Ups and downs at Endress+Hauser
Financial year 2015: currency fluctuations impact sales growth and place pressure on earnings
Endress+Hauser issued a solid financial report for 2015. The measurement and automation engineering specialist was nevertheless unsatisfied with how the business developed. In local currencies, the Swiss-based Group experienced hardly any growth in net sales. Foreign exchange rate impacts additionally strained earnings.
The Group increased consolidated sales by 6.5 percent to more than 2.1 billion euros. As CFO Dr Luc Schultheiss pointed out, growth was driven by the effects of foreign exchange rate fluctuations. “All key currencies lost value against the euro. From a local currency standpoint, sales only increased by 0.7 percent.” In Swiss francs, the actual reporting currency for the holding company, sales declined by 6.6 percent.
Economic transformation in China and low raw material prizes
The business was impacted by slower economic growth in China and sinking raw material prices, in particular the oil price. “Sagging demand for raw materials and energy in China had a negative impact in many countries, from the Pacific Rim over Southeast Asia to South America,” explained CEO Matthias Altendorf. Political crises and economic uncertainties dampened enthusiasm for investments around the world.
New fields of business growing positively
According to the CEO, consumer-oriented and non-cyclical industries such as food & beverage, water & wastewater and life sciences developed well in 2015. The services and comprehensive automation solutions businesses experienced high growth. Above-average growth also occurred in the field of analytics. “That confirms our strategy of strengthening the process analysis business while tapping into the laboratory analysis market.”
Declining earnings, continued financial strength
With costs rising at a disproportionately high rate, the operating profit (EBIT) decreased 6.3 percent to 251.3 million euros. Despite slightly lower tax rates, net income decreased 14.1 percent to 164.7 million euros. Return on sales (ROS) fell 2.7 points to 10.9 percent. Endress+Hauser’s financial strength remains unaffected, with liquid assets of 382.7 million euros against bank loans of 7.8 million euros. The equity ratio rose 4.7 points to 73.0 percent.
Significant investments in sales and production
In 2015 Endress+Hauser invested 166.1 million euros in new buildings and equipment, an increase of 31.5 percent compared to the prior year. Endress+Hauser had 12,952 employees at year end. 517 jobs were added in 2015. This included 353 in Europe. Endress+Hauser submitted 270 patents in 2015, 11 more than in 2014. Research and development expenses increased 11.1 percent to 159.7 million euros, which represents 7.5 percent of sales.
Moving forward with a new strategy
The global sales and production presence, a broad base of diverse industries and the comprehensive portfolio of products, solutions and services all helped the Group succeed in a difficult business environment in 2015. The company plans to continue this course with its new Strategy 2020+. Matthias Altendorf believes 2016 will be even “more difficult” than the previous year. Endress+Hauser foresees single-digit growth and wants to keep earnings at the 2015 levels.