For KSB, 2014 was associated with organisational changes. The main alteration was the realignment of our sales teams so that they now focus on three separate sales channels. We now serve our project business and general business customers as well as the end users of our products through these channels. Our sales staff advise and serve customers via these sales channels according to their technical expertise needs, standardised ordering processes and after-sales services.
In supplying these customer groups with products and services, the order situation differed significantly according to industry and region. Positive factors in our business included the slightly improving power plant business in the wake of several large contracts for projects in Asia, the Middle East and South America, as well as the valves business for tankers. The pressure on prices continued, especially with regard to the awarding of major contracts in the energy industry. Order volumes for water and waste water products as well as for pumps and valves for use in mining were similarly positive. In view of the lower number of new mining projects we took advantage of the opportunities arising from the modernisation and replacement needs of existing mines. Industrial product business suffered from a slightly negative development, while orders for building services equipment fell markedly short of prior-year figures.
Overall, the Group’s consolidated order intake improved by € 80.0 million to € 2,321.2 million. This corresponds to a growth rate of 3.6 %, which was our forecast in the previous annual report. Without the impact of the depreciation of several South American currencies, the Russian rouble and the South African rand against the euro, this increase would have been around € 53 million higher.
The increase was mainly driven by the pump business. Order intake for valves also grew encouragingly, and only the volume of service orders was lower than in the previous year.
We achieved the greatest increase, in absolute terms, in the Pump segment, with an increase of € 70.9 million to € 1,524.1 million. In percentage terms, the value of orders received for pumps increased by 4.9 % compared with 2013, in line with our forecast. The reasons for this improvement were on the one hand large projects such as the construction of new power plant units in Brazil, Finland and Saudi Arabia, and on the other, the expansion of our general business with standard pumps. In addition, we increased the competitiveness of our standardised and close-coupled pumps by using more local manufacturing sites. In addition, we launched standard variants of technically revised heat transfer pumps onto the market.
In 2014, Valves order intake rose by € 20.4 million to € 407.4 million. This represents an increase of 5.3 % – the forecast increase for this segment. Business with butterfly valves for liquefied gas tankers and associated onshore plants contributed significantly to this success, with our French company KSB S.A.S. and our South Korean company KSB Seil Co., Ltd. benefiting in particular. Our triple-offset butterfly valves introduced to the market at the end of 2012 and our systems for the remote control of valves found increasing use in cryogenic applications like gas liquefaction and regasification. Orders for power station valves grew positively thanks to purchase orders for plants in Brazil and China. There was a decrease in demand, however, for industrial valves, including from the chemical and petrochemical industries.
In the Service segment, we recorded a 2.8 % reduction in orders for services and service-related products in 2014. The volume of incoming orders fell by € 11.2 million to € 389.7 million, whereas we had expected significant growth. The main reason for this development was the unexpectedly sharp decline in demand from energy suppliers in Europe, particularly in Germany. In addition, several service customers in France closed production facilities.
The Group companies in Europe increased order intake by 6.6 %. The main contributors to the order volume of € 1,427.0 million were the energy industry and the merchant navy. KSB AG’s order intake also developed positively, thanks to several export orders for power plant equipment. It grew by 5.1 % to € 848.7 million.
In the previous crisis countries of Portugal and Spain, companies reported double-digit growth rates. Several Eastern European subsidiaries, too, reported significant to strong growth. Because of the above-mentioned difficulties in Russia, however, OOO “KSB” in Moscow went against this trend.
The order intake of the companies consolidated in the Region Middle East / Africa totalled € 122.5 million, down 5.5 % from the previous year. However, their sales activities helped KSB companies in other Regions to be included in infrastructure projects for energy and water supply as well as waste water treatment.
At € 357.0 million, the order intake of our companies in Asia remained more or less at the previous year’s level (+ 0.4 %). Our two South Korean companies each achieved double-digit growth rates. They benefited from the equipment of tankers by the South Korean shipyards and the demand from domestic plant engineering contractors. Order intake in India, in contrast, was below that of 2013; the improved investment climate in the second half of the year did not decisively stimulate the demand for pumps and valves. In China, our valves business declined.
