We did not fully meet our previous year’s expectations due to the economic conditions as well as non-recurring costs and charges arising from the realignment of the KSB Group. As set out in the Business Development section, the consolidated order intake in the Group increased in line with expectations (+ 3.6 %), despite higher than planned for negative currency effects. The Pumps and Valves segments achieved the forecast increases of 4.9 % and 5.3 % respectively. Contrary to our planning, Service had to contend with a 2.8 % decline. Here, too, we had assumed a significant increase. Sales revenue did not reflect our outlook (moderate growth), it experienced a 2.9 % decline across the Group. Effects from the translation of currency into euro had an unexpectedly strong negative impact. Only Valves managed to achieve their target (slight increase) year on year. Sales revenue for Pumps did not experience the anticipated slight increase, but fell by 5.8 %. The Service segment had to contend with considerable declines (– 7.1%) rather than the planned significant growth. As a result of the unexpectedly difficult market environment combined with the continued pressure on prices in the project business and unplanned non-recurring and restructuring costs, the moderate increase in profits of € 30 million that was expected failed to materialise. Earnings before interest and taxes (EBIT) fell by € 47.6 million to € 88.6 million. The Pumps and Service segments had to contend with very considerable declines. The Valves segment, however, improved substantially, enabling it to achieve what was forecast in last year’s report. For Pumps, we had planned only slight declines, and for Service, significant increases. As a consequence, earnings before income taxes (EBT) for the Group was 39.2 % down on the previous year’s level; accordingly we failed to meet our target for pre-tax return on sales. Owing to the fall in earnings accompanied by a sharply increased investment volume, the development of the net financial position, at € 185.5, was also somewhat weaker than planned twelve months ago (€ 200 million).


The difficult economic environment – in particular for the project business that continues to be affected by high pressure on prices – as well as non-recurring and restructuring costs resulted in a sharp decline in earnings within the Group.

Total output of operations

The above-mentioned decline in sales revenue is also reflected in a lower total output of operations. However, as the change in inventories reversed in comparison with the previous year (2014: € 12.0 million increase in work in progress and inventories of finished goods, 2013: € 24.9 million reduction), the decrease by 1.2 % to € 2,197.7 million (previous year: € 2,223.9 million) was significantly more moderate than it was for the sales revenue.

Income and expenses

Other income declined from € 44.6 million to € 36.3 million, partly due to decreasing income from the reversal of provisions no longer required.

The cost of materials fell by 0.6 %. Due to the more significant decline in total output of operations, the cost of materials (€ 887.4 million) as a percentage of total output of operations rose from 40.1 % in the previous year to 40.4 % in the year under review.

Staff costs fell by 0.3 % to € 785.5 million. In relation to total output of operations, however, this meant an increase of 0.3 percentage points. Key factors were the collectively agreed salary increases and the lower number of employees. Compared with 2013, the number of employees fell by 237, taking the total figure at the end of the reporting year to 16,309. Significant declines were recorded at KSB AG and KSB Service GmbH, Frankenthal, with 176 fewer employees. This reduction is related to measures taken to adapt to new market conditions and to improve KSB’s competitiveness. In addition, our Chinese subsidiaries cut their staff numbers by 103 employees in total. In contrast, 49 employees joined the Group in the reporting year through the changes in the consolidated Group. Therefore, the KSB Group employed on average 131 fewer people than in the previous year. Due to the lower total output of operations and simultaneous decrease in the number of employees, the average output per employee remained unchanged at € 134 thousand compared with the previous financial year.

The ratio of other expenses to total output of operations rose from 17.2 % to 17.9 %. In absolute terms, they total € 393.0 million compared with € 383.4 million in 2013. The increase results primarily from higher other staff costs of € 9.0 million that relate to the reduction in our workforce at the Homburg and Pegnitz sites in Germany.

Financial income / expense decreased by € 3.1 million. This is above all attributable to lower income from investments which we accounted for using the equity method (€ – 1.9 million), and increased financial expenses (€ + 0.9 million). The latter are attributable to a € 1.7 million increase in write-downs on immaterial, non-consolidated financial assets as a result of lower earnings prospects.


The KSB Group achieved earnings before interest and taxes (EBIT) of € 88.6 million (previous year: € 136.2 million). The Pumps segment reported EBIT of € 55.8 million (previous year: € 105.2 million), the Valves segment € 16.9 million (previous year: € 7.3 million) and the Service segment € 28.8 million (previous year: € 42.7 million). The reconciliation effect from the measurement of construction contracts in accordance with IAS 11 changed by € + 6.2 million year on year.

