Annual Report 2001

KSB Highlights 2001

KSB Group
Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Orders received million 1 013 1 021 1 010 1 046 1 062 1 114 1 121 1 065 1 158 1 182
Index 100 101 100 103 105 110 111 105 114 117

Sales million 1 030 1 006 1 032 1 017 1 072 1 095 1 148 1 088 1 097 1 162
Index 100 98 100 99 104 106 111 106 107 113

Employees (at year end) 13 850 13 796 13 682 15 254 14 844 14 133 13 795 12 784 12 217 12 071
Index 100 100 99 110 107 102 100 92 88 87

Personnel expenses million 410 416 413 434 424 419 433 414 415 424
Index 100 101 101 106 103 102 106 101 101 103

Capital expenditure
Tangible assets million 53 54 46 70 36 31 33 31 30 29
Financial assets million 5 4 4 2 1 6 3 3 7 1

Depreciation million 47 44 42 42 41 36 43 34 32 30

Balance sheet total million 689 681 682 709 699 731 744 750 774 805

Fixed assets million 147 156 157 176 172 169 146 148 150 150

Current assets million 531 514 513 522 517 552 587 585 607 633

Equity million 210 218 217 185 179 215 239 257 267 285
Percentage equity % 31 32 32 26 26 29 32 34 35 35

Cash flow million 67 58 53 22 47 72 91 48 50 63

Net financial position million 17 15 39 96 44 2 39 66 37 38

Net income / loss for the year million 36 15 11 28 2 29 39 16 16 26

Results per share acc. to DVFA/SG
Old definition 13.04 7.16 4.35 17.90 4.35 14.83 20.71 9.97
New definition 12.78 4.09 7.93 9.51

Return on equity 1) % 26 12 9 14 3 19 22 8 11 11

Return on assets 1) % 10 6 5 2 3 8 9 5 6 6

Return on sales 1) % 5 3 2 3 1 3 4 2 3 3

1) before taxes on income

KSB Aktiengesellschaft

Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Dividend
per share
Ordinary shares 4.35 4.35 1.79 3.83 2.50 4.00

Preference shares 4.60 4.60 2.30 1.02 1.02 1.02 4.09 1.03 3.02 4.26
 Regional Presence 2001

32 factories in 20 countries:
a s a g l o b a l p l a y e r, K S B i s a t h o m e o n a l l c o n t i n e n t s .

We s t e r n E u ro p e E a s t e r n E u ro p e / M i d d l e E a s t

GERMANY CZECH REPUBLIC
KSB Aktiengesellschaft, KSB Pumpy +Armatury spol. s r.o., Prague)
Frankenthal )
KSB Armaturen GmbH, S L O VA K R E P U B L I C

^
Frankenthal ) KSB Cerpadl a Armatry spol.
KSB Fluid Systems GmbH, Frankenthal s r.o., Bratislava)
KSB Service GmbH, Frankenthal

KSB Service GmbH, Schwedt H U N G A RY
KSB Szivattyu s Armatura Kft.,
FRANCE Budapest)
KSB S.A., Gennevilliers (Paris) )

POLAND A s i a / Pa c i f i c / A f r i c a
FINLAND KSB Pompy i Armatura Sp. z o.o.,
Oy Mercantile-KSB Ab, Helsinki) Warsaw ) PA K I S TA N
KSB Pumps Co. Ltd., Lahore )
SWEDEN TURKEY
KSB Mrck AB, Askim KSB-Pompa, Armatr Sanayi INDIA
(Gothenburg)) ve Ticaret A.S., Ankara ) KSB Pumps Limited, Pune
(Bombay) )

DENMARK U N I T E D A R A B E M I R AT E S MIL Controls Limited,
KSB A/S, Rdovre (Copenhagen)) Masaood-KSB Fluid Systems LLC, Alwaye (Kerala) )
Abu Dhabi)
G R E AT B R I TA I N CHINA
KSB LIMITED, Loughborough) SAUDI ARABIA KSB Shanghai Pump Co. Ltd.,
KSB Pumps Arabia Ltd., Riyadh) Shanghai )
NETHERLANDS KSB Limited, Hong Kong)
KSB Nederland B.V.,
Zwanenburg) Americas THAILAND
KSB Pumps Co. Ltd., Bangkok )
BELGIUM CANADA
N.V. KSB Belgium S.A., Wavre) KSB Pumps Inc., Richmond Hill) SINGAPORE
KSB AMRI (Asia Pacific) Pte. Ltd.,
LUXEMBURG USA Singapore )
SISTO Armaturen S.A., Mersch ) KSB Inc., Richmond, Virginia)
AMRI Inc., Houston, Texas ) JAPAN
SWITZERLAND GIW Industries Inc., Grovetown, KSB Ltd., Tokyo )
KSB Zrich AG, Zurich) Georgia )
SOUTH KOREA
AUSTRIA MEXICO KSB Korea Ltd., Seoul )
KSB sterreich Ges. mbH, Vienna) KSB de Mexico S.A. de C.V.,
Quertaro ) TA I WA N
I T A LY KSB Taiwan Co. Ltd., Taipei )
KSB Italia S.p.A., Milan ) VENEZUELA
Aguador S.A., Caracas) INDONESIA
SPAIN KSB Venezolana C.A., Caracas ) PT KSB Indonesia, Jakarta )
KSB-AMVI S.A., Madrid)
BRAZIL AUSTRALIA
PORTUGAL KSB Bombas Hidrulicas S.A., KSB Ajax Pumps Pty. Ltd.,
KSB Bombas e Vlvulas S.A., Vrzea Paulista (So Paulo) ) Tottenham (Melbourne) )
Lisbon)
ARGENTINA SOUTH AFRICA
GREECE KSB Compaa Sudamericana de KSB Pumps (S.A.) (Pty.) Ltd.,
KSB TESMA AG, Amaroussion) Bombas S.A., Buenos Aires ) Germiston (Johannesburg) )

CHILE
KSB Chile S.A., Santiago )

3
 Regional Presence 2001

) Production company

) Marketing company

KSBs Products and Services

Pumps for Pumps and associated control systems for water supply, drainage,
Building Services heating and air-conditioning

Pumps for Industry and Pumps for industrial and process engineering applications, as well as
Wa t e r E n g i n e e r i n g for municipal and industrial water and waste water management

Pumps for the Pumps for use in power stations and district heating systems
E n e rg y I n d u s t r y

Va l v e s Butterfly, globe, gate, diaphragm and control valves, plus the

requisite actuators for all fields of application

Systems Overall design and realization of fluid transfer systems and sub-
systems, with a major focus on water / waste water installations

Mining Slurry pumps for use in the mining industry and on suction hopper
dredges

Service Installation, commissioning, inspection, servicing, maintenance and

repair of pumps and valves, as well as spare parts supply

4
 Contents 2001

KSB Highlights 2

R e g i o n a l P re s e n c e 3

L e t t e r t o t h e S h a re h o l d e rs 6

R e p o r t o f t h e S u p e r v i s o r y B o a rd 8

S u p e r v i s o r y B o a rd a n d B o a rd o f M a n a g e m e n t 9

R e p o r t o f t h e B o a rd o f M a n a g e m e n t
Management Report 10
Employees 22
Research and Development 26
Environmental Protection 30

P u m p s We s t e r n E u ro p e
Pumps for Building Services 32
Pumps for Industry and Water Engineering 33
Pumps for the Energy Industry 36
Systems 36
Service 39

Va l v e s We s t e r n E u ro p e 42

E a s t e r n E u ro p e / M i d d l e E a s t 46

A s i a / Pa c i f i c / A f r i c a 50

Americas 55

S h a re s i n A f f i l i a t e d C o m p a n i e s 60

Financial Statements
KSB Group: Consolidated Balance Sheet 62
KSB Group: Consolidated Profit and Loss Account 63
KSB Aktiengesellschaft: Balance Sheet 64
KSB Aktiengesellschaft: Profit and Loss Account 65
Development of Fixed Assets in the Financial Year 66
Notes to the Financial Statements 68

Key Corporate and Technical Terms, Abbreviations (identified by *) 81

5
 Letter to the Shareholders
Dear Shareholder,
For many investors, 2001 was one
of the worst years ever on the stock
market. Share prices tumbled
across the board, with the slide
being further accelerated by the
events of 11th September and the
subsequent crash on the financial
markets. Even titles that were con-
sidered the darlings of the stock
marketproved a bitter disappoint-
ment to investors.
While KSB shares were not able to
go against the trend, price move-
ments remained relatively moderate
with both ordinary shares and
preference shares. By the end of the
year, they had regained the value
they enjoyed at the start of 2001,
so that KSB shares performed sub-
stantially better than major indices
of the German stock market such
as Dax, MDax and SDax.
S TA B I L I T Y AND GROWTH
For the development of the Group,
the economic environment was not
favourable either. The decline in
demand for capital goods as a re-
sult of the economic downturn was
reflected in the order intake for
pumps and valves with the time lag
typical of our industry, and will
also remain noticeable in the cur-
rent year.
Taking the right action to hold our
position is therefore one of the
most urgent tasks we face in order
to lead the company through an
economically difficult period.
We have also taken measures in the
areas of organization, engineering
and sales to lay the foundations for
further growth. By implementing a
new functional organization, we
have strengthened our ability to
gear the resources at our disposal
to particularly attractive markets.
In engineering, we are continuing
to focus on the integration of
automation and drives, as well as
further improvements in the life
2001
cycle costs of our products. In
sales, we have opened up a new
channel for our customers with our
Web Shop.
INCREASE IN THE
DIVIDEND
The net income of KSB AG for the
year 2001 was 70 percent higher
than a year earlier and made a sub-
stantial contribution towards the
doubling of the Groups consoli-
dated net income for the year. The
Board of Management and the
Supervisory Board are therefore
recommending to the Annual Gen-
eral Meeting that the dividend for
ordinary and preference shares be
substantially increased to 4.00
per ordinary share and 4.26 per
preference share.
We are thus returning to a dividend
level which we last saw at the be-
ginning of the 90s. In the future,
too, you will see the success of the
company to be promptly translated
into your benefit.
6
 Letter to the Shareholders 2001

K S B O R D I N A RY S H A R E KSB PREFERENCE SHARE

130

120

110

100

90

80

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4
2001 2002

SHARE PRICES OF K S B A K T I E N G E S E L L S C H A F T ( J A N U A RY 2 0 0 1 TO 10 APRIL 2002)

For the coming years, we have set with you. We therefore sincerely
ourselves ambitious targets, which hope that you will continue to put
we would very much like to your trust in us.
achieve in a spirit of partnership

J. Gerstner Dr. W. Enderle Dr. A. Wittmann P. Wurzbacher

7
 Report of the Supervisory Board
In the year under review, the
Board of Management informed
the Supervisory Board in written
and oral reports, as well as in joint
sessions, on the company's situa-
tion, business policy and all major
business events. On this basis, the
Supervisory Board monitored all
corporate management activities.
The Supervisory Board met four
times in 2001. The personnel com-
mittee met twice, the finance and
investment committee once in the
year under review. All measures
requiring Supervisory Board
approval were discussed in detail.
In addition, the Chairman of the
Supervisory Board maintained a
continual exchange of information
with the Chairman and the other
members of the Board of Manage-
ment.
In its meetings, the Supervisory
Board examined measures intend-
ed to stabilize the results in a
changed economic environment.
Other issues included partial fac-
tory closures, the sale of manufac-
turing facilities for unprofitable
products, and the acquisition of
companies that are expected to
strengthen the global service net-
work.
Key topics discussed by the Super-
visory Board were the new organi-
zational structure of KSB AG, the
ongoing development of the com-
pany's IT infrastructure, and the
use of e-commerce as an additional
marketing channel.
2001
In accordance with the provisions ment in accordance with Article
stipulated by the German Law on 312 AktG (Aktiengesetz - German
Controls and Transparency in Companies Act) on our business
Companies (KonTraG Gesetz zur dealings with affiliated companies
Kontrolle und Transparenz im Un- in the financial year 2001.
ternehmensbereich) the Chairman
of the Supervisory Board commis- The auditors confirmed their un-
sioned the audit report. At the qualified agreement with this re-
Annual General Meeting held on port in their audit opinion.
28 June 2001, KPMG Deutsche
Treuhand-Gesellschaft Aktienge- In accordance with the final result
sellschaft Wirtschaftsprfungsge- of our examination we have no
sellschaft (KPMG) was appointed objections either to the Board of
auditor for the financial year 2001. Management's declaration in its
report according to Article 312
The financial statements of KSB AktG, or to the auditors' report
Aktiengesellschaft and the KSB submitted.
Group, and the joint management
report submitted for the financial The Supervisory Board wishes to
year 2001, were all audited by express their thanks and apprecia-
KPMG. The auditors had no ob- tion to the members of the Board
jections and gave their unqualified of Management, the Works Coun-
approval. The audit reports have cils and all employees for their
been submitted to us. valuable work in the financial year
under review.
We have examined the company's
financial statements, the profit ap-
propriation proposal, the consoli- Frankenthal, April 2002
dated financial statements, the
joint management report and the
annual report, and agree with the
opinion expressed by the auditors
on the basis of their audit. We do
not have any objections. Conse-
quently, the financial statements
are approved and adopted.
We have accepted the profit appro-
priation proposal submitted by the
Board of Management.
We have examined the report pre-
pared by the Board of Manage-
8
 Supervisory Board and Board of Management 2001

Supervisory Board Board of Management

D r . Wo l f g a n g K h b o r t h Hermann Meyer Dipl.-Ing.

