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Editorial by the executive board

Oliver Hermes 2018 Chief Executive Officer (CEO) and chairman of the board

Oliver Hermes Chief Executive Officer (CEO) & Chairman of the executive board

Dear Ladies and Gentlemen,

Looking back at a successful and eventful financial year, I once again have very good results to report to you: Wilo developed profitably again in 2017, as confirmed impressively by the figures for the year under review. Net sales climbed by 7.4 percent to reach another record of more than EUR 1.4 billion. They thus increased significantly for the eighth time in a row. Consolidated net income achieved a new record of EUR 85.9 million. EBIT remained stable at EUR 106.3 million. A new record was also set with cash flow from operating activities of EUR 140.4 million. The consistently strong cash flow forms a solid basis forthe great financial strength and high financial flexibility of the Wilo Group.

In the past financial year, we once again invested heavily in our future: in modern and efficient corporate infrastructure, in research and development, in new manufacturing technologies, in  the establishment and expansion of sales and production locations and in Wilo’s digital transformation. At EUR  124.8 million, capital expenditure marked a new historic high. We stepped up our globalisation strategy with a corporate acquisition in the USA and investments in emerging economies. Particularly high growth rates were generated in the markets of China, India and Korea.

For years, Wilo has been developing extremely dynamically and can claim to be an innovation and technology leader as an international premium provider of high-tech in the pump segment. We repeatedly set new standards in the pump industry. Our top position is attributable to a number of different success factors that we

combine in an intelligent way. First and foremost are our employees. Their commitment is the driving force behind the Wilo Group’s high productivity, its innovations, its economic success and ultimately also its competitiveness. Also on behalf of my colleagues on the Executive Board, I would like to thank the entire Wilo team for their excellent work and great achievements.

There are a few special aspects, events and topics from the 2017 financial year that I would like to describe to you in a little more detail in this editorial:

Wilo strengthens its presence in Russia

For Wilo, Russia is one of the world’s most important individual markets with high potential. According to projections by the German Committee on Eastern European Economic Relations, German-Russian trade is steadily increasing. The German Federal Statistical Office calculates that German exports to Russia were up by more than 20 percent in 2017. In opening our new plant in Moscow in June 2016, we sent a clear signal for our Russian location. In October 2017, the Wilo Group concluded a special investment contract at a meeting with Russian president Vladimir Putin. This gives Wilo the status of a local manufacturer in Russia. As part of our localisation strategy, we will continue to invest in the Russian location, press ahead with the digital transformation locally and thereby further strengthen our competitive position in Russia and the Eurasian region.

Wilo in Germany’s top 3 “Most sustainable large companies”

Wilo was recently presented with the renowned German Sustainability Award 2018 as one of the top 3 of “Germany’s most sustainable large companies”. In explaining its choice, the high-calibre jury under the auspices of German Federal President Dr Frank-Walter Steinmeier emphasised our high-efficiency products and our comprehensive approach to sustainability. This award gives us added motivation in our efforts to provide innovative products that also help mitigate against ecological megatrends such as climate change and water shortages.

“We4Europe” as a commitment

For over 50 years, companies and employees in Europe have benefited from peace, freedom and partnership. A stable Europe forms the basis for our economic prosperity and our quality of life. It is important to protect and future-proof this basis. This is why Wilo, along with many other international companies, is pledging a shared commitment to an open, united and strong Europe. In joining the “We4Europe” initiative organised by German businesses, the Wilo Group wants to bring the benefits of European integration back to the centre of public debate. We support all those who actively and constructively work for the future of a stable Europe. We are convinced that a united and resolute Europe is a key stability factor for dealing with global challenges.

Growth area of the future: smart urban areas

One of the areas where I see major growth opportunities for Wilo is interconnected urban centres, or “smart urban areas”. These are future markets in which urban infrastructure and different areas of life will be connected with one another digitally and intelligently. All around the world, our cities are getting smarter. Smart cities represent a new form of urban development with the aim of making urban areas greener, more resource-efficient, more pleasant and more liveable on the basis of technological progress. Rapid growth of cities will result in smart cities growing or merging to form smart urban areas in many cases. These areas will combine all of the challenges for which Wilo can offer and develop smart, efficient solutions. 50 percent of the world’s current population of seven billion already live in megacities, and by 2050 this figure is expected to reach almost 70 percent of an estimated ten billion people. Pumps will be needed everywhere, resulting in a big market for Wilo.

Host of the “#GoDigital 2017” strategy summit

Digitalisation was also the main topic at the two-day “#GoDigital 2017” strategy summit at the end of last year. At this event in Berlin, high-profile speakers from business and research took up Wilo’s invitation to hold specialist talks and a panel discussion presenting a comprehensive picture of the dynamic developments. Digitalisation has led to changes for all different industries. Companies have to react to this and adjust their strategic positioning accordingly. It is a matter of developing innovative sales processes and digital business models on the basis of new technologies in order to move even closer to customers. Using digitalisation and individualised products, for example, Wilo is developing a new dimension of customer proximity that has never been seen before in the pump sector. In this way, we are significantly increasing the benefit for customers.

Continued growth

Ladies and gentlemen, Wilo is excellently positioned andremains on a growth trajectory. We are therefore optimistic for the future, which is becoming increasingly complex in a globalised world full of challenges. Day by day, we work to successfully implement our ambitious goals and make Wilo a pioneer in the pump sector in the digital era. We invite you to accompany us on this exciting journey.

Yours,

Oliver Hermes
Chief Executive Officer (CEO) & Chairman of the Executive Board