K-Tig’s (ASX:KTG) welding revolution: Interview with MD Adrian Smith

K-Tig Limited (ASX: KTG)

We talked with Adrian Smith, Managing Director, about the unique welding technology which this Adelaide company is developing and its potential to become the industry standard globally.

See full transcription below.

 

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Transcription

 

Stuart: Hello, and welcome to Stocks Down Under. My name is Stuart Roberts, and I’m one of the founders of our publication. And joining me today on the 20th of December, 2021, from Adelaide, is Mr. Adrian Smith, who’s the CEO of K-TIG, ASX: KTG. Adrian, good afternoon.

Adrian: Good afternoon, Stuart. And thanks for having a chat.

Stuart: It’s a pleasure. So, Adrian, it’s not too much of an exaggeration to say that K-TIG is the next big thing in welding technology in a generation. We’re talking a truly disruptive technology that’s 100 times better than the standard TIG weld that all my welding friends know all about. You’re about to revolutionise an industry that no one thought was revolutionisable.

Adrian: Well, certainly, the welding industry is a very conservative industry. And most of the technology is, as you’ve said, 50, 60, 100 years old, depending on the thing. We’re a proudly Australian innovation. It was actually developed some 10 years ago by CSIRO, who did the original science of working, of taking the TIG welding process. So, it’s a standard TIG welding process in terms of the codes and the standards that are required, but actually producing a highly focused energy density in the arc. And we’re able to do keyhole welding.

And what that essentially means is, we can weld thick pieces of steel in a single pass. So, we actually produce a molten slag of metal, you butt up two pieces of weld together without any preparation, we run the torch across them, and we actually weld full penetration all the way through. And that’s where the productivity comes.

To do a, say, a 12-millimeter thick piece of stainless steel, you might have to do eight or nine passes of a normal TIG weld, where you would go in there, you would lay down a…you would, first of all, you would cut a big V in it so you’ve got access to your torch, you would lay a 1.5, 2-millimeter bead down, then you would clean it, you know, remove all the contaminants. And then lay another one down on top of it, and another one alongside it, will gradually fill up that V preparation gap with filler material. And you would do that over, you know, perhaps hours. Whereas we would do it with a single pass. So, our benchmark, a standard schedule 40 pipe, which a highly experienced TIG welder can weld in a couple of hours, we can do in three minutes.

Stuart: Right. So we’re talking orders of magnitude worth of improvement. Now, this is taking me back a little bit. But there was a time when we had such serious labor shortages in Australia that we were bringing skilled welders from Korea to work in Australia. If K-TIG had been available in those days, possibly we could have made the welders we already had much more productive than they were at that time.

Adrian: Well, yeah. I mean, and indeed, prior to COVID, we were still doing that in Australia and in the world. In America, they bring them up from Latin America. In Western Europe, they bring them in from Eastern Europe. It is a pretty well-established part of the thing. But you’ve still got a manual welding process, you’ve still got a welder. Whereas, ours is a highly automated robotic system. So, you put the torch onto some form of manipulator that moves the torch in a computer controlled manner, and we lay down a very high-quality weld.

One of our big customers is the nuclear sector for welding for the nuclear industry, which has the highest standards possible. And we’re able to do that time after again, repeatable and with a low-skilled operator. So, you know, one of the interesting things about COVID, with all the welders that were being brought in from Southeast Asia into Australia, they don’t come anymore, they’re not allowed through the borders. And that’s actually driven a lot of the demand. And we’re seeing that globally.

Stuart: Right. And today, the last few quarters have been good for K-TIG. In the September 2021 quarter, we recorded our first million-dollar quarter. So, it’s fair to say that business is brisk at K-TIG right now?

Adrian: Yeah, we’re really pleased. So, we’ve done six consecutive quarters of between, you know, 30% to 40% compound quarter-on-quarter growth. So, you know, we’re on a good trajectory. We believe that’s due to a lot of hard work from our people and our partners, and we see a very bright future.

Stuart: Right. Now, no surprise that K-TIG is based in Adelaide, a centre of excellence for the Australian defence industry. And obviously, defence players are an important part of the potential customer base for K-TIG. You had a very interesting announcement in October, where you were working with Hanwha, the big Korean chaebol, who’s a player in the South Korean defence industry. And you had some very good news in terms of the ease with which K-TIG could make welding of armored steel easy.

Adrian: Yeah. We’ve been working with Hanwha for quite some time. Welding armored steel is one of the most complex problems that there is, certainly. And, you know, basically, steel, for things like armored vehicles, is in two categories, there is the ultra-high hardness, which basically gives you ballistic protection from an incoming. And then there’s the ultra-hard toughness, which gives you the flexibility to be able to move.

And armored vehicles are very, very complex structures, well, the blending of ultra-high hardness and ultra-high toughness. Because hardness and toughness are like two edges of the pendulum. So, if you make something very hard, you compromise on toughness, and vice versa. We were tasked by Hanwha, could we weld ultra-high hardness steel to ultra-high toughness steel? And everybody in industry says no, you can’t do that.

