Endress+Hauser took advantage of the strong market conditions and made progress in all fields. CFO Luc Schultheiss explains what’s behind the Group’s best ever year.
No question about it, 2018 was an outstanding year for us. Sales reached a new high, earnings improved significantly on an already high level, we created hundreds of new jobs and incoming orders grew considerably. Additionally, we have made record investments and further improved our solid position with respect to sustainability.
At first glance, the numbers appear to conflict with the negative headlines that currently dominate the business news. The trade conflict between the US and China and dissent within the European Union, not to mention Brexit, are all creating uncertainty. Although low interest rates and unemployment levels make a recession unlikely, the slump in stock markets at the end of the year illustrates just how little it takes to make the financial and stock markets nervous.
So why was 2018 nevertheless such an excellent year for Endress+Hauser? First off, the process automation business was carried by a strong economic environment in our industry. Behind this development are ongoing catch-up effects from previous years as plant operators put off largescale projects and cut back on maintenance. The consumer business is still strong, however. The subsequent demand has now triggered new investments. Another contributing factor is the price of oil, which is high enough to make more projects pay off again.
Endress+Hauser even managed to outperform the industry’s strong growth and gain market share again last year. This success is closely tied to impulses spurred by our strategy and our portfolio. Year after year, we are introducing a wealth of innovative products, solutions and services to the market. We are also helping our customers to make their installed base part of the Industrial Internet of Things, whether it involves new or existing plants. And we can use our devices and systems to measure and analyze more and more quality-relevant parameters while the production process is running.
We have aligned our offerings with a wide range of different industries and boast a worldwide sales and production presence. This allows us to counter market fluctuations and pays double dividends when, as in 2018, nearly all industries and regions are performing well. Over the years, we have seen the balance shift strongly in the direction of Asia and the Americas. After 65 years of being our undisputedly largest market in terms of sales, Germany was overtaken by the US for the first time in 2018. This change is tied to growing currency risks. Foreign exchang developments once again cost us revenues in 2018.
Calculated in local currencies, growth would have been a good four percentage points higher. On the other hand, the strength of the euro against all other major currencies helped us on the cost side. And because we were operating at a high level of capacity, we were able to significantly raise productivity and increase return on sales. This allowed us to achieve a new high on the income side despite the extraordinary revenues we generated in the prior year. The equity ratio rose slightly once again.
We have to admit, the economic and political climate has certainly not improved over the past several months. Looking forward, our business environment is once again marked by more uncertainty. We are nevertheless confident about our prospects for 2019. We anticipate growth will be slower, but still solid. However, we will continue to follow a prudent path in order to act swiftly in case of serious developments.
The target for this year’s consolidated sales growth, in euros, is in the mid single-digit range. In local currencies, we are once again looking at two percentage points on top of that – certainly an ambitious goal. We want to keep productivity, as well as profits, at a high level. We are investing heavily in order to expand production, and as result our capacity, and to accommodate future growth. We want to create several hundred new jobs around the world at the same time. And finally, in 2019 we again want to make good use of any arising opportunities to the benefit of Endress+Hauser.