Grundfos Interim Results

These record earnings are, first and foremost, the result of a significantly accelerated sales growth of 15 per cent, increasing the first six months’ turnover to DKK 7.3 billion, which is approx. DKK1 billion more than in the first half of 2005.

The 15 per cent sales growth is broadly based, as there is marked sales growth in all the Group’s regions. The most significant change is a strong increase in the Group’s largest market, Germany, where, after a number of years of low growth, the turnover has risen by 13 per cent. The acceleration strategy for the US has generated a marked growth of 35 per cent in the American region, where approximately half of the growth is organic. Eastern Europe continues to experience high growth with a growth of 30 per cent, while the Far East has reported a slightly lower growth than in previous years, with a growth of approx. 10 per cent due to a slightly slower start to the year. This trend has, however, already reversed and, over the past few months, sales growth in the Far East has once again risen above 20 per cent.

”We are extremely satisfied with this sales performance,” says Group President Jens Jørgen Madsen. ”It is rare for us to register significant sales growth in all the Group’s regions at once, and the marked increase in Germany has been long-awaited and is extremely important to us. Following the significant increase in the Group’s earnings over the past few years, we have increasingly focused on accelerating sales growth, which proved to be a great success in the first half of 2006, and we are satisfied that it has not affected earnings, but rather served to strengthen them”.

”We have benefited from the generally favourable global economy and market conditions, whereas the record-high cost of raw materials has had a negative effect. The main reason for the good result is, however, that our strategies are generally working well. The key elements of these strategies are major investment in the trend-setting development of energy-optimised products, combined with the globalisation of production and the widening and optimisation of the Group’s sales network,” continues Madsen.

In line with these interim results, Group Management’s expectations for 2006 have increased. The second half of 2005 was, however, so good that we do not expect to be able to maintain the growth rates of the first six months, but we do expect to achieve a two-digit sales growth for 2006 as a whole. This would bring us close to the second of our two main goals which is to achieve a turnover of DKK 15 billion in 2007, in 2006! On this basis, pre-tax profits are expected to reach DKK 1.3 billion, provided that the war in the Middle East has no further implications for the world economy, that the cost of raw materials does not increase, and that the USD does not to continue to fall as it has done over the last quarter.

Grundfos will continue its relatively high level of investment in 2006, heading towards a record level of investment of approx. DKK 1.1 billion for 2006 as a whole, and the interim earnings increase the ability to invest even more in the future.

The strong sales growth has meant that all of the Group’s manufacturing plants are extremely busy, and the factories in Denmark now employ 3,900 people, which are 200 more than at the beginning of the year.