KSB AG : Preliminary Report on Financial Year 2013

KSB Group reports subdued business development 

Global sales revenue growth in the machinery sector declined from + 2 % to + 1 % in 2013 (according to provisional data from the German Engineering Federation [VDMA]). The backdrop to this was underutilisation of production capacities in many countries limiting the need for investments in new plants. The project business with pumps and valves therefore remained difficult, while the general business with standard products for building services and industry offered comparatively better prospects. In this market environment, German pump manufacturers saw production growth of 1 %, while domestic production of industrial valves stagnated.

Key Group figures as per 31 December 2013 (provisional figures)

Slight decline in order intake
At € 2,240.7 million, the volume of incoming orders in the Group in 2013 was 0.7 % down on the previous year. The decisive factors in this development were the nega­tive currency exchange effects of around € 70 million and the continuing weakness in the project business. In the year under review, the value of orders for pumps and valves therefore remained below the 2012 level, while Service reported significant growth. 

In Europe and Asia, the order situation of the local companies remained fairly stable. KSB AG, the most important European company, increased its order intake slightly (+ 0.5 %) to € 806.1 million. Order volume was significantly down in the Americas, due primarily to currency exchange effects. In contrast, the Group companies in the Region Middle East / Africa experienced strong growth rates.

Currency exchange effects negatively impact sales revenue
At € 2,252.9 million, the Group's consolidated sales revenue in 2013 was 0.7 % down on the prior-year figure. Increased Service sales were offset by a significant decrease in sales revenue from valves. In contrast, pump sales revenue saw only a slight decline.

Like order intake, sales revenue was also materially impacted by negative currency exchange effects amounting to around € 68 million. Translation into euros, the Group currency, reduced in particular the sales revenue of the companies in Asia and the Americas. In contrast, the Region Europe was able to virtually maintain its volume and KSB AG's sales revenue (in accordance with the German Commercial Code [HGB]) rose by 3.4 % to € 855.9 million. The Group companies in the Region Middle East / Africa recorded an increase in their sales revenue.

In addition, the consolidated figures included eight operating companies consolidated for the first time in 2013. These newcomers achieved a total order intake of € 27.0 million and sales revenue of € 26.0 million.

Consolidated earnings down year-on-year
Business development in the fourth quarter lagged behind expectations. No material growth impulses came from the market. The subdued sales revenue development and weaker margins in the project business weighed down on profitability.  Exchange rates and restructuring costs also had a negative effect. From today's perspective, pre-tax earnings are expected to fall significantly short of 2012's level (€ 132.8 million) and the return on sales will also be lower than in the previous year.

First-time consolidations increase the number of employees
The number of employees in the Group as at 31 December 2013 increased by 344 to 16,551 compared with the same time in 2012. This increase was the result of the above-mentioned first-time consolidations. The newly integrated companies brought 377 employees to the Group.

Outlook
The anticipated momentum in the global economy is expected to boost demand for pumps and valves in the course of this year. A rise in order intake in the general business with standard pumps and valves would be likely to lead to a short-term increase in sales revenue, as would an increase in Service orders. In the project business, we do not expect an improvement in the order situation to be reflected in sales revenue before 2015. KSB therefore anticipates a moderate increase in consolidated sales revenue in 2014, although order intake should grow more significantly. Consolidated earnings are also expected to see a renewed increase, helped by cost-cutting measures.

KSB has started the new year with an organisation that improves the integration of all production, logistics and assembly capacities in global networks and is also geared to fully exploiting the opportunities offered by the markets through various sales channels.