarcer and markets begin to mature. Two of the fastest growing
segments are: point of use/point of entry (POU/POE) systems and
waste water treatment. How do companies involved in this arena
see their future? In addition, over the past several years, the
industry has undergone considerable consolidation and
acquisition, a trend that is believed to continue. How will this
impact the development of the water market?
Water Shortage Of a population of roughly 6.1 billion, more than
1 billion lack access to potable water. This situation is
expected to get much worse in the future. Countries and firms
are actively looking for alternative solutions to address this
problem. Point of use/point of entry systems and waste water
recycling are two of the most popular solutions.
Point of Use/ Point of Entry Systems:
Figure 1: Quoted from www.epa.gov/ord Both POU and POE devices
purify water coming from the distribution system to a home or
facility. POU purifies water to a desired level at the tap to
which it is connected, while POE is one single device which
purifies all the water coming into the building.
As water prices increase, people start to pay more attention to
the quality of the water they are getting. Therefore, with more
publicity and awareness on the issue, POU/POE, which is said to
be a cheaper way to insure the quality of water than other
alternatives (e.g. bottled water), starts to attract more and
more attention from both industrial and residential users.
Hendrx Corp (OTCBB: HDRX), a manufacturer of water purification
technology, is addressing the water quality issue by providing
highly purified drinking water for both residential and
industrial markets. Hendrx CEO Robert De Costa said, “We at
Hendrx believe strongly that POU systems will gain in
significance providing pure drinking water for the future. The
water / sewage infrastructure worldwide is in need of massive
repair and there simply is not enough money to properly fix
these systems. In the United States alone we’re talking about
hundreds of Billions of dollars and this estimate goes up
dramatically every year. We’re also learning that currently used
water treatment methods like chlorination may not be as safe as
we once thought. Any time you introduce an additive or cleanser
to the water we drink, there’s the possibility of short term and
long term complications. Today’s consumer is becoming
increasingly health conscious and they know that proper
hydration is a major factor in maintaining a health life style.
For all of these reasons we think that micro-water systems, POU
systems will play an ever increasing roll in the supply of
personal drinking water.
Hendrx is in a unique position since we are the leading
manufacturer of Atmospheric Water Generators (AWGs). These
devices collect pure water from the naturally occurring moisture
in the atmosphere. Once you get an AWG, the only thing you need
is the proper temperature, humidity and power to run the
machine. Although atmospheric water devices will not work
everywhere, we’re very positive about the future of AWGs in many
regions of the globe.”
Brita water filtration system is a POU product as well.
According to the Clorox Company (NYSE: CLX), Brita®
water-filtration systems remove 98% of the lead from tap water.
In addition, Brita systems reduce chlorine (both taste and
odor).
Neil D. Berlant, First Vice President and Managing Director for
The Water Group, The Seidler Companies, comments,” One of the
major difficulties, in addressing water quality, is that even
when water utilities do a terrific job in purifying it, once it
leaves the central treatment facility, it conceivably passes
through dilapidated pipe systems, and it might take up harmful
chemicals along the way, so the water you get at home could be
considerately different than the water leaving the central
treatment facility. The only effective means of assuring good
quality water when you use it will be to treat it at the point
at which it will be used. Also, it is much cheaper to treat
water at the point of use versus, the cost of repairing the
pipes and infrastructure to guarantee the water quality from the
central treatment plant. ”
Steve Maxwell, Managing Director at TechKNOWLEDGEy Strategic
Group has a similar opinion, “Some people in the industry argue
that we concentrate too heavily, and spend too much, at the
centralized treatment plant. Some argue that perhaps it makes
more sense to distribute water from a central plant with lower
quality to later be treated to the level needed at home or at
the tap, instead of treating 100% of all the distributed water
to a high degree of purity at central facility,; after all, we
only drink 0.5 to 1% of the water. From a broader economic point
of view, it might be cheaper to treat the water at the point of
use. The big drawback is that this would require a rebuilding of
the whole water infrastructure, but it might be cheaper in the
long term.” To Read the Full Market Overview Click Here:
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Water Market Future Potential
Both experts think the water industry is very promising. Maxwell
states, “Generally speaking, I think we have a business that
will continue to grow and offer great potential for firms into
the very long term future. From a global point of view, we have
a growing demand for water with a fixed supply, but we have a
rapidly growing population and rapidly expanding economy.
Meanwhile, we have the issue of poor water management practices.
So all of these combine to suggest that water resource and
availability of drinking water in the future is going to be a
bigger and bigger challenge and problem. Firms that are involved
in this kind of business solving these problems have very bright
future. So it is a very good industry to be involved in long
term. Most sectors of this industry do not offer spectacular
growth or profitability, but I think there is a very sustainable
basis for long-term growth and profitability.
Similar opinion is expressed by Berlant, “I think water will be
increasingly precious, I think the need and desire of customers
for water treatment, and desire to have better quality water is
just at the emerging stages. And I think the economics and
pricing are going to make this an extraordinary market. It has
been an excellent place to be for a long period of time.
Although up until recently, it has been largely an invisible
area. People never thought about water particularly. It is the
most important element in our life. Partially because it has
been so inexpensive, that’s why people don’t think about it that
much.”
Fei Wang
Fei Wang holds an Honors Bachelor of Commerce from University of
British Columbia Sauder Business School, with double major in
Finance and Marketing. She has experience in investment banking
and advertising in Canada, China and Korea, with a firm academic
background. Disclaimer:
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InvestorIdeas 2006