The effects of the 2009 economic crisis have been felt at Endress+Hauser, with sales dropping for the first time in the Group’s history. The Group remained profitable during the past year by improving its working capital through sound financial and operations management. Furthermore the balance sheet is stronger than in 2008, which was a bumper year. The number of employees remained virtually unchanged during the crisis. The company has had a positive start to 2010 and anticipates a sustained recovery and considerable growth.
Speaking at the Annual Endress+Hauser media conference in Switzerland, CEO Klaus Endress said that the organisation had experienced one of the most difficult years in its history. The Group was unable to compensate for the effects of the economic crisis through its international presence or through its broad industrial customer base. “Never before have we experienced such a profound, wide-ranging and long-lasting slump in business,” he stressed.
Management and the family shareholders deliberately accepted lower profits to save jobs. “We wanted to avoid job losses,” said Endress. “We wanted everybody to be on board when business started to gain momentum again. In 2009 we scrutinised our expenses and broke many old habits.” Travel and meetings were cut, salaries were left unadjusted and in many sales and production centres shareholders’ dividends were lower. Shortened working weeks were also introduced at some of the production centres to prevent job losses.
On the other hand, Endress+Hauser increased its research and development expenses and 200 patent applications were registered, as many as in 2008. Thus, confirming the Group’s commitment to innovation. With the acquisition of a minority interest in the US high-tech firm Integrated Sensing Systems, it secured know-how and expertise in the field of Coriolis flow measurements using micro-electro-mechanical systems. By acquiring a majority in the English company MHT Technology, it strengthened its competence in tank gauging and tank farm automation.
“We have survived these difficult times relatively unscathed,” stressed Endress. “The crisis has sharpened the eye for the needs of customers and markets alike. It has forced us to expect the improbable and to think the impossible. To re-evaluate, and either discard a project or implement it rapidly. The result of it all is that important products have been brought to market faster than usual.”
COO Michael Ziesemer believes that much that was changed by the crisis is here to stay. This is also reflected in the Group’s new strategy. “We expect years of lower growth,” explained Ziesemer. He highlights that emerging markets will gain importance at a faster pace. Next to Asia, Latin America and the Middle East, Africa is expected to play a more important role. Endress+Hauser see business drivers in the protection of the environment, the utilisation of resources, energy efficiency, biotechnology and demographic change.
“Endress+Hauser has had a good start to the new year. After just four months, incoming orders increased by double-digit figures against the previous year. The growth in sales is well above the cautious target of 5 to 6%. Business in the USA and Germany has picked up,” reported Ziesemer. “Russia is catching up fast, China shows dynamic growth again. Only the Scandinavian countries are still deep in the recession.”
If this continues, CFO Fernando Fuenzalida believes that growth as high as 10% is well within reach. “But even then, we would not have reached our sales level of 2008,” he stressed. As many cost cutting measures were one-off actions and because the headcount is expected to rise slightly, the Group – in spite of the growth – expects profits at the same level as in 2009.
Endress called for caution: “Basically, the causes of the economic crisis are still with us. 2009 was a difficult year and 2010 will not be much easier. We are pretty certain that the crisis will be with us for some time to come.”
All in all, Endress+Hauser believed it fared better than the process automation industry as a whole, which shrank by 16%. “We have actually gained market share,” concluded Ziesemer.
For more information contact Hennie Blignaut, Endress+Hauser, +27 (0)11 262 8000, [email protected], www.za.endress.com
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