Valve World Americas October 2024 | Page 11

MARKET REPORT

Valve Market is Now High Profit and High Risk

A few valve companies are achieving EBITDA ( Earnings Before Interest , Taxes , Depreciation , and Amortization ) of thirty percent . However , the average is less than fifteen percent . Profits are steady and predictable . Over the next ten years the industry will be transformed in ways which we can only predict .
By Robert McIlvaine , Founder and CEO – The McIlvaine Company
This transformation will occur due to the following :
• Major impact of artificial intelligence
• Double digit growth in AROM ( Automation , Remote Operation and Maintenance )
• The weaponization of the ‘ Industrial Internet of Wisdom ( IIOW )’
• Competition between valve , automation , and system suppliers
AI experts are telling us that the technology will profoundly change our lives in the next ten years . The valve industry will be impacted more than most because high efficiency pattern recognition is well suited to control flow . We are moving towards a time when owners will rely on third parties to operate and maintain their process systems , and these systems will be producing better and safer products . They will prove fertile ground for developments in AROM . This creates an enticing opportunity for third parties .
Presently , valve companies generate a third of their revenues from products and services other than valves and parts ; these can be lumped together and called ‘ support ’. It includes smart valve systems , service , remote advice , valve performance monitors , and various automation components such as actuators
and positioners . The Industrial Internet of Wisdom results from adding valve expertise to IIOT . The greater the extent that artificial intelligence is used in automation systems , the greater the need for niche personal experts . For example , a valve performance monitor
provides tremendous amounts of information that AI can utilize in guidance . But how that guidance specifically applies to a niche situation is best determined by a niche expert . The more robust the AI system , the more need for expertise in smaller and smaller niches .
Over the next ten years we are predicting that support revenues will grow at double digit rates . The valve support revenues captured by valve companies will be only a fraction of valve support revenues in total , the remainder will be captured in competition between the automation and
www . valve-world-americas . net • October 2024 | Valve World Americas 11