Despite the gloomy outlook at the beginning of the year, the Grundfos Group came out of 1999 with a growth in turnover which was well above the previous year’s growth and which also exceeded expectations. The Group’s consolidated turnover rose by 8.3% from DKK 7,520 million to DKK 8,145 million. This compares to 4.6% growth in 1998.
The year began unsteadily, but sales increased as the year progressed, and 1999 ended with an increase in sales in the last quarter of 13% in relation to 1998. Group Management considers the result to be highly satisfactory as it indicates that the sales offensive launched at the beginning of the year was already beginning to bear fruit in the second half of 1999.
However, the increase in growth can also be attributed to the situation in the international economy which proved to be far more favourable than Group Management had dared hope at the start of the year. The financial crises in the Far East and Russia, which had a profound effect on Grundfos’ sales in 1998, subsided somewhat during the course of 1999. Particularly in the second half of the year, Grundfos regained some of the turnover that was lost as a result of the financial crises in these regions. This applied especially in the Far East where the Group’s sales companies took advantage of the abating crisis to once again push sales up and ended the year with an overall increase in sales of no less than 15%. This growth was to a large extent due to the continuing advances being made in China.
A strong 15% growth in Grundfos’ Southern European region in 1999 shows that the Group is continuing to win market share in this region despite a declining global pump market. Sales in the rest of Europe were somewhat more modest but nevertheless positive.
It is with a great deal of satisfaction that the Group can report that without exception all of the acquired companies have made positive contributions - both in terms of sales and earnings. This reinforces the decision by the Grundfos Group to allow a more active acquisition strategy to become a more significant factor in the future growth of the Group.
Increased expenditure brought ensuing gains
A strong customer-oriented marketing offensive in 1999 resulted in a significant increase in sales and marketing costs, and as expected this had a negative impact on the year’s result. However, the increased marketing activity had already had a positive impact by the end of the year making the overall result better than budgeted. The pre-tax profit for 1999 was DKK 476 million.
Expenditure on research and development also increased - from DKK 324 million in 1998 to DKK 336 million in 1999. This is an indication that Grundfos continues to maintain this area as a high priority.
Investments in production equipment, new buildings, etc. amounted to DKK 707 million in 1999. In keeping with previous practice, cash flow and not loans has been used to finance these investments.
The year 2000 has made a very promising start, and all the indications are that the positive tendencies which were seen in the final months of 1999 will continue this year. Moreover, the general global economic situation is better this year than at the same time last year. In view of both of these factors, the Grundfos Group is suitably optimistic about the outlook for 2000. Growth in sales has been budgeted at approx. 8%, but in light of the positive tendency seen in recent months, a double-figure growth in sales in keeping with the Group’s goal is seen as realistic in 2000.