MANAGEMENT’S REPORT This report covers the annual result of the Grundfos Group, Grundfos Holding A/S and affiliated companies. To read the owners’ annual report, please visit the Poul Due Jensens Fond website, thepoulduejensenfoundation.com. Key achievements Grundfos is a global leader in advanced pump solutions and a trendsetter in water technology. 2017 has been a strong year for Grundfos. Our solid sales growth is outperforming the market, we further strengthened our profitability and cash flow, we safeguarded our world-class customer loyalty and we have executed a number of initiatives that lay the foundation for bringing even better offerings and service to our customers. Our pump solutions have a significant positive impact on the UN Sustainable Development Goals #6 (water) and #13 (climate) by securing safe and reliable water for people and by reducing energy consumption. After two years of modest sales growth in 2015 and 2016, sales grew in 2017 by 5.3% measured in local currencies. Net turnover reached a record high of DKK 25.6bn. Our earnings before interest and tax (EBIT) increased to DKK 2,346m, corresponding to 9.2% of net turnover. Moreover, free cash flow improved in 2017. Every year we conduct an extensive customer satisfaction and loyalty survey. The 2017 survey confirmed that loyalty among our customers meets the best performing companies globally. We are grateful for this, and we will continue to work hard to earn the loyalty of existing and future customers. Based on our 2020 Strategy, we have in 2017 invested substantial resources in initiatives that will secure our future competitiveness. Our global service organisation is now operational and ready to bring innovative service offerings of a high qual- ity to our global customer base. We have an ambition to offer the best digital customer experience and the best digitally crafted services to the market. We are investing massively in digital tools and platforms to support this. We are working closely with our customers to enable their digital platforms, and our customers are recognising our efforts. Sales and market development Net turnover reached DKK 25.6bn compared to DKK 24.7bn in 2016. Measured in local currencies, sales have grown 5.3% in 2017. Due to an unfavourable currency development, growth in DKK was 3.9%. We see growth across several markets and within most of our products and solutions categories – both in terms of sales value and sales volume. Based on an estimated global market growth in 2017 of approx. 2-3%, Grundfos has gained further global market share. Strong performance in China On the back of a solid 2016, we have accelerated even further in 2017, resulting in very satisfactory double-digit growth in China. We continue to expand our geographical presence. Grundfos now has sales offices across the entire country to support a growing sales force and a highly capable network of distributors. We are participating in China’s efforts to reduce energy consumption, to improve air quality and to secure safe and reliable water access and disposal. China has embarked on a major conversion to heating households with gas. The installation of gas boilers in many Chinese homes has led to a sharp increase in demand for circulator pumps. Using our global supply chain capabilities, we have been able to meet this demand. In 2017, we successfully launched a number of new pump solutions developed specifically for the Chinese market. China is one of our most important growth markets globally, and we will continue to invest in developing our market position. Europe, Greater Middle East and Africa (EMEA) Although most of the European markets are mature, we still delivered sales growth across Europe. The UK/Ireland, the Mediterranean countries, Benelux and several Central European countries are showing a solid sales development. After some difficult years, we now see the Russian market picking up with strong growth. Grundfos is continuously investing in the Russian market, e.g. by localising production. Moreover, we are also seeing double-digit growth in Kazakhstan and the Ukraine. Our strong market position in the Greater Middle East has been maintained despite a slow-down in projects. In Africa, we have also in 2017 increased our sales substantially. Our HVAC OEM business, which supplies pumps to gas boiler manufacturers, had good traction in 2017. In this highly competitive market, Grundfos has for many years been successful in delivering a superior value proposition in our pump solutions and in our partnerships with customers. Our DAB branded business, which operates globally, demonstrated solid growth in 2017. Big potential in the Americas The USA is a critical market for Grundfos, where we see a big potential for new innovative pump solutions and services. In 2017, we ramped up our efforts to develop pump solutions targeted especially at the US market. Despite challenges in parts of our US business, we came out of 2017 with a modest sales growth. The standard product range in particular performed strongly, JOURNAL17
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