And we took that challenge on. We put our research people. We have in our team, you know, highly skilled trades people, but we also have PhDs in welding physics in our team, and they went to work on it. And we’re now seeing some pretty pleasing results. Obviously, for defence security reasons, I can’t give numbers and things like that. But suffice to say, we were no longer the weak point in the joint, where the weld is traditionally always the weak point.

Stuart: Certainly. Now, you flagged earlier in the conversation that the nuclear industry is gonna be important for you. Obviously, containers for nuclear waste need to be foolproof in order to keep the public safe. You’re hoping to be the new industry standard in welding for an industry that’s not going away in the 21st century and is probably gonna become more important in terms of decarbonizing our economy. Talk to us about the strategy that you’re pursuing in order to get involved in that industry.

Adrian: Sure. So, our technology has been used in the UK for some time for producing the waste containers. Specifically, there’s a wide range of containers, but the big volume one is a 3-cubic-metre stainless steel concrete-lined box that is used for the decommissioning of the Sellafield facility, and is being proposed for the future. These boxes are circa 100,000 pounds each. And they’re looking at something around 70,000 of them. So, it’s a multi-billion dollar contract.

Our technology is being used to manufacture the first initial units now. And we’ve just entered into an agreement with Sheffield University in the Nuclear Advanced Manufacturing Research Center to develop the next generation of fully automated and robotic welding. So our torch technology is used, but in pretty conventional manipulator automation collar and boom. We’re making that a fully robotic solution. And that’s envisaged as part of their factory-of-the-future concept to be the standard for producing these boxes. So we’re working very closely with the industry.

Our goals and our aims are not only to be the source of the technology, but also to be a participant in the fabrication industry. So we actually wanna make boxes as one of the supply chains. And we’ve been having discussions along those lines, where we not only are the OEM of the technology, but we will actually be a fabricator producing it. So, attaching ourselves to those multi-billion dollar revenues. And being able to offer the customer, basically, continuous improvement in the technology over the, as you said, it’s here for a long time, we’re talking 30, 40 years of production of these boxes.

Stuart: Totally. Now, you flagged as well that your own business is gonna be changing to become more data-driven. Now, a term that we’re hearing more and more of these days is industry 4.0, which is, if I could summarize it, it’s manufacturing backed up by a lot of data behind it is what we mean by that. Well, you’re hoping to be the industry standard for welding as the sector moves into industry 4.0. Talk to us about how that’s gonna happen through the Evolve-3 program.

Adrian: Yeah. So, Evolve-3 is a really exciting project that we have on at the moment. Essentially, our welding torch technology is very mature, it’s been developed, you know, we can lay down a beautiful weld. But what we’re seeing in advanced manufacturing, globally, is the need for the torch weld itself to be incorporated in the entire digital record of the manufacturing process. So, that’s everything from the drawings, the actual welds, you know, what currents, and voltages, and speeds you move the torch at at various times, what gas flows you had, all of those sort of geared.

But also all of the post-weld quality control checks. So, ultrasonic checking of the weld, using audio of the weld actual arc, you can listen to the arc and analyze that and see if there’s any faults. Because if you have like a fit up problem, it shows up in a change in the pitch. And experienced welders use this all the time. But AI applied to that would get to another level of fidelity in terms of understanding it.

So, our vision is that, not only will you monitor the drawing pack that’s come in, so, you have all of the, you know, the cutting plans and everything for the base metal that went into it, into a digital record. We will incorporate all of the work on sort of like the welding parameters, the speeds we use, the gas flows we use, the currents, the voltages, all of those, you know, dozens of parameters that are acceptable.

And also take, in real time, the non-destructive testing that’s done live. And we’re looking at artificial intelligence and things to look at ultrasonics, and audio tracks, and visual tracks, welding cameras and things like that, and bring all of those into a digital record, which is then goes with the piece. And that’s the concept of industry 4.0.

So, Evolve-3 is our project for looking at that. What’s different about us is that we’re putting all of that into a single welding unit, and integrating in third-party cameras. So, we never become a camera producer, but we’ll have other people’s cameras and we’ll be able to collect all those records. And that’s unique in the industry. So…

Stuart: And no one’s ever done this before you?

Adrian: No one’s ever done this before, and industry, the big end of town, you know, the leaders in the things, so, like the defence shipyards, the nuclear, you know, processes and the people building nuclear reactors, indeed, they’re screaming for a good solution for this and there isn’t one in the market.

Stuart: So, it’s just before Christmas, 2021, if we’re having this discussion before Christmas, 2022, what do you hope to have achieved by then?

Adrian: Oh, by Christmas, 2022, I think we will have developed the, or be well on the way to having developed the next generation of nuclear waste container things and we’ll have made a number of announcements on that. We’ll have increased our distribution partners for our kit. We’ll have worked on that quite extensively. We’ll be having a number of announcements of that, going forward, throughout the whole of next year. We’ll have continued our 30%-plus quarter-on-quarter compound growth in revenue. And we’ll be announcing the release of Evolve-3.

Stuart: Well, it’s gonna be a busy year, no question about that. Adrian Smith, well done to you and your colleagues at K-TIG for everything you’ve achieved to date. I’m certain, if I nosed around amongst the customers, they’d all be very satisfied with your progress. So, keep up the good work. And, investors, this is a company you may not have heard of, but worth paying attention to.

Adrian: Thank you very much, Stuart.