In 2011 a series of unexpected events resulted in the economy taking a different course to that predicted by many. While at the start of the year most experts expected the economic revival to continue, it quickly became apparent that there could be no “stabilisation of growth” in the face of the disaster in Japan, political upheavals in North Africa and a worsening debt crisis in Europe.

Benefiting from current market opportunities

Nevertheless, our basic assumptions for the year were confirmed. As a result, we succeeded in continuing to grow our business based on the expected strong demand for our standard pumps and valves. In 2011, we manufactured more standardised and close-coupled pumps for industrial applications than ever before in our Frankenthal plant, and once again increased our production of standard valves for industry and building services. This shows that we have been able to take advantage of the market recovery in the general business as planned.

The demand situation in project business was quite different. Investors remained hesitant to realise large-scale plants, particularly in the energy industry, where many plans were halted in view of new considerations concerning the right energy mix, for example in China. Several water and waste water projects in Arab countries too were put on hold, while in Southern Europe companies simply lacked the money to undertake any major projects.

In consequence, we were only able to increase our order intake in 2011 by a moderate 2.8 %. Due to our strong order book, however, we were able to increase consolidated sales revenue by 7.8 % to € 2,091 million and thus achieve earnings before taxes of € 120.5 million.

Taking advantage of global growth potential

We are currently seeking to increase both our sales revenue and profit margins. This involves continuing to implement our strategy projects and analysing our cost structure for possible improvements, particularly within KSB AG. We believe we can increase our earnings in 2012, even if the project business market is unlikely to revive before 2013. In the current year we particularly aim to boost sales by taking advantage of opportunities in the general business with standard pumps and valves in as well as in service.

Long-term thinking, strategic action

In the general business in particular, there is a need for strategic action in a number of growth markets outside Europe. In these countries many customers have been impressed by our ­success in resolving extremely challenging technical tasks – in the fields of power generation, water transport and waste water treatment, and in realising large-scale building services projects. Our product range for standard applications is also based on this expertise, but is not as well-known in some countries. For this reason we plan to promote it in those countries and simultaneously intensify our client relationships via new local sales offices and use of our e-business portal.

As part of our strategy, we also intend to strengthen our medium- and long-term valve business, the potential market for which is even larger than that for pumps. With this in mind, in 2011 we opened our valve factory in Changzhou, China, and acquired the South Korean valve specialist Seil Seres based in Busan. In the current year we will be opening a new plant in Brazil, which initially will exclusively produce valves.

As Europe’s number one company for pump and valve servicing, we can see that there is great potential for growing outside our home market in the area of services, including a rapid spare parts service. This so-called after-market is another way of strengthening our global business.

Corporate strength is essentially based on employee performance, innovativeness, and the willingness to expand. Also important is having the tenacity – including the financial tenacity – to bring new ideas to fruition and strength. KSB has this “staying power”, not least thanks
to its ownership structure, with a principal shareholder for whom the future of the company is a high priority. Everyone ultimately benefits from this: our investors, who receive adequate dividends from us and also enjoy high security as regards their invested capital; customers, who remain loyal to us thanks to our reliable, high-quality products; and employees, who enjoy long-term employment and career prospects at KSB.

Of course the saying that you can’t please everyone also applies to companies, but we can try!

Yours,

Dr. Wolfgang Schmitt,
Chairman of the Board of Management of KSB Aktiengesellschaft