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INTERVIEW INTERVIEW

July 2015 • gasworld | 3736 | gasworld • July 2015

An interview with CEO, Sam Thomas

Going full circle at Chart Industries, Inc.

Chart Industries Chairman, President and CEO Sam Thomas discusses the evolution of the company throughout the decades and doing business in a fluctuating energy market.

Synonymous with cryogenic equipment, Chart Industries is at the forefront of today’s global industrial gases business. The

company’s roots can be traced as far back as 1740 and its direct heritage to 1859, with a British entrepreneur named John Marston. “The date is ironic when we talk about Chart’s evolution, as it’s the same year that Charles Darwin published On the Origin of Species,” says Chairman, President and CEO Sam Thomas.

The modern story of Chart begins more than 100 years later with the 1986 purchase by the Holmes brothers, CHarlie and ARThur, of Altec International, a brazed aluminium heat exchanger manufacturer based in La Crosse, Wisconsin. Further acquisitions followed to supplement the focus on cold temperature (cryogenic) processing, particularly – in 1999 – MVE Holdings, which included CAIRE, a small business specialising in liquid oxygen respiratory equipment. This subsequently formed the basis for Chart’s increasingly significant BioMedical business.

“Cryogenics remains our focus and today Chart is a recognised brand for the design and manufacture of highly engineered equipment used from beginning to end in the liquid gas supply chain. Our principal market sectors are energy, industry, life sciences and respiratory healthcare,” explains Thomas.

The industrial gas business perfectly demonstrates Chart’s role right across the supply chain. Its brazed aluminium heat exchangers are fundamental to the cryogenic separation of industrial gases from air; Chart supplies tanks for the storage and transport of these gases to point-of-use; and the company provides a multitude of engineered solutions at the point-of-use, including systems to carbonate soft drinks in restaurants, nitrogen dosing for food preservation, laser assist gas solutions in industry, oxygen respiratory therapy, and biological tissue storage.

In fact, Chart has a motto on its website that aptly reads, ‘You may never use the products we make, but everyone uses the products we make possible’. This is

a pertinent message right now as others within the industry, such as the British Compressed Gases Association (BCGA), extoll the virtues of the invisible industry. Thomas is keen to point out, however, that this not only summarises Chart Industries but is also a Chart trademark.

“The statement has its origins in our attempts to summarise, at a high level, what Chart does,” he says. “For example, an explanation to friends, family and others, unfamiliar with the details of the diverse markets we serve. Very few will ever have direct use for a Chart manufactured heat exchanger or storage tank, but all will use products whose own manufacture relies on Chart equipment. The statement is therefore true, but provides a simple analogy that people can relate to.”

“We think of atmospheric and hydrocarbon gases as the building blocks for industry and cryogenic storage of biological materials can be the essence of life itself; so our statement is applicable to the gases/cryogenics industry as a whole.”

While this motto symbolises Chart’s role within the gases industry and society at large, the company also has a tagline that encapsulates its value proposition. “We’re a niche specialist and aim to be the market leader where our technologies are employed,” Thomas adds. “It probably means we’re a little bit ‘nerdy’ as our people are passionate about what they do and proud that customers rely on our expert knowledge. Our tagline – Innovation. Experience. Performance – came from a customer survey as to why they bought from Chart and we feel this aptly characterises our value proposition.”

EnergyToday, Chart rolls out that value proposition in virtually every corner of the world, with domestic operations in eight US states and international engineering and manufacturing sites in Australia, China, Czech Republic, Germany and the UK. The company is also active across an array of applications.

Arguably the most topical application at the moment is in the energy sector. When charting the company’s history,

it is interesting to note that a significant growth driver for its business in the 1990s was the rapid expansion of industrial gas production, when little development was going on in the natural gas sector. Now, however, one might suggest the reverse is true, with Chart entering a period of substantial transformation in the field of natural gas and wider energy market.

“Whether it’s our own Energy Information Administration (EIA), the International Energy Agency (IEA), or the energy outlook reports published by the oil majors such as Shell and BP, all are united in forecasting continued worldwide growth in energy demand caused by rising population and income. All are also united in their opinion that natural gas will play an increased role in the energy

mix, overtaking coal in the process,” Thomas notes.

Chart’s Energy & Chemicals (E&C) business is rooted in midstream gas processing including cryogenic process design and equipment for natural gas, and other hydrocarbon, processing applications as well as air separation

As Thomas affirms, this is about much more than just LNG, “Currently many observers most closely associate Chart with LNG and, much like the industrial gas sector, our equipment and solutions are used right across the value chain from production through to end-use. In recent weeks there have been press releases from Venture Global, Parallax, Shell and Scania, amongst others, for LNG projects. The common denominator for them all, is Chart’s participation.”

“Liquefaction of natural gas is just one of the processing operations that rely on Chart and the removal of nitrogen, separation and purification of the high value natural gas liquids (NGLs) and helium all have cryogenic stages and use

“2015 will continue to be a challenge...however, the industries we sell into continue to predict long-term growth”

Chart supplied equipment and, often times, process technology as well.”

Nonetheless, LNG is increasingly significant for Chart Industries both now and in the future. While undoubtedly a positive in the long-term, this can present challenges in the near-term as dynamics fluctuate in the global energy market.

