Welding specialist K-TIG (ASX: KTG) is already bearing the fruit of its four-pronged growth strategy, which aims to develop sovereign capability for Australia’s upcoming defence procurements and strengthen its presence in international markets.
The welding technology developer recently raised $5.6 million through a private share placement with funds planned to “accelerate strategic initiatives, develop new strategic alliances and increase market penetration”.
It also just announced the appointment of Adrian Smith as managing director, who brings a wealth of defence sector experience to the role and has a demonstrated history of growing innovative and technology-based businesses.
K-TIG chairman Stuart Carmichael joined Small Caps to discuss the company’s latest developments and its four strategic priorities to achieve long-term recurring revenue generation and growth.
Disruptive welding technology
K-TIG is a transformative, industry disrupting welding technology company that “seeks to change the economics of fabrication”.
The technology is the result of extensive research over many years into the gas-tungsten arc process, keyhole physics, weld pool stabilisation, heat removal and process efficiency.
KTIG’s technology has been field tested and has been exported to customers in 20 countries. It is being utilised by some of the world’s largest fabricators, which are attracted by K-TIG’s ability to increase weld quality as well as save time and money.
According to the company, a conventional TIG weld achieved in about six hours only takes K-TIG’s technology about three minutes.
Not only is the welding of the highest quality, but the technology is also said to reduce fabrication costs by up to 95%, Mr Carmichael said.
“It is unique technology that is really disrupting and transforming the economics of fabrication,” he added, noting that the technology is commercially proven and globally certified.
The company boasts many industry-leading customers including GE, Siemens, Bilfinger, Doncasters and the Nuclear Advanced Manufacturing Research Centre (NAMRC) in the United Kingdom.
K-TIG has expanded internationally with a “freemium/premium” licensing model that already generates recurring revenue and listed on the ASX late last year after raising $7 million.
K-TIG outlined the four priorities of its growth strategy in a recent investor presentation: customer acceleration expansion in the United States market, the United Kingdom nuclear industry, and planned partnerships and continued research in the defence and space industries.
The company said it is aggressively pursuing opportunities in the stainless steel, aerospace/space, defence and nuclear sectors, which all represent massive global markets.
According to market research, the global pressure vessel market is expected to be worth at least a whopping US$225 billion (A$316 billion) by 2025, while the global metal fabrication equipment market is predicted to be worth US$93 billion (A$130 billion).
In addition, the global stainless steel piping market is estimated to be worth US$21 billion (A$30 billion) this year.
Partner and distribution channels are being developed to accelerate revenue growth with an increased presence in the US marked as a key priority.
US market expansion
According to Mr Carmichael, the US has and will continue to be K-TIG’S largest market.
“Part of the expansion plan includes establishing a presence on the ground in the US, so we appointed a number of senior sales executives who are experienced industry specialists with an understanding of the sector and have an existing network of prospective customers,” he said.
Secondly, K-TIG has just announced a memorandum of understanding (MOU) with automatic welding and robotic welding provider, Key Plant Automation, which operates its US operations from Houston, Texas.
“Key Plant has a raft of complementary technologies around the automated welding space and the MOU effectively provides a distribution channel for K-TIG to expand its operations in the US,” Mr Carmichael said.
UK nuclear industry
K-TIG’s third strategic priority focuses on the nuclear market in the UK, with an anticipated 17 sites across the country requiring decommissioning over the next few decades at a total cost of around £121 billion (A$221 billion).
“The company has established relationships with industry parties in the UK including the Nuclear Advanced Manufacturing Research Centre (NAMRC),” Mr Carmichael said.
“We’ve also got existing relationships with a number of key players who are providing support to the manufacture of nuclear storage containers, or ‘coffins’ as they’re technically referred to, which house nuclear waste,” he added, calling this as a “medium-term priority” for the company.
Defence and space
K-TIG’s final, but just as important, priority involves planned strategic partnerships and continued research in the fields of defence and space.
Earlier this month, the company announced it achieved a key milestone in its new partnership with Axiom Precision Manufacturing and Bisalloy Steel Group (ASX: BIS) by demonstrating the weldability of Bisalloy’s “high hardness” armoured steel coupons designed for the Australian defence industry.
“The partnership is about trying to build out Australian input and manufacturing capability to support the Australian government defence procurement processes,” Mr Carmichael said.
He described defence as a key strategy for K-TIG and said the company would consider opportunities both domestically and internationally.
“On the back of the MOU with Axiom and Bisalloy, we received a lot of international inbound enquiries. We would expect to see that progressing in due course.”
Managing director brings track record of building global businesses
The recent appointment of Adrian Smith as managing director also aligns with K-TIG’s stated strategy to accelerate revenue, expand US operations as well as pursue both the nuclear and defence market opportunities.
“Adrian brings a significant amount of experience, understanding, knowledge and relationships with a track record of growing technology companies and making them global”, Mr Carmichael said.
Mr Smith joined the board in a non-executive role in February and became an executive director in June before his appointment as managing director, which will become effective from 1 November.
He previously held the role of managing director of Rheinmetall Defence Australia, a subsidiary of German defence and weapons manufacturer Rheinmetall AG.
Mr Smith also has a “demonstrated history of growing innovative, business-to-business companies in both managing director and chief executive officer roles,” K-TIG stated in this month’s announcement.
“Adrian has been instrumental in driving a number of our key strategic initiatives since joining the company and brings significant knowledge and networks across industry sectors, particularly the multi-billion-dollar defence sector, which we expect will benefit our shareholders,” Mr Carmichael said.