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Dresser-Rand Group (DRC) |
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WIKI ANALYSIS
Dresser-Rand produces equipment for natural resource extraction, principally in the oil, gas, petrochemical, and process industries. Its products include centrifugal and reciprocating gas compressors, gas and steam turbines, gas expanders and associated control panels. Its revenues are derived from the following end market segments: oil and gas production (30% of revenue), gas transmission (13%), refining (27%), chemical (13%), and other(17%). The company has 12 manufacturing facilities in 7 countries and 39 service centers in 22 countries but operates primarily in North America. [1] DRC seeks to expand globally by integrating more of its operations in countries outside of North America through local facilities, which exposes it to international risks. DRC is also affected by consolidation of firms within its industry, leading to more competition among fewer firms.
Business Growth
In 2010, net sales decreased 14.7% to $1.95 billion. Net income decreased 30.3% to $147 million.[2] This decrease in growth is attributed to low production volumes as the company seeks to improve new unit margins and acquire new businesses.
Trends and Forces
DRC's industry is consolidating, leading to more competition
The turbo compressor industry consolidated from more than 15 to 7 large competitors; the reciprocating compressor industry has consolidated from more than 12 to 6 large competitors; the steam turbine industry has consolidated from more than 18 to 5 large competitors. As a result, each competitor has taken on larger production volumes, leading to lower unit costs and more competitive prices. In order to differentiate itself from other competitors, DRC has to focus on developing deeper relationships with its clients, so as not to lose its customers to lower prices. It also needs to continuously expand globally in order to claim new clients. [3]
DRC's increasing global presence leads to risks and benefits that affects revenues
Dresser-Rand is localizing its presence in countries where it has key operations, such as Brazil, China, India, South Korea, and Indonesia. Although most of its operations are based in North America, 17%, 15%, and 12% of its revenue is derived from Asia, Middle East/Africa, and Latin America, respectively. Having facilities in these areas allows the company to improve services and expand product offerings directly based on the clients in the area. In turn, this could attract new clients and lead to longer term relationships with existing clients. However, at the same time, increased globalization leads to increased risks that affect revenue, such as changes in foreign exchange rates, civil unrest in global regions, differing labor and tax regulations, etc.[4]
Competitors
The industries that DRC operates in have consolidated to fewer and larger competitors. As a result, these firms have focused on continuously expanding their operations to new global markets or entering different parts of the industry through acquisitions of different businesses along their supply chain.
References
- ↑ http://files.shareholder.com/downloads/DRESS/1273647250x0x455444/8ed0fd0f-405d-4c09-bdd8-c246a1550432/DRC_2010AnnualReportLoRes_FINAL031711.pdf
- ↑ http://files.shareholder.com/downloads/DRESS/1273647250x0x455444/8ed0fd0f-405d-4c09-bdd8-c246a1550432/DRC_2010AnnualReportLoRes_FINAL031711.pdf
- ↑ http://files.shareholder.com/downloads/DRESS/1273647250x0x455444/8ed0fd0f-405d-4c09-bdd8-c246a1550432/DRC_2010AnnualReportLoRes_FINAL031711.pdf
- ↑ http://files.shareholder.com/downloads/DRESS/1274584423x0x455444/8ed0fd0f-405d-4c09-bdd8-c246a1550432/DRC_2010AnnualReportLoRes_FINAL031711.pdf
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