Costly copper contracts wipe out Sunderland manufacturer's profits

An end to "favourable" copper contracts has seen Sunderland pump maker Grundfos fall into the red, but the firm will be back in the black in 2014

Grundfos
Grundfos

Wearside pump manufacturer Grundfos said it will return to profit this year after costly copper contracts saw it slump into the red with a loss of £809,000 in 2013.

Sunderland-based Grundfos, the UK arm of the Denmark-headquartered Grundfos Group, saw sales rise by 5.7% in 2013 to top £102.9m, up from £97.3m.

But the previous year’s healthy profit of £4.3m was wiped out by the end of favourable copper future contracts, and a change in the products it makes, leading to the six-figure post-tax loss which the firm said was significantly worse than expected.

The firm was also hit by a slow uptake in sales for its new product – a more expensive, energy-efficient UPS2 pump that represents a change from its main manufactured product.

Sales of the new pump were slow in the first half of the 2013 but grew steadily throughout the rest of the year, the directors’ report accompanying the firm’s latest accounts said.

Net assets at the year end were £5.4m, a steep drop from the £11.3m in 2012, due to the payment of inter-group dividends of £5.1m combined with the loss after tax.

The directors said the business is forecast to grow turnover by 4.6% in 2014, and that it also expects to see a return to a pre-tax profit position.

UK sales represented £74.1m of all sales, with £28.1m coming from other European countries and £729,000 of orders coming in from the rest of the world.

A final dividend of 237.2p per share was paid out in 2013, up from the previous period’s 200p per share.

The average number of staff employed in 2013 was 172 but the firm has since grown to 190.

Lee Carlin, general manager of Grundfus Manufacturing Ltd
Lee Carlin, general manager of Grundfus Manufacturing Ltd
 

Lee Carlin, general manager Of Grundfos, said: “Although Grundfos Manufacturing did increase sales revenue through the financial year (2014) we did post a larger than anticipated loss in profitability. The company was actually budgeted to make a loss due to the expiration of favourable copper contracts and the transition from manufacturing the UPS domestic circulator to the new energy efficient UPS2 circulator.

“Whilst ensuring that in excess of £2.5m of capital investment was made in the facility with the new production line, development and associated costs were higher than anticipated.

“Positively, however, Grundfos Sunderland is the only Grundfos facility worldwide which manufactures the ‘A’ rated UPS2 circulator and the company expects sales volumes to steadily increase through 2014 when it also starts to support the wider European sales region with the product. The company’s first quarter results are on budget and this is also helped by the increasing sales of larger Engineered to Order Systems which are also now produced and distributed from the Sunderland site.”

The business diversified into bespoke solutions having developed a range of engineered-to-order fire suppressant units, products that were given the seal of approval earlier this month when Knud Kraegpoth, senior vice-president of group production for Grundfos, visited the Castletown plant to see the new range for himself.

The company said it will continue producing a high volume of domestic water pumps but additional focus will be made into the engineer-to-order sector, where Grundfos create specially-made fire suppressant ‘packaged pump houses’ to specific orders.

Customers for the units currently being constructed include Grangemouth Oil Refinery, a Welsh hospital and a UK power station.

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