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Editorial by Oliver Hermes


Oliver Hermes

Dear Ladies and Gentlemen,

The coronavirus pandemic delivered an abrupt and hard shock to the economy and society around the world. COVID-19 dominated 2020 and continues to control global life in almost every respect. Social and economic activities were scaled back dramatically on every continent – with far-reaching consequences. The world will be permanently changed and is facing a test of historic dimensions.

At the same time as addressing the health risks, it is extremely important to maintain financial stability and lay the foundations for a phase of economic recovery. A cohesive approach to economic matters is no less vital than solidarity during the pandemic. Once more, we are seeing that protectionism and closed markets are counter-productive and only serve to heighten the existing risks. Global challenges like the coronavirus pandemic and advancing climate change can be solved only through cross-border cooperation. As an active member of the “UN Global Compact” network, Wilo supports a multilateral social and economic world order as a matter of principle. As a globally active company, we are aware of the critical importance of cooperation in international partnerships and initiatives. This is the only way to ensure responsible development.

Sustainable and future-oriented

Wilo’s sustainable products and systems make it a pioneer and one of the world’s “50 Sustainability & Climate Leaders”. The companies participating in this global sustainability and climate protection initiative all operate on the basis of the United Nations Sustainable Development Goals (SDGs). Working with our network partners, we promote innovative, climate-friendly solutions and proactively encourage dialogue with politics, business and NGOs. Corporate political responsibility is something we actively pursue as part of our sustainable action.

The Wilo Group also won the renowned German Sustainability Award 2021 in the "Climate" transformation field. The German Sustainability Award recognises companies that integrate sustainability into their business model to a significant extent. At Wilo, our aim is to advance the topic of energy efficiency while also being a pioneer in the age of climate change.

Wilo is systemically important and serves critical infrastructures

In exceptional times like these, companies are required to combine long-term strategic thinking with tactical cleverness, rapid action and pragmatism. At the very start of the coronavirus crisis, the Wilo Group took extensive steps with the formation of a “Wilo Corona Task Force”, which has since begun focusing on the post-coronavirus era as the “Wilo Go-Ahead Task Force”. Wilo’s strategy is proactive and adaptable. And it is already demonstrating its effectiveness.

As an industrial and technology group, the Wilo Group plays a significant role in keeping systemically important sectors functional in many countries of the world. Our products, systems and services are a fundamental part of critical infrastructures. They serve applications without which everyday life would be almost impossible. Even in exceptional times, we meet our social responsibility for supplying water management, building services and key industries and ensuring their processes. To this end, we obtained special permission to continue our production activities in 2020 in countries including the USA, China, Russia, France, Italy and India. We did not suspend pump production at any of our plants. Wilo has been able to deliver its products since the start of the pandemic. We can guarantee consistently high product quality and availability thanks to our efficient procurement and distribution network.

Excellently positioned and on track for further growth

The Wilo Group continued on its profitable growth path in the year under review with net sales growth of 1.8 percent after adjustment for exchange rate effects. Wilo generated adjusted EBITDA of EUR 181.6 million and an adjusted EBITDA margin of 12.1 percent. At EUR 161.5 million, cash flow from operating activities remained essentially unchanged compared with the previous year’s record level. Free cash flow actually increased more than threefold year-on-year to an extremely high EUR 35.6 million. In other words, the conclusion from the past financial year is that we again succeeded in generating sustainable and profitable growth even in the stormy waters caused by the coronavirus pandemic.

Fine-tuning our strategy

The coronavirus crisis is providing a painful illustration of the weaknesses and issues affecting the current world economic order and its tightly interconnected value chains. Now more than ever, our "region-for-region" approach is protecting us from upheaval, business interruptions and delivery failures. Our organisation is designed to allow the individual regions as much decentralisation as possible and as little centralisation as necessary. In future, we will continue to pursue our commitment to localisation and increasingly manufacture locally for domestic and regional markets. With production sites in ten countries, including the USA, Russia, the United Arab Emirates, China and Korea, Wilo already has a presence on every continent.

We are also scrutinising our make-or-buy strategies. Broadly speaking, this will lead to us increasing the degree of vertical integration, meaning we will produce more ourselves and bring additional activities back into the company, especially with regard to critical components. We want to remain an independent group of companies, and that also means not allowing ourselves to be dependent on individual suppliers. All in all, Wilo is gearing itself for the future megatrend of “Globalisation 2.0”, because parts of the world economy are set to be shaped in particular by the drive toward self-reliance and protectionism. This process will be characterised by the more pronounced regionalisation of value chains in the three major economic centres of Europe, Asia and the USA, as well the pursuit of sovereignty with regard to systemically important goods.

Thanks to the "region-for-region" approach we have practised for many years, the Wilo Group is ideally prepared for this development. As part of this, we are systematically pursuing the goal of meeting regional and local customer requirements with products that are manufactured regionally or locally. Accordingly, our organisation is designed to allow as much decentralisation as possible and as little centralisation as necessary. At the same time, we want to make greater use of global standards and products. We will continue to intensify our "region-for-region" approach over the coming years. Wilo will establish a second headquarters in Beijing for our Emerging Markets sales region and construct additional production sites in China and India.

Thanks and acknowledgements

On behalf of the entire Executive Board, I would like to take this opportunity to to express my utmost appreciation to our globally committed employees for what they have achieved and accomplished. Each and every one of them is helping the Wilo Group to deliver on its important social remit. The virus has led to even greater solidarity within our team. One word applied and continues to apply more than ever before: together. We will continue to address the challenges ahead of us resolutely, optimistically, and with vigour and pragmatism in equal measure.