Editorial by the Executive Board
Although 2022 began with growing concern from month to month, we remained optimistic in our 150th anniversary year. Despite all the uncertainties and the unfavourable global conditions, the Wilo Group enjoyed excellent performance. We continued on our profitable growth path in 2022 and are strategically extremely well positioned for future challenges.
The Wilo Group again proved to be resilient and crisis-resistant in the face of considerable uncertainty and unfavourable global conditions. We continued on our profitable growth path in 2022 with encouraging increases in net sales and earnings. The 2022 financial year was a success, with net sales totalling around EUR 1.9 billion and earnings before interest, taxes, depreciation and amortisation (EBITDA) coming in at around EUR 197 million.
The Wilo Group derives its corporate strategy from the megatrends that are especially pertinent to us: Globalisation 2.0, urbanisation, energy shortage, water scarcity and climate change. These are supplemented by digital transformation, which is a key factor in all five megatrends.
As well as celebrating our 150th anniversary with a superb family festival attended by around 3,500 guests and soundtracked by our in-house Wilo band, last summer saw us respond to the global political situation by addressing the opportunities and risks of expected future development in terms of the global megatrends even more intensively than before.
From companies and their employees to the members of civil society, we are all facing what is being described as a geopolitical or historical turning point. The watershed moment was Russia’s invasion of Ukraine on 24 February 2022.
As a direct result of these geopolitical developments, we also find ourselves at a “geo-economic turning point”. We are currently seeing policy reversals in terms of the energy transition, inflation is back with a vengeance, interest rates are on the rise and real estate bubbles are bursting.
30 years of hyper-globalisation are coming to an end!
It is simply too late for supply chains to be decoupled – the world is already too connected and intertwined. However, European companies with global operations are advised not only to understand the geopolitical objectives and activities of individual states and regions, but also to take political responsibility in their own right by actively contributing to decision-making processes. The findings of various studies, like the Edelman Trust Barometer 2023, have again shown that society considers companies to be particularly capable and ethically responsible in their actions – while also increasingly expecting them to take a position on issues such as climate protection. When politics and the economy work together in a spirit of mutual partnership rather than separately, the benefit for society can be up to four times greater.
As part of its corporate political responsibility, the Wilo Group pursues this approach by expressing opinions on political topics publicly as a family-owned company and by taking responsibility. We seek out active dialogue with policy-makers.
Our region-for-region approach means we are excellently positioned, allowing us to meet regional and local customer requirements highly efficiently with products that are manufactured regionally or locally.
Over a billion euros in capital expenditure
Over the past decade, we have invested more than a billion euros globally in production capacities, sales infrastructures and company acquisitions. Our organisation is designed to allow as much decentralisation as possible and only as much centralisation as necessary. This helps us to respond flexibly and find answers to the economic challenges and risks arising from the “geo-economic turning point”.
The world’s population has grown abruptly since our company was founded in 1872. According to the United Nations (UN), it passed 8 billion people on 15 November 2022. This development mainly stems from the technological achievements during the age of industrialisation. Comfort and hygiene in residential buildings has also improved, including thanks to the use of Wilo technology.
The proportion of the population living in urban conurbations is increasing rapidly all around the world
Over half of all people currently live in cities, and the UN estimates that this figure will be 75 percent by 2050. In addition to today’s existing cities and metropolitan regions, which are constantly growing, entirely new major cities are being built in a short space of time. This dramatic urbanisation and consistently high population growth go hand in hand with numerous ecological, economic and social challenges. Sustainable and intelligent urban development in these regions is therefore essential. Smart cities and smart urban areas are being planned around the world. Connected digital infrastructures are being established to make these cities more efficient, less wasteful of resources, and more social.
New capital cities are emerging
One trend in urbanisation is the establishment of new secondary capital cities in Asia and Africa. Already under construction, the city of Xiong’an will fulfil this function in China alongside the national capital, Beijing. The new metropolitan area is located some 180 kilometres from Beijing and will be home to around 2.5 million people.
In Egypt, a city called “New Administrative Capital” is being constructed in the middle of the desert, 60 kilometres away from the national capital Cairo. Jakarta, the current capital of the Asian island nation of Indonesia, is slowly sinking into the ocean. This is mainly because of the groundwater that has been pumped out to supply the city’s population with water. In response to this development, the Indonesian government decided to build a new capital city, Nusantara, on the island of Borneo.
The megatrend of urbanisation, especially when it comes to the digital features of smart urban areas, is the source of excellent long-term growth potential for the Wilo Group in the Building Services Residential and Commercial, OEM and Water Management market segments.
We are supporting all the aforementioned projects with our products, systems and solutions and the smart urban area approach we have developed in recent years.
The rapid growth of cities in the wake of urbanisation and the sustained dynamic economic development in many parts of the world, especially in the emerging economies, are triggering huge growth in demand for energy.
Europe is lagging behind when it comes to making the energy transition a reality. Efficient regulatory incentives are required in order to advance the diversification of sources of supply for energy Europe, for example. But this will take time. Another way of resolving the dilemma with quick and visible success is to increasingly incentivise measures aimed at reducing demand for energy.
Saving energy is the order of the day
As well as making our European economies more resilient and slowing the pace of climate change, this will free up the financial resources that are needed to strategically restructure and upgrade our critical infrastructures. The energy transition must be intensified, including the significant expansion of the energy efficiency measures taken.
A considerable share of global energy consumption is caused by electric pumps. We are aware of the enormous potential of efficient technology and want to advance its use in the interests of climate protection and ensuring the secure supply of energy.
