Strong growth and solid profits in 2008, but considerable reduction in incoming orders in 2009

A strong growth in net sales and a net profit at the same high level as the previous year are the key features of the 2008 business year for Endress+Hauser. The Group has created numerous jobs worldwide and has made significant investments. Nevertheless, towards the end of the year the company felt the effects of the global economic crisis. Chief Executive Officer Klaus Endress still looks ahead with confidence: “We must emerge from this crisis strengthened,” he emphasized at the annual media conference in Basel, Switzerland.

At the presentation of the annual figures, Klaus Endress spoke of a “divided year”. “For a long time it looked like yet another ‘best year ever’ for Endress+Hauser,” said the CEO. However, the initially good double-digit growth gradually flattened off. With net sales of 1.211 billion euros and a growth of 8.8 percent, the Group still exceeded its ambitious targets. “We have once again grown at a stronger rate than the market,” stressed the CEO. All in all, the process automation industry grew by 4 to 5 percent.

Broad-based growth across regions and industries

“Our growth has a broad base,” declared Chief Financial Officer Fernando Fuenzalida. Growth across Europe was stable, with a plus of 8.4 percent. In addition to the emerging markets in the East, export-oriented countries such as the United Kingdom, Italy, Switzerland and Germany in particular remained strong. Despite healthy developments in China, India and South East Asia, business in Asia lost momentum (plus 8.1 percent) as a result of the exchange rate. In America (plus 6.2 percent) the downturn was noticeable at an early stage, particularly in the USA and Canada. The Middle East developed dynamically; Africa and the Middle East increasing by 33.3 percent.

Many industries contributed to the good growth, excepting pulp & paper. Oil & gas, power & energy, renewable energies and shipbuilding developed particularly strongly. “Questions of energy efficiency and environmental protection concerned our customers,” reported Chief Operating Officer Michael Ziesemer, deputy of the CEO. Although instrumentation for process engineering still forms the core of the business, services and automation solutions are increasingly significant sectors. IT plays more and more an important role. 200 new patent applications in 2008 give evidence of the innovative strength of Endress+Hauser. The Group spent 88.8 million euros on R&D – 17.5 percent more than in 2007. This equates to 7.3 percent of net sales.

Improved operating results, increased investments

As a result of high investments and the significant increase in the number of employees, operating results rose a little slower than turnover by 7.0 percent, achieving 156.5 million euros. Pre-tax profit dropped by 3.9 percent to 140.3 million euros. The negative financial results, above all, prevented another all-time best. Exchange rate losses alone amounted to 17.1 million euros – due to the unfavorable currency rates on the closing date. However, a slightly improved tax rate has ensured that, at 104.6 million euros (minus 1.5 percent), net profit is almost at the same level as the previous year.

In 2008, Endress+Hauser invested the record sum of 106.8 million euros (plus 12.6 percent) in new buildings and plants (see text ‘Endress+Hauser investments at a record high’). “We have invested almost 400 million euros within just five years,” stated CFO Fernando Fuenzalida. The worldwide network of the family-owned group of companies was further strengthened by the addition of a sales center in Venezuela. A Latin American Support Center was established in Panama, supporting the work of representatives throughout 20 countries in Central and South America. Sales centers have also recently been founded in Qatar und Lithuania.

Almost 600 additional jobs created worldwide

“For Endress+Hauser, 2008 was already the fifth year in succession with good growth,” declared Klaus Endress. Organizations and structures had to be adapted in response to these developments. In total the company created 579 additional jobs last year. Over half of the 8,434 staff employed worldwide are based in the German-French-Swiss region around Basel, where 197 new positions were added. The Group also strengthened their top management level, the Executive Board, by appointing five new members, bringing the total number to eight.

For Endress+Hauser the past year was overshadowed by the death of the founder of the company, Dr Georg H Endress. He passed away in December 2008 shortly before his 85th birthday after a brief, severe illness. Klaus Endress emphasized that the transition to the second generation had already successfully taken place several years earlier. Everything has been prepared to pass the responsibility on further to the third generation some day. “We want to ensure that Endress+Hauser remains a successful company in family ownership, a company committed to sustainable principles.”

