People need to maintain or modernise their systems. So the types of service that KSB provides at an international level were again very much in demand in 2011.

ECONOMIC ENVIRONMENT

  • Economic slowdown
  • Reorientation of the energy industries
  • Strategic acquisitions in the pump industry

During the course of 2011, global growth slowed down considerably. Attempts by the United States and some European countries to limit their budget deficits, as well as the introduction by several emerging countries of regulatory measures to protect their national markets against possible overheating and high inflation all went against the strong recovery ­experienced in 2010. The lack of recovery in the US economy, the political turmoil in North Africa and the natural and ­nuclear disaster in Japan also dampened investor willingness in various sectors and regions.

In Europe, economic development manifested itself in two ways as expected: The countries of Northern and Central Europe generally enjoyed stable growth, while demand in Southern Europe and in some Eastern European countries was impacted more strongly by the effects of the debt crisis. The performance of the export-oriented countries in the EU was relatively good, especially that of Germany, which took advantage of the export opportunities to emerging markets. In Eastern Europe, Poland, thanks to stable domestic demand, and Russia, thanks to high commodity prices, both recorded above-average economic growth.

The Region Middle East / Africa benefited from strong ­demand for energy sources and commodities. The high prices generated high revenues, which were used to finance a number of investment projects. The political and social unrest in several countries, however, impeded economic development. In North Africa especially there was little investment in ­infrastructure, industry or tourism.

Asia remained by far the fastest growing region in the world. Some countries, however, introduced measures to prevent their economies from overheating, which dampened growth. This applied in particular to China, whose government sought to counteract inflationary tendencies and credit risks. Nevertheless, demand in the Chinese market and in some other Asian countries remained high. In India, the second largest emerging economy in Asia, investment in infrastructure fell due to financing problems and the difficult political ­situation.

In the Region Americas, there was no sign of a sustained ­economic recovery in the USA in 2011. Domestic demand in the United States remained weak, weighed down by persistently high unemployment. Economic development in South America, in contrast, was encouraging, with countries benefiting from the high commodity prices. During the year, ­however, economic growth slowed in Brazil as a result of monetary policy measures implemented to combat rising ­inflation.

SUSTAINED GROWTH IN MECHANICAL ENGINEERING

Although the pace of global economic growth declined, business development in the mechanical engineering industry continued unabated, expanding by 13 % in real terms globally. However, growth rates varied considerably according to sector.

China’s importance as a supplier of mechanical engineering products has increased even further: Around a quarter of all machines produced worldwide now originate in China. ­Germany’s mechanical engineering sector increased its output by 14 % in real terms in the year under review, making it ­one of the key drivers of German economic growth. Its most important export market continued to be China.

WORLD MARKET OF CENTRIFUGAL PUMPS AND VALVES

PUMP AND VALVE MARKET WITH ORDER EMPHASIS ON OUR GENERAL BUSINESS

Demand for pumps and valves developed positively overall in 2011. This applied mainly to our general business with standard products required particularly by industry and the construction sector. In project business, however, the order situation recovered in only a few areas, including the mining industry, which benefited from high commodity prices, and the oil and gas industry, for whose products there was an increased demand.

As the future of energy supplies remains uncertain in some countries, the number of new power plant projects was ­significantly lower than before the financial and economic crisis. In particular, the construction of planned nuclear ­power stations came to a halt after the disaster in Fukushima, with ­future operators urgently examining location- and technology-related safety issues. Construction of conventional power plants was also delayed, resulting in a reduction in the overall number of high-pressure pumps and valves required. The second half of the year also witnessed growing scepticism concerning future economic development, which led to a number of major industrial and infrastructure projects not being awarded.

Opportunities remained good for service providers in the pump and valve market to participate in maintenance and modernisation projects. Of the operators who put new ­investments on hold, some had higher servicing needs as they attempted to extend the service lives of existing industrial, water and waste water systems. At the same time, Germany’s energy transition policies reduced the demand for inspection, maintenance and repair services from operators of nuclear power plants. The demand for services in the area of renewable energies in contrast increased.

MANUFACTURERS ACQUIRE AND EXPAND IN THE GLOBAL MARKET

Competition among suppliers of pumps and valves to participate in newly awarded major projects was intense in the year under review and the fall in the number of such projects meant that all producers found it harder to obtain fair prices for their products.

In 2011 several pump manufacturers made major acquisitions. The aim of these acquisitions was either to increase the size of existing portfolios of products and services, to expand into new regions, or to develop additional sales channels. Some were also aimed at establishing additional business lines.

To take advantage of the opportunities offered by the emerging markets, pump manufacturers increased their presence in the BRIC countries. In Brazil in particular, several competing companies began to build up production capacity in order to strengthen their market position through local value creation. An increased level of competition was also observable in India.

The valve industry is much more fragmented than the pump manufacturing industry, although acquisitions and mergers are leading to continuous changes on the supply side. This ­remained the case in 2011.

The concentration process has also continued in the service market and particularly affected the industrial all-rounders, several of which were involved in takeovers. Some service specialists looked for new business areas, for example, the maintenance and repair of renewable-energy power generation plants.