Dominique Henri – Chairman & CEO, Heurtey Petrochem – France
The CEO of Heurtey Petrochem, an international oil and gas engineering group, discusses the growing importance of its gas treatment branch and the success of the capital raise he engineered last year.
Heurtey Petrochem recently published its 2014 results, which indicate a strong performance with a 9 percent growth rate. You highlighted order intakes as a major driver of your excellent results. What makes Heurtey Petrochem’s business model so robust?
Heurtey Petrochem’s model relies on the complementarity between its business units. Fired heaters for the refining industry and hydrogen generation constitute the group’s historical core business, which is mainly related to the downstream sector. Our Prosernat division is on the other hand dedicated to gas treatment, which is more focused on the upstream sector. We have developed commercial and industrial synergies between both branches. Today, furnaces represent 80 percent of our turnover while gas treatment represents 20 percent. We are progressively trying to re-balance our portfolio and hoping to achieve a 60-40 ratio in the near future. Despite Heurtey Petrochem’s medium size, we have a very strong presence in the United States, our main growth contributor in 2014, and are also present in Korea and in Russia.
Overall, I like to define Heurtey Petrochem as a specialized engineering and project management company, which subcontracts most of its manufacturing. We however do have some integration, with the fabrication plant in Romania – which covers the Russian and European markets, and a second production unit in India which was unveiled last year. Encompassing engineering, project management and fabrication has introduced greater flexibility into the company especially in regards to quality control and reliability.
Amongst its competitors, Heurtey Petrochem has the widest range of expertise, competencies and capacity to operate in complex technical environments. We have the largest number of references too, and I always like to highlight the fact that we have delivered 52 (out of 54 – 55) heaters for Reliance’s Jamnagar, currently the largest refinery in the world. We consider ourselves to be a specialized EPC player, and a market leader in our segment, which allows us to accommodate fluctuating market trends.
In 2013, you expressed your commitment to seize growth opportunities in the field of natural gas treatment. How has this objective come along and what have been the major developments of Prosernat since its acquisition in 2011?
The acquisition of Prosernat was a two-stage process. We purchased 60 percent of the company in 2011 and finally acquired the remaining shares last year. Prosernat has registered a strong growth since the acquisition and accounted for more than 50 percent of our order intake in 2014. Prosernat has also significantly expanded its portfolio of technologies with the acquisition of a MEG reclaiming technology in 2013 and of a sulfur recovery technology in 2014.
Overall, in the last 10 years, thanks to a balanced combination of organic and external growth, we have multiplied our revenues by 5 and operating profit by 7-8. The establishment of our American subsidiary, Petrochem Development, and the installation of production units in Romania and India illustrate our recent growth trends.
The majors have expressed their commitment to reduce their investments in order to maintain high levels of cash flow. How do you predict these trends will affect your activity in 2015?
The markets we address are clearly negatively impacted by the majors’ capex reductions. In certain areas, the geopolitical context is also jeopardizing our activity. We are expecting a reduction of 5 to 10 percent of our revenue. In the long term, Heurtey Petrochem’s business model is resilient and I am confident that we will absorb this slowdown. In this particular context, our customers and not only the super majors, are ever so demanding. Projects are more complex, schedules are tighter and execution schemes are more challenging, particularly in remote areas. In light of the current context, Heurtey Petrochem must carefully examine the strategies it chooses to implement. We choose to differentiate ourselves with the quality of the projects we undertake. Cost reduction is undeniably critical at the moment and has encouraged Heurtey Petrochem to develop an extensive international network of suppliers and contractors in order to respond to its customers’ needs in a reactive way. For instance, we capitalize on our fabrication facility, project management and engineering offices in India, which enable us to deliver our services more effectively in Asia and in the Middle East.
What are Heurtey Petrochem’s prospects for international expansion?
In 2015, amid a depressed market, we are planning on pursuing opportunities in Asia and the Middle East. In North America, declining investments in refining have led us to position ourselves in the LNG market. As I mentioned earlier, our middle term objective is to bolster sales in our gas treatment business line via external growth in order to incorporate new technologies and integrate new geographic areas. A few months after our capital increase, we acquired a small company in sulfur recovery, which has helped us introduce a new technology in our portfolio.
The Indian and Romanian facilities enable Heurtey Petrochem to optimize costs, but when you outsource your manufacturing, how are you able to do so without compromising your highly qualified expertise?
Our production facilities serve to increase proximity to clients and improve our reactivity in certain markets. Our plant in Romania which addresses Europe, Africa and Russia is unable to effectively serve clients in China or Korea for instance.
Heurtey Petrochem has a historical presence in South Africa, but usually addresses its African markets from India and Romania. We capitalize on historical and cultural ties to export our solutions to Francophone Africa, and are now investing Eastern Africa, Kenya and Mozambique in particular.
What are your objectives for the coming years?
We want to remain a specialized EPC contractor. Our objective is to complement the services provided by general EPC’s. We aspire to expand our technological breadth and depth of knowledge in innovation. We have a thorough understanding of our competencies and a clear vision of segments where we can be competitive.