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Economic environment
The global market for the pumps, valves and systems manufactured and sold by the KSB Group remained very receptive in 2007. As in the previous year, the strongest demand for these products came from the industrial and energy sectors, which are KSB’s most important markets. In addition, the Group benefited from investments in facility extensions made by mining companies to be able to cover the rising demand for raw materials and energy carriers. Water and waste water management companies also made substantial investments. In building services, the construction boom in a number of countries in Europe, Asia and the Middle East provided a new stimulus for demand.
Key Group figures as per 31 December 2007
(Preliminary figures)
| KSB Group | | 01-12/2007 | 01-12/2006 | Veränderung | | Order intake | € million | 1,934.3 | 1,712.8 | + 12,9 % | | Sales revenue | € million | 1,775.8 | 1,607.4 | + 10,5 % | | Employees (31 Dec.) | | 13,922 | 13,063 | + 6,6 % |
Double-digit percentage growth in order intake and sales revenue
Order intake in the Group rose again sharply in 2007, recording growth of around € 222 million to € 1,934.3 million. Group companies in the three Regions of Asia / Pacific, Americas and Middle East / Africa recorded significant double-digit growth rates.
The development at the Asian and South American Group companies was particu-larly encouraging. KSB Brazil increased its order intake by more than one third, based on major purchase orders from the oil and petrochemicals industries, as well as from the water industry and the mining sector. In the Region Middle East / Asia, KSB’s Turkish subsidiary recorded a more than 50% increase in its order intake, with strong growth in the water industry and building services.
The highest order intakes in absolute terms continued to be posted by the KSB companies in Europe. KSB AG improved by 9.9% to € 790.7 million.
Backed by a considerable increase in volume, Group sales revenue reached € 1,775.8 million. This year-on-year increase of 10.5% was driven by growth in all Regions. The Group recorded particularly strong sales revenue growth in the Americas. The European companies again posted the largest sales revenue growth in absolute terms. At +14.3%, KSB AG’s sales revenue grew well above average to € 696.7 million.
For the Group figures, it should be noted that KSB consolidated four operating companies in Belgium, Brazil, Dubai and Thailand for the first time at the beginning of financial year 2007. Without these newly consolidated companies, the order intake would have risen by 11.1% and sales revenue by 8.7%.
Further improvement in earnings and return on sales
Consolidated earnings before tax (EBT) will again improve year on year, and the return on sales will increase to around 7%. In the previous financial year, the Group generated earnings (EBT) of € 90.2 million and a return on sales of 5.6%.
KSB AG, which returned to profitability in 2006, will also be able to increase earnings significantly.
Personnel changes
Considering the strong order growth in the past two years and in the expectation that this development will continue, KSB increased the workforce at various companies. In addition to KSB AG and KSB Service GmbH in Frankenthal, this related above all to companies in Brazil, India and South Africa. Overall, the Group expanded the workforce by 859 to 13,922 by the end of 2007, including 361 employees attributable to the four newly consolidated companies.
Stepping up production capacity
With a view to achieving the planned growth in sales, KSB is in the process of extending its production facilities. In the year under review, this included the commissioning of a new factory for standard pumps in Shanghai and the move to a new valve production facility in Dalian (northern China). The KSB companies in India and France also expanded their valve production capacity. The Indian factories will continue to step up capacity in 2008.
In addition, KSB AG launched several major investment projects at three sites in Germany with a total volume of € 70 million. These are expected to be largely imple-mented in 2008. The most complex project is the construction of a new factory for power station pumps with an associated test facility in Frankenthal.
Outlook
Assuming an environment of stabilising economic development, the KSB Group is aiming for further growth in order intake and sales revenue with new and improved products. In view of the current high order intake level, KSB expects order intake to rise at a lower level than in the previous years. Among other sectors, KSB believes that the water industry, where several major projects are planned for 2008, offers good prospects. In addition, global demand in the chemicals and petrochemicals industries, waste water management projects in Asia and the Middle East, and con-struction projects in the Arab nations will stimulate demand. The level of investment activity in both the energy industry and mining will remain high.
Orders on hand, which were already high in 2006, recorded further growth in 2007 based on the continued success in the project business. As a result of the completion of these orders, the percentage rise in sales revenue is expected to be higher than that for the order intake in the current year. This sales revenue growth will also have a positive effect on Group earnings.
With a view to securing future sales revenue growth, KSB aims to extend its technological lead in important applications in the coming years. To this end, the company has reorganised its research and development activities at the beginning of the year. Several development projects are underway which focus on energy-efficient products characterised by high availability and relatively low service requirements.
The current assumption is that KSB will continue its positive development in 2008 against a background of more unfavourable conditions in the economic environment.
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