Dipl.-Ing., Frankenthal Lathe Operator, Pegnitz Josef Gerstner 3 )
Chairman, Deputy Chairman of the Neckargemnd
Chairman of the Advisory Pegnitz Works Council Chairman
Board of Klein Pumpen GmbH (until 28 June 2001)
Dr. Ing. Willi Enderle
Hermann Reutter Gnther Mller Friesenheim/Baden
Mechanical Engineering Technician Dipl.-Ing., Pegnitz (since 1 Feb. 2001)
Bad Drkheim, Deputy Chairman, Vice President
Chairman of the General Works Competence Centre Sales Dr. rer. pol.
Council and Chairman of the Industry and Process Engineering Alois Wittmann 4 )
Frankenthal Works Council Frankenthal
P ro f. D r . Fr a n z St e f f e n s
Jac q u e s B o u v e t Wiesenbach Dipl.-Ing.
Dipl.-Ing. Holder of the Chair of Peter Wurzbacher 5 )
Marnes-la-Coquette (France) Business Administration, Ludwigshafen
Former Prsident Organization and Industrial
Directeur Gnral de Information Technology at
Charbonnages de France Mannheim University

Sigrid Feldmann D r . U d o N . Wag n e r

Neustadt / Weinstrae Karlsruhe
Trade Union Secretary of IG Metall Member of the Board in the
Ludwigshafen / Frankenthal Industrial Solutions and Services
Division of Siemens
Heinz Kppel Aktiengesellschaft
Managing Director, Bayreuth (since 28 June 2001)
1. Delegate of IG Metall
Administration Area Prof. Dr. Dietmar Werner 2 )
Ost-Oberfranken Dipl.-Ing., Neustadt / Weinstrae
Former Member of the Board Mandates of KSB AG's Board of Manage-
ment members in the Board of Directors of
P ro f. D r . of Management of KSB companies:
E dwa r d G . K ru bas i k 1 ) BASF Aktiengesellschaft 3) KSBFinanz S.A., Mersch, Luxemburg
KSB sterreich Ges.m.b.H, Vienna,
Dipl.-Physiker, Starnberg Austria
Member of the Board of B e r n h a r d Wi l d KSB Nederland B.V., Zwanenburg,
The Netherlands
Management of Siemens AG Dipl.-Ing., Kronberg
4) KSBFinanz S.A., Mersch, Luxemburg
(until 28 June 2001) Chairman of the Board of KSB LIMITED, Loughborough, UK
Management of Braun AG KSB Italia S.p.A., Milan, Italy
KSB America Corporation, Richmond, USA
A l o i s L au t n e r GIW Industries Inc., Grovetown, USA
Lathe Operator, Kirchenthumbach K l au s - P e t e r Wi n g e rt e r KSB Bombas Hidrulicas S.A.,
Vrzea Paulista, Brazil
Deputy Chairman of the Machine Fitter, Frankenthal
5) KSB Ajax Pumps Pty. Ltd.,
Pegnitz Works Council Member of the Frankenthal
Tottenham, Australia
(since 28 June 2001) Works Council KSB AMRI (Asia Pacific) Pte. Ltd., Singapore
KSB Pumps Co. Ltd., Bangkok, Thailand
KSB Shanghai Pump Co. Ltd., China
Supervisory Board mandates of KSB Supervisory Board members in other companies: KSB Pumps Limited, Pune, India
MIL Controls Limited, Alwaye, India
1
) Dresdner Bank AG, Frankfurt; Stinnes AG, Mlheim an der Ruhr
KSB Pumps Co. Ltd., Lahore, Pakistan
2
) Aktiengesellschaft Khnle, Kopp & Kausch (KKK), Frankenthal; KSB Pumps (S.A.) (Pty.) Ltd., Germiston
TV Rheinland Holding AG, Cologne (Johannesburg), South Africa

9
 Report of the Board of Management 2001

Board of Management of KSB Aktiengesellschaft (from left to right):

Peter Wurzbacher, Josef Gerstner (Chairman), Dr. Alois Wittmann and Dr. Willi Enderle

Management Report

In the course of 2001, world eco-
nomic conditions took a serious
turn for the worse. Industrialized
nations and many emerging econo-
mies in Asia alike experienced an
economic downturn. In Latin
America, too, economic forces
weakened as a result of the recession
in the USA and of local national
problems, especially in Argentina
and Venezuela. Overall, therefore,
the world economy showed only
very sluggish growth.
In our home market of Europe, the
slump in the economy was accom-
panied by great caution with regard
to both private and public sector
investment. At the same time,
exports to non-European countries
declined, which had a negative im-
pact on the highly export-oriented
mechanical engineering industry in
Germany. The order books of pump
and valve suppliers reflected the
global weakness in demand with the
customary time lag.
GROWTH IN ORDERS
DESPITE FLAGGING DEMAND
Despite the general weakness in
demand for capital goods, order in-
take within the Group rose by 2.1

10
 Report of the Board of Management
percent to 1182 million. Excep-
tions to this positive development,
however, were the two core com-
panies in Germany and France,
whose domestic markets were
affected by a particularly weak
demand for pumps.
The volume of orders received in the
year under review thus fell by 1.7
percent in KSB AG and by 3.2
percent in KSB S.A. By contrast,
good growth in orders was achieved
by the three German companies
engaged in business with valves,
service and systems engineering.
Most other European KSB com-
panies even showed double-digit
growth rates in their order intake.
The Group companies in the Ameri-
cas increased their order volume in
total by 6.4 percent. This was above
all attributable to the positive effects
of a peak in the US business with
power plant and waste water pumps
and the dollar exchange rate.
In the Region Asia / Pacific /Africa,
order intake declined by a total of
9.5 percent as a result of the eco-
nomic downturn. The slump in
demand was felt both by our pro-
duction companies and by most
sales and marketing organizations in
the region. Our Korean company
was able to move against this trend
and achieved strong growth in the
project business.
A number of major orders were
reported from the Region Eastern
11
Europe / Middle East for water and
waste water engineering products.
S A L E S S U B S T A N T I A L LY U P
ON PREVIOUS YEAR
The high level of orders on hand at
the start of 2001 was the basis on
which we were able to increase
Group sales over the previous year
by 5.9 percent to 1 162 million.
Our two core companies KSB AG
and KSB S.A. played a major part in
this development with growth rates
of 7.9 and 6.5 percent, respectively.
The sales growth of these companies
stemmed mainly from the industry,
water and energy sectors. Similarly
gratifying was the performance of
the service operations of KSB S.A.
and the sales of our German service
companies.
Our European sales and marketing
organizations overall posted double-
digit sales growth rates. Our two
Spanish companies in particular as
well as our Dutch subsidiary re-
ported very good growth.
The sales achieved by our Group
companies in the Americas remained
almost unchanged with a slight dip
of 0.9 percent. Declines were
reported for the business with slurry
pumps and valves in the USA, while
at the same time the sale of power
plant and waste water pumps devel-
oped very favourably. A marked in-
crease in sales was also recorded in
Canada.
2001
In the Region Asia / Pacific /Africa,
sales rose by 2.1 percent. Major
contributions came from our joint
venture in China and our produc-
tion company in India. A decline in
sales was posted by our Australian
company, which closed one of its
two manufacturing plants and a
foundry as part of a restructuring
programme.
From the Region Eastern Europe /
Middle East, we have only included
our companies in Turkey and Po-
land in the consolidated financial
statements. Both registered a growth
in sales during the year under re-
view.
W a v e 1 o f S A P R / 3
Implementation
Completed
In mid-2001, as scheduled, we com-
pleted Wave 1 of the BIG* project
started in 1999 for the introduction
of the SAP R/3 software in all Euro-
pean companies. The development
of the new systems landscape in the
areas of sales, materials manage-
ment, finance and accounting was
accompanied by clear process im-
provements. These are helping us
today to serve our customers in
Europe faster and at lower cost. The
project costs, totalling 30 mil-
lion, will be amortized by the end of
2003. Implementation of the distri-
bution module of SAP R/3 is also an
important prerequisite for our
e-commerce activities.
 Report of the Board of Management 2001

The Web Shop is our customers on-line route to pumps, valves and spare parts. Nicola Bertellini, Heiko Hrburger and Anita Grigoriadis
(from left) of our B2B team see to smooth order traffic.

12
 Report of the Board of Management
We b S h o p f o r K S B
Products
Since the beginning of 2002, cus-
tomers have had access to a Web
Shop, where they can currently
order 3 000 pumps and valves as
well as 500 000 spare parts on-line.
Developed in 2001, the system
offers the opportunity to select our
products documented there accord-
ing to a large variety of features and
to order them directly via the Inter-
net. For registered system users, we
have filed the bilaterally agreed
terms and conditions so that our
customers can receive an individual
price quote within a very short time.
Consultants and plant engineering
contractors can use the Web Shop as
a reliable instrument for preparing
cost estimates. The provision of the
Web Shop is a response to the
wishes both of distributors and
major industrial customers who are
seeking to simplify their purchasing
processes.
S a l e s G r o u p in million
1148
1095
1000
750
500
250
0 Americas Europe /
1997 1998
13
By the same token, we are also
making use of the procurement
opportunities offered by the Internet
right through to auctions. In the
year under review, we already
placed tenders in on-line market-
places and on our own homepage
for around five percent of our
purchasing volume. Our staff now
order all consumables directly from
suppliers via electronic catalogues.
R e o r g a n i z a t i o n o f We s t
European Operations
Aiming to strengthen our market
positioning, we introduced a func-
tional organization for our Euro-
pean companies on 1 January 2002.
All our activities in the sale and
marketing of pumps and valves, as
well as in development, production
and product management have been
brought together. This has enabled
us to reduce internal interfaces, to
focus cross-divisional know-how
and to further simplify our proces-
ses. The new structure will make it
1162
1097
1088
1999 2000 2001
2001
easier for us to respond fast and
flexibly to customers needs.
In sales and distribution, we have
put the one face to the customer
principle into practice, so that our
customers have only a single contact
for all pumps, valves and system
solutions they need. Competence
centres provide support for our field
force throughout Europe in the
drafting of complex offers and
handling of orders.
The newly established Pumps and
Valves division encompasses with
the exception of the service com-
panies and KSB Fluid Systems
GmbH all European marketing
and production operations. This
also includes our companies in those
Central and Eastern European
countries which are preparing to
join the EU.
Regional Management for Eastern
Europe / Middle East, to which
Sales Group
by Sales Region
10% 28%
France Germany
20%
Other 15%
West Asia /
European 10% Pacific /
countries 17% Eastern Africa
Middle East
 Report of the Board of Management 2001

Income Group
before Income Tax in million
Gross Return on Sales in %
in the charges for special restructur- The net profit applicable to minority
ing and modernization projects. interests decreased by 1.3 million
to 4.5 million in 2001.
R e s u l t s a f t e r Ta x

50
S u b s ta n t i a l ly I n c r e as e d The combination of the above-men-
50
38 o v e r P r e v i o u s Ye a r tioned effects results in more than a
40

28 30 The individual Group companies doubling of the consolidated net in-

30
4.3 % 20
20 3.4 % contributed in varying degrees to the come for the year from 10.2 mil-
2.6 % 2.6 %
1.9 %
10
improved consolidated pre-tax lion to 21.2 million.
0

-10
-20
-30
1997 1998 1999 2000
these companies hitherto reported,
assumed responsibility for our
operations in Africa on 1 January
2002.
I m p rov e m e n t i n G ro u p
R e s u l t s b e f o r e Ta x
With the sales return, at 2.6%, the
same as a year earlier, we improved
the results from our ordinary activi-
ties by around 6 percent to 29.8
million.
In this context, it has to be taken
into account that our results in the
previous year enjoyed the positive
influence of major special factors in
results. In particular, KSB AG and
KSB S.A. posted a marked increase
in their results, whereas other Group
companies suffered decreases. The
2001
improvement in results in these two
companies did not entail any addi-
tional tax burden because of the
losses brought forward. The decline
in results among other companies
reduced the level of income tax
expenditure. Consequently, the taxes
on income fell from 12.1 million
to 4.1 million.
The improved pre-tax results and
decrease in tax expenditure led to a
60 percent increase in the Groups
net income for the year, which totals
25.7 million.
Consolidated Profit and Loss Account
G r o u p in million
Higher Dividend
Our shareholders should have an
appropriate share in the improved
development of the KSB AG results.
We are therefore recommending
an increase in the dividend from
2.50 to 4.00 per ordinary no-
par-value share and from 3.02 to
4.26 per preference no-par-value
share. This corresponds to approxi-
mately a 50 percent increase in divi-
dend payments to 7.2 million.
A total of 10.0 million is to be
transferred to the revenue reserves.
2001 2000

other operating income. % %

Sales 1 161.9 99.6 1 097.1 99.5

The cost of materials as a percentage Total output of operations 1 166.4 100.0 1 102.9 100.0

