Foresight paid off for Grundfos


A growth in turnover of 5 per cent in 2002 is less than what Grundfos has achieved in recent years. However, with flexible budgets and an early intervention to reduce costs the pump manufacturing group reached a result of DKK 726M which marks an increase in profit after taxes of 17 per cent - almost DKK 100M – compared to the previous year.

With this, Grundfos took a significant step towards achieving the Group's earnings target of a profit before tax of 10 per cent.

Already when the budget for 2002 was planned Group Management acknowledged that the global development might move in other directions than anticipated and had incorporated a number of alternative plans of action. This meant that when the development in turnover slowed down in the beginning of 2002 it was only a matter of effectuating one of the plans of action.

The quick intervention took effect and by the end of the year a sound balance between the growth in turnover and profit was not only restored but also improved - by the last quarter there was even a growth in turnover of 7 per cent while there was no development in costs compared to the previous year. For the year as a whole costs increased by 3 per cent whereas, as mentioned above, the turnover has increased by 5 per cent.

Despite the continued uncertainty in the global economy, and generally difficult market conditions in most of Grundfos' markets, 2002 became a fairly good year for the Group. The growth in turnover from DKK 10,214M to DKK 10,703M is seen as satisfactory by Group Management and as a result of Grundfos' continued global capture of market shares.

Group Management is also satisfied with a profit before tax of DKK 726M which is 6.8 per cent of the turnover. That is a significant gain compared to 6.1 per cent in 2001.

Greatest growth in new markets

In recent years, Grundfos has focused on ensuring a large share in the growth in the new Eastern European and Far Eastern markets. This strategy has once again proved fruitful – approximately 40 per cent of the Group's total growth in turnover was generated there. This compensated partly for the low growth in the large markets such as Germany, Japan, and the USA.

In 2002 Russia has produced the highest growth in turnover with 40 per cent. This means that Russia is now a significant market for Grundfos and is considered to hold a major growth potential. This applies to all of the Eastern European region which is why a considerable part of Grundfos' sales and marketing investments in the next few years will be placed there.

Apart from Japan the growth in the other Far Eastern markets reached 13 per cent. Also in this region – and especially in China – Grundfos will aim at increasing its growth rates over the next years.

Record high level of investments in 2003

Once again Group Management notes that uncertainty and sudden change are permanent elements in the world in which Grundfos does business. Due to the tense international situation Group Management has once again created flexible budgets with alternative plans of action to be implemented if things go better or worse than anticipated in the cost budgets.

The Group budget 2003 includes a continued focus on cost control – this, however, does not apply to costs on research and development. On average, they will increase in parallel with the increase in turnover. It is vital to Grundfos' long term strategies to sustain and develop its position as the most innovative pump manufacturing company in the world.

The budget contains a record in budgeted investments of DKK 950M. A large part of that will be spent on a number of new products to be introduced in 2003 and another important part will be spent on the expansion of the Group's factories in Hungary and China and the establishment of a production site in Russia.

The growth in turnover for 2003 has been budgeted to remain on the same level as that of 2002, whereas profit before tax has been budgeted to increase by 20 per cent. Group Management considers the growth in profit a prerequisite of the Group's continued ability to self-finance its ambitious plans of investments in trend-setting product development and aggressive marketing – and thereby ensuring the Group's long-term profitable growth.

The two economic main objectives for the Grundfos Group over the next years is to reach a profit before taxes of 10 per cent in 2005 and to reach a turnover of Euro 2M in 2007.

For more details have a look at the Grundfos homepage.

Source: Grundfos

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