The earnings before income taxes (EBT) amount to € 72.6 million, following € 119.4 million in 2013. This means we achieved a pre-tax return on sales of 3.3 % (previous year: 5.3 %). The income tax rate increased by 3.3 percentage points. This was primarily due to non-tax-effective impairments on goodwill, up from 33.1 % in 2013 to 36.4 %. As a result, the 42.2 % fall in earnings after income taxes to € 46.2 million (previous year: € 79.9 million) was somewhat more pronounced than the decline in earnings before income taxes (EBT) (– 39.2 %).

Earnings attributable to non-controlling interests fell by a similar percentage from € 14.2 million to € 7.9 million. Consequently, they remained virtually constant relative to earnings after income taxes (17.1 % compared with 17.8 % in the previous year).

The earnings attributable to shareholders of KSB AG (€ 38.3 million) were € 27.4 million lower than in the previous year (€ 65.7 million).

Earnings per ordinary share were € 21.74, compared with € 37.38 in the previous year, and € 22.00 per preference share, compared with € 37.64 in 2013.


The financial position of the KSB Group deteriorated slightly. In particular, the significant growth in the provisions for employee benefits related to the interest rate development and significant opposing effects in the equity resulted in a decrease in the equity ratio of almost 3 percentage points.


The KSB Group’s equity amounts to € 829.2 million (previous year: € 844.5 million). This includes KSB AG’s subscribed capital of € 44.8 million as in the previous year. The capital reserve remains unchanged at € 66.7 million. Revenue reserves total € 585.0 million (previous year: € 618.8 million), including the proportion of earnings after taxes attributable to shareholders of KSB AG of € 38.3 million (previous year: € 65.7 million). € 132.7 million (previous year: € 114.2 million) is attributable to non-controlling interests. Due to the decline in total equity and liabilities and simultaneous increase in total assets (€ 126.3 million or 5.9 %), the equity ratio has dropped (36.4 %; previous year: 39.3 %).

The non-controlling interests mainly relate to the following companies: KSB Pumps Limited, India, KSB America Corporation, USA, GIW Industries, Inc. USA and KSB Shanghai Pump Co. Ltd., China.


The largest item under liabilities continues to be provisions for employee benefits, including, also as the largest item, pension provisions. On the basis of the significantly lower capital market interest rates, the provision as at the reporting date was increased by 29.3 % to € 514.7 million. A large number of the pension plans currently in place in the KSB Group are defined benefit models. We will be reducing the associated risks, such as demographic changes, inflation and salary increases, for example by increasingly introducing defined contribution plans for new staff.

Our obligations for current pensioners and vested benefits of employees who have left the company account for nearly half of the amount recognised in the balance sheet. The rest relates to defined benefit obligations for our current employees.

The remaining provisions for employee benefits, which are predominantly current, fell from € 124.1 million to € 113.9 million partially as a result of lower provisions for profit bonus schemes.

The other provisions rose year on year mainly due to the increase in provisions for other obligations. They include non-current components of € 15.1 million (previous year: € 14.4 million) for warranty obligations. The excess relates to provisions for mainly current uncertain liabilities.

Non-current other liabilities fell significantly to € 159.4 million, following € 205.0 million at the end of 2013. They include liabilities of € 140 million from a loan against borrower’s note placed in 2012 (previous year: € 175 million). It is divided into repayment tranches of 3 to 10 years. The change can be explained by the fact that the first tranche of € 35 million is being repaid in 2015. There is a corresponding reclassification to the current other liabilities. Furthermore, we repaid a long-term bank loan of € 10 million before maturity in 2014. Current other liabilities increased overall by € 68.0 million (€ 523.3 million compared with € 455.3 million at year end 2013). The financial liabilities these include rose to € 31.8 million primarily due to the above-mentioned reclassification. Other liabilities also grew from € 188.7 million to € 218.0 million. Reasons for this are higher advances received from customers (€ + 8.9 million) and a € 11.5 million increase in accrued currency forwards and interest rate swaps. At € 211.7 million (previous year: € 204.8 million), trade payables changed by 3.4 %. Taking into account the increase in total equity and liabilities, the share of current liabilities in total equity is 23.9 % (previous year: 22.3 %).


