BSH Group delivered above average profitability in the recessionary market, by maintaining its green focus and growing its investment in energy-efficient technologies. Anna Ryland reports.
All in all, 2011 was a very successful year for us: We continue to achieve above-average profitability. That is remarkable, not least because the past year was anything but easy for the home appliance industry. In many countries, BSH was able to achieve above-average growth and strengthen its competitive edge – especially with regard to super-efficient home appliances and consumer products”, said BSH CEO Dr Kurt-Ludwig Gutberlet, opening the annual press conference in Munich.
In 2011, BSH Group’s revenue increased by 6.4% to a total of EUR 9.654 billion which was a new record for the company. Adjusted for currency effects, the figure represents a year-on-year increase in revenue of 8.2%.
However with material prices rising by an average of 5%, the company saw a decrease of 1.2 percentage points in the group’s profit in 2011. In Germany it achieved above the market growth and it was able to generate a revenue increase of more than 8%.
BSH was able to further strengthen its leading role in the energy efficient appliances category. In 2011, the sales of its super-efficient appliances (energy efficiency categories A++ and A+++) rose by 12% to approximately 3.5 million units. The sales share of super-efficient appliances as part of the overall BSH sales in Europe thus increased from 26 to 28%. The company’s small home appliances have made an above-average contribution to the growth of BSH in the past year.
Despite the worsening debt crisis, in Germany BSH experienced more growth than the market as a whole. In 2011, BSH increased its revenues in Germany by 8.2% to EUR 2.062 billion passing the two billion Euro mark for the first time in that country. This came as a result of high sales of built-in appliances and the growing demand for energy-efficient products, such as tumble dryers with the heat pump technology.
Company’s revenues in other Western European countries (excluding Germany) decreased slightly to EUR 3.514 billion (- 0.7%). Due to problems in national economies, BSH also experienced particular difficulties in the Spanish, Greek and Portuguese markets. BSH business activities in Great Britain, France, Belgium and Sweden, on the other hand, showed positive growth.
Eastern Europe has been considered a growth market for the company for some time. In 2011, its core markets of Turkey, Russia and Poland once again exhibited solid growth. Dynamic growth was also achieved in the Russian, Romanian and Ukrainian markets. In Eastern Europe the overall revenue increase was 15.5%.
The BSH North American market displayed a noticeable downward trend. In 2011, BSH revenues there decreased by 10.3% to EUR 479 million. This was partially due to the fact that the company withdrew the regional production of 27in washing machines from its North American site in New Bern, North Carolina, because of aggressive competition, which led to a steep decline in prices.
The Asian region continues to be the largest growth market for the company. Until 2011, China made the most significant contribution to growth. However, the funding program for home appliances ended in three of the largest Chinese provinces in 2011. As a result, China experienced a noticeable decline in growth. Nevertheless the Group’s revenues in Asia increased by 17.6% to EUR 1.506 billion. In China, the company continue to be the most successful foreign home appliance manufacturer, and its revenue increased by 18.4%. BSH’s business also expanded in the rest of the Asian region, especially in India, Malaysia and Singapore, as well as in Australia and Oceania.
The steady growth of the small appliances market in Europe continued in 2011 and it helped to increase the revenue of BSH’s small home appliances business by 7.6%. “Our goals for the future are just as ambitious: By 2015, we want to significantly expand our consumer products segment in Europe. Especially coffee, which is now considered a lifestyle item, is one of our largest growth generators in this area. Ever since coffee has become a trend product, the demand for our fully automatic coffee machines and the Tassimo multi-beverage appliance has risen by about 30% every year,” commented Dr Gutberlet.
In 2011, the company registered above-average growth in the floorcare category. This positive development was due in part to the success of its bagless vacuum cleaners, particularly the Bosch Roxx’x model. In 2011, the vacuum cleaner production plant in Bad Neustadt, produced more than two million appliances for the first time. That equates to an increase of almost 10% in comparison with 2010.
Dr Gutberlet has also outlined the challenges for the company in 2012. Of key importance are persistent currency risks. “In 2011, the international debt crisis caused major distortions on the financial markets. The insecurity of market players resulted in an extraordinarily high volatility. We can assume that this trend will continue throughout the year 2012. We strategically counter these risks with currency hedging.”
The second principal challenge will be raising cost of raw material which BSH expect to remain at last year’s level in 2012.
With regard to the world economy, the company expects only a moderate rise in GDP of 2.5%. “First and foremost, this will have a negative impact on global trade, which is likely to experience very low growth rates. We consider the highest individual risk to be the worsening debt crisis in Europe. We predict an average US dollar exchange rate of US$1.30 to the Euro. Against this background, we assume that the global market for white goods will only experience limited growth. This means the Western European market is likely to stagnate at best, with the exception of Germany, where we expect to observe moderate growth in the market.”
The UK market
“The UK is not an easy market for the BSH Group. A large proportion of the market purchases appliances purely on price. In the free-standing category it is the most price sensitive market for us. In this sense the market is similar to the US one,” said Dr Kurt-Ludwig Gutberlet to the British press at the briefing after the conference.
“The UK is the number four market for BSH Group in Europe, with Neff enjoying particularly strong position in the UK. In the UK it has a number one position in the built-in market while in Germany it’s only number three.
Independent channel is a key distribution channel for BSH in the UK as CIH is a biggest business partner of BSH in Britain and in the whole European market.
“Moreover the eco message is not widely accepted and understood in Britain.
In Europe super-efficient appliances constitute 28% of BSH’s sales, in Germany the figure is close to 50%, in the UK it is less than 10%. In the cooling category – in Europe super efficient appliances constitute 35% of BSH’s sales, but in Germany 53%; in dishwashing in Europe 46%, in Germany 61%. The German market demand for these appliances is shaped by the high cost of energy and the general public awareness of environmental issues.
“According to our research, 80% of customers intending to buy domestic appliances research information online before going to the store, so often the customer is better informed about the product than the retail staff. However retailers still have an important role to play explaining to the customer various products benefits. It’s up to retailers to convince them why it’s worth spending extra £30 to buy a silent dishwasher instead of a noisy one.”