Kurita Leverages Synergies Between Its New Chemicals and Smart Water Investments to Grow in North America

Water chemicals specialist Kurita marked the beginning of 2017 with two big deals to accelerate its business in North America.

  • Smart water company APANA (client registration required) announced last week that Kurita led its $3.5 million Series A round. With about 140 installations in North America, the majority of which are with wholesale giant Costco, APANA has found quite some traction since its inception in 2012. APANA offers its customers hardware, such as high resolution flow sensors and meters, as well as automatic meter reading (AMR) from third-party vendors, and bolts on its wireless gateway and telemetry equipment. Its innovation is in software algorithms, where it takes baseline water usage data for a large store or facility and optimizes operations to locate water leaks/bursts, identify waste signatures, and equipment malfunctions. APANA leverages both cellular communications and LoRa (Low Power Wide Area Networks) to collect and analyze data in real time. Customers using APANA see above 20% water savings and reduction in associated maintenance costs, with an expected payback within 24 months. While long payback periods can be a hurdle for adoption, the company has been delivering operational benefits to customers. Its recent traction has seen the technology implemented at large university campuses, car washes, cooling towers in industrial facilities, and wineries, to provide both energy and water savings annually.

  • In early January, Kurita acquired a 100% stake in Fremont Industries, a Minnesota-based water treatment chemicals company, for $40 million. Fremont has primarily operated in the U.S. Midwest, where it manufactures treatment chemicals and provides services to markets including food and beverage, hospitals, and commercial buildings, as well as industries like biofuels, power, oil and gas, refining, and municipal wastewater facilities. Fremont offers chemical formulations and monitoring services to prevent corrosion in boilers and cooling towers, biocides for Legionella removal, polymers, enzymes, and microbial solutions for wastewater treatment and nutrient removal, and pre-treatment chemicals for membrane systems and clean-in-place applications. With about $30 million in annual revenues, the addition of Fremont will more than double Kurita’s revenues in North America. This acquisition provides more footprint and sales force for Kurita’s overseas business, very similar to its acquisition of Germany chemicals provider BK Giulini’s water and paper chemicals products in January 2015, which boosted Kurita’s revenues in Europe (see graphic below).

Kurita’s annual revenues are about JPY 214 billion (a little over $1.9 billion USD). While the company is known for its ultra-pure water services, it is expecting a decline in this segment in its local market as well as headwinds from the semiconductor industry. Kurita has typically spent less than 3% of net sales in R&D, relying on strong M&A deals to grow its business overseas. Having tried and tested its M&A model in Europe (roughly 30% of its revenues for 2017), the company is now venturing a similar approach to gain a formidable foothold in the North American industrial chemicals market. While its acquisition of Fremont Industries appears in line with its existing business, Kurita’s investment in APANA is a first step into the digital water market. This allows it to package digital solutions and advanced sensing capabilities into its services business and expand its process control offerings. APANA gains access to industrial customers seeking operational efficiency improvements similar to what several municipal and commercial facilities are experiencing today.

Kurita’s investments are an example of similar deals we expect to see in the “water-IoT” nexus through 2017 as chemicals and materials providers begin to integrate more automated solutions into services. This includes GE Water’s recent partnership with two water analytics companies, Xylem’s acquisition of Sensus (client registration required for both) and Visenti, and 3M and ABB’s investment in TaKaDu (client registration required) back in 2014. Readers keen on exploring partnerships in smart water and industrial internet of things should see the updated profiles on i2O Water, CitiLogics, and I-Real, which offer software and hardware solutions for real-time monitoring of the water and energy infrastructure.

By: Abhirabh Basu