Interview with Xylem’s David Flinton: Complete Dewatering Solutions

Feb. 14, 2017
RER’s Michael Roth talks with Xylem’s senior vice president and president of dewatering David Flinton about Xylem’s international expansion and the company’s strategy for offering complete solutions.

RER’s Michael Roth talks with Xylem’s senior vice president and president of dewatering David Flinton about Xylem’s international expansion and the company’s strategy for offering complete solutions.

RER: Your expansion in Latin America is impressive. Is your focus in Latin America on major projects such as the Panama Canal project, the mining project in northern Colombia and the response to the flooding in the southern cone, or do you do your share of small projects as well?

Flinton: Large projects such as those which you have mentioned tend to attract a lot of press but we work on a wide range of projects across the Latin America region. While we had a presence in Latin America prior to the acquisition of Godwin Pumps, the acquisition meant that we significantly increased our footprint, enabling us to build our business in the region. Because of the nature of the Latin American economy, we do a lot of day-to-day business with the mining market which is the largest segment of our revenue, but we also do some public utilities and construction work.

Is a good bit of work similar to the kind of rental work we’re familiar with in North America? Or more long-term projects?

The mining market operates a little bit differently than the traditional construction space. In terms of dewatering, mines will generally own their own dewatering equipment. We’re working with some major mining customers in Colombia, typically on dewatering projects at large pits that have not been worked in a long time and are being reopened.  Depending on the nature of the project, it can run from six months to a year; some are long-term projects and some are permanent installations. In addition, when mining customers reach capacity, they rent products from us. We tend to top off their capacity with our rental capability.

What are your branches in Latin America mostly focused on – bypass projects, construction sites, mining sites, industrial projects? What about the small jobs like flooding in a house or building?

Certainly we’re very active in the construction and public utilities markets in Latin America. Historically, our presence in the region has been heavily mining focused and we’re working to diversify into other markets. We’ve been further diversifying into public utilities and construction. Our new branches and hubs provide us with a springboard to do that in Latin America.

Regarding the smaller projects that you mentioned such as flooding in a house or building, our dewatering business is generally focused on larger applications. However, within the Xylem portfolio itself, we have other areas of the business that make products suitable for those types of residential applications – for example, sump pumps for basements, etc.

You now have 17 branches in Latin America?

We do. We opened three new hubs in Latin America in 2016, with the latest in Barranquilla in the northern part of Colombia. There are several large mining companies in the country who we will support from the Barranquilla hub. In April 2016, we opened a new rental hub in Pará, Brazil, while another was opened in Chiclayo, Peru, in January 2016. These new hubs are in addition to six dewatering pump rental hubs that Xylem has opened in the region over the past six years as part of a multi-million dollar investment in Latin America.

Looking at North America, what are your branches primarily focused on?

In North America, our market participation is a lot more diverse than Latin America, given the nature of the economy. Currently, the public utilities and construction markets are very healthy. Overall, we’re seeing strong construction trends and when we talk to our customers - for example in the mid-Atlantic region - we’re hearing that some construction firms have backlogs stretching out several years. There is also a lot of municipal infrastructure spending going on right now, driven by healthier municipal tax revenues.

What other areas are strong in North America?

Public utilities and construction are our largest and fastest-growing segments right now, but if you go back a year or so, we were doing a lot of projects in the power market, driven to a large degree by the Fukushima nuclear accident in Japan. Many power plants, particularly the nuclear power plants in the U.S., wanted to establish contingency plans for such an event so that was a strong market for us as well, albeit a smaller piece of our overall business.

In public utilities work and construction work, do you typically have engineers going out to the site to spec the job?

Yes, in the public utilities space there are differing types of projects. We do a lot of bypass work, and those bypass jobs typically come in two different forms. One is the unplanned bypass, where there is damage to a piece of critical infrastructure.  We will send a group of our application engineers who are specialists at designing and installing pumping and dewatering systems. They visit the site, assess the situation with the customer, design a bypass solution and then implement it. A lot of effort and resources are required because it is an emergency response type of activity.

Then there are planned bypasses. Take for instance a lift station upgrade involving the pump and pipes. In this case, it is necessary to install a temporary bypass solution while the work is underway. This planned scenario usually involves engineering and construction firms and is a little more bid-and-spec type work versus the unplanned emergency bypass work.

What about flooding and hurricanes, disaster situations?

We’re very well positioned to mobilize our teams and technology during large storm events. Several days out from Hurricane Matthew hitting off the U.S. coast for example, we had a fleet manager in the U.S. working with our regions to identify locations where we had assets that we could re-deploy to Florida and the Mid-Atlantic states. So, by the time the storm hit, we’d already mobilized and installed hundreds of pumps and piping systems to support our customers in need.

What type of inventory would you typically have in the U.S. market?