Cost of materials 446.1 38.2 413.2 37.5

of total output of operations showed
Personnel expenses 424.2 36.4 414.9 37.6
a further slight increase. By contrast,
Depreciation 29.5 2.5 31.6 2.9
the personnel expenses as a percent-
Other operating expenses / income 229.5 19.7 208.8 18.9
age of total output of operations and
Financial result 7.3 0.6 6.2 0.5
also other operating expenses con-
Results from ordinary activities 29.8 2.6 28.2 2.6
tinued to decline. We see here the
Taxes on income 4.1 0.4 12.1 1.1
effects of a continued reduction in Net income for the year 25.7 2.2 16.1 1.5
our production depth and a decrease

14
 Report of the Board of Management 2001

I n c r e a s e i n DV FA / S G -
Funds Flow Statement KSB Group
Ca l c u l at e d R e s u lt
The DVFA/SG*-calculated result per 2001 2000
share is 9.51, up from 7.93 a (in thousands)

year earlier. This is equivalent to an Results before extraordinary items 25 704 16 081

increase by about 20 percent. Depreciation / reinstated depreciation, fixed assets 29 699 31 625

Changes in long-term accruals 8 501 6 393

Results Development Other expenses / income not affecting cash flow 312 5 103

in the Companies Profit / l oss from the disposal

of fixed assets 1 195 9 375
As mentioned above, KSB AG sub-
stantially improved its result, which Cash flow 63 021 49 827

now totals 17.5 million before tax Changes in inventories 13 199 4 611
compared with 10.1 million in the Changes in trade receivables and
year 2000. The company increased current assets 27 544 28 724

sales by 7.9 percent and total output Changes in short-term accruals 259 3 740

of operations by 8.7 percent. Changes in payments received on account of orders 5 814 7 142

Changes in trade payables and

other liabilities 12 714 7 440
Other operating income fell with the
22 474 44 177
removal of special factors. The cost
Cash flow from ordinary activities 40 547 5 650
of materials as a percentage of total
output of operations rose again as Cash inflow from the disposal
of tangible and intangible assets 2 234 12 997
production depth was reduced. The
Cash outflow for investments in tangible
percentage of personnel costs and and intangible assets 29 036 29 698
other operating expenses decreased Cash inflow from the disposal of
accordingly. financial assets 201 238

Cash outflow for investments in

financial assets 664 6 503
The gratifying developments at KSB
Cash inflow from / outflow for the acquisition
Armaturen GmbH are reflected in and sale of consolidated companies and
the financial result through the other business units 561 12 872

profit transfer. For 2001, this com- Cash flow from investment activities 27 826 35 838
pany showed a profit of + 0.8 Cash inflow from additions to equity 1 216 0

million compared with a loss of Payment of prior-year dividend

(incl. third-party shares) 6 583 5 965
5.6 million in the previous year.
Cash inflow from
The profit transferred by the two financial liabilities 0 10 103
KSB Service companies in Franken- Cash outflow for repayment of
thal and Schwedt ranged at prior- financial liabilities 5 243 2 155

period levels. The 2001 figures for Cash flow from financial activities 10 610 1 983

the first time include the profit Consolidation measures 3 452 8 247

transfer of the new German service Changes in financial resources 1 341 19 958

subsidiary Uder Elektromechanik Opening balance financial resources 101 088 121 046
GmbH. For KSB Fluid Systems Closing balance financial resources 99 747 101 088

GmbH, we again had to compensate 1 341 19 958

a slightly increased loss.

15
 Report of the Board of Management
KSB S.A. contributed to the Group
results with a profit of 2.4 million
(previous year 2.5 million).
Apart from the higher sales of our
French company, the fact that no
further accruals had to be set aside
for restructuring measures also had
a positive effect on the results.
Our European companies outside
Germany and France also showed a
marked improvement in their overall
results. They achieved 4.6 million
compared with 2.9 million a year
earlier. The increase in sales pro-
vided the basis for this improvement
in profit.
The companies in the Region Asia /
Pacific /Africa posted positive results
with slightly increased sales. At
3.1 million, however, the profit
was below the prior-period value of
5.9 million. This development is
essentially attributable to the com-
panies in India and Australia.
With sales stagnating overall, our
companies in the Region Americas
were not able to repeat the previous
years profit of 11.4 million. They
achieved an overall result of 7.4
million in 2001. While our North
American companies with the ex-
ception of GIW Industries main-
tained their profit overall at prior-
period levels, some of our Latin
American companies suffered
noticeable losses as a result of tur-
bulence on the currency exchange
markets.
The consolidated financial state-
ments include restructuring accruals
amounting to 4.5 million for the
realignment of our business in Vene-
zuela.
In the Region Eastern Europ e /
Middle East, our two consolidated
companies in Turkey and Poland
both made positive contributions to
the results.
The Board of Management submit-
ted a dependency report to the
Supervisory Board. This concludes
with the following declaration: In
accordance with 312 clause 3
AktG (German Companies Act), we
declare that our company on the
basis of the circumstances known to
us at the time the transactions were
made or the measures were taken or
not received adequate compensa-
tion and was not disadvantaged by
the fact that the measures were
taken or not.
Divisional Development
Although sales declined in building
services, we managed to further
reduce the loss compared with the
previous year.
We substantially increased sales of
pumps in industry and water en-
gineering. This helped us achieve a
good result.
With slightly increased pump sales
in the energy industry, we managed
to keep profit in this business sector
at the same level as in the previous
2001
year despite a relatively unfavour-
able structure of the orders invoiced.
Our valves business closed the year
2001 with a marked profit. In the
Service area, too, we succeeded in
further improving our results.
Rise in Investments in
Ta n g i b l e A s s e t s
In 2001, we increased our invest-
ments in tangible assets compared
with the previous year. The main
focus of capital expenditure was on
modernization, maintenance and
environmental protection.
Additions to tangible assets rose
from 22.4 million to 27.9 mil-
lion. Of this, 9.0 million (versus
5.9 million in 2000) went to KSB
AG and 4.4 million (versus 3.5
million in 2000) went to KSB S.A.
A sharp decrease from 7.3 million
to 1.2 million was seen, however,
in additions to intangible assets. The
prior-year figure included the addi-
tion of goodwill from the complete
acquisition of minority interests in
our two Italian companies.
We were again able to finance all
investments during the year entirely
from current cash flow.
The KSB Group spent around 25
million on research and develop-
ment in 2001.
16
 Report of the Board of Management 2001

We were nevertheless able to

C a s h F l o w G r o u p in million
strengthen the equity position once
C a p i t a l E x p e n d i t u r e G r o u p in million
91 again. Including half of the special
80 reserve with equity portion, the con-

70
72 solidated percentage equity is now
63 35.4 percent.
60

50
50 48 Stronger Net Financial
40 37 37 Position
36 34
30 The balance sheet of the KSB Group
30

on 31 December 2001 shows liquid

20
assets totalling 99.7 million.
10 Compared with the same date a year
0 earlier, this represents a slight
1997 1998 1999 2000 2001
decrease. At the same time, however,
as already mentioned, the financial
C o n t i n u e d I m p rov e m e n t The liabilities show an absolute in- liabilities were reduced by 3.6
in Balance Sheet Ratios crease in accruals for pensions. This million. Despite the growth in busi-
The increased business volume in is basically a result of adjustments ness volume and the accompanying
2001 is also reflected in the KSB and improvements in the pension increase in funds tied up in receiv-
Group's consolidated balance sheet. schemes of the German Group com- ables and inventories, there was an
panies. Other accruals decreased improvement in the net financial
In particular, receivables rose in line slightly, as did financial liabilities. position of the KSB Group from
with the growth in sales. Less mar- Other liabilities showed a slight 37.2 million to 38.5 million.
ked was the increase in reported increase.
inventories, because more payments Risk Management
received on account of orders were Overall, the balance sheet total grew The system introduced in 1999 for
offset. by 3.9 percent to 804.8 million. identifying and analysing foresee-
able risks proved a success through-
out the company. Signs of potential
Balance Sheet Structure KSB Group
risks are regularly reported to
Assets Equity and Liabilities
Group headquarters. These are
2001 2000 2001 2000
classified into six risk areas and
Fixed assets 19% 20% assessed in terms of potential effects
35% 35% Equity
on results and their probability of
Inventories 26% 26% occurrence. At the same time, meas-
17% 17% Accruals for pensions
ures are initiated to avert or mini-
18% 18% Other accruals mize the risks.
Receivables 43% 41%
8% 9% Financial liabilities
For the current year, our Risk Man-
22% 21% Other liabilities agement Officer has not reported
Liquid assets 12% 13%

Balance sheet total any risks which can be classed as a

805 774 805 774
(million )
serious risk to the future existence

17
 Report of the Board of Management 2001

Smart products tell you what's up: a Web-based monitoring system analyses the performance data of the Hya-Drive pump motor and reports critical
changes by SMS, for example. Development engineer Oliver Fischer tests the new system's functions.

of the company. In the six risk areas,
we did, however, observe the follow-
ing developments, amongst others:
Markets / Competition
The markets are undergoing a
process of rapid change, to which
KSB must come up with an equally
rapid response. With the new organ-
ization introduced in 2002, we have
increased our ability to focus re-
sources and use them systematically
to ensure that we can make the most
of quickly changing market oppor-
tunities.
We are taking account of the risks
arising from the difficult market
situation in building services by
focusing our activities on the large-
scale project business. Here we
enjoy a very strong market position.
Early in 2002, we therefore sold off
a factory in France specializing in
series products as well as our busi-
ness in the do-it-yourself market.
For our activities in the Middle East,
we see the risk of political crises in
the region, including the possibility
of military conflicts. These could en-
tail the postponement of projects at
short notice and have a lasting nega-
tive impact on the business climate.

18
 Report of the Board of Management
The economic and currency ex-
change crises in some South Ameri-
can countries also represent a risk
for our business.
Technology / Research and
Development
Innovations in pumps and valves
engineering stem essentially from the
adaptation of new technologies. To
minimize the risk of reacting too
late, we are monitoring the techno-
logical environment in which we
operate as part of our early detec-
tion approach. We also foster inter-
disciplinary cooperation with uni-
versities and other research institu-
tions. This enables us, for example,
to include new materials or innova-
tive electronic components in our
product development at an early
stage.
Products and Projects
By taking on more and more sys-
tems engineering work, right
through to the installation of all-in
pumping stations, we are exposing
ourselves to an increasing risk of
technical or logistics problems. With
suitable training measures, we there-
fore aim to improve our staffs skills
in managing highly complex en-
gineering projects professionally and
efficiently.
Finances / Liquidity
As a safeguard against currency
exchange and interest rate risks, we
employ derivative financial instru-
ments such as forward exchange
transactions, swap deals, and inter-
est rate swaps. We engage in trans-
19
2001
actions exclusively with banks on an
operative basis.
Payment of receivables from the
export business is guaranteed by
measures appropriate to the credit
risk, predominantly by letters of
credit.
Procurement
Aiming to deal with fluctuations in
the price of raw materials, we have
concluded long-term framework
agreements with most of our
suppliers. We see a fundamental risk
in supplier countries whose curren-
cies are heavily dependent on the US
dollar. We are keeping our options
open, however, so that we can
switch to new sources of supply if
an exchange rate becomes unfavour-
able for our purchasing require-
ments. To this end, we are further
extending our global information
network for materials purchasing.
Environmental Protection
We have analysed all KSB sites with
regard to environmental criteria
and, where necessary, have initiated
measures to minimize pollution of
soil, air and water. In doing so, we
are following the development of
environmental legislation very close-
ly in the various countries, to take
account of possible changes in limit
values in any modernization activi-
ties.
 Report of the Board of Management 2001

Outlook
As yet there is no discernible trend
towards an economic upswing in
our business. In the pumps and
valves sector, however, any econo-
mic recovery is only reflected in
Group figures with something of a
time lag. We are aiming to compen-
sate for the decline in demand,
which is hampering activities in the
market, by redoubling our efforts in
those areas where KSB has to date
been less well represented. This
includes in particular some high-
volume European markets outside
Germany and France.

Overall, we are expecting order

intake and sales in the Group for the
current year to be at the same level
as 2001. We are also expecting
results to range at the same level as
last year.