The majority of all pumps in use worldwide are outdated. Vast potential for energy and CO2 savings can be achieved by replacing old, uncontrolled pumps with modern, highly efficient Wilo pumps.
We inform operators of public buildings, plants and properties around the world of the many benefits of switching to a high-efficiency Wilo product at an early stage. In addition to the environmental benefit, arguments in favour include an 80 percent reduction in energy costs, future-proofing, security of supply and hygiene safety.
The uninterrupted supply of water for drinking, for agriculture and for industry has always been one of the greatest challenges to humanity. The growing world population, urbanisation and climate change are making this task even more challenging.
According to estimates from the World Health Organisation (WHO) and UNICEF, around 785 million people currently have no access to a rudimentary supply of drinking water, and this figure is on the rise.
More than two billion people live without basic sanitation. Water supply and wastewater disposal present a substantial problem, especially in the rapidly growing megacities in the emerging nations. At the same time, huge quantities of drinking water are lost due to outdated and dilapidated pipe systems.
No food without water
As well as calling established alliances and international supply chains into question, global crises, protectionism and nationalism are complicating the food supply. Some countries need to find long-term solutions to reduce their dependency on grain imports.
As the world’s largest wheat importer, Egypt has been particularly hard hit by this development. Imports account for around 70 percent of its wheat consumption, with the majority coming from Ukraine and Russia. The Egyptian government is now doing everything in its power to make the country independent of wheat imports in order to secure its food supply for the long term. To this end, it aims to increase the proportion of arable land in the country to 25 percent.
Converting deserts to farmland
In the hot and dry southwest of the country, between Lake Nasser and the oases of the Libyan Desert, one of the world’s biggest pumping stations has been constructed as part of the Toshka project.
The River Nile is Egypt’s lifeline. Flood waters from the Nile used to seep away into the desert sand. Today, the waters are channelled and brought to their destination via a network of additional pumping stations. Huge volumes of water are being removed from Lake Nasser and used to permanently transform the desert into land that can be used for agriculture. Wilo is supplying the necessary technology and expertise.
With the biggest infrastructure project in its 150-year history, Wilo is making a substantial contribution to ensuring the supply of food and water in Egypt. However, sustainable water management focuses on more than just the production and supply of drinking water. The disposal and treatment of sewage are also increasingly important. With floods becoming more and more frequent due to climate change, drainage and flood control are a further key factor.
We improved our market access in China in 2022 with the acquisition of another two companies specialising in flood control and wastewater cleaning. With these strategic acquisitions, the Wilo Group enhanced its portfolio for water management in a targeted manner and expanded its production capacities and direct market access in China.
As a result, we can now offer our customers an even broader range of solutions and implement local projects even more quickly and from a single source.
In addition to combating the decoupling tendencies resulting from economic policy developments, this means we are systematically pursuing our strategic evolution into a full-service provider of solutions for all applications in the areas of transport and the utilisation and treatment of water and wastewater.
The megatrend of climate change remains a major issue of our time. Global warming, water shortages and extreme weather events are challenges for which answers must be found.
Wilo can make an immense positive contribution here with its highly efficient and sustainable products, systems and solutions. Wilo always has been and still is an energy efficiency pioneer.
We have underscored our own climate protection targets by signing the “Business Ambition for 1.5°C”. In conjunction with the campaign by the Science Based Targets Initiative (SBTi), companies and organisations are pledging to reduce global harmful emissions to zero by 2050, thereby limiting global warming to 1.5 degrees Celsius.
One step towards achieving this is climate-neutral production. In 2022, our production sites in Aubigny, France, and Bari, Italy, became climate-neutral. This means we have implemented climate-neutral production at all of Wilo’s European sites, and this will be the case for all of our sites worldwide by 2025.
In response to the energy crisis, this year also saw extensive efforts to significantly reduce energy consumption at our European sites in particular.
Hydrogen as a future market
We are also working with our international network partners to advance pioneering, climate-friendly solutions. At the Wilopark in Dortmund, we have built the H2POWERPLANT – a hydrogen-based, safe, compact and sustainable energy system of the future. The plant was ceremonially opened in September 2022 together with our partner, the French company Schneider Electric.
This provides us with the foundations for a self-sufficient, decentralised and renewable power grid and demonstrates how industrial companies can use pioneering, technology-neutral solutions to make an essential contribution to climate protection and sustainability.
This was one reason why the world-leading independent rating agency EcoVadis awarded us the highest sustainability status of platinum last August.
Financing structure sustainably optimised
In light of the uncertain geopolitical environment and growing capital market volatility, we also optimised our financing structure and made our investor base more international.
We successfully concluded the biggest refinancing in our 150-year history while also adhering to “green” criteria.
The Wilo Group successfully placed a traditional promissory note loan with a volume of EUR 224 million on the international capital market for the first time, as well as realising a US private placement with a volume of EUR 95 million. The promissory note loan includes an ESG (environmental, social and governance) component, ensuring that Wilo’s leading holistic sustainability approach is also reflected in its financing strategy.
Megatrends present more opportunities than risks for the Wilo Group
Although all the megatrends entail both positive and negative potential for economic players, I am confident that, on the whole, they present more opportunities than risks for our Wilo Group.
Throughout our 150-year history, we have consistently mastered difficult tasks even in historically challenging times. Not content with merely emerging from three years of the COVID-19 pandemic in excellent shape, we also expanded our market share and strengthened relations with our market partners. In this spirit, we intend not only to overcome these turbulent geopolitical and geo-economic times, but to make the best of them.
President & CEO, Wilo Group