The additions to intangible assets amounting to € 7.4 million (previous year: € 4.2 million) primarily concerned advance payments and own work capitalised for a new software to be deployed in Sales (in the previous year purchase of licences).

Investments in property, plant and equipment in the reporting year amounted to € 77.7 million, significantly above the figure of € 52.8 million for the previous year. The highest additions at € 32.2 million (previous year: € 7.6 million) relate to advance payments and assets under construction. They are connected with the construction of a foundry at our US mining company GIW Industries, Inc. A further € 19.2 million are attributable to technical equipment and machinery (previous year: € 21.6 million). As in 2013, the focus of our investment activities was Europe, predominantly Germany and France. Outside Europe, the highest additions were again made at our plants in the USA as well as India, China and Brazil. We maintained our policies for measuring depreciation and amortisation in the year under review.

Net financial position

The net financial position of the KSB Group only changed immaterially, from € 189.6 million to € 185.5 million, despite the greatly increased expenditure on property, plant and equipment.


Cash flows from operating activities amounted to € 88.6 million, a year-on-year decrease of € 46.8 million. As well as the decline in earnings and an increase in receivables, funds tied down in inventories had a negative impact on cash flows. This contrasted with more write-downs as well as increasing amounts of funds tied down in liabilities.

In the year under review, we intensified our investment activities primarily in property, plant and equipment. Moreover, the change in term deposits reduced cash flows, whereas in the previous year, it had resulted in a substantial increase. Accordingly, cash flows from investing activities increased significantly to € – 103.9 million (previous year: € – 15.7 million).

Cash flows from financing activities changed from € – 22.3 million to € – 37.5 million. This was in part due to the advance repayment of a long-term bank loan.

Cash and cash equivalents with a maturity of under 3 months from all cash flows declined from € 331.6 million to € 290.5 million. Exchange rate effects amounting to € + 10.8 million (previous year:  € – 5.0 million) played a role in this. The KSB Group’s cash and cash equivalents decreased from € 451.4 million to € 432.7 million (including € 15.3 million (previous year: € 18.0 million) of cash used to secure credit balances for partial retirement obligations and long-term working hours accounts, which is available for immediate use at any time).

We assume that, in future, we will continue to be able to meet our outgoing payments largely from operating cash flow. From the current perspective our financial management is meeting the goal of ensuring our liquidity at all times essentially without any additional external financing measures. For more information on liquidity management (such as credit lines) see the section on Risk Reporting on the Utilisation of Financial Instruments elsewhere in this group management report.

Contingencies and commitments

The KSB Group’s off-balance sheet contingent liabilities totalled € 8.0 million as at the reporting date (previous year: € 11.1 million). These arise mainly from collateral and performance guarantees.

There are no other extraordinary obligations and commitments beyond the reporting date. Other financial obligations arise only within the normal scope from long-term rental, lease and service agreements (in particular IT and telecommunications) necessary for business operations and from purchase commitments amounting to € 17.8 million (previous year: € 12.5 million).

Expenses in Statement of comprehensive income
Balance sheet structure


Our total assets increased by 5.9 % to € 2,277.7 million. There were significant increases both in non-current assets (in particular in deferred tax assets and in property, plant and equipment) and in inventories as well as in receivables and current assets. These contrasted with lower cash and cash equivalents.

A good 27 % is attributable to fixed assets (previous year: around 28 %). Intangible assets and property, plant and equipment with a historical cost of € 1,270.4 million (previous year: € 1,168.7 million) have carrying amounts of € 587.2 million (previous year: € 554.2 million). The goodwill impairments recognised in the reporting year and the decrease in concessions and licences were offset by the increase in the advance payments made on intangible assets, meaning that a change of only € + 0.1 million is to be reported. As the investments in property, plant and equipment in the reporting year were above the figure for the previous year as well as the figure for write-downs (€ 55.3 million following € 54.7 million in 2013), this balance sheet item increased by € 32.9 million. Taking into account the decreases attributable to the first-time consolidations as well as the impairments on immaterial – non-consolidated – other investments of about € 2 million in each case, the carrying amount of financial assets and the investments accounted for using the equity method declined overall by € 1.7 million to € 35.3 million. At € 1.4 million, the investments accounted for using the equity method had an opposite effect.