This has been observed in Chart’s recent financial disclosures. In its fourth quarter 2014 results declared in February (2015), the company delivered ‘better than anticipated’ results on improved execution in E&C, with segment sales improving 40% compared with fourth quarter 2013. Chart was also quoting significant LNG liquefaction and distribution opportunities, which could result in orders during late 2015 or 2016. By the time of its first quarter 2015 results in May, however, currency and energy headwinds were taking their toll and the slowing LNG infrastructure build-out in North America was cited a chief catalyst behind the planned closure of its Distribution & Storage LNG equipment manufacturing facility in Owatanna, Minnesota.

Despite this, Chart stated an unwavering confidence in the increased demand for energy globally and the ‘long-term fundamental drivers of our growth’ – a stance that Thomas maintains in our interview. “2015 will continue to be a challenge and the low oil price is certainly responsible for deteriorating near term prospects in LNG diesel fuel substitution, petrochemical and natural gas processing applications,” he says. “However, the industries we sell into continue to predict long-term growth and already this year Chart has, once again, proved our ability to deliver on strategically important major projects.”

“We’ve previously demonstrated our ability to successfully chart a course through cyclical economic conditions, and are confident we will do so again.”

He continued, “We have seen deteriorating near term prospects in LNG fuelling, but we continue to quote significant LNG liquefaction and distribution opportunities, predominantly in North America, for both the export of LNG and its domestic use for vehicle

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“...at this moment in time, it’s probably liquefaction that we’re most excited about, and particularly in the spaces referred to generically as small and mid-scale”

fuelling and diesel replacement in the shale basins. We’re also cautiously optimistic that conditions in China will recover later on this year following government incentives promoting LNG, in favour of coal and distillate fuels, consistent with improving environmental air quality.”

Asked which aspect of its LNG solutions Chart sees the greatest potential in, �omas makes particular mention of the small and mid-scale LNG business and opportunities in liquefaction. �e company is involved in a signi�cant number of the planned North American LNG export projects to this end, and �omas says, “Ostensibly we remain positive about the future of LNG because we don’t see the demand going away. Despite the current low oil price, there have been no signi�cant amendments to the forecasts in the reports we mentioned earlier and domestically, many of the answers to the question of ‘what to do with all this shale gas?’ involve LNG.”

“Consequently, at this moment in time, it’s probably liquefaction that we’re most excited about, and particularly in the spaces referred to generically as small and mid-scale LNG. Earlier this year, a Chart-supplied small-scale plant went into production supplying LNG as a diesel substitute for high horsepower engines used in the shale �elds, and later this year

there will be another, primarily supplying LNG as fuel for heavy haulage vehicles.”

�omas notes that while Chart’s project backlog has declined from last year, it is still above the levels of both 2011 and 2012. Further, the company is positioning itself for future growth. “We’ve already implemented cost reduction programmes, which regrettably do include a reduced global headcount, and we continue to monitor market conditions and will take further actions as necessary.”

“However, the successful course we’ve steered through previous cyclical downturns has included positioning ourselves to be fully prepared for when the markets return and that is also at the forefront of our business strategy for 2015.”

‘Full circle’Another strong area of business for Chart in the future will be the healthcare and life sciences sector, driven by an ageing population, the increasing need for respiratory oxygen, and continued research into living organisms.

�e BioMedical business at Chart, which comprises both Life Sciences and Respiratory Heathcare, contributes almost 20% to its total turnover, chie�y through the MVE and CAIRE brands. MVE is Chart’s principal life sciences brand, a leading manufacturer of cryogenic storage

equipment including vacuum insulation products and cryogenic freezer systems. Its products are primarily used for the storage of highly sensitive human and animal tissue, including cells and bone marrow, and MVE counts many major pharmaceutical companies, research institutions, universities and government facilities among its clients.

CAIRE is the company’s principal brand in the respiratory healthcare sector, including AirSep and Sequal, and most notably provides a range of portable oxygen concentrators (pocs). “�e advent of reliable, inexpensive pocs has considerably changed the market dynamic for home oxygen,” �omas says.

�e challenge for Chart is to increase its global presence and continue to be ‘the partner of choice’ for the major stakeholders in the sectors it serves. “Increasing global energy demand, environmental legislation, an ageing population and continued medical advancements are the opportunities for our diversi�ed business portfolio,” he adds, noting that these are all applicable to large areas of the world where the markets for Chart’s products have yet to develop.

�e company has arguably set about meeting this challenge, through further expansion of its portfolio, as this interview goes to press; Chart announced in early June that it had entered into a de�nitive agreement to acquire vaporizer manufacturer �ermax, Inc., a leading provider of cryogenic �uid vaporizers utilised in industrial gas, petrochemicals, and LNG applications (see news, page 10).

In looking to the future for Chart, �omas refers back to its origins and concludes, “You may never use the products we make, but everyone uses the products we make possible. Which brings us neatly back full circle. Hopefully I’ve been able to demonstrate our con�dence in the growth prospects for all the markets we serve and our con�dence that all the products in our portfolio are the right ones for those markets.”

“Chart has a strong balance sheet and a successful track record of growth through acquisition, and we remain active in a desire to supplement our portfolio.”