KSB : Half-year Financial Report 2023 (656.2 KB)

KSB Group

2 Contents

1

Interim Management Report

1. Basic Principles of the Group

1. Macroeconomic Environment and Sector View

1. Business Development and Results of Operations

1. Financial Position and Net Assets

1. Report on Expected Developments

1. Opportunities and Risks Report

2

Interim Consolidated Financial

Statements

14 Balance Sheet

1. Statement of Comprehensive Income

1. Statement of Changes in Equity

1. Statement of Cash Flows
2. Notes

3

General Information	Key to Symbols
33	Responsibility Statement			Reference to table
34	Contacts
35	Financial Calendar			Interactive table of contents,
				links directly to the respective page

KSB Group / Half-year Financial Report 2023

Interim Management Report

Interim Consolidated Financial Statements

General Information 3

1

Interim

Management

Report

1. Basic Principles of the Group

1. Macroeconomic Environment and Sector View

1. Business Development and Results of Operations

1. Financial Position and Net Assets

1. Report on Expected Developments

1. Opportunities and Risks Report

KSB Group / Half-year Financial Report 2023

4

Interim Management Report

Interim Consolidated Financial Statements

General Information

Interim Management Report

for the Six Months Ended 30 June 2023

Basic Principles of the Group

The basic business model of the KSB Group (hereinafter also referred to as "KSB" or the "Group") has not changed compared with the presentation in the 2022 consolidated financial statements. External economic and political changes, however, have had a partial effect on business. These are - where relevant and material to KSB - described in the following sections.

KSB takes management decisions primarily on the basis of the key performance indicators - order intake, external sales revenue and earnings before finance income / expense and taxes (EBIT) - determined for the Pumps, Valves and KSB Supreme- Serv reporting segments (hereinafter also referred to as "Segments").

Macroeconomic Environment and Sector View

The outlook for global economic development in the current year improved at the start of the year. This is attributable to China's strong recovery after the pandemic, the easing of supply chain disruptions and adaptation to the distortions on the energy and commodity markets due to the war in Ukraine. At the same time, the monetary policy tightening measures to curb inflation showed the first signs of taking effect. Inflation rates declined as a result of interest rate increases by the central banks, and falling energy and commodity prices. Core infla- tion, however, proved persistent. The turbulence on the financial markets dampened the outlook for global economic growth and financial market instability emerged as a considerable risk.

Overall, the downside risks prevail for the global economic development forecast. The threat of upheaval on the financial markets due to systemic risks, combined with a coinciding high level of debt, could lead to a drastic deterioration in financing conditions and therefore weaken the real economy. Higher and prolonged core inflation could force central banks to tighten their monetary policy measures even more and therefore slow down growth further. Another risk is the ongoing war in Ukraine, which is not only driving up energy and commodity prices again but could even spread to other countries. Growing

geopolitical tensions and fragmentation into geopolitical blocs on the one hand are one reason for lowering medium-term growth expectations. On the other hand, they represent a risk factor for the forecast.

In the latest estimate of the International Monetary Fund (IMF) of July 2023, the global average growth forecast for the current year was slightly raised compared with the estimate at the beginning of the year. Global economic output is anticipated to grow by 3.0 %, and global inflation expectations have increased to 6.8 % compared with the start of the year. The IMF has raised its economic growth forecast slightly for the economically advanced countries to 1.5 % and expects an inflation rate of 4.7 % in these countries.

In the USA, high inflation and rising interest rates led to lower consumer spending and a slowdown in growth. Although the forecasts were raised slightly, the economy is expected to grow by only 1.8 %. The legislation passed in recent years to improve infrastructure and combat inflation is intended to offer considerable incentive for investments and develop their impact.

The negative impact of the war is felt most in Europe. Expected growth in the euro zone is estimated at 0.9 %. which is only marginally above the forecast at the beginning of the year.

In China, one of KSB's most important markets, growth will accelerate to 5.2 % according to the IMF forecast, which is in agreement with expectations at the start of the year. This is attributable to the economic recovery after the pandemic- related restrictions were lifted. The real estate market, too, has stabilised, reflecting tighter regulation and restored confi- dence. Major infrastructure projects are also making an impact. The inflation trend remained low by international standards, so that the economy could also be stimulated through monetary policy measures.