The economic crisis has caused a drop in orders

“The global economic crisis has reached Endress+Hauser,” stated Klaus Endress. The volume of orders is at present 15 percent below target. The numbers vary significantly, with a trend towards the better. “Nevertheless it is already clear that we will not reach the ambitious targets we had set ourselves.” Zero growth, commented the CEO, would be a success. “Our turnover will probably shrink slightly.” However, Klaus Endress remains confident: “The crisis has not yet affected all of our markets, it has not gripped all areas of our business to the same degree.”

COO Michael Ziesemer stressed: “We want to concentrate on the 85 percent of our business that is still running well. We can still achieve more here, as we provide support for our customers on issues that are important for their sustainable success.” Contrary to the general trend, for Endress+Hauser business is developing well in the fields of oil & gas, renewable energies and agrochemicals, as well as in those industries influenced less by economic cycles such as power & energy and water & wastewater. The Middle East continues to be marked by growth, whilst India, Latin America and South East Asia are also developing well.

Since process automation lags behind the economic cycle, Endress+Hauser does not count on tangible improvements before next year. The company is responding flexibly to the drop in orders. Efforts are being made at all levels to reduce costs. In production, the time is being used for restructuring and training. In Nesselwang, Germany, 117 employees – nearly 40 percent of the workforce – have been on short working hours for three to five days a month since May. In Wattwil, Switzerland, 56 employees – almost 60 percent of the workforce – are also on reduced working hours. The decision on shorter working hours will be revised monthly but, at present, these measures are not envisaged at other locations. As the CEO stated, the company is taking a very cautious approach to any new appointments, but no redundancies are planned. Klaus Endress: “Our prime objective is to retain all employees. We will need all hands on deck when the wind changes direction and the economy picks up again.”

Endress+Hauser must maintain its strategic positions

“On no account will we carelessly abandon strategic positions,” emphasized Klaus Endress. The company will continue to invest in the latest production technology and focus on reinforcing the sales and service network. Investments totaling 100 million euros are planned. The sales centers in Poland and the Netherlands are constructing new buildings. The site of the sales center in Shanghai, China, will be extended by the addition of a logistics center. Work on current building projects will continue as planned.

Endress+Hauser can depend on an extremely solid balance sheet. The Group increased its equity capital ratio by 2.6 points to 61.3 percent. Although the bank loans rose by 14.3 million to 77.4 million euros, liquid assets increased even more strongly, by 41.0 million to 182.3 million euros. “We could repay all credits and still had sufficient liquidity,” explained Fernando Fuenzalida. “That ensures our independence and allows us to follow our long-term strategy.”

“We can cope well, even with such a difficult year as 2009”

“Endress+Hauser has always emerged strengthened from difficult times,” the CEO recalled. “We will do everything in our power to ensure that we succeed this time, too.” The company is well-prepared to cope with crisis. “We have a wealth of excellent products and are working

at full strength on the development of new innovations.” Last but not least, the company is backed by the strong culture of a family business. Klaus Endress: “With the right attitude and a clear focus on the needs of our customers we can cope well, even with such a difficult year as 2009.”

The Endress+Hauser Group

Endress+Hauser is a global leader in measurement instrumentation, services and solutions for industrial process engineering. With over 8,400 employees worldwide, the Group generates annual net sales of more than 1.2 billion euros.

Structure

Company-owned sales centers and a network of partners guarantee competent worldwide support. Production centers in eleven countries meet customers’ needs and requirements quickly and effectively. As a successful family-owned business, Endress+Hauser is set for continued independence and self-reliance in the future.

Products

Endress+Hauser provides sensors, instruments, systems and services for level, flow, pressure and temperature measurement as well as liquid analysis and data acquisition. The company supports customers with solutions and services in automation engineering, logistics and information technology. Our products set standards in quality and technology.

Industries

Customers are primarily from the chemicals/petrochemicals, food & beverage, water/wastewater, life science, oil & gas, power & energy, renewable energies, primaries & metal, pulp & paper and shipbuilding industries. Endress+Hauser supports its customers to optimize their process engineering procedures while taking into consideration reliability, safety, economic efficiency and environmental protection.

History

Founded in 1953 by Georg H Endress (1924 – 2008) and Ludwig Hauser (1895 – 1975), Endress+Hauser has been solely owned by the Endress family since 1975. The company group, headed by Klaus Endress since 1995, has developed from being a specialist in level measurement to a provider of complete solutions for industrial measuring technology and automation, with constant expansion into new territories and markets.

For further information, please visit www.press.endress.com or www.endress.com