Dow Chemical Co's buyout of Rohm & Haas earlier this year could help transform its small water business into an economic river, though the recession and enormity of sifting through thousands of potential products could slow its ambitious plans.
When Dow bought Rohm last April to diversify beyond commodity chemicals, it also added Rohm's ion exchange resins, widening its portfolio of water-related products to supply an ever-increasing demand for what is likely to be a scarce resource in coming years.
It's an enormously complex integration, said Ian Barbour, head of Dow Water and Process Solutions. We're having to go through an exhaustive process of deciding which products we want to offer the market.
Companies like Dow, General Electric and Siemens are moving aggressively to supply technology that will clean or desalinate the liquid that is increasingly viewed more as a commodity than an unlimited and taken-for-granted resource.
Demand for water is just fundamental, and there's a lot less of it, said Barbour. You need water to run economies, so the fundamentals (of the business) are fantastic.
Dow's water unit sells membranes and other filters to governments, water processing centers and companies such as Culligan that make retail water filters.
Being visible in tackling a worldwide issue like water availability ... can only help a business like mine, said Barbour, 52, a former charter airline pilot who has worked at Dow for nearly 30 years.
Dow Water and Process Solutions pulled in $580 million in revenue last year, just a small fraction of Dow's total revenue.
The unit is hoping Rohm & Haas' water technology will help its sales double by 2015.
But the recession has taken a bite out of the unit's performance. In its third-quarter 2009 earnings statement, Dow said sales in the Electronic and Specialty Materials division, which contains the water unit, fell by 15 percent.
That drop was largely due to lower demand for ion exchange resins, a bead-like material through which water is filtered, and was offset only partially by an increase in sales of reverse osmosis membranes, which act like a strainer on water to remove impurities.
Though sales are slowly improving from recession lows, they have yet to regain highs attained in 2008.
Dow shares were up 3 percent at $27.58 on Wednesday morning on the New York Stock Exchange, not far from their 12-month high of $29.50 reached last month.
Many of Dow's water customers are located in arid regions like Australia, the Middle East and the Mediterranean basin.
Factories in India and China, which require vast amounts of clean water to operate, also employ Dow's water technology.
The pressure on our unit is to continue to grow, said Barbour.
The company declined to make specific research and development figures available for its water unit, but Barbour insists Dow's executives, and its chief executive, Andrew Liveris, are supportive of his unit.
We have been able to compete very effectively for the resources that we've needed to grow this business, he said.
(Reporting by Ernest Scheyder, editing by Matthew Lewis)