Net income increased by almost 19.8 percent to over 1.31 billion euros not only compensating for the drop in sales in 2009, but even significantly exceeding the previous best results of 2008. "We have recovered more quickly from the effects of the worldwide economic and financial crisis than expected," said Chief Executive Officer (CEO) Klaus Endress at a recent press conference in Basel. He stressed the dynamic nature of this development." In 2009 we didnt know where the work would come from at times. Last year we often struggled to complete all orders on time."
The economic recovery was noticeable right from the start of the year. Only a few markets such as Greece, Ireland and the Scandinavian countries experienced no upturn. The company had the strongest growth in America, with an increase of 38.2 percent, even exceeding growth in Asia (28.5 percent). In Europe sales grew by 12.9 percent, in Africa and the Middle East by 10.0 percent. "As a result of the crisis, the emerging markets have grown in significance much faster than predicted," explained Chief Operating Officer (COO) Michael Ziesemer.
Growth was driven in particular by the food and beverage industry, the largest sector for Endress+Hauser, where recovery was especially rapid in the plant building and machinery sectors (for example the manufacturers of filling machines). The primaries industry also made an above-average contribution; mining, for example, profited from the worldwide hunger for raw materials as well as the pharmaceutical industry. The chemical; oil and gas; metal; power and energy; water and wastewater industries also developed well. Only the pulp and paper industry continued to struggle.
Strong influence of exchange rates
The development of the exchange rates had a marked effect on both the income statement and the balance sheet. On the one hand the weak euro supported the recovery of export-oriented industries in Europe. In addition, business carried out in US dollars, yen, British pounds or Swiss francs brought correspondingly higher yields. On the other hand, the loss in value of the euro in the course of the year it slumped by 16 percent against the Swiss franc led to net foreign exchange losses of 20.5 million euros. Nevertheless Endress+Hauser was still able to more than double its operating profit (187.4 million euros, plus 123.2 percent), as well as the net income (126.6 million euros, plus 114.6 percent). "This shows that we kept costs under control and budgeted carefully during the recovery, too," emphasises the Groups Chief Financial Officer (CFO), Fernando Fuenzalida.
As the equity (888.5 million euros, plus 30.5 percent) grew considerably stronger than the total capital employed (1.30 billion euros, plus 24.1 percent), the equity ratio increased by 3.4 points to currently 68.3 percent. Cash and cash equivalents have grown considerably, by 54.4 percent to 377.3 million euros, and meanwhile exceed bank loans (50.5 million euros, 24.8 percent less than 2009) more than six fold. "We thus ensure that we are not dependent on third party investors," stressed Fuenzalida.
New jobs, further investments
This financial independence allows the family-owned company to follow long-term goals and remain true to their own convictions. "As we had hardly reduced the size of our workforce during the crisis, we were able to respond immediately once recovery began," said Endress. In 2010 jobs, on a small scale, were created once more, above all in worldwide sales. The number of employees in the Group increased by 175 to a total of 8,594; in the region of Basel, where 4,251 people are employed by Endress+Hauser, 33 new jobs were added.
Both during the crisis and throughout last year the company continued to invest in research and development. The Group earmarked 96.4 million euros (plus 2.5 percent) for this, 7.3 percent of net sales. Patent applications reached a new record high of 219; Endress+Hauser now holds over 4,400 live patents and patent applications worldwide.
Investment in buildings, plants and machinery decreased by 15.2 percent to 57.0 million euros. Previous years had been marked by many major building projects, most of which have now been completed. In Stahnsdorf on the outskirts of Berlin, a new facility for the development and production of silicon pressure sensors was inaugurated; in Cernay, eastern France, work on a customer center for the magnetic flowmeter plant has been completed. In the meantime some of our production facilities have already reached the limit of their capacities. The plants in Maulburg (level and pressure measurement) and Waldheim (glass sensors for fluid analysis), Germany, have already been expanded. Other building projects outside Europe are also in the pipeline.
The network for sales and marketing is also to be further reinforced. In 2010 Endress+Hauser Poland inaugurated new premises in Wrocaw, the Chinese sales center took up operation of a goods distribution center in Shanghai, the Dutch sales center recently moved into a new building in Naarden, Endress+Hauser Thailand is to enlarge its current headquarters in Bangkok and the sales center in Malaysia is to invest in its own premises. The company's presence in the Middle East will also be strengthened with the opening of a sales office in Abu Dhabi. Working together with a partner, Endress+Hauser will set up a subsidiary in Saudi Arabia before the end of the year.
Excellent start to 2011
Just as 2010 ended well for Endress+Hauser, 2011 has started equally well with incoming orders and net sales currently exceeding last year's figures by a two-digit number. Although the Group expects a weakening in this development in the second half of the year, the CFO is confident that the cautious target of 7 to 8 percent growth in sales will be significantly exceeded. Profit and equity are also expected to continue to grow. The Group has earmarked 88 million euros for investments in 2011 and expects to create over 600 jobs worldwide.
CEO Klaus Endress pointed out that there were still major uncertainties to contend with. In his eyes, the financial crisis is far from over, and the debts of many countries, especially in the euro zone, remain a burden for the future. He called the political unrest in northern Africa and the Middle East, as well as the earthquake, tsunami and nuclear disaster in Japan, a clear reminder that a company must always expect the unexpected. "We have to remain agile and alert," he warned." We want to continue to make use of opportunities, but must not overlook the risks."