The order intake of companies in the Region Americas / Oceania at € 414.7 million (– 0.6 %) was very close to prior-year levels.
In North America, we offset the lower number of new mining projects in Canada and the United States with increased activity in other sectors. This also included our involvement in the energy industry. In addition, we received more orders for service work and spare parts, so that in particular our US subsidiaries in California and Texas, which specialise in service, grew strongly.
Our companies in South America succeeded in expanding the general business with standard pumps. However, the volume of this business was not yet as large as the project business, which is primarily based on orders from the oil and gas, mining and water industries. Due to the largely poor performance of the South American economies, the number of such projects remained limited. Our two Brazilian companies in particular suffered from the weak economy.
In Australia, our company had to contend with an economy that had slid into recession. The manufacturing sector contracted further due to high wages, while the mining sector suffered from the weaker demand for commodities from Asia. KSB Australia Pty Ltd. consequently recorded a sharp drop in orders received and responded with structural changes and the closure of a production site.
In 2014, consolidated sales revenue was 2.9 % down on the previous year and reached a volume of € 2,181.7 million. The decrease of € 65.6 million is attributable to negative currency effects (approximately € 53 million), but to a lesser extent also to the lower number of project business orders in the preceding years. The “modest increase” in consolidated sales revenue we projected has therefore not been achieved.
Sales revenue in the Pumps segment amounted to € 1,437.9 million, down 5.8 % from 2013; in last year’s report, we had projected a “slight increase”. Despite the € 88.3 million reduction in volume, business with this product group remained by far the most important. Single- and multistage pumps, submersible pumps and associated actuators and automation devices accounted for approaching two thirds of consolidated sales revenue.
In the second largest segment, Valves, growth – as anticipated – was a slight 1.7 %. We generated sales revenue of € 378.8 million with globe, gate and butterfly valves, and associated actuators and control devices, a year-on-year increase of € 6.3 million. A key factor in this improvement was the strong demand for our cryogenic valves.
In the Service segment, sales revenue was € 28.5 million, 7.1 % up from the previous year. We generated sales revenue of € 373.8 million with inspection, maintenance, repair, associated spare parts as well as systems analysis and efficiency advice. Our objective had been to achieve a significant increase.
In the Regions Europe (– 2.1 %), Asia (– 3.9 %) and Americas (– 7.5 %) , sales revenue declined in 2014, partly due to the above-mentioned effects of exchange rate changes. The sales revenue of companies in the Region Middle East / Africa continued to grow (+ 7.4 %), despite the depreciation of the South African rand and the Turkish lira against the Group currency, the euro.
The European companies achieved sales revenue of € 1,329.4 million, € 29.0 million down on the previous year. Here it was primarily KSB AG and KSB’s Russian subsidiary, OOO “KSB”, that saw downturns in sales revenue. At € 814.9 million, KSB AG’s sales revenue (in accordance with the HGB German Commercial Code) was 4.8 % lower than in 2013.
The consolidated companies in the Region Middle East / Africa improved their sales revenue by € 8.7 million, generating a total volume of € 126.1 million. The strongest growth momentum came from KSB Middle East FZE, based in Dubai.
In the Region Asia, the weaker China business in particular during the preceding two years weighed down on sales revenue performance. This was associated with a lower volume of project business orders. The positive growth in India as well as in a number of smaller East and South-East Asian companies could not fully offset the decline in sales revenue in China. The sales revenue volume therefore, at € 339.0 million, was € 13.7 million lower than in 2013.
In the Region Americas / Oceania, exchange rate changes had the most negative effect in 2014. Sales revenue in euro (the Group currency) was € 31.6 million lower year on year. GIW Industries, Inc. in the US and the Brazilian company KSB Bombas Hidráulicas S.A. accounted for by far the largest share of the total sales revenue volume of € 387.2 million, despite downturns.