- Email: [email protected]
KSB Group, Germany
September 2006
Pump Industry Analyst
KSB Group, Germany
Pentair Inc, USA
million) Key Figures ( Six months ended 30.6
Sales Revenue Earnings before Income Tax No of Employees
2006
2005
923.1
760.4
720.88
645.0
35.4
14.5
12 834
12 826
COMMENT KSB’s consolidated sales revenue rose by 11.8% in the first six months of 2006 compared with 2005. Energy, water, wastewater and mining all recorded double-digit growth rates. Group companies in the Americas region delivered the strongest percentage growth, reflecting positive business developments in Brazil and in the USA, as well as the appreciation of the real and the US dollar against the euro. Group companies in the Asia/Pacific and Middle East/Africa regions also recorded doubledigit growth rates. At 35.4 million, the group more than doubled its six-month earnings yearon-year. Increased earnings contributions came from the European companies, which improved their cost structures by implementing the Efficiency Enhancement Programme. The French subsidiary KSB SAS in particular sharply increased its earnings, benefitting from growth in butterfly valves for cryogenic applications. Germany-based KSB AG again recorded a loss at the mid-year point of 8.9 million, an improvement on last year’s 11.1 million interim loss. However, KSB expects significant improvement for this business by the end of this financial year.
1.7.2006
2.7.2005
Net Sales Of Which: Water
862.0
788.5
605.5
585.7
Cost of Goods Sold
599.3
553.3
Operating Income Of Which: Water
108.0
107.2
84.2
92.2
68.6
61.4
Net Income The Efficiency Enhancement Programme, launched in 2003 and set to run until the end of 2006, is expected to generate savings of approximately 100 million at the European companies, mainly in purchasing, sales and marketing, product management, development, administration and IT. This should more than offset rising personnel and material costs, as well as falling prices. Beyond 2006, the programme will be turned into a continuous process of improvement. KSB is also continuing its 700Up growth and innovation programme until 2010 to broaden its revenue base. The objective here is to expand KSB’s traditional product and service portfolio, and to implement new business ideas. In order to increase the competitiveness of its European production centres, KSB will implement the new ProSys production system at three German and two French facilities by mid-2007. The goal is to increase productivity by simplifying work flows, shortening cycle times and reducing buffer stocks. Looking ahead, KSB expects its group order intake to remain high during the second half of the year, but lower than the first six months of the year. ■
Six months ended 1.7.2006
2.7.2005
Net Sales Of Which: Water
1633.4
1498.2
1122.7
1097.7
Cost of Goods Sold
1148.2
1058.8
Operating Income Of Which: Water
186.5
179.3
139.8
152.7
Net Income
110.3
101.6
COMMENT Pentair has enjoyed a good second quarter of 2006 with its net sales up 9.3% to US$862.0 million, compared with a year earlier, while its net income was up 11.7% to US$68.6 million. The Water Group posted sales of US$605.5 million, up 3.4% over the same period last year. Pump growth included record sales of Aurora and StaRite pumps and strong sales of water systems in commercial, municipal and residential pump markets. Wet weather in the northeastern US contributed to the strong quarter, as did new customers in several vertical markets including wastewater and fire protection systems, and new products, including control boxes, variable speed drive pumps and
end-suction pumps. Pool sales were up from year-ago levels driven by new products including electronic control packages and high-efficiency variable speed pumps. This performance came despite a decline in Spa & Bath sales, and slower pool building markets in Florida and California. Operating income for the Water Group totalled US$84.2 million, down 9% over the same period last year. Return on sales was 13.9%, down 180 basis points compared with 2005. Margin gains in Pump operations - driven by sourcing activities, pricing and volume - were offset by mix, material cost inflation and plant consolidation-related inefficiencies in Pool and Filtration operations. ■
9
COMPANY WATCH
Order Intake
Key Figures (US$ million) Second quarter ended
Pump Industry Analyst
KSB Group, Germany
Pentair Inc, USA
million) Key Figures ( Six months ended 30.6
Sales Revenue Earnings before Income Tax No of Employees
2006
2005
923.1
760.4
720.88
645.0
35.4
14.5
12 834
12 826
COMMENT KSB’s consolidated sales revenue rose by 11.8% in the first six months of 2006 compared with 2005. Energy, water, wastewater and mining all recorded double-digit growth rates. Group companies in the Americas region delivered the strongest percentage growth, reflecting positive business developments in Brazil and in the USA, as well as the appreciation of the real and the US dollar against the euro. Group companies in the Asia/Pacific and Middle East/Africa regions also recorded doubledigit growth rates. At 35.4 million, the group more than doubled its six-month earnings yearon-year. Increased earnings contributions came from the European companies, which improved their cost structures by implementing the Efficiency Enhancement Programme. The French subsidiary KSB SAS in particular sharply increased its earnings, benefitting from growth in butterfly valves for cryogenic applications. Germany-based KSB AG again recorded a loss at the mid-year point of 8.9 million, an improvement on last year’s 11.1 million interim loss. However, KSB expects significant improvement for this business by the end of this financial year.
1.7.2006
2.7.2005
Net Sales Of Which: Water
862.0
788.5
605.5
585.7
Cost of Goods Sold
599.3
553.3
Operating Income Of Which: Water
108.0
107.2
84.2
92.2
68.6
61.4
Net Income The Efficiency Enhancement Programme, launched in 2003 and set to run until the end of 2006, is expected to generate savings of approximately 100 million at the European companies, mainly in purchasing, sales and marketing, product management, development, administration and IT. This should more than offset rising personnel and material costs, as well as falling prices. Beyond 2006, the programme will be turned into a continuous process of improvement. KSB is also continuing its 700Up growth and innovation programme until 2010 to broaden its revenue base. The objective here is to expand KSB’s traditional product and service portfolio, and to implement new business ideas. In order to increase the competitiveness of its European production centres, KSB will implement the new ProSys production system at three German and two French facilities by mid-2007. The goal is to increase productivity by simplifying work flows, shortening cycle times and reducing buffer stocks. Looking ahead, KSB expects its group order intake to remain high during the second half of the year, but lower than the first six months of the year. ■
Six months ended 1.7.2006
2.7.2005
Net Sales Of Which: Water
1633.4
1498.2
1122.7
1097.7
Cost of Goods Sold
1148.2
1058.8
Operating Income Of Which: Water
186.5
179.3
139.8
152.7
Net Income
110.3
101.6
COMMENT Pentair has enjoyed a good second quarter of 2006 with its net sales up 9.3% to US$862.0 million, compared with a year earlier, while its net income was up 11.7% to US$68.6 million. The Water Group posted sales of US$605.5 million, up 3.4% over the same period last year. Pump growth included record sales of Aurora and StaRite pumps and strong sales of water systems in commercial, municipal and residential pump markets. Wet weather in the northeastern US contributed to the strong quarter, as did new customers in several vertical markets including wastewater and fire protection systems, and new products, including control boxes, variable speed drive pumps and
end-suction pumps. Pool sales were up from year-ago levels driven by new products including electronic control packages and high-efficiency variable speed pumps. This performance came despite a decline in Spa & Bath sales, and slower pool building markets in Florida and California. Operating income for the Water Group totalled US$84.2 million, down 9% over the same period last year. Return on sales was 13.9%, down 180 basis points compared with 2005. Margin gains in Pump operations - driven by sourcing activities, pricing and volume - were offset by mix, material cost inflation and plant consolidation-related inefficiencies in Pool and Filtration operations. ■
9
COMPANY WATCH
Order Intake
Key Figures (US$ million) Second quarter ended