In the years that follow, our activi-

ties will be aimed at sustainable
growth. To this end, we are prepar-
ing regional market initiatives,
starting process and product inno-
vations and opening up new appli-
cations for our products. We will be
focusing on deploying the limited
resources of our Group on attractive
and growing markets. To strengthen
market position and growth, we are we are in a stronger position to offer have secured a pioneer position in
also aiming for a greater interna- all-in package solutions. In the field the capital goods sector. We antici-
tionalization of our performance, a covered by KSB Fluid Systems pate that acceptance of this distri-
reduction of our complexity, and the GmbH, these range right through to bution channel will steadily increase
development of important core com- the turnkey installation of pumping in the coming years, especially
petencies for the future. stations. amongst distributors and major
industrial customers. We are already
By building on our achievements in We also see considerable sales po- expecting sales in the current year
the field of automation and drives, tential in e-commerce, where we running into eight figures.

20
 Report of the Board of Management
Our IT structures will be improved
to facilitate fast and lean processes.
In this context, we shall also switch
our production systems throughout
Europe to the SAP R/3 software by
2004. A preliminary study has con-
firmed that this switch is possible
within three years at an acceptable
level of cost. Within the scope of
21
2001
Following our reorganization, pump sales
engineers also need to help customers find the
right type of butterfly, gate or globe valve.
Intensive technical training offered by valve
experts like Roland Stauber was geared to
bringing them up to speed on the other part
of the KSB range.
reengineering our three production
centres in Germany, we shall re-
design and optimize our production
organization. In the process, we
shall replace more than ten legacy
systems by SAP R/3.
 K eS p
R B o: rMt i ot af r tbheei t Be or a r d o f M a n a g e m e n t 2001

Employees

G re a t e r f l e x i b i l i t y o f w o r k i n g h o u rs Tra i n i n g f o r s u c c e s s f u l C h a n g e M a n a g e m e n t
N e w w a y s f o r e m p l o y e e s u n d e r t h e c o l l e c t i v e a g re e m e n t t o s h a re i n t h e c o m p a n y s s u c c e s s

The rapid changes taking place in think and act. To foster this flex- training for employees. We have
the marketplace mean that everyone ibility, we have improved our con- also intensified the international
in KSB is called on to show a high ditions of work with new working exchange of managers.
degree of flexibility in the way we hours systems and change-oriented

Intercultural exchange of ideas: KSB trainees from France and Germany meet regularly with senior managers like Dr. Joachim Klpien, head of
Corporate Human Resources.

22
 Report of the Board of Management 2001

NEW WORKING HOURS
SCHEMES
Today we deal with the inquiries
and orders of our customers in
much shorter time spans than was
the case two or three years ago.
A prerequisite for this is that em-
ployees can plan their work indi-
vidually in times of fluctuating
workloads.
Appropriate opportunities have
now been created for everyone
working in Germany. The traffic
light account scheme developed in
Frankenthal in 2001, for example,
is based on a three-tier flexibility
range. Depending on order volume,
the annual working hours may be
exceeded by 20 percent or reduced
by 10 percent for a limited period
of time. Similar schemes are in op-
eration at other sites in Germany.
For selected areas of the company,
so-called working time on trust
has been in use since last year. The
employees working in these depart-
Pe rs o n n e l E x p e n s e s G ro u p
Pe rs o n n e l E x p e n s e s in % of
total output of operations (Group)
million
450 433
419 414 415
400
350
300
ments take responsibility for man-
aging their own working hours
within the limits of the provisions
laid down in law and in collective
bargaining agreements, without the
attendance time being recorded.
Employees with individual con-
tracts have for many years already
had control over the shaping of
their work time, and have not been
tied to restrictive regulations.
CHANGE MANAGEMENT
A N D I N T E R C U LT U R A L
SKILLS
How can positive changes be ini-
tiated and implemented? This
question was the point of depar-
ture for a series of training events
aimed at various target groups
within the company. Participants in
these seminars had the opportunity
to improve their methodological
skills in the areas of change man-
agement, team building and inter-
cultural cooperation.
For the first time, we extended the
training programme for junior
managers started in Europe in 1999
to include the Region Asia /
Pacific / Africa. In the current year,
this programme will also be intro-
424
duced in the Americas. The aim of
these activities is to ensure that em-
ployees from the KSB companies in
ever from companies outside
Europe to new functions within the
corporate Group.
SEARCHING FOR NEW
TA L E N T AND TRAINING
Aiming to heighten the interest of
engineers-to-be in KSB as a poten-
tial employer, we put our student /
trainee programme into practice in
2001. The underlying concept is to
sponsor university and polytechnic
college students and offer them
work placements in the KSB Group,
stays abroad and the selection of
topics for their thesis. In this way,
the students can gather experience
in European and non-European
companies. We also continued our
international trainee programmes
for graduates from Germany and
France.
The importance we attach to the
combination of academic training
and on-the-job experience is also
reflected in our return to the dual
system of the university of coop-
erative education. The training
opportunities we offer business
administration specialists and
engineers enable up-and-coming
managers to start their career with
KSB early on.
With a view to meeting the future

250
those regions have the same op- need for technical and commercial
200 portunities to qualify for challeng- specialists, we have also stepped up
150
38.0% 38.0 % 38.5% 37.6% 36.4%
ing management tasks as their our vocational training activities.
100
colleagues in Europe. In Germany, we took on 20 percent
50

0 more apprentices than last year. In

1997 1998 1999 2000 2001 To foster intercultural exchange, addition to their technical training,
we appointed more managers than they are all acquiring strong social

23
 Report of the Board of Management
and methodological skills in the
framework of the company train-
ing programmes. In the coming
four years, we shall be investing a
total of one million euros in the
equipment of our training work-
shops in keeping with our forward-
looking technical training concept.
DEVELOPMENT OF
PERSONNEL NUMBERS
The number of employees in the
KSB Group fell only slightly in the
year under review. At the end of
2001, there were 12 071 people
employed in KSB companies world-
wide, 1.2 percent fewer than a year
earlier. This decrease is primarily
attributable to personnel measures
in some companies outside Europe.
The number of KSB AG employees
fell by 1.5 percent to 3 254, but the
employment figure in German com-
panies overall remained virtually
2001
Investment in the future: in the new KSB
TrainingCenter in Dville-ls-Rouen, coach
Pascal Roth helps young fitters like Steeve
Linant (l.) and apprentices prepare for
service jobs.
acquired in Germany, France and
the UK. This led to a 1.7 percent
increase in staffing levels in Europe
to a total of 6 619 people.
unchanged. With an increase by
0.6 percent and a total of 1 242 The number of employees in the
employees, the French KSB S.A. Americas fell in the year under
likewise showed no substantial review by 5.9 percent to 1 629.
change compared with the previous The main reason for this is that we
year. are focusing production in Mexico
at one site and have given up our
Additions to the personnel statis- manufacturing facilities in Vene-
tics of the Group included the staff zuela. Our Brazilian company, by
from three service companies contrast, increased staff levels to
strengthen its sales force and
extend its operations in the global
E m p l o y e e Po p u l a t i o n
by Region manufacturing network.
In the course of restructuring
11% 36%
France Germany activities, we cut back both pro-
duction and staff capacity in Aus-
tralia. In addition, we adjusted the
number of employees in India to
reflect the changes in local market
conditions. This reduced personnel
8% 31% figures in the Region Asia / Pacific /
Other Asia /
West 1% Pacific / Africa. Overall, the number of em-
European 13% Eastern Africa
countries Americas Europe / ployees in the region fell by 4.9
Middle East
percent to 3 726.
24
 Report of the Board of Management
NEW OPPORTUNITY FOR
EMPLOYEES TO SHARE IN
COMPANY SUCCESS
A company's success is always the
outcome of a joint effort. The
Board of Management and the
Works Council therefore agreed on
an enhanced profit-sharing scheme
for the companies in Germany.
Under the new scheme, there is to
be a graduated bonus from a
return on sales of two percent
upwards.
To help employees improve their
retirement benefits, we have also
increased the flexibility of our
Effective human resources marketing includes on-line recruitment.
Jadranka Bojic (l.) and Sabine Steinmetz-Gauck are redesigning our employment web site.
25
company pension scheme. Unlike
in the past, individual contribu-
tions are no longer coupled with
company performance. As well as
the profit bonus, any component of
remuneration, including Christmas
and holiday pay or capital-building
payments, can be converted into a
retirement pension module.
A WORD OF THANKS
THE S TA F F
Good capacity utilization of our
production facilities meant that we
had our hands full serving our
customers with the quality and
speed to which they have become
2001
accustomed. At the same time,
major future-oriented projects had
to be taken forward.
The Board of Management would
like to thank everyone for the com-
mitment they showed in fulfilling
these tasks. A special word of
thanks is due to the Works Coun-
cils and the Executives' Committee
TO for looking after the interests of the
staff and for their constructive con-
tribution to shaping the future of
our company.
 Report of the Board of Management
Research and Development
R o u g h s u r f a c e s i n c re a s e e f f i c i e n c y
S e n s o r v a l v e o p e n s u p n e w m a r ke t s
Innovative technology is the key to
our business success. Based on
input from Sales and Marketing,
and driven by technical progress,
our experts in hydraulics, materials
and electrical engineering give
shape to the wishes of our cus-
tomers in the form of new design
solutions. To this end, our devel-
opers are working on joint projects
with research teams from universi-
ties, polytechnics and independent
institutes. The reduction of our
products' life cycle costs* is among
the primary goals to help custom-
ers tap additional optimization
potential.
FLOWING INTO
U N C H A RT E D T E R R I T O RY
In the field of fluid dynamics, the
year under review was a period of
further developments and refine-
ments on our computer-based
design methods. The advances
achieved here have enabled us to
increase the efficiency of existing
pump hydraulic systems and to
 N a t u re p ro d u c e s b e t t e r b e a r i n g m a t e r i a l s
avoid time-consuming prototype
testing of new developments.
A special focus was on high-pres-
sure pumps for industry and circu-
lators for building services. Sub-
stantial improvements of internal
flow conditions yielded a two to
three percent increase in the pump
sets' efficiency. And our customers
stand to gain from considerable
energy savings. At the same time,
we optimized the suction charac-
teristics of these pumps, which
translates into higher wear resis-
tance.
We also extended the range of our
flow simulation programs to areas
that were previously not accessible
by numerical methods. This inclu-
ded computational fluid dynamics
analyses of the kind of turbulent
flow that occurs in submersible
waste water pumps or mixers.
These products are, for example,
used in sewage treatment plants.
2001
With the aid of experimental data,
we verified the accuracy of our
computational models to ensure a
realistic simulation of flow con-
ditions.
TA K I N G A CUE
FROM N AT U R E
In the framework of an interdisci-
plinary project, our hydraulic en-
gineers and materials specialists
examined the friction-reducing
influence of nano coatings* and
microstructuring* on the boundary
layer of wetted surfaces. The prin-
ciple that lies at the heart of this
approach is the shark skin effect
patented by KSB for pump impel-
lers. This effect is based on the
paradox that a ribbed surface is
smoother in hydraulic terms than a
polished one.
A friction-reducing effect of this
kind, however, is difficult to pro-
duce using conventional machine
tools. In close cooperation with a
German university, we therefore
26
 Report of the Board of Management
for the first time used laser technol-
ogy to apply the desired finish to
the surface of a part. In the next
few years, this technology will help
to further improve the efficiency of
our pumps and reduce life cycle
costs.
R E N E WA B L E R AW
M AT E R I A L S
How can fibre-reinforced ceramics
be obtained from plant-based car-
bons? This was a question that
occupied us in the context of the
Renewable Resources pro-
KSB materials experts work closely with universities to explore the opportunities offered by modern laser technology. The surface structure of
pump components can, for example, be changed so as to reduce resistance to flow.
27
2001
gramme of the German Federal
Ministry for Consumer Protection,
Nutrition and Agriculture together
with the Fraunhofer Institute and a
partner company. The outcome of
our research is a range of new
ceramics and ceramic composites,
which are excellently suited to use
in heavy-duty shaft bearings for
boiler feed pumps. We have already
fitted multistage high-pressure
pumps with components made of
An impeller surface is lasered to produce a
such materials, which withstand hydraulically favourable microstructure.
even high friction loads without
any damage.
 Report of the Board of Management 2001

A NEW DIMENSION TO potential in terms of electricity Sanitation, Heating, Air-condition-

ECONOMY
Our integrated, variable-speed
pump drives have been very well
received in the marketplace. So we
extended the series to include
motors up to ratings of 22 kW. An
costs. The use of magnets in the ing) in Frankfurt to test its market
rotor eliminates the resistance acceptance. And the response was
losses that occur in other types of so positive that concrete products
electric motor. To translate this will follow.
technical advantage into customer
value, we have undertaken some MEASURING AND

important technical requirement development work in this direc- CONTROLLING

was a new kind of cooling concept.
The life cycle costs of variable-
speed pump sets are substantially
lower than those of non-controlled
machines.
At lower ratings, the synchronous
motor* offers considerable savings
tion. The reversal of the magnetic
field required to turn a motor of
this kind is achieved by means of
an electronic commutation device.
We presented this pump drive to
the public for the first time at ISH
2001 (International Trade Fair
Integration of a multifunctional
sensor into a valve was our devel-
opers' solution to enabling the
continuous measurement of flow
and temperature values in a
system. This innovative valve is
unique to the market.

