Grundfos strengthens its market position, but profitability must be improved
(Thomson Reuters ONE) -
The world's leading pump manufacturer, Grundfos, is being challenged by
intensified competition, low growth in the European markets and unfavourable
currency exchange rates in 2014. High growth in for instance the United States
and China strengthens the global market position, but there is a continued
decline in profitability. A new strategy is to reverse this trend.
In 2014, the Group experienced a growth in turnover of 5.7 per cent, measured in
local currency. This has strengthened Grundfos' global market share. Compared to
2013, the year was characterised by negative impacts of currency movements,
which was particularly evident during the first six months of the year. Overall,
the effects of currency movements have reduced net turnover by 4.1 per cent,
which means that sales growth in DKK amounted to 1.6 per cent, resulting in a
total turnover of DKK 23.6 bn.
"The overall growth is satisfactory, given that a number of markets were
characterised by low growth. We have maintained and probably improved our global
market position, even though competition has intensified, especially in Asia.
But the growth and profitability of the group measured in Danish kroner is
disappointing", says Group President Mads Nipper.
More than half of the turnover comes from Europe, and is therefore considerably
influenced by the European market trends. A generally low growth in the European
economies resulted in modest growth rates for Grundfos.
"Our important and largest market, Germany, showed a positive growth during the
first six months, but took a negative turn during the second half. For the year
as a whole, it meant a negative growth, for instance because the market for
circulators still does not show the expected sales growth. Besides this, our
sales and profitability have been negatively influenced by the development in
Russia, which is also one of our main markets. Here, several years of impressive
growth has been replaced by deterioration. Despite this, our organisation in
Russia has pulled through very well. The economy in Southern Europe is still
weak, which has resulted in low or no growth in these countries. But fortunately
there are also bright spots, where we have managed to deliver a solid growth.
This goes for, for instance, France, Great Britain, Poland, Hungary and
Denmark", explains Mads Nipper.
For some years, Grundfos has worked hard on strengthening its position in the
United States. In 2014, a growth equivalent to 11 per cent in local currency has
been reached, which, like the achieved growth rates in South America, was above
expectations. The Chinese market grew with approximately 9 per cent in 2014.
The establishing of sales offices in Central and Western China shows positive
results. During the last six months of 2014, the growth, however, decreased due
to the slowdown in the Chinese property market and it will be a challenge
maintaining the growth rates in the years to come.
Economic independence is one of Grundfos' fundamental values. The solidity
continues to be strong, and has risen to 68.1 per cent - from 67.0 per cent in
2013. The Group holds interest-bearing deposits of DKK 2.7 bn.
The profitability has declined during the last few years, and unfortunately the
trend continued in 2014. The result before tax amounted to DKK 881 mill. -
compared to DKK 1,475 mill. in 2013. In particular lower margins due to
intensified competition, unfavourable currencies developments and an
unfavourable geographical sales mix affected the profitability negatively. In
addition, a further increase in fixed costs worsened the operating profit.
Finally, the result before tax has been negatively influenced by one-off
restructuring costs as well as write-downs totalling DKK 224 mill.
Irrespective of this, the profitability is not satisfactory.
The trend from the previous years' meant that the Board of Directors found it
necessary to make changes to Group Management and the business strategy. Mads
Nipper joined the company as new Group President on 1 August 2014, and a new
Group Management has been put together, consisting of seasoned executives from
within the company and new people recruited externally. They have implemented a
number of initiatives to improve the Group's profitability while at the same
time securing financial transparency, greater decision-making-power and a faster
pace in implementing decisions. A new strategy will make sure that the
organisation's full potential is utilized.
In January 2015, the Board of Directors approved a new 2020 strategy for the
Group. It is to secure clear and shared ambitions, reduced organizational
complexity, and to prioritise the business areas and markets and map out the
most essential strategic initiatives in strengthening competitiveness towards
2020.
"The foundation of the strategy is our existing purpose and values, and it
confirms that Grundfos continues to be characterised by strong innovation,
ground-breaking products and continuing emphasis on sustainability. It is to
secure stronger financial results with an ambition to increase the average
annual sales with 6 per cent and a significantly higher profitability in
combination with a continued high customer loyalty and employee satisfaction",
Mads Nipper tells and continues;
"We have also identified a number of strategic focus areas: We need to maintain
a global leadership in selected product segments through distinct
prioritisation, we need to strengthen our end-to-end supply chain to provide us
with competitive advantages, we need to develop a strong business in delivering
services, we need to secure and maintain a competitive cost base, and we need to
strengthen our ability to collaborate across functions and geographies through a
culture that is customer-focused, cost-conscious and responsible. Altogether
some great ambitions and challenges, but I am convinced that we will be
successful", Grundfos' Group President concludes.
The Group's goals and expectations for 2015 are a moderate growth in sales, but
first and foremost an improvement in profitability.
Further information:
Kim Nøhr Skibsted
Group Vice President, Group Communications
M: +45 30525020
This announcement is distributed by GlobeNewswire on behalf of
GlobeNewswire clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Grundfos via GlobeNewswire
[HUG#1900054]
Unternehmensinformation / Kurzprofil:
Datum: 06.03.2015 - 11:00 Uhr
Sprache: Deutsch
News-ID 376678
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contact information:
Town:
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Kategorie:
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