It varies by market but, by and large, we have a vast combination of pumping equipment. We manufacture Godwin and Flygt brand products which represents the core of our pump fleet, but we pride ourselves on being relatively pump-brand agnostic. If a job requires a type of pump that we don’t make within Xylem, we’ll acquire that from an outside source and put it in our rental fleet. A good example of that is some of our branches in Florida which are doing a lot of well-pointing work – an application that requires special pumps – and we have added those to our rental fleet.

We have a comprehensive range of hoses and pipes and fittings because we regularly provide complete dewatering solutions. Around a pumping solution like that, we also have light towers for work at night and some generators. We’ve got diesel and electric-driven pumping equipment within our fleet. These items would represent a typical core branch inventory. Depending on where you are, the type of product might be a little bit different but in general our branches carry a broad portfolio of equipment to meet the diverse needs of our customers.

In North America, is a certain percentage of your work on the order of sudden breakages and industrial fixes? 

Yes, that’s quite a bit of our business, not so much at industrial plants but more in the municipal space where you have a lot of aging infrastructure. Aging infrastructure is a major issue. It’s no secret that the U.S. has historically under-invested in maintaining its infrastructure so we see a lot of that work, particularly on the municipal side of the ledger. We just did a very large job in Tennessee earlier this year for such a project, and supported a similar project in the Bowery Bay in New York City last year.

Similar in Latin America?

The dynamics in Latin America are a little different. In general, the municipal infrastructure is not as developed as it is in North America. There are certain places in Latin America, like Santiago, Chile, where it’s a very mature, well-maintained municipal infrastructure but in other cities, that’s not the case.  Where there are mature infrastructures in some of the larger cities, we’re doing that type of work, but overall, it’s a smaller part of our business in Latin America given the maturity level of the infrastructure in that region.

You just opened a new branch in Dubai? Are you active in the Middle East?

Our recently opened Dubai branch is our first branch in the region. Historically Xylem has not had a rental and service branch in the Middle East. We’ve gone to market through indirect channels. From the Dubai hub, we will further our knowledge of the market, develop a center of mass for dewatering rental and sales expertise, and as with Barranquilla in Latin America, use the hub as a springboard from which to participate in other fast-growing markets, for instance Saudi Arabia, Qatar, and other parts of UAE -- the largest markets in the region.

The Middle East has a diverse range of markets, but those three are the largest and we’ll leverage some of the fleet and resources we have in the UAE to take advantage of opportunities in the Qatar construction market, with the World Cup coming up there. Those types of events drive a lot of infrastructure build and when you have that level of infrastructure growth, there are always opportunities for dewatering rental and sales.

Branches and hubs like those in the Middle East and Latin America also give us the opportunity to take a well-established, complete dewatering solution offering and business model from the U.S. and export it to other markets. It doesn’t just happen overnight going from no branches to full-service branches that can design, engineer, install and decommission complete dewatering solutions. This is a deliberate, long-term strategy to take our tremendous knowledge and capability here in the U.S. and leverage it globally.

The three biggest general rental companies in North America – United Rentals, Sunbelt Rentals and Hertz Rental – all have separate divisions for pump rental. And in fact, those segments are outperforming general construction and industrial rental in terms of percentage of growth. So what makes this pump rental space so attractive, why is the potential for growth so big?

For us at Xylem, it’s not just about renting a single piece of equipment but about providing complete dewatering solutions. Certainly, there are some customers, like construction firms, which at times simply want to rent a single pump, but there’s also a large segment of the customer base that are seeking support in putting together a complete dewatering pumping system with pipes, fittings, etc. and often, they also want help operating the system.  In those cases, we can provide additional services such as our monitoring and control technology to make sure their system is operating optimally throughout the life of its installation.

Our business is about solving problems for customers. This moves us up the value chain from simply providing our customers with a piece of equipment to forging really special relationships and strong bonds through longer-term involvement in complex dewatering projects. This results in really strong customer intimacy that you don’t get through traditional transactional renting. That’s a very attractive proposition.

Setting up the job, setting up the equipment, staying there and making sure it’s operating properly is a big part of what you do, right?

Exactly. That’s why we consider ourselves more of a specialty rental house. That’s not to say that Xylem doesn’t get involved in transactional rental. If somebody needs a 4-inch pump, they come pick it up and drive away with it. Where we excel is in the specialty part of the business, where we’re working with the customer to design a complete pumping solution, often helping them set it up, run it and decommission it after the job is finished. You look at the Panama Canal project; that was a turnkey project for us. But certainly, we have a lot of smaller examples of that type of work all over the U.S. And when I talk about exporting our business model from the U.S. to places like Dubai and Latin America, it’s exactly that – a model whereby we work with our customers to design a complete solution and implement that onsite - not just a transactional relationship.

We don’t go from zero to 100 percent capability overnight and so on a job like the Panama Canal, we had a whole group of individuals from the U.S., which is a very mature, capable dewatering organization, deployed to Panama and working down there for a period of time alongside the local team. These gigantic projects are an opportunity for us to educate our international teams and build capability in new geographies.