WILO SE - The Wilo Executive Board in conversation

Welcome to a new edition of GEO TV. I am very pleased to welcome my board colleagues Mathias Weies, Georg Weber, and Dr. Patrick Niehr. Together we look back on a turbulent year 2020. The corona pandemic posed huge challenges for us – for our employees, customers, suppliers, and for our company. We want to talk about that today. We have prepared some highlights and will not lose sight of how we are preparing for the future despite the pandemic. What were our biggest challenges in 2020? What moved you the most? Let's start with your impressions, Georg.

Yes, it was a very volatile year, very dynamic, very crazy. For me, it was important to keep a cool head in those difficult phases. In all the challenges we had in the regions and in the factories, we had to ensure that the factories kept running while complying with hygiene regulations and health precautions, because we didn't want employees to become infected internally. On the other hand, it was important that we kept producing because we manufacture system-critical products that were very important for customers like hospitals.

He brings up an important point. I think we all became aware of our responsibility in this crisis year – that we are not just any industrial company, but one that serves critical infrastructure with its products, systems, and solutions. We often discussed in the board that the pump for critical infrastructure is like the heart for the human body. Nothing works without a pump, and we felt that in 2020. I think that was an important aspect for our employees – to live up to that responsibility socially. Dear Matthias, what was your biggest challenge in 2020? As CFO, you certainly had a special responsibility, especially to maintain financial stability in the group. What was your personal biggest challenge?

Yes, thank you for the question. I think the past year was very special, especially for the finance department. We had to deal with countless uncertainties. I remember in December 2019 we had just approved the plan for 2020. That plan we could throw in the trash in February; it was obsolete. We had to think about how to make the uncertainties in the world tangible and see how the Wilo Group would get through this pandemic. So we decided to run different scenario calculations to see what would happen if, for example, plants failed or if the supply chain broke. Based on that, we initiated measures to reduce costs and cut investments. We also looked at what support programs different countries had, in case we needed them – thank God we didn't. We got through the crisis well. On the other hand, we also thought about what opportunities there were in 2020 and didn't want to let them pass. We balanced opportunities and risks and found a good way to get through the crisis financially solid. This cautious approach certainly paid off. If you look at sales revenue, we achieved currency-adjusted sales growth of 1.8%, which is a very good value. We were cautious on the one hand, but also courageous on the other. We are one of the few industrial companies that did not opt for short-time work. And if you look at the quarterly figures, which you know better than I do, they were very good – 20% growth in the first quarter and nearly a sixfold increase in profitability. That shows that we are stable and robust for 2021, even though the crisis is not over yet.

Yes, this cautious approach paid off. We came through the crisis very well. With 20% growth in Q1 and nearly sixfold profitability, we show that we are robust. This success would not have been possible without our 8,000 employees worldwide. In 15 years, I have never experienced such a quarter. The signs are good, but uncertainties remain. We must continue to handle our spending restrictively to get through 2021 well. We also need to be prepared for everything – look at India where case numbers are exploding. But we have learned how to deal with the pandemic and we are well equipped. Let me share my personal impressions. First, our tactical crisis management with all its facets. We had to fight significantly with the pandemic in 2020. Extensive communication was required; we launched new formats like GEO TV, board letters, and the Wilo podcast. Overall, 2020 was marked by short-term intelligent tactical behavior, but it was important not to lose sight of the long-term perspective. For me personally, the challenge was to keep the strategy and strategic steering of the group in mind alongside all the tactical pandemic management. Dear Patrick, from your perspective, what was your biggest personal challenge?

Yes, Patrick, that's certainly a good example. Digitalization can also help us in this corona crisis. For instance, the contact tracing devices we are using since mid-2020 successfully help us to warn employees when distances are too short and provide a very good solution for tracing in suspected cases. So it's a complete package. I think it's very important that we can state that we were always one step ahead of the official requirements. That's why I'm surprised by the political discussion about mandatory twice-weekly self-tests – for well-run companies, that's a matter of course. We established that long before it was even discussed in politics. Well-run companies take responsibility themselves for business activities, for employees, and for their health. When you are responsible for 8,000 employees, you gladly go beyond legal or regulatory requirements. That cannot be a question of cost. I think we did quite well. Another example is that we developed software for the voluntary self-tests to make test management easier. That was in Matthias's area of responsibility. Matthias, maybe you can say a few words about that – switching from finance to IT.

