From supercars to wastewater: How Sprintex pivoted to target the $2b Chinese market

Formed in the 1980s, Sprintex (ASX: SIX) manufactured electric compressors and supplied superchargers for the likes of Ford and Mitsubishi cars, and were an essential component for engines on what was then one of the world’s most popular motorcycle drag racing circuits, the Top Fuel Motorcycle Series.

In fact, Sprintex CEO Jay Upton was a four-time Australian champion back in the day known as the “White Knight”, with a UK and New Zealand title as well, so what’s driving his decision to take the company in a completely different direction from the fast and furious into industrial applications like wastewater treatment and clean energy production from hydrogen fuel cells?

“Quite simply, about three years ago we identified that the technology we’ve developed over four decades now has the potential to apply to wastewater and, in China alone, this is going to be a $2 billion industry,” Upton explains.

“Sometimes in business you have to be prepared to make bold decisions and pivot to a strategy that delivers not just growth, but sustainability which is what this move is all about.”

The company recently launched an innovative technology that its board believes will revolutionise wastewater treatment and other global industrial applications, while reducing energy consumption.

Perth-based Sprintex believes its ‘e-compressor’ will transform the wastewater treatment process and provide energy savings of up to 40 per cent. Called the G15 Turbo Blower, it is equipped with Smart Pulsation Aeration (SPA) technology which leads to higher energy savings.

“This technology is game changing and has the potential to deliver measurable energy savings in dollar terms for wastewater plants while simultaneously delivering significant environmental benefits,” Upton explains.

On Tuesday, the company announced it had launched a successful capital raise of $1.3 million from shareholders and company directors to accelerate the rollout of 15,000 units to “meet the high demand from the industry in China”. It also plans to raise a further $500,000 from shareholders through a security purchase plan with a closing date of July 31.

The China International Capital Corporation (CICC) research shows that the China market for industrial blowers was valued at RMB6.8 billion ($1.42 billion) and is expected to more than double to RMB16.6 billion ($3.48 billion) by 2027, which represents growth of more than $2 billion.

The CICC estimates that by 2027 around 426,000 industrial blowers will be manufactured in China per year, just for wastewater applications.

Fixed asset investment in urban wastewater treatment and its recycling in China amounted to RMB104 billion ($21.2 billion) and is undergoing year-on-year growth of 30 percent, according to Joint Capital Credit’s 2022 Outlook Report on the Water Industry.

“When you also consider that the US market is expected to grow from $5.3 billion to $6.5 billion by 2030, it underscores the immense size and significance of this industry sector,” Upton says.

“With this disruptive technology we can tap into the massive potential of the wastewater industry and transform it on a global level.

“We’re under no illusion that this will be a challenge and our biggest hurdle is likely to be reaching our production targets to meet the demand, which is clearly there.

"That’s why we’ve been out raising capital. In a way, it’s a good problem to have and if we can hit our production targets then we can achieve profitability in FY24 and build momentum from there."

Sprintex has a R&D and manufacturing base established in the Chinese city of Suzhou, along with a manufacturing plant in Malaysia and a sales and distribution centre in the USA.

Upton says dealing with the China market and its regulatory "hurdles” has also been a challenge but believes the Suzhou base provides a competitive advantage for the company.

“Anyone who has done business to try and get into China understands that it all works differently and we found that out initially as well.

“Having that research and development base in the country has helped us navigate through some of the complex issues that inevitably arise.”

Upton says it has also “opened doors” for the company and it recently partnered with Nanjing RGE, a large China based researcher and manufacturer of wastewater aeration equipment.

“Nanjing RGE is currently conducting real-world industry trials with their larger customers across the Chinese mainland as the company gears up for mass production of the G15 to meet the expected industry demand,” Upton explains.

Sprintex’s largest shareholder is China Automotive Holdings Ltd (CAHL) which holds 17 percent. CAHL director Rick Siemens, based in Hong Kong, is a former chairman of Sprintex.

A turbo blower is a type of compressor used to provide aeration in biological treatment processes within wastewater treatment plants.

Wastewater treatment plants use biological treatment processes to break down organic matter and remove pollutants from wastewater. These processes rely on microorganisms that require oxygen to carry out their work effectively.

Aeration is the process of supplying oxygen to the microorganisms, allowing them to thrive and efficiently break down the pollutants.

The G15 turbo blowers, and the entire G series, are self-contained for use in water aeration and can also be used in many other industrial applications including food processing and steel and cement manufacturing.

“The technology has many other industrial applications including within the telecommunications and mining industries,” Upton says.

The company has also designed and manufactured air compressors for hydrogen fuel cells (HFC) which it says provides more efficient, reliable and power-dense solutions for the HFC industry.

The S15 compressors for HFC have similar internal components to the G15 turbo blowers and are also a key part of Sprintex’s push into China.

“We see the telecommunications industry as a big opportunity especially in China,” Upton says.

“Across the whole country there are 5G mobile towers that are being run by diesel generators which will eventually be converted to hydrogen fuel cells.

“Mining is another big opportunity with most operations being powered by diesel.”