How can you check the flow rate and temperature in a system quickly and at low cost? The answer: the BOATRONIC measuring computer.
Ralph Vollmer-Beck (l.) and Dieter Hanewald are seen here putting it to the test.

28
 Report of the Board of Management 2001

The valve is linked to a micro-

computer which features both an
analog and a digital signal output.
The sensor signals are processed by
the computer and transmitted to
the higher-level electronic system to
control or monitor processes. In
conjunction with other KSB
products, this innovation opens up
a whole new range of opportunities
for the decentralized automation of
fluid flow systems. This answers
the wishes of many customers for
more intelligence to be inte-
grated into system components in
the context of process improve-
ments, thereby reducing installa-
tion costs.

Synchronous motors used as pump drives

help save energy costs. Bernd Khler of the
Frankenthal research centre examines
potential applications in building services.

29
 Report of the Board of Management
Environmental Protection
N e w s o f t w a re f o r a s s e s s m e n t o f c o n t a m i n a t e d s i t e s
a n d w a t e r p o l l u t i o n c o n t ro l
Great importance is attached to the
protection of water, soil and air
throughout the Group. Regardless
of the differences in national laws
and regulations, specially trained
employees are engaged at all pro-
duction sites to take preventive
action aimed at avoiding negative
impacts on the environment.
By following the comparatively
stringent European standards on
the environment, we are not only
making our social contribution to
protecting the natural basis of exis-
tence. In so doing, we are also fore-
stalling the kind of financial burden
in the future which can occur as a
result of a less rigorous attention to
environmental protection.
P O T E N T I A L R I S K S H AV E
BEEN IDENTIFIED
Prevention needs to be as compre-
hensive as possible. This requires
reliable information on the materi-
als currently used in offices, work-
shops and production facilities and
I n v e s t i n g i n m o d e r n i z a t i o n f o r a i r, s o i l
M e a s u ra b l e re s u l t s o f e n v i ro n m e n t a l p ro g ra m m e s
their relevance to the environment.
With this in mind, we have drawn
up a detailed environmental pro-
tection inventory for all production
and service operations over the last
two years. Regular internal audits
help us to identify new potential
risks in good time.
In addition, we also conducted a
painstaking analysis of all sites in
the year under review to identify
any possible inherited problems.
All suspicious findings have been
listed and will be evaluated using a
software specially developed for
this purpose. Site comparisons help
to ensure that appropriate and
cost-effective action is taken in
accordance with the urgency of the
case.
M E A S U R A B L E R E S U LT S
INVESTMENT
In the year 2001 we further im-
proved the environmental situation
of our sites worldwide through
investments totalling over three
2001
million euros. Above all, we
modernized our painting equip-
ment, exhaust air removal systems
and waste water tanks.
The main focus of these activities
continued to be on our Brazilian
foundry in Americana, where we
installed an immersion priming
system to German environmental
standards in 2001. The system's
soil protection and filter installa-
tions provide for a markedly higher
degree of environmental safety
than is usually the case with other
Brazilian companies. We also put a
foundry sand recycling plant into
service in Americana. This will not
least help to save on landfill costs.
In previous years, we invested at
our European sites in dust extrac-
OF tion equipment for our plant heat-
ing stations as well as paint shop
emission filters. Current analyses
have produced figures that confirm
the relevance of these measures for
the environment.
30
 Report of the Board of Management 2001

The dust generated in the heating

station of our Pegnitz plant today,
for example, is 94% below the
legal limit. Instead of the permitted
50 mg/m3, only 2 mg/m3 of dust is
released into the environment
today.

At our French service centre in

Dville-ls-Rouen we also achieved
measurable reductions in pollution
by taking appropriate action. Air
emissions of the new paint shop
are now 75 lower than is permitted
by French law.

Outlook
Measures to protect the environ-
ment are often closely linked to
health issues. For this reason, we
combined the three areas of envi-
ronmental protection, industrial
safety and occupational health into
one organizational unit at the
beginning of the year. The aim is to
streamline and improve internal
processes within this framework.
At the same time, we are also
creating an integrated management
system for these areas.

Environmental protection at its best:

air emissions of the modern paint shop in
Dville-ls-Rouen are well below the legal
limit in France.

31
 Pumps Western Europe
Pumps Western Europe
 N e w f ra m e w o r k a g re e m e n t s i n i n d u s t r i a l a n d w a t e r m a r ke t s
 S u c c e s s f u l e x p o r t b u s i n e s s w i t h h i g h - p re s s u re p u m p s e t s
station packages
The Pumps Western Europe seg-
ment encompasses all activities of
the German and French core com-
panies KSB AG and KSB S.A. as
well as other marketing and pro-
duction companies in the region.
Also included in the segment are
the KSB Service companies and
KSB Fluid Systems GmbH, which is
involved in the construction of
water and sewage transport plants.
Pumps for
Building Services
In Western Europe we supplied
engineering contractors, whole-
salers and installation companies
with pumps and systems for water
supply and pressure boosting
facilities, rainwater utilization and
drainage installations, as well as for
heating and air-conditioning
systems. Especially in our core mar-
kets of Germany and France, how-
ever, pump demand from the con-
struction industry remained slack.
 P u m p s
M a j o r o rd e rs f o r a l l - i n p u m p i n g
Owing to stagnation in the housing
construction sector, we focused our
attention on providing pumps for
large building projects such as ho-
tels and hospitals as well as airports
and industrial buildings. As a result,
we were able to lessen the market-
related decline in business activities
compared with our competitors.
Outstanding projects in Germany
included the supply of pumping
equipment for the new airport ter-
minal in Munich, for a refrigerating
plant at Frankfurt airport and for
the Dresden production building of
a computer component manufac-
turer. Good business development
was reported in Italy, where we
provided several large industrial
complexes and hospitals with
pumps for the heating and air-
conditioning systems. In 2001, KSB
pumps and valves also took up
service in Germanys new Federal
Chancellery in Berlin.
2001
with web access
PUMP MOTOR COMMUNI-
C AT E S V I A T H E INTERNET
In response to the demand for
smart products, we introduced
two new products. There has been
particular interest among our
customers in the sensor-controlled
submersible motor pump, which
makes the conventional type of
mechanical float switches unneces-
sary. An integrated electronic sys-
tem allows these pump sets to be
controlled and matched with each
other without the need for elabor-
ate cabling.
Customers also stand to gain from
higher energy savings and greater
reliability with the launch of addi-
tional Hya-Drive models. This
integral motor series now covers an
extended operating range and of-
fers new communication functions.
It controls, for example, the speed
of pumps for domestic water sup-
ply or industrial applications.
32
 Pumps Western Europe
Equipped with a modem, the new
motor is able to inform the opera-
tor about potential malfunctions by
SMS, e-mail or fax. Every pump
user can access information on cur-
rent operating data such as output,
speed or temperature via the Inter-
net. After entering a password, the
user can also manually change the
unit's current performance settings,
or switch it off in the event of a
malfunction.
KSB pumps and valves keep the building services going in the new Federal Chancellery in Berlin.
33
Pumps for
Industry and Water
Engineering
With our range of products for in-
dustrial applications, we operated
in a stagnating West European
market. Especially after the events
th
of 11 September, this sector
showed a discernible downturn in
investment among many of our
customers in industry. Nevertheless
we managed to increase order in-
take in this important market.
2001
We were very successful with the
range of seal-less pumps that we
had extended in the previous year.
Designed to prevent fluid from
escaping, these pump sets are
particularly well-suited to handling
aggressive, toxic and explosive
media. For reasons of environ-
mental and industrial safety, more
and more customers opt for these
types of zero-leakage pumps for
their processes engineering require-
ments.
 Pumps Western Europe
The Amphitria sewage treatment plant at Cap Sici near Toulon in France is operated by our customer Vivendi Water S.A. Its biological treatment
stage is equipped with KSB products.
Demand for pumps for water sup-
ply and waste water disposal facili-
ties remained weak in Western
Europe. In our core markets of Ger-
many and France, the infrastructure
requirements designed to meet EU
directives on waste water treatment
have largely been met. This is limit-
ing the demand for relevant equip-
ment. Other European countries are
still rather slow to put the environ-
mental provisions into practice.
From Italy, however, we received an
order to fit a new municipal sewage
plant in the city of Milan with 120
submersible motor pumps and
mixers.
Stagnating demand in Western
Europe prompted us to intensify the
export of our water and waste
water pumps to other markets. The
US American market proved espe-
cially receptive. Major orders came
in from this region to fit sewage
treatment plants, as well as flood
control facilities and other pumping
stations with our products.
FRAMEWORK AGREEMENTS
SAFEGUARD OUR MARKET
POSITION
With a view to stabilizing and
strengthening our good market po-
sitioning in Western Europe, we
have concluded new framework
agreements with industrial com-
panies, as well as water and waste
water utilities. These include in
particular agreements with French
companies such as Vivendi and
Ondeo, which have chosen us as
2001
preferred supplier for pumps,
valves and services. If they wish,
these customers can obtain stan-
dard products and spare parts
directly via the KSB Web Shop.
We have also signed framework
agreements with UK water and
waste water utility companies such
as Thames Water.
To establish a stable basis for
growth, we have also entered into
longer-term supply agreements in
our industrial business with major
customers such as Drr, Henkel and
York. These agreements ensure a
continual supply of pumps on
individual terms and conditions.
34
 Pumps Western Europe 2001

ONE-STOP-SHOPPING
ENHANCES
AT T R A C T I V E N E S S
In the industry and water business,
we offer our customers a range of
pumps that is constantly being
matched to changing market needs.
With this in mind, we are systema-
tically extending our range of seal-
less pumps. The year under review
saw the market dbut of our first
mag-drive pump for handling ther-
mal oils in heat transfer systems.
The new model combines a high
degree of reliability with long ser-
vice life and long service intervals.
For use in industrial heating instal-
lations, forced-circulation boilers
and district heating systems, we
launched a new generation of hot-
water circulating pumps. Thanks to
a newly designed heat barrier, these
innovative products are capable of
handling hot water up to tempera-
tures of 230 C without any exter-
nal cooling.
Our developers also came up with a
new impeller design for waste water
pumps. Characterized by excellent
efficiency, it allows the free passage
of coarse solids and thus offers a
high level of reliability free of
clogging. In addition to liquids
containing solids and long fibres,
viscous sludge can also be handled
by these pumps.

At the Frankfurt-Niederrad combined heat and power station, variable-speed KSB pumps help supply the district heating system catering to the
airport and several city districts. Rainer Wehmann (r.) from the Frankenthal sales branch discusses integration of the automatic units into the control
room circuitry with plant manager Gnther Bumann and consulting engineer Werner Schfer (l.).

35
 Pumps Western Europe
Pumps for the
Energy Industry
We are among the leading suppliers
worldwide of pumps for conven-
tional and nuclear power plants.
The driving force of our business in
2001 came from exports to the
USA. Here, electricity companies
were in urgent need of additional
capacity to provide reliable cover
for the countrys energy require-
ments.
Exports to non-European markets
made up for the declining demand
in Western Europe. Here, the
energy supply companies reduced
the capacity of their power plants
and implemented cost-cutting pro-
grammes, which had a negative ef-
fect on the demand for pumps.
NEW PUMPS FOR POWER
PLANTS AND S E AWAT E R
D E S A L I N AT I O N S Y S T E M S
High-pressure pumps from our
power engineering range are also
used in seawater desalination
processes. In this field of appli-
cation, we have established a
strategic focus that will open up
new market opportunities.
The classic method of seawater
desalination is the multistage flash
process. For these applications, we
supplied customers not only with
process coolant pumps but also
high-grade steel tubular casing
pumps with new customized hy-
draulic systems.
Twenty-five of these new pumps
will go to Fujairah in the United
Arab Emirates for use in what will
be the worlds largest plants for the
production of drinking water. The
10 most powerful of these pumps
measuring up to 15 metres in height
will each deliver 13 000 cubic
metres of brine to the evaporation
stations. Commissioned by a
Korean customer, we shall also be
supplying more than 30 pumps of
various types for the mega-plant's
desalination trains.
Seawater desalination by reverse
osmosis is another method. For this
process, we can now offer custom-
ers a new pump. It is capable of
forcing salt water at high pressure
against the membranes of the plant
which are only permeable to pure
water. The first customer to sign a
contract for delivery of these
pumps, which are designed for
reliability and ease of maintenance,
is a systems supplier from Switzer-
land.
For small power stations as well as
combined cycle systems, we devel-
oped new boiler feed pumps. Unlike
conventional equipment, these new
pumps have two parallel suction
impellers. This allows them to be
operated very economically; there is
no need for booster pumps.
S TA N D A R D I Z AT I O N OF
PRODUCTS AND PROCESSES
In line with the commercial require-
ments of the market, we have intro-
duced a basic standard for all core
Ludwig Szlenzak (l.) and Suat Dogan assemble a new type of double-entry high-pressure
pump intended for use in a Polish combined heat and power station.
2001
products over the past few years.
Modular systems nevertheless allow
flexible customization to meet
different technical requirements.
In an ongoing project, we have re-
organized our internal work flows
to suit the needs of this increased
standardization. Process-oriented
work teams now focus on handling
orders for standardized pumps at
low cost and on time. If extensive
preliminary engineering is required
or if the special needs of the
customer cannot be served by the
standard system, our Engineering
House takes on the order.
Systems
Major orders from the Eastern
Mediterranean and Middle East
provided the main impetus for the
business of KSB Fluid Systems
GmbH in the year under review.
This subsidiary is specialized in
building turnkey systems for water
and waste water transport. In
addition to the engineering, we also
provide the complete hydraulic and
electrical equipment for pumping
stations and other water man-
agement systems.
The increasing shortage of water is
a prime concern in various parts of
the world. The supply of drinking
and service water in these regions is
therefore a key activity of our
systems engineering specialists. In
this sector, we managed to secure
participation in a number of major
new projects in 2001.
36
 Pumps Western Europe 2001

From Libya, KSB Fluid Systems
GmbH received an order for the
turnkey construction of a pumping
station intended for the Great
Man-Made River* project.
Scheduled for commissioning in
2004, the plant costing around 70
million euros will help to bring
water from below the Sahara to the
densely populated coastal region.
KSB Service engineers will take care
of in-service support.
The supply of the complete equip-
ment for a pumping station in
Saudi Arabia is our contribution to
the second major project in the
region. From 2004 onwards, KSB
pumps will be transporting desali-

Underground treatment: an installation with 24 jet pumps automatically cleans a large combined-system water tank under the new office
complex in Hamburg known as the Berliner Bogen.