Yes, our IT department actually developed their own software to properly document the thousands of tests and assign the correct test results to the respective test persons, so that in case of an infection, we can contain the outbreak. I am very proud that we managed this so quickly and efficiently.

Yes, I think that's a great thing. We also essentially cleared out a hall to set up our test center. This center is designed flexibly so that we can quickly turn it into a vaccination center when the time comes. We have coordinated closely with our company doctors. Now we are waiting for approval for the doctors to start and, of course, for enough vaccine. As I mentioned at the beginning, we spent a lot of time on tactical instruments in 2020, but as a board, it was equally important to keep the long-term orientation of the group in view. The pandemic will change the world permanently. An important point for us as a global player is the phenomenon of globalization 2.0. After two decades of increasing interconnection, we now see the opposite: value chains for critical infrastructure are beginning to decouple and become more regional. That is a strategic challenge. I believe we have initiated the right steps. A very prominent example is that in the future we will not only have one headquarters in Dortmund for our subsidiaries worldwide, but also a second one in Beijing in three years, and a third one in Niederberg/Chicago in another three years. We have also approved additional investments in further production sites. We are building new ones in Changzhou near Shanghai, in Churdas near Pune in India, and we are also erecting a new production site in the USA, which has developed excellently in recent years. All these new sites will be Industry 4.0-capable and climate-neutral. Besides the three new production sites in emerging markets, we also need to strengthen the European production network. In that context, we will relocate production volumes from Oschersleben to Laval and Hof. I hope we will find fair and good solutions for our employees there. Dear Georg, what was your strategic highlight for 2020, besides the pandemic management?

There were many highlights in 2020, but one that fills me with pride is winning the German Sustainability Award in December. That gives us tailwind for our measures and wind under our wings to sail further into the future. Also, we can report that we have achieved climate neutrality for the Dortmund site since 2021, and our goal is to have all production sites climate-neutral by 2025. The Dortmund site is already certified for 2022, which is fantastic. The Dortmund site is the flagship of the Wilo Group.

The Dortmund site is thus the flagship of the Wilo Group. Dear Patrick, in your assessment, what was your personal strategic highlight for 2020? You are also responsible for corporate products, among other things.

That is certainly something, Matthias, where you can give us some inside information. With that, you also touch on a personal highlight of mine: the acquisition of the Abjuni Group, a specialist in water treatment. This acquisition expands our application spectrum significantly. I am very proud of that. Also, a personal highlight is that we ventured into hydrogen. We have developed a hydrogen strategy showing how Wilo can contribute along the hydrogen value chain, especially for green hydrogen in electrolysis. We will implement this strategy in 2021.

At the end, I would like to ask a very difficult question. Let's try to project. What would we wish for if we were standing in the same spot next year and could look back? What do you wish? Let's start with Patrick.

For me, of course, I think for all of us and for employees worldwide, that we stay healthy and come through the crisis. But also that visitors will have a chance to see our fantastic smart factory from the inside. And looking back, I would wish for events with many people, especially international exchange between regions. Certainly different than before the crisis, but I would wish for that. And last but not least, that we can share a glass of beer together again.

I have two wishes: that we come through the crisis stably in 2021 and that we can look back on a successful fiscal year 2022 when we meet again next year, and that we can perhaps engage in some model activities this year.

Very good. From my side, I can only agree – they are almost my wishes too. I would also be happy if we can hold a summer party for the 150th anniversary with all our employees. What I miss most at the moment is customer contact. Of course, it's possible via Teams, Zoom, etc., but international customer contact is also associated with travel. I miss that a lot. Nevertheless, we have managed to increase customer loyalty during the pandemic through digital means, but these are only short-term solutions. Personal contact will be important in the future. If I could say next year that we have achieved that, that would be my big wish. And with that we come to the end of today's keynote. I would like to thank you very much for your participation and your time. Thank you for watching, and all the best.