In 2004, the Grundfos Group achieved a pre-tax profit of turnover of DKK 1,234m - an increase of 14 per cent compared with 2003, when pre-tax profit amounted to DKK 1,078m.
Satisfactory growth in earnings in 2004 can be attributed to an increased growth in sales, focused investments in globalisation of the sales effort and the production activities and generally improved efficiency throughout the Group. Both profit and turnover were larger than budgeted.
Despite the negative impact of the weakened dollar, the turnover rose by DKK 1b or 9 per cent to DKK 12,153m against DKK 11,152m in 2003. In local currencies, the rise in turnover amounted to 11 per cent, which is above the level of 2003. The positive sales figures in the US, Russia and China had the greatest impact, but also considerable double-digit rises in Eastern Europe and the Far East contributed to the satisfactory increase.
Group President Jens Jørgen Madsen expresses his satisfaction with the year’s result: “We are pleased to have achieved our long-term objective for earnings - pre-tax profits of 10 per cent - one year ahead of time. After a significant increase in earnings during the previous year, we were able to maintain the positive trend despite adverse exchange rates and unusually high increases in costs of materials,” says Jens Jørgen Madsen.
There is one primary objective behind the increased earnings in the Grundfos Group - to strengthen long-term growth by starting even more long-term initiatives. Consequently, this has also been given high priority in 2004. Investments in research, product development and equipment were the highest ever in 2004 and amounted to more than DKK 1.5b. Of this amount, DKK 543m were spent on research and development and more than DKK 1b on equipment for among other things the introduction of new products and continued globalisation of the Group’s production facilities. In 2004, we were again able to self-finance these long-term initiatives.
The record profit is proof that the long-term efforts of the Group are paying off.
“Contrary to a lot of other companies, Grundfos does not regard the international division of labour as a threat, but as a positive opportunity, which we have actually profited from for many years. Continuously establishing sales and production companies in the emerging markets of the world gives us a number of competitive advantages. We get closer to our customers so as to offer them a quicker and better service. And we are able to locate the simplest work processes where the costs are lowest,” Jens Jørgen Madsen adds.
The Group President emphasises that Grundfos gives high priority to moral as well as ethical aspects when moving production from one country to another: “We make a serious and wholehearted effort to help the employees who may lose out in this development,” he says.
Grundfos’ sense of social responsibility is also expressed by the fact that the Group, as a consequence of its accession to the UN Global Compact Initiative in 2002, now demands of its suppliers that they observe the ten UN principles on human rights, employees’ rights, environmental rights and anti-corruption.
The globalisation of Grundfos’ production facilities will continue at full speed in 2005. In the course of the year, new factories with a total area of 55,000 m2 will open in India, Russia, China and Hungary. At the same time, the initial steps to establish a major dollar-based production facility in Mexico are taken as one of the long-term measures that will reduce the Group’s dependency on the fluctuating dollar.
At the turn of the year, the Group comprises 12,586 staff employed by 67 companies in 43 countries.