Sunday, November 02, 2008

Fast Growth for Water Treatment Technologies due to World-wide Water Shortage

Author: Fei Wang

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, 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 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: 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: ©Copyright InvestorIdeas 2006

About the author: 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.


At 11:45 PM , Blogger Robin said...

Thank you for the great post. But some water systems are now available that can create very pure drinking water from air around us!


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