38
 Pumps Western Europe
nated seawater over a distance of
140 km to the desert town of Al
Hofuf.
In Germany, our activities in 2001
focused on surface drainage, rain-
39
water tank cleaning and waste wa-
ter transport installations. Projects
included the supply of equipment
for a large combined-system water
tank under the new office complex
in Hamburg known as the Berliner
Bogen. Among the equipment de-
ployed here are 24 jet pumps of the
Amajet series in the automatic tank
cleaning system.
As a result of financial constraints
in the public sector, domestic order
intake from municipal organiza-
tions saw a marked downturn. This
was offset by orders for system
projects in industry.
Service
Our service operations for pumps,
valves and similar machines defied
difficult market conditions and en-
joyed an increase in orders over the
previous year. In addition to the as-
sembly of new installations, inspec-
tion, maintenance and repair activi-
ties, we also concluded long-term
service contracts in the framework
of our Total Pump Management*.
The scheme is intended to reduce a
systems life cycle costs and to en-
sure that it is constantly opera-
tional.
A number of large companies
decided in 2001 to come to us for
the complete service of their pumps
and other types of machinery. In
France, the chemical and steel
industries in particular continued
the trend towards placing the
service for their systems in the
hands of specialists. Accordingly,
2001
we succeeded in securing new
service agreements with major
companies. Our contractual
services will ensure permanent
availability and efficient operation
of our customers plants.
A key element of our business in
2001 came from the maintenance
inspection service for valves. In
power stations and industrial plants
we inspected gate, globe and butter-
fly valves of all makes during
scheduled downtimes and repaired
where necessary. In the process we
regularly had large teams on the
spot, as for example during the
inspection of a steam cracker at a
chemicals plant in Southwest Ger-
many. Within a time frame of just
three weeks, a team of 70 service
engineers dismantled around 1 200
high-pressure valves, performed
functional tests on them, repaired
any defective valves and reinstalled
them all on time.
Additional service operations were
provided for the modernization of
conveyor screws. This service was
ordered for sewage treatment
plants, paper factories and brick-
works. We were also able to extend
our range of services to include
motors, with the help of the know-
how gained with a German service
operation acquired in 2000. The oil
company DEA, on whose premises
in Heide we operate a service work-
shop, became the first customer to
commission us with the complete
service of the motors in its plant.
 Pumps Western Europe
Acquisition of the UK service com-
pany Rotary Equipment Services
Ltd. was another step towards ex-
panding our services in England
and Wales. This included the
signing of a framework agreement
with a UK water and waste water
authority. The agreement covers
service and upgrade measures on
320 pumping stations in South
Wales. This order gave added im-
petus to what was overall good
growth of the service business in
Great Britain.
Outlook
In view of predictions for the
construction industry, the Building
Services market cannot be expected
to show a sustained business
development. We do, however, see
opportunities for growth in some
West European countries where we
have been less strongly represented
to date than in our core markets of
Germany and France. We will be
stepping up our activities in these
countries, focusing on the large-
scale projects business, for which
we show the most competitive
advantage in terms of product
engineering.
With new pumps for Industry and
Water Engineering we are seeking
to grow further and to increase our
market share in the relevant
business areas. On the basis of
current market studies we also aim
to modify our product range to
serve applications which have not
hitherto been covered. Pending-
project awards, the conclusion of
2001
additional framework agreements for long-term service contracts in
and the strengthening of our sales the framework of our Total Pump
and marketing organization offer Management*.
business opportunities that we shall
make the most of this year. In the valves service business, we
are aiming to expand our inspec-
In the field of Energy engineering, tion and maintenance activities in
we are in the process of making our industry. Major success factors are
modernization programmes for our service teams flexibility, the
eastern European power plants quality of their service, and exem-
even more attractive by providing plary cost transparency. We are also
our customers with comprehensive planning to acquire a few more
financing support. We shall build service companies in Europe.
on the business achieved through
the expansion of our product range All activities in Western Europe for
with seawater desalination plants. the development, manufacture and
marketing of pumps and valves
Growing demand for turnkey water were brought together at the
supply systems is creating interest- beginning of the year, as outlined in
ing business prospects in Systems the Management Report. This has
engineering. KSB Fluid Systems enabled us to create synergies,
GmbH has therefore increased its eliminate internal interfaces and
capacity for providing solutions improve our image in the
both to the hydraulic and to the marketplace.
electrical engineering tasks that
arise in the construction of new
plants. In this way, our expert
knowledge on the interaction
between hydraulic components
can flow directly into programming
of the control systems.
In the Service business the trend
towards all-in service packages will
continue. Industrial companies are
reducing their maintenance teams
and outsourcing some of the work
to specialists. The same is true of
major water supply companies,
which are creating new structures
as part of the concentration process
taking place in this business. In the
process, opportunities are emerging
40
 Pumps Western Europe 2001

Closing the service ranks: in Great Britain, Paul Williams (l.) and Tony Deakin of the newly acquired Rotary Equipment Services Ltd. now
cater to KSB customers. The company is for example involved in the modernization of 320 pumping stations in Wales.

41
 Valves Western Europe
Valves Western Europe
S u b s t a n t i a l g ro w t h i n t h e p o w e r p l a n t b u s i n e s s
p ro j e c t s S t e r i l i z a b l e v a l v e s f o r t h e w o r l d s l a rg e s t i n s u l i n p ro d u c t i o n f a c i l i t y
automation engineering
The Valves Western Europe seg-
ment covers all the regional activi-
ties for supplying the market with
high-quality globe, gate and butter-
fly valves. This function is served
by the German KSB Armaturen
GmbH, parts of KSB S.A. in
France, and SISTO Armaturen S.A.
in Luxemburg.
OVERALL IMPROVEMENT
O R D E R I N TA K E
The valves business, which in the
previous year had proved very dif-
ficult, showed gratifyingly positive
developments again in 2001 after a
successful restructuring of our
activities and with signs of the
market picking up in some areas.
Strong impetus for growth came
from the energy sector, where
amongst other things we succeeded
in meeting the demand from North
America. With the focus on safety,
German nuclear power plants en-
gaged in modernization pro-
Va l v e s p a c k a g e s e n s u re s u c c e s s o n m a j o r
grammes, placing orders for high-
pressure valves. Orders came also
in for other globe and gate valves,
as well as special butterfly valves.
Our commitment to the develop-
ment of all-in solutions was a cru-
cial factor in winning orders for
several major projects in the indus-
trial sector. To comply with cus-
IN tomers wishes in every respect, we
also integrated products from other
suppliers into our offers through
our trading house. The success of
this package approach helped to
cushion the decline in orders from
the chemical industry resulting
from the downturn in the economy.
At the same time, our business
with diaphragm valves from SISTO
Armaturen S.A. continued its very
positive course. These special
valves were ordered by customers
in particular for the operation of
new sterile process facilities in the
pharmaceutical industry. This in-
Butterfly valves used on liquefied gas tankers are tested in
La Roche Chalais at extremely low temperatures.
2001
Expansion of
cluded an order from a Franco-
German pharmaceutical company
for more than 2000 sterilizable
stainless steel valves for the con-
struction of the worlds largest in-
sulin production plant.
Our business with butterfly valves
showed a positive trend in the area
of large valves for water supply
duties. Equally well fared our
cryogenic valves, which we sup-
plied complete with pneumatic
actuators, as well as control and
monitoring systems, for liquefied
gas transport systems.
In the building services sector,
which was feeling the effects of the
slump in the construction industry,
we saw a slight improvement. A
positive factor here was that we
could offer customers matching
pumps and valves for new systems
from a single source.
42
 Valves Western Europe 2001

S M A R T VA LV E S FOR

BUILDINGS AND I N D U S T RY
We further strengthened our com-
petitive position in the building
services market with the launch of
the first microprocessor-controlled
compact valve and a balancing
valve with permanent volume flow
measurement function. Both pro-
ducts are opening up new market
segments for us. Together with our
smart pump drives, these new
products can be used to set up
independent control circuits.

Our valves for industrial appli-

cations continued to be upgraded
by the integration of electronic
components. In the year under
review, we added explosion-proof
designs to our range of pneumatic
actuator control and feedback
devices with communication inter-
faces. These models enable our
motorized butterfly valves to be
used in highly sensitive areas of
process engineering.

We further extended our range of

double-offset valves for industrial
and marine engineering appli-
cations, as well as wedge gate
valves for industrial and power
plant systems.

VA LV E S C O M E WITH

PRESSURE EQUIPMENT
C E RT I F I C AT E S
In the year under review, we
adapted our valve portfolio to
comply with the European Pressure
Equipment Directive* and acquired
certification for all our European
production sites. Since 1 January valves procured from production
2002, we have been supplying all sites outside Europe.
valves of specific types in accor-
dance with this directive as a stan-
dard. This also applies to KSB

44
 Valves Western Europe 2001

Outlook
The slackening economy will have
a negative impact on order intake
in the valves sector. However, we
do expect to see a continued
positive development of high-
pressure valves and butterfly valves
for power plants. In this segment,
the USA will become an important
export market.

We also see encouraging signs of

demand for our special valves for
sterile processes. Aiming to step up
production of these cutting-edge
system components, we started
construction of a new manufac-
turing facility in Luxemburg in
2002.

Michael Leupold (l.) and Bernd Mende put

the finishing touches on high-pressure valves
for delivery ex our Pegnitz works.

45
 Eastern Europe / Middle East
Eastern Europe / Middle East
C o n t i n u i n g g o o d b u s i n e s s c l i m a t e i n t h e re g i o n
M a j o r o rd e rs f ro m t h e M i d d l e E a s t a n d N o r t h A f r i c a f o r w a t e r a n d w a s t e w a t e r e n g i n e e r i n g
The world economic downturn has
so far had only a moderate impact
on our markets in the Eastern
Europe / Middle East region. In
some Eastern European countries,
such as the Czech Republic and
Slovakia, the pace of economic
growth picked up thanks to
successful structural reforms. In
Poland, however, we saw the
emergence of recessionary trends.
The Russian economy profited
from the increase in the price of
crude oil, as did the main oil-
producing countries in the Middle
East. This led to an increase in
demand for our products in Saudi
Arabia and the United Arab Emir-
ates. In Egypt and Libya, our busi-
ness was dominated by a number
of large orders.
2001
Growing industrial business in Eastern Europe
Eastern Europe
In Poland, the privatization process
slowed down, which had a negative
impact on the investment climate.
The slumping economy led to
stagnation in orders received by
KSB Pompy i Armatura Sp. z o.o.
in Warsaw. However, the company
was involved in two major projects
of relevance for our business. This
included the supply of power plant
pumps and butterfly valves for flue
gas desulphurization processes.
Another major order came in for
a water pumping station near
Warsaw, which we shall be fitting
with submersible pumps and
frequency inverters in the current
year.
A pick-up in growth enabled our
two companies in the Czech
Republic and Slovakia to increase
their order intake compared with
the previous year. Prague-based
KSB Pumpy + Armatury spol. s r.o.,
was particularly active in industry
and building services, while
46
 Eastern Europe / Middle East
KSB C erpadl a Armatry, spol.
s r.o in Bratislava focused on its
refinery and services business.
Despite a lack of major projects,
KSB Szivattyu s Armatura Kft. in
Budapest also registered a slightly
higher order intake than in the
previous year. Our products for
industrial applications and sprin-
kler pumps were in particular
demand. Late in 2001, the TV
Rheinland (German Association for
Technical Supervision) awarded the
63 pumping stations along the Nile feature KSB pumps. In Halle, Dietmar Rger prepares volute casing pumps for shipment to Egypt.
47
Hungarian company ISO 9002
certification.
Our activities on the Russian
market, served through a KSB sales
office, showed a very positive
development in 2001. The
countrys economic growth was
reflected in the order intake for our
power plant and mining pumps.
2001
Eastern Mediterra-
nean and Middle East
Turkey experienced its worst post-
war crisis and a dramatic loss in
the value of its currency in 2001.
This resulted in a sharp decline in
demand for imported pumps and
valves, as well as for the pressure
boosting systems produced by
Ankara-based KSB-Pompa,
Armatr Sanayi ve Ticaret A.S.
An outstanding feature of the year
was the order received for the com-
plete fitting of a pumping station
 Eastern Europe / Middle East 2001

Mustaqeem Chaudhry (l.) and Hima Ajit see to proper accounting at our joint venture in Abu Dhabi.

