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several years of impressive growth has been replaced by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
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
Further information: Kim Nøhr Skibsted, Group Vice President,
Group Communications, M: +45 30525020