Digitalisation helping to drive growth

The Group increased sales and profits, invested heavily and created hundreds of jobs worldwide.

“The bottom line is, 2018 was a good year for Endress+Hauser worldwide,” explains CEO Matthias Altendorf at the Group’s annual media conference in Basel. The Group increased net sales by 9.5% to €2.455bn, despite facing strong headwinds from foreign exchange rates. Expressed in local currencies, sales grew by 12.7%.

The business was bolstered by a strong economy in the process automation sector. Continued high demand from private consumers, as well as recovering oil and raw material prices, contributed to the solid growth. After years of somewhat restrained investment activity, large-scale projects made a return. According to chief financial officer, Dr Luc Schultheiss, Endress+Hauser’s performance “exceeded the industry average.”

Endress+Hauser made excellent progress in Europe. Business was dynamic even in Africa and the Middle East as well as in the Asia-Pacific region. The strongest growth was seen in the Americas, however. “After 65 years, the US replaced Germany as our largest sales market,” reported Matthias Altendorf. China also grew at a double-digit pace. “If this trend continues, China could soon take over the top spot,” added the CEO. 

Profits rise sharply

Foreign exchange rate fluctuations not only slowed down sales growth, but also stifled cost structures, despite notable cost increases on the materials side. Operating profit (EBIT) increased by 31.4% to €330.6m. Even though no one-off income was recognised in 2018, in contrast to the prior year, profit before taxes (EBT) still rose by 14.6% to €315.7m. Return on sales (ROS) climbed 0.6 points to 12.9%.

Net income rose by 11.2% to €232.5m, which reflects an effective tax rate of 26.4% which increased over the prior year due to a change in the composition of the profit. The equity ratio reached 71%, an increase of 0.8 points. The Group has no considerable bank liabilities. 

Innovations for the digital age

Endress+Hauser’s growth was fuelled by a wealth of innovations. The company brought 54 new products to the market last year. Research and development expenses climbed to €184.2m, representing 7.5% of sales. The company filed 287 initial patents in 2018. At the end of the year, Endress+Hauser held almost 7800 patents and other intellectual property rights.

About one-third of the new patents were related to the IIoT, digital communications, diagnostics and electronics. “Digitalisation is penetrating all areas,” says Matthias Altendorf. Apart from 1000 developers active in the Group’s centres of competence, various start-ups established by the Group are also busy working on products, solutions and services for the digital age. Endress+Hauser is furthermore collaborating closely with industry partners such as software specialist SAP.

A further driver of growth was process analysis. “The optical analyser business performed extremely well,” says Matthias Altendorf. Endress+Hauser established a European support centre for advanced analysers in Lyon, France. The network of sales specialists in this area is growing in Europe. The CEO is hoping for additional impulses to spur this business area.

Hundreds of new jobs

The positive development was reflected in the creation of numerous jobs. At the end of 2018, Endress+Hauser had a global workforce of 13,928, an increase of 629 over the prior year. Hiring was especially strong in production and production-related areas, as well as in the service units. The company created 200 new jobs in the Basel region alone.

Endress+Hauser invested almost €750m within a five-year period, “all of which the company financed through its own funds,” as CFO Luc Schultheiss pointed out. In 2018, €158.6m flowed into buildings, machinery and IT. The two largest projects involve the expansion of the plants in Reinach, Switzerland and Maulburg, Germany. The Group is also undertaking a large project in the US that will bundle the Gulf region sales, service and support organisations in Houston, Texas. 

Top sustainability ranking

“As a family-owned company, sustainable development is important to us,” explains Matthias Altendorf. One of the strategic indicators is the annual EcoVadis benchmark, which assesses companies with respect to sustainability. In 2018 Endress+Hauser continued to improve, scoring 68 out of a possible 100 points to place in the top 5% of its comparison group. Endress+Hauser plans to use the EcoVadis platform to eventually evaluate its own suppliers.

“We feel it’s important for the future of Endress-Hauser to continue to have members of the shareholder family work at the company,” emphasized Klaus Endress, President of the Supervisory Board. “This strengthens the bonds between the family and the company.” A decision was thus made to allow members of the family to work at all levels within the company. The Family Charter provides clear guidelines; candidates who choose this path will receive close support from the Family Council.

Continued solid growth

Endress+Hauser got off to a good start in 2019. Incoming orders and net sales for the Group are tracking well above prior year levels. The company nonetheless expects this trend to cool off in the second half of the year. “We are still anticipating solid growth in the mid-single-digit range,” said Luc Schultheiss. According to the CFO, the company plans to invest €260m this year, and assuming the business continues to perform well, 500 new jobs will be created worldwide.