48
 Eastern Europe / Middle East
for Istanbuls drinking water sup-
ply system. The company also
managed to double its service
business.
In the United Arab Emirates, the
joint venture Masaood-KSB Fluid
Systems LLC in Abu Dhabi focused
on both its service business and on
the successful processing of several
major orders from the previous
year. These included the extension
of three large pumping stations in
the emirate state of Abu Dhabi.
Overall, order intake for our water
and waste water pumps showed a
positive development in the United
Arab Emirates.
In Saudi Arabia, the increase in the
price of oil provided a boost to
investment activity. KSB Pumps
Arabia Ltd. in Riyadh posted a
corresponding rise in its business
with pumps for agriculture, as well
as for the water supply and waste
water disposal sectors. The com-
pany also continued to improve its
positioning in the building services
market with imported products.
Not least as a result of a large
order for the equipment of a drink-
ing water pumping station, KSB
activities in Saudi Arabia were par-
ticularly encouraging.
Business in the North African
countries, which we service
through trading partners and resi-
dent engineers*, showed gratifying
growth, especially in Libya and
Algeria. The very lively pumps
49
2001
business in Egypt in the previous
year weakened as a result of the
economic downturn, but we
managed to strengthen our market
position through two major orders
in the field of water engineering.
Outlook
Despite the uncertainties in the
world economy there have only
been minimal signs to date of any
substantial slowing of the growth
process in Eastern Europe.
Especially in the countries that
have applied to join the EU there is
a need to implement Western Euro-
pean standards through invest-
ments in water supply and waste
water disposal systems. We are
aiming to share in this effort with
our pumps and valves.
The propensity towards investment
in the Middle East will probably be
sustained. In the water and waste
water management sector, our
systems engineering business
should profit from this environ-
ment. We also see continued good
opportunities for playing a part in
the construction of seawater de-
salination plants. A major focus of
our activities will be the devel-
opment of the valves business.
 Asia / Pacific / Africa
Asia / Pacific / Africa
C h i n e s e j o i n t v e n t u re m a n a g e s t u r n a ro u n d
C o n c e n t ra t i o n o f m a n u f a c t u r i n g o p e ra t i o n s i n A u s t ra l i a
During the second half of 2001,
the economic climate deteriorated
further in the Region Asia / Pacific /
Africa. Some exporting countries
such as Singapore and Taiwan saw
themselves faced with the most
severe recession in their economic
history as a resulting of the flag-
ging world economy.
This development had a negative
impact on the business of KSB
companies in the region, which
prevented a repeat of the overall
high order intake of the previous
year. The large production com-
panies in China, India, Pakistan
and South Africa, however, suc-
ceeded in holding their market
position well and made positive
contributions to the results.
Particular difficulties were pre-
sented by the market situation in
Australia, where we implemented
extensive restructuring measures,
including production transfers.
East Asia
KSB Shanghai Pump Co. Ltd. sub-
stantially improved its cost situa-
tion and emerged from the red.
Overall, the order intake of our
2001
K S B I n d i a e x t e n d s p ro d u c t ra n g e
Sino-German joint venture de-
clined, but on the domestic market
the company achieved an order
volume about fifty percent higher
than in the previous year. This was
related to a growth strategy with
greater emphasis on the Chinese
market, which helps mitigate
dependency on the export business.
The company supplied its home
market above all with pumps for
water supply, industrial and power
plant applications. Within the
scope of our global manufacturing
network, KSB Shanghai also pro-
duced tubular casing pumps, which
are used throughout the world for
the supply of cooling water in
power stations.
In the export business, a further
order was received at the beginning
of the year for Iraq as part of the
Oil for Food programme. KSB
Shanghai supplied around 260
waste water pumps from its own
production facilities for the waste
water disposal needs of Baghdad.
50
 Asia / Pacific / Africa
KSB Limited in Hong Kong
completes the range of products
manufactured by our Chinese joint
venture with imported pumps and
valves. Its activities in 2001 were
shaped by the demand in energy
and environmental engineering, as
well as by the emerging invest-
ments of foreign companies in the
Chinese petrochemical industry.
First-hand know-how: Philip Chow (l.) from KSB Limited in Hong Kong gets up to date on the latest in production processes with the help of
Ralf Stygar in Frankenthal.
51
In the most severe recession for 30
years, KSB Taiwan Co. Ltd. in Tai-
pei held its position well in relation
to its competitors. The sharp decli-
ne in investments in both the public
and the private sector, however, had
an adverse effect on order intake.
Pump orders from the semiconduc-
tor and water utility industries
showed a positive development.
2001
Japanese shipbuilders in 2001
placed orders with KSB Ltd. in
Tokyo for a large number of the
high-quality cryogenic valves
needed to transport liquefied
petroleum gas in large tankers.
The total value of orders to our
company rose accordingly com-
pared with the previous year.
 Asia / Pacific / Africa
Seoul-based KSB Korea Ltd. also
secured orders to fit new ships, in-
cluding liquefied petroleum gas
tankers, with valves. Further orders
came in from Korean industry for
butterfly and globe valves, leading
to a marked increase in order
intake in the companys own busi-
ness operations. KSB Korea Ltd.
also engaged with great success in
the acquisition of orders for other
Group Companies, with two major
orders being particularly promi-
nent. The value of orders from
Korea booked in the Group figures
thus reached a record level.
South Asia
In India, most of the industries
supplied by KSB Pumps Limited,
headquartered in Pune, had not yet
started to show any signs of econo-
mic recovery. In particular the pro-
ject business in the energy and in-
dustry sectors felt the impact of
investment activities being either
abandoned or postponed by many
large companies. Our Indian com-
panys order intake therefore came
essentially from the standard
business and from smaller projects
in the paper, sugar and cement
industries.
The company responded to diffi-
culties in the domestic market by
stepping up the export of its prod-
ucts. For example, it delivered
3500 globe, gate and non-return
valves to a refinery in Tripatra,
Indonesia.
Aiming to meet the requirements of
the power plant industry, KSB
Pumps Limited of India installed
and started up the countrys largest
privately operated test rig for
boiler feed pumps in 2001. Power
station pumps can be tested here
under full load conditions. This is,
for example, required to handle a
major current order for the supply
of high-quality boiler feed pumps
for a large lignite-fired power
plant.
In the year under review, KSB India
carried out a large modernization
and expansion programme. This
included the development of new
condensate pumps for the energy
industry, the manufacture of new
high-pressure ring-section pumps
and the production of refinery
pumps to API* standards (610, 8th
edition). For three series manufac-
tured in India the company receiv-
ed the Made by KSB certificate,
which documents the high quality
standards to be met in the global
manufacturing network.
The political and economic condi-
tions in Pakistan were detrimental
to the business activities of Lahore-
based KSB Pumps Co. Ltd. In
water management, the most im-
portant sector, there was a dearth
of new projects; and industry, too,
cut back sharply on investments.
Despite the cancelling of a major
th
order after 11 September the
decline in order intake, however,
remained quite moderate overall.
In the countrys shrinking pumps
2001
market, KSB Pumps Co. Ltd. was
therefore well able to maintain its
leading position. The company
responded to the economic
recession in the country with
restructuring measures.
Southeast Asia
The order intake of KSB AMRI
(Asia Pacific) Pte. Ltd. in Singapore
was hit by the poor economic
growth in this city state as well as
in neighbouring Malaysia. More
success was achieved in other
countries covered by the company,
such as Vietnam and Myanmar,
where orders for water pumps
showed a very positive develop-
ment.
The elections and change of gov-
ernment in Thailand prompted
restraint on the part of foreign
investors. KSB Pumps Co. Ltd. in
Bangkok nevertheless succeeded in
increasing its order intake once
again. Major orders came in from
the chemical and petrochemical
industries. The company also took
on the task of fitting one of the
worlds largest sewage treatment
plants in Bangkok with pumping
equipment.
The unstable economic environ-
ment in Indonesia led to a decrease
in demand for cast products from
Jakarta-based PT KSB Indonesia.
This negative trend could not be
offset by rising exports to Europe
in the framework of our manufac-
turing network. An upward trend
was seen in the service business,
52
 Asia / Pacific / Africa 2001

KSB employees like Aparajita Ravanshad in Pune, India, help our customers worldwide find just the right person to contact.

53
 Asia / Pacific / Africa
where orders were placed by
leading water and energy suppliers.
Australia
In 2001, the Australian market
further stabilized, but failed to
recover. In mining and industry, the
customers of KSB Ajax Pumps Pty.
Ltd. in Tottenham further post-
poned the implementation of major
projects or reduced their scope. As
a result of delays in anticipated
orders, order intake declined in the
year under review.
The company responded to the
changes in demand and rising
pressure on prices with radical
restructuring measures. As part of
the reorganization, the company
sold the foundry in Kyneton and
relocated its submersible motor
pump production from Ipswich to
Tottenham. The concentration of
manufacturing operations at the
company headquarters helps im-
prove utilization of the available
capacity. This, in turn, enhances
the competitiveness of KSB Ajax.
South Africa
KSB Pumps (S.A.) (Pty.) Ltd. in
Germiston, maintained its market
position in a successful business
year and increased its order intake
very substantially in local currency
terms. The main contribution to
this success came in the shape of
orders from the petrochemical and
mining sectors, whereas economic
development in other lines of
industry stagnated.
2001
For the petrochemical industry, the industrial pumps in the region. In
company supplied process pumps China, where extensive investments
to API* standards (610, 8th edition). in waste water technology are
Mining companies in South Africa planned, new opportunities are
ordered locally manufactured also emerging for our portfolio of
slurry pumps for the hydraulic environmental engineering
transport of solids such as ore and products. We also see definite
tailings. Our South African com- prospects for growth in the valves
pany also stepped up its activities and service business sectors.
to supply the industrial market
with valves.
Outlook
In the second half of 2002, the
economic situation is widely ex-
pected to improve also in the Asia /
Pacific / Africa region. In view of
the high growth potential in Asia,
we aim to strengthen our regional
presence in this region and to in-
crease our market share. Our focus
here will be on supplying the water
and waste water markets as well as
the industrial and energy sectors.
In the water management business,
we see good business development
opportunities in India and China
simply on the basis of their grow-
ing populations. We shall be
making increased use of the
production capacity of our Indian
factories in order to supply the
Asian energy market. In Singapore,
we are planning to extend our
central warehouse for standard
pumps.
Major petrochemical companies
are building up their production
capacity in Asian countries, such as
China and Malaysia. This improves
the prospects for the sale of our
54
 Americas 2001

Americas

D e v e l o p m e n t o f t h e d i s t r i b u t i o n n e t w o r k i n B ra z i l R e s t r u c t u r i n g o f c o m p a n i e s i n Ve n e z u e l a
G ro w t h i n t h e U S b u s i n e s s w i t h p o w e r p l a n t p u m p s

The macroeconomic development pumps in the USA. These US We also started to extend our
of the region was marked by de- products in particular, which are production capacity at our site in
clining to stagnant growth through- designed for tough mining applica- Richmond, Virginia, with the aim
out the business year. Negative in- tions, met with lively interest of intensifying our activities in the
fluences resulted from the recession among customers. US energy and water markets.
th
in the USA, the aftermath of 11
September and the economic prob-
lems in Argentina and Venezuela.

Our American companies never-

theless managed to increase their
order intake overall. A contribut-
ing factor here was the brisk de-
mand for pumps in the US Ameri-
can energy and water management
sectors, as well as the Canadian oil
sand industry. The Brazilian oil
industry and Chilean mining
companies also placed orders on a
large scale.