In India, another important market for KSB, weaker export growth, inflation and a more restrictive monetary policy slowed down growth. The forecast remained at 6.1 %.

KSB Group / Half-year Financial Report 2023

Interim Management Report

Interim Consolidated Financial Statements

General Information 5

The economy of the ASEAN countries is expected to grow by

4.6 %, which is slightly above expectations at the beginning of the year. Growth is subdued by the negative impact of inflation and slower global growth coinciding with these countries' high foreign trade ratio.

In Brazil, where KSB holds a strong market position, growth is slowing down due to lower momentum in domestic demand and exports. Nonetheless, the current forecast for the year was raised to 2.1 %.

Following the strong momentum in the previous year, growth in the countries in the Region Middle East was a more moderate 2.6 %. This development is somewhat weaker than expected at the start of the year. For energy-exporting countries this is mainly attributable to lower energy prices, while countries importing crude oil are held back by inflation and more restrictive monetary policy.

The Sub-Saharan countries are anticipated to grow at a rate of

3.5 %, which is slightly lower than expected at the beginning of the year.

SLOWER GROWTH IN MECHANICAL ENGINEERING

Demand for capital goods and machinery and equipment is rising only slowly, because of continued high inflation rates and ongoing monetary policy tightening by the central banks.

The German Mechanical Engineering Industry Association (VDMA) is forecasting growth of 1 % in global real sales revenue in mechanical engineering. Despite capital goods schemes, sales revenue adjusted for inflation is expected to decline in the USA and the euro zone.

Sales revenue of mechanical engineering companies producing in Germany rose by 15 %, unadjusted for inflation, compared with the prior-year period. However, the order intake unadjusted for inflation declined by 6 % in the same period.

Order volumes (unadjusted for inflation) of liquid pumps produced in Germany increased compared with the prior-year period. Similarly, the order volume for industrial valves saw an increase. By comparison, the order volume for building services valves declined.

PERFORMANCE OF KEY MARKETS

The global deceleration of economic growth was also reflected in the individual sales markets for pumps and valves, albeit with varying intensity and time lags.

Key sales markets for KSB continued to be general industry, the water and waste water sector and the energy industry.

In general industry, growth in machinery and equipment production as well as in metal processing, adjusted for infla- tion, was subdued. This is attributable to rising financing costs as a result of interest rate increases and weaker demand for capital goods. Expectations for the further course of the year were revised downwards compared with the start of the year. By comparison, growth in vehicle construction is higher, reflecting higher orders on hand and a normalisation of supply chains. Stable growth is expected in the course of the year for the pharmaceutical industry, which is confirmed by the statistics for the first few months. In the consumer goods industry, by contrast, growth is somewhat more subdued, due to inflation and lower demand.

Investments in water and waste water management are less sensitive to cyclical fluctuations compared with other sectors. State-subsidised infrastructure programmes in numerous countries, including the USA, EU member states and India, as well as tighter environmental regulation and market requirements for energy efficiency and digitalisation, ensure the continued robust growth of these investments.

In the energy industry, energy prices have normalised again and a shortage of gas in Europe did not materialise. The decarbonisation strategies of many countries and the previous year's energy crisis triggered a sharp rise in investment in electrification and decarbonisation technologies (hydrogen, wind power, nuclear power, battery storage), which continued in the current year.

Investment in crude oil and gas production will rise only slightly in the course of the year, despite the record profits made in the previous year. The regional focus of investment is the Middle East, while investment in other regions remains low. In addition to capacity expansion, it also includes the transition to clean energy through carbon storage and utilisation as well as hydrogen. The expansion of the liquefied natural gas (LNG) infrastructure, which was boosted significantly by the sanctions against Russia and changes in global trade flows, will continue at a strong pace in the current year. New capacity is being created, especially in North America and the Middle East. Growth in the chemical industry, which was already low in the previous year due to high energy and raw

KSB Group / Half-year Financial Report 2023