Fluid market

Of Pumps and Pioneers

Pumping it up in Dortmiund. Source: PR/Wilo
Pumped up and ready to go in Dortmund.
  • Why it matters

    Why it matters

    No country has as many market-leading companies as Germany. But not all of these “hidden champions” are well known around the world. We profile these firm in our monthly series.

  • Facts

    Facts

    • Wilo makes specialized pumps and other machinery and manufactures and assembles its products from eight locations worldwide.
    • The company has a strong market position in Turkey, China and South Korea, and sees potential in Latin America, and central, west and east Africa.
    • By 2020, Wilo hopes to reach €2 billion in sales. Other competitors on the market for pumps are KSB Pumps and the Weir group.
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Germany’s Ruhr Valley is shaped by industrial history, but the Dortmund pump specialist Wilo is committed to the future of the gritty area. Proof comes in the form of a multi-million euro expansion of its headquarters.

“We believe in the strengths of the region,” Oliver Hermes, Wilo’s chief executive officer, told Handelsblatt. “And we are one of the few firms investing in the manufacturing industry.”

Wilo is one of the world’s leading suppliers of high-tech pumping systems, which are needed wherever water is moved. The smallest pump it produces measures just 30 centimeters (12 inches), the largest, used in power plants, 15 meters (almost 50 feet). Customers include heating companies such as Vaillant and Stiebel-Eltron, which use the pumps in their boilers. Most domestic users are unaware that they have Wilo products in their homes.

The company also makes the motors that power the pumps, and as a result is one of the largest producers of electric motors in Europe. Worldwide, the company has more than 7,000 employees in more than 60 production and sales subsidiaries.

Wilo is profiting from major trends such as the migration of people to cities and the rising global demand for water. Its headquarters are being modernized at a cost of €30 million to €50 million ― a lot for the former coal mining region. The building project is expected to be completed by 2020.

Wilo has already made headway in Turkey, China and South Korea, and sees potential in Latin America, and central, west and east Africa.

Wilo was founded in Dortmund by Caspar Ludwig (Louis) Opländer in 1872. At that time it operated as a copper and brass goods factory and manufactured distillery systems for the drinks industry.

The company’s reputation as a leader in innovation is well established. In 1928 it developed the first heating pump in the world. In 2001, Wilo brought the first high-efficiency pump to the market, and in 2009 the first decentralized pump system.

Today, the business rests on three main areas: building services engineering, water resources management and industrial applications, for example in metalworking and the energy sector. Above all, Mr. Hermes is promoting service and the coordination of customer demands.

“We are not purely a component manufacturer, but are developing as more of a system provider,” Mr. Hermes said. That is important, he said, because pump manufacturers in Asia are growing stronger.

As a result, having the newest and most innovative products is no longer enough, he said ― the company must also create better value for customers. “Not only in the mature markets, but also in the emerging markets it is becoming more important to have strong service,” Mr. Hermes explained.

Wilo is worried that the crisis in Ukraine may threaten its plans to invest €25 to €30 million in a new plant in Moscow.

Germany, Switzerland and Austria are still the company’s most important markets. However, the market for pumps in those countries is regarded as saturated.

According to data from the German engineering association VDMA, last year German pump manufacturers’ sales increased by 2 percent, and at the beginning of May they were forecasting a growth in sales of 1 percent.

But in the first half of this year, the VDMA found that orders for pumps and systems were down 6 percent compared to the level the previous year. “In some markets everything is stagnant,” the Danish pump manufacturer Grundfos noted recently.

Wilo is therefore keen to find new markets. “In Dortmund, we are profiting not just from growth in our own country, but also from growth, for example, in the eastern European E.U. countries,” Mr. Hermes said. The company is also dispatching “pioneers” across the globe to develop new sites.

Wilo has already made headway in Turkey, China and South Korea, and sees potential in Latin America, and central, west and east Africa. “We are going now into the second-generation emerging markets,” said Mr. Hermes. With growing sales, this branch of the business might eventually be turned into a subsidiary.

Nigeria is a succesful example of Wilo’s expansionist plans. Last year, only three years after local manager Cyril Ogu began building the business in the country, Wilo pumps were fitted in one of the largest waterworks in Africa, on the Ogun River.

“The pumps must continue to be more intelligent. About 90 percent of the pumps in buildings in Europe are outdated.”

Oliver Hermes, Wilo chief executive

Other markets are proving more difficult to penetrate. For example, the company is worried that the crisis in Ukraine may threaten its plans to invest €25 to €30 million in a new plant in Moscow.

The deal was made before the outbreak of the crisis in March, and the groundbreaking is planned for the end of this year. However, political tensions between Russia and the West loom large, and Wilo is hoping for a quick resolution to the fighting.

A lot is at stake. “We already generate about €100 million in sales in Russia today,” said Mr. Hermes. That amounts to almost 10 percent of last year’s total sales of €1.23 billion. European Union sanctions have not affected the company because it does not produce pumps for the armaments industry.

Mr. Hermes believes that Wilo’s expansion into new markets, safe or risky, is driven by current megatrends: globalization, urbanization, technological advances, water shortages, energy efficiency and climate change. “The pumps must continue to be more intelligent,” he said. “About 90 percent of the pumps in buildings in Europe are outdated.”

In his opinion, replacing inefficient pumps should be at the forefront of the energy transition to renewable sources. “Replacing them would save four medium-sized coal-fired power plants in Germany alone,” he said.

In German households, a switch to a high-efficiency pump would mean energy savings of up to €166 a year, Wilo claims, an investment that would pay for itself within two years.

With sales targets of €2 billion a year by 2020, Mr. Hermes is hoping many people make the switch. “But we do not want to grow for the sake of growing,” he said. A return of on average 10 percent is deemed solid.

Progress is on track. “We are moving near record levels and expect further growth,” said Mr. Hermes. Future success will rely on the company’s own strength. No initial public offering is planned, and the majority of shares belong to the family’s foundation. “We are self-financed, and that is also part of our strategy,” he said.

This article was translated by Mary Beth Warner. To contact the author: palm@handelsblatt.com 

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