The significant development in the deferred tax assets (€ 86.7 million, following € 39.6 million in the previous year) can predominantly be attributed to the change in the provisions for pensions and similar obligations.

As a result of the increase in order intake, the inventories – in particular the finished goods and goods purchased and held for resale as well as the raw materials, consumables and supplies – rose by 6.1 % to € 449.8 million. They continued to tie up around 20 % of our resources.

Due to an increased delivery volume in the final quarter of 2014, trade receivables were € 35.1 million above the figure at the end of the previous year, despite lower sales revenue year on year in a full-year comparison. The persistently difficult situation in the project business was reflected in the development of receivables for customer orders, measured according to the percentage-of-completion method. Besides a reduction in advances received from customers for these orders (€ – 7.8 million), the associated value also decreased by € 6.0 million. As in 2013, receivables and other current assets in total made up just about 30 % of total assets, taking into account the change in the total assets.

Cash and cash equivalents account for around 19 % of assets (previous year: approx 21 %). This decrease was caused by lower cash flows from operating activities with simultaneously higher investments.

Inflation and exchange rate effects

There were no consolidated companies within the Group whose financial statements were required to be adjusted for the effects of inflation.

The translation of financial statements of consolidated companies that are not prepared in euro gave rise to a difference of € + 38.8 million (previous year: € – 53.5 million). This was taken directly to equity.


The growth targets we set ourselves for the past year have, as shown in the previous part of the report, only partially been achieved.

Weak demand in our home market of Europe as well as in several important sectors held back the growth in our business. At the same time, for various products our price flexibility was insufficient for achieving satisfactory margins in a tougher competitive situation. This was particularly true for large pumps for use in fossil-fuelled power station as well as for submersible borehole pumps, both of which are manufactured in Germany.

In 2014, we therefore once again focused on creating the conditions that will allow our business to flourish again. This included redistributing tasks within the global manufacturing network, reorganising our sales structure and introducing new measures to reduce our costs, including gradually reducing staff numbers in several companies, most notably KSB AG. We took the decision to increasingly run our power plant engineering business in Asia, using mostly locally manufactured products. We will soon manufacture submersible borehole pumps in Frankenthal rather than Homburg, thereby making substantial cost savings. Similarly, we plan to supply standard castings to our German production plants from our new foundry in India as well as from external suppliers in future, and at the same time to cease manufacturing standard castings in Pegnitz. In Australia and China, too, we have improved our structures in order to reduce costs.

The weaker financial year not only gave us an impetus to implement a number of radical structural changes, it also prompted us to launch a global initiative to improve our per- formance. The aim is to improve cross-departmental and transnational processes, and to encourage our employees to intensify their focus on achieving our corporate goals. In addition, we have invested in new buildings and equipment to further expand our technical capabilities in the areas of liquefied gas transport and mining.

Order intake developed positively for the entire Group and for the Pumps and Valves segments, in line with the forecasts made in the prior-year report. The Service segment, however, failed to achieve the targeted growth rate and even contracted slightly.

With regard to consolidated sales revenue, our expectations of moderate growth were not fulfilled, and, as stated, it declined by 2.9 %. The situation was similar in our Pumps and Service segments, where we had expected moderate and substantial increases. Here we suffered, as stated, declines of 5.8 % and 7.1 % respectively. Only in the Valves segment were we able to realise the projected slight increases.

This sales revenue trend is one of the main reasons for us failing to achieve our earnings forecasts. In addition, non-recurring and restructuring costs of about € 30 million, which were not included in prior-year planning, also had a negative impact on earnings. Accordingly, we were unable to realise the moderate improvements in Group earnings before income taxes (EBT) and the return on sales before income taxes we had anticipated at the start of the year. Both indicators fell significantly below the previous year’s figures. This is also reflected in the earnings of the segments, which we measure as values before interest and taxes (EBIT). The Pumps and Service segments had to con- tend with significant declines. For Pumps, we had forecast a moderate decline only, and for Service had expected a signi- ficant increase. In the Valves segment, however, the planned strong earnings growth was achieved.

At the end of 2014, the net financial position at € 185.5 million was somewhat below the previous year’s forecast value of around € 200 million.

Overall business performance in the reporting year was there- fore less favourable than expected. Despite these negative influences, the KSB Group continues to have a sound financial footing for the future. The measures taken to permanently improve our cost structures will additionally strengthen this basis.

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