Fluid Power Roundtable 2016

DE: According the National Fluid Power Association’s latest industry update, overall sales saw a downward trend last year. From your company’s perspective, how is 2016 shaping up?

Patrick Magill, Canadian general manager – Aventics Inc.: From our perspective, we’re not seeing a downturn in 2016. In fact, if we look at GDP, it’s predicted we’ll see very small increments of growth over the next three years. We also had some good growth in 2015 and explored some other emerging markets. Since we’ve separated from the Bosch Rexroth world, it has been a market awareness exercise for us over the past two years.

After all, we’re still the same people and products from Rexroth Pneumatics, but now we have our new Aventics brand and name to develop in the marketplace. So it has been a process of renewing the trust that the quality of the Rexroth product is still within the organization.

Roy Pietila, Vice President of Finance – Festo Canada: From the perspective of the industry reports we produce at the Canadian Fluid Power Association, a lot of people are getting decimated. It’s more on the hydraulic side than the pneumatics side, but 2015 was a very poor year for many. The main reason was Western Canada, which is directly related to the fall in oil prices. The loss of business there has been overnight. Although we have seen an increase in exports for OEM manufacturers in largely Ontario and Quebec, that market typically takes a longer time to gain traction.

John Lamb, National Segment Manager for Packaging, Food & Pharma – ASCO Div. Emerson: The Canadian fluid power market didn’t exactly follow same path as the U.S. industry. For example, the pneumatic numbers here were generally flat in 2015 while hydraulics was down a little bit. It also depends on what region you’re in. Central Canada is doing well, but the oil and gas declining market, out west predominantly, affected everybody in this business across the board. For 2016, I wouldn’t say it’s going to be any worse, but there aren’t any signs it’s going to be better than last year.

DE: Did the decline in oil prices last year affect your business? If so, what has been your company’s strategy going forward?

Magill – Aventics: It has affected us in some areas of our business. We do have a long-standing relationship within the oil and gas industry dating back to our Wabco days, before Bosch or Rexroth. We have a strong presence in the oil and gas globally and therefore we are affected by oil prices. However, for many years, we have been branching into other industries like food and beverage, packaging, life sciences, mobile and heavy industries, transportation and industrial automation. Within some of those, government is investing very heavily, such as infrastructure, while there are opportunities in life sciences given our aging economy. So we’re not re-inventing ourselves; however, we are known in the market as a smart pneumatic engineering company that provides solutions while being easy to do business with.

Pietila – Festo: We’re fortunate in that we don’t have a strong footprint in oil and gas or the process automation side. So, in actual fact, the lower oil price, which converts into a weaker Canadian dollar, has helped. Our stronghold is more in manufacturing, so a lower Canadian dollar helps OEMs be more competitive. That’s not necessarily for the right reasons, namely via increased productivity, but via exchange rates when they sell abroad. The U.S. dollar started off 2015 at $1.19 and peaked at $1.46 while the Euro started 2015 at a roughly $1.30 threshold and went up to $1.61 so that weakening really helped them out in terms of exports. As a result, our strategy hasn’t changed; we’re staying the course.

Lamb – ASCO Div. Emerson: Being the company we are, ASCO Div. Emerson has its roots in most industries – including oil and gas and process industries – so it certainly affected us. At the same time, we’ve done well enough in Central Canada to keep things fairly flat last year. Going forward, I’d say it’s all about organizing the resources we have and pointing them in the right direction. For us, that means focusing on the vertical markets that are doing well in Canada.

DE: Which products or product categories have seen the largest growth or decline?

Magill – Aventics: In most markets, a really strong trend is bus communication that allows fluid power the ability to communicate intelligently with an automated system. As OEMs expand sales of their equipment globally, this integrated technology allows them to communicate with machines abroad. In other words, a company in Canada could “dial into” a machine in China for instance and monitor the performance of a machine right down to a single valve. This touches into another growth area, namely safety, which is all about communication. We have the latest products and solutions to help our customers be on top of the efficiency curve.

Pietila – Festo: What is important for us moving forward is the whole movement toward Industry 4.0 which is centred on electrical automation. For us, customer connectivity will be driven initially on the electrical automation side. It doesn’t mean we will ignore the fluid power side, since it’s the majority of our DNA. We are moving toward integrating pneumatics into that movement but, initially, it will be more easily completed on the electrical side because that connectivity is there already. Industry 4.0 will be a continuation of that.

Lamb – ASCO Div. Emerson: The products experiencing growth are those that combine pneumatics and controls into one platform as well as the solution-type products. Take, for example, an air prep assembly. Instead of getting a bunch of pieces, manufacturers are looking for a complete solution on a plate that arrives just in time. More and more suppliers are offering that service so there is high acceptance. Many companies are also resource poor so they don’t have the time or people to do these kinds of activities. And, given the demands of industry and projects, they have to complete in less time and for lower cost, so they are always looking for ways to be more efficient.

DE: To what extent does the regulatory framework in Canada hamper introduction or adoption of fluid power products?

Magill – Aventics: For us, it doesn’t. In fact, our focus in the Americas is specifically geared to meeting those certifications. In terms of the electronics, a lot of our products are CSA and UL dual certified to name a few. In addition, AVENTICS has a focus on all global certifications, like RoHS and others. If our customers are shipping their equipment abroad, this is a mandatory requirement. Being a global manufacturer with multiple factory locations gives us a competitive advantage.

Pietila – Festo: It’s both good and bad. It all depends on whether you have the certification or not. If you have it, you love it because it’s a real barrier to market that is costly and timely to overcome. Conversely, if you don’t have it, it’s very frustrating because you may have opportunities to sell products but you can’t pursue them.

For example, take the Ontario Boilers and Pressure Vessel standard. The hydraulic industry addressed this issue very early and lobbied for and got an exemption. Unfortunately, this wasn’t the case for our pneumatic industry.
As the standard implies by its title, the pressures a boiler system could reach are completely different than the pressures an industrial pneumatic system can reach, so it’s difficult to get products certified. Products designed for global markets will not pass the Canadian standard. Therefore, standard products would have to be substituted for more specialized product.

Lamb – ASCO Div. Emerson: This is an important topic because it’s a difficult one to understand. At the Canadian Fluid Power Association (CFPA), we have become a resource for all the relevant certifications, from the electrical to the CRN pressure vessel type. There are a lot of regulatory requirements in Canada yet many suppliers and their customers don’t understand all that’s required to become compliant. Being a North American company, ASCO Div. Emerson has been dealing with all the requirements for a long time, which gives us a competitive advantage. On the other hand, companies that import product from overseas may have CE or UL but not specifically Canadian certification. It’s not that they are trying to deceive; they just don’t understand how different the Canadian market is.