Aiming to increase our chances in

the market, we launched a range of
new products in the region during
2001. These included technically
improved submersible pumps and
motors in Latin America as well as
a series of plastic-lined slurry
In Grovetown, Allen Germany, Mike Matthews and Fred Reid prepare a slurry pump for the
performance test run.

55
 Americas
South and
Central America
The Brazilian company KSB Bom-
bas Hidrulicas S.A., Vrzea Pau-
lista, managed to achieve a sub-
stantial increase in its order intake,
in local currency terms, despite the
climate of economic turbulence.
The company profited from
demand in the petrochemical and
energy sectors, and also won some
major orders from the paper
industry and the mining sector, as
well as for an irrigation project in
the state of Paraba.
With a view to maintaining and
building on its position as market
leader, the company stepped up its
sales activities in the north and
north-east of Brazil. This included
opening a sales office in Fortaleza.
At the same time, KSB Bombas
Hidrulicas S.A. intensified its sales
and marketing cooperation with
KSB companies in Argentina,
Chile, Venezuela, Mexico and the
USA. For the first time, our Brazi-
lian company supplied North Ame-
rica with volute casing pumps of
the Mega series, which meet the
specific US requirements.
At its headquarters site of Vrzea
Paulista, the company modernized
its machine pool and improved
assembly processes. The company
added not only new close-coupled
pumps to its portfolio but also
slurry pumps manufactured under
licence from GIW.
2001
Owing to its close links with the supplying the expanding mining
US economy, the Mexican market industry with slurry pumps and
was particularly hard-hit by the new sewage treatment plants with
recession which its neighbour to pumping equipment. The company
the north was going through. also strengthened its service
KSB de Mexico S.A. de C.V. in operations for power plants and
Quertaro was therefore unable to mining companies.
achieve its order intake of the
previous year. The company is in
the process of diversifying its
business and is successfully engag-
ing in the waste water market.
Demand from the water sector,
however, was weak in 2001, owing
to financial bottlenecks and result-
ing project postponements.
In Venezuela, the political and
economic situation deteriorated
further. KSB Venezolana C.A. and
Aguador S.A., both headquartered
in Caracas, therefore intensified the
restructuring measures started in
the previous year.
The recession in Argentina, which
has already lasted four years and
led to a national crisis towards the
end of last year, continued to
hamper the business activities of
KSB Compaa Sudamericana de
Bombas S.A. in Buenos Aires. The
company suffered a decline in
order intake. But it managed to
improve its market position in
building services through its entry
into the pressure boosting systems
business.
Double-digit growth in orders was
registered by Santiago-based KSB
Chile S.A. A major contributory
factor was the companys success in
56
 Americas 2001

North America
GIW Industries Inc. in Grovetown,
Georgia, successfully defended its
strong positioning in the market
for slurry pumps, but nevertheless
suffered a drop in orders. This was
due to problems in the mining
industry in North America, which
led to the closure of mines. The
decline in business here was com-
pensated by activities in the Cana-
dian oil sand industry, where GIW
supplied amongst other things 60
pumps for the hydraulic transport
of raw material as part of a major
project.
The globalization policy the com-
pany has pursued for many years
has reduced the dependence of
GIW Industries on the US market.
In the year under review, the same
volume of business came from
exports as from the domestic
market. This international business
involved not only supplying mining
companies but also the delivery of
slurry pumps for suction hopper
dredges.

US power stations are expanding their capacities. This has brought KSB Inc. in Richmond, Virginia, rising order levels for high-pressure pumps.
Assembled by Frankenthal employees like Lothar Reisel, the pumps are fitted with motors, baseplates, couplings and other accessories in Richmond.

57
 K
A SmBe: r iMc iatsa r b e i t e r
More and more customers are
supplied with GIW products
through competence centres* in
other parts of the world, where
local KSB experts prepare quota-
tions for slurry pumps, process
orders, take care of production and
assembly and provide service to
customers.
Despite the difficult economic en-
vironment in the USA, KSB Inc. in
Richmond, Virginia, enjoyed a
strong increase in its order intake.
The reason for this above all was
lively demand for high-pressure
pumps in the power plant industry.
With these products, which are
manufactured in Europe and
finished in Richmond, the company
secured a substantially higher
market share than in the previous
year.
An increased order volume was
also reported by KSB Inc. in the
field of water engineering, where it
was involved in several major pro-
jects. A new waste water transport
pump launched onto the market
sold even better than expected in
its first year.
With the aim of supplying the
power plant and water markets on
a larger scale, the company started
to expand its production and
assembly capacity in May. The
technical facilities needed for this
will be fully available in the middle
of 2002.
AMRI Inc. in Houston, Texas,
which manufactures and distri-
butes rubber-lined butterfly valves,
posted a decline in orders in its
core business because of the econo-
mic downturn. This affected both
customers in the chemical industry
and manufacturers of micro-
electronic products, who need
special valves for shutting off the
flow of ultrapure liquids. Business
with AMRI* valves imported from
France for power plant applica-
tions developed very well.
Based in Toronto, Canada, KSB
Pumps Inc. managed to increase its
order intake. The company
supplied imported pumps to equip-
ment suppliers and operators of
power plants, industrial companies
and sewage treatment plants. In the
year under review, the company
relocated its sales and marketing
office as well as its warehouse and
shipping facilities to Toronto,
where it will also centralize its
customer service in the future.
2001
Outlook
In view of the prevailing economic
conditions, our American com-
panies are faced with a new chal-
lenge. Business development in the
region will depend heavily on the
course which the US economy
takes in the future. This is espe-
cially true of our North American
companies and KSB de Mexico.
In Brazil and Chile, we anticipate a
sustained positive development of
the market, which will feel little
impact from the crisis in neigh-
bouring Argentina. Apart from the
concern caused by the development
of the Argentinian economy over-
all, a further cause of worry is the
dire situation in Venezuela. Here
we shall be implementing further
radical restructuring measures.
In the USA, following the increase
in capacity in Richmond, Virginia,
we will be well-equipped to meet
the rising demand for high-pressure
pumps in the energy sector. We also
aim to continue the expansion
course in the waste water business
started in 2001.
In the slurry pumps market, GIW
Industries faces strong pressure on
prices. It is meeting this challenge
amongst other things by using the
competence centres outside the
USA to improve its cost structures.
58
 2001

59
 Shares in Affiliated Companies 2001

Capital share Equity Net income

31 Dec. 2001 for the year
Name and seat
(Net loss for the year)
of the fully consolidated companies % T 2) T 2)

Direct interests held

KSB Armaturen GmbH, Frankenthal 100.00 10 226 1)

KSB Service GmbH, Frankenthal 100.00 1 534 1)

KSB Service GmbH, Schwedt 100.00 1 023 1)

KSB Fluid Systems GmbH, Frankenthal 100.00 3 375 1)

Uder Elektromechanik GmbH, Friedrichsthal 100.00 27 1)

KSB Zrich AG, Zurich 100.00 1 414 (11)

Hydroskepi GmbH, Amaroussion 100.00 1 234 22
KSB A/S, Farum (Copenhagen) 100.00 366 18
KSB Mrck AB, Askim (Gothenburg) 55.00 1 690 3
KSB Pompy i Armatura Sp. z o.o., Warsaw 100.00 1 251 223
KSB-Pompa, Armatr Sanayi ve Ticaret A.S., Ankara 76.48 1 297 547
KSB Chile S.A., Santiago 100.00 4 282 774
KSB Shanghai Pump Co. Ltd., Shanghai 51.00 19 682 388
KSB de Mexico S.A. de C.V., Quertaro 100.00 2 730 (992)
MIL Controls Limited, Alwaye (Kerala) 51.00 2 504 467

KSB Finanz S.A., Mersch 100.00 89 255 1 431

KSB S.A ., Gennevilliers ( Paris ) 100.00 38 378 2 374
Techni Pompe Service S.A., Hoerdt 100.00 1 160 259
AMRI Inc., Houston/Texas 10.03
K S B Ve r w a l t u n g s g e s e l l s c h a f t S . A . , M e r s c h 100.00 1 998 169
SISTO Armaturen S.A., Mersch 52.86 8 312 440
KSB Italia S.p.A., Milan 100.00 18 770 505
KSB sterreich Ges. mbH, Vienna 100.00 2 434 334
KSB Nederland B. V., Zwanenburg 100.00 3 920 78
KSB LI M ITE D, Loughborough 100.00 5 370 1
Rotary Equipment Services Limited, Loughborough 100.00 127 103
N.V. KSB Belgium S.A., Wavre 100.00 2 222 104
KSB-AMVI S.A., Madrid 100.00 2 117 71
AMVI S.A., Burgos 99.80 4 277 391
KSB Ajax Pumps Pty. Ltd., Tottenham (Melbourne) 100.00 6 114 (2 482)
KSB Pumps (S.A.) (Pty.) Ltd., Germiston (Johannesburg) 50.00 4 874 988

PA B P u m p e n u n d A r m a t u r e n - B e t e i l i g u n g s g e s e l l s c h a f t m b H ,
Frankenthal 51.00 13 214 7
Canadian Kay Pump Ltd ., Toronto 100.00 17 049 291
Aguador S.A., Caracas 100.00 (312) (363)
KSB Venezolana C.A., Caracas 100.00 (218) (1 106)
KSB Bombas Hidrulicas S.A., Vrzea Paulista (So Paulo) 100.00 23 360 2 665
KSB Comp. Sudam. de Bombas S.A., Buenos Aires 100.00 7 892 (226)
KSB Pumps Co. Ltd., Lahore 58.89 4 464 63
KSB Pumps Limited, Pune (Bombay) 40.54 23 468 2 066
MIL Controls Limited, Alwaye (Kerala) 49.00
KSB America Corporation , Richmond/ Virginia 100.00 22 311 2 352
KSB Inc., Richmond/Virginia 100.00 4 777 956
GIW Industries Inc., Grovetown/Georgia 100.00 25 832 1 532
AMRI Inc., Houston/Texas 89.97 6 665 1 529

1) Results transfer agreement

2) T = thousand euros

60
 Financial Statements 2001

KSB Group, KSB Aktiengesellschaft

61
 KSB Group: Consolidated Balance Sheet 2001

Notes 31 Dec. 2001 31 Dec. 2000

Assets T 1) T 1)

Fixed assets
Intangible assets 1 18 082 10 290

Tangible assets 1 121 532 122 316

Financial assets 2 10 415 17 770

150 029 150 376

Current assets
Inventories 3 207 381 202 902

Receivables and other assets 4 325 533 302 625

Securities 69 70

Liquid assets 5 99 678 101 018

632 661 606 615

Deferred items 6 22 131 17 496

804 821 774 487

Equity and Liabilities

Equity 7

Subscribed capital 44 772 44 772

Capital reserve 66 663 66 663

Revenue reserves 85 557 78 324

Consolidated net retained profit 17 432 10 008

Item for shares not held by the parent company 64 671 62 113

279 095 261 880

Special reserve with equity portion 8 11 314 11 001

Accruals 9

Accruals for pensions and similar obligations 139 764 129 563

Other accruals 141 588 143 547

281 352 273 110

Liabilities 10 233 060 228 496

804 821 774 487

1) T = thousand euros

62
 KSB Group: Consolidated Profit and Loss Account 2001

Notes 2001 2000

T 1) T 1)

Sales 14 1 161 940 1 097 139

Changes in inventories 2 915 3 560

Own work capitalized 1 553 2 193

To t a l o u t p u t o f o p e r a t i o n s 1 166 408 1 102 892

Other operating income 15 19 317 39 670

Cost of materials 16 446 103 413 188

Personnel expenses 17 424 152 414 880

Depreciation on intangible and tangible assets 29 537 31 604

Other operating expenses 18 240 126 240 336

Other taxes 8 667 8 184

37 140 34 370

Income from interests held 19 1 209 1 039

Financial result 20 8 558 7 221

7 349 6 182

Results from ordinary activities 29 791 28 188

Taxes on income 21 4 087 12 107

Net income for the year 25 704 16 081

Profit applicable to minority interests 5 848 8 465

Loss applicable to minority interests 1 325 2 602

Consolidated net income for the year 21 181 10 218

Profit brought forward from the previous year 67 2

Transfer to the revenue reserves 3 816 212

Consolidated net retained profit 17 432 10 008

1) T = thousand euros

63
 KSB Aktiengesellschaft: Balance Sheet 2001

Notes 31 Dec. 2001 31 Dec. 2000

Assets T 1) T 1)

Fixed assets
Intangible assets 1 1 424 1 671

Tangible assets 1 28 441 27 303

Financial assets 2 125 285 124 433

155 150 153 407

Current assets
Inventories 3 65 809 63 468

Receivables and other assets 4 135 689 137 105

Liquid assets 5 58 898 59 388

260 396 259 961

Deferred items 6 106 50

415 652 413 418

Equity and Liabilities

Equity 7

Subscribed capital 44 772 44 772

Capital reserve 66 663 66 663

Revenue reserves 32 192 27 079

Profit available for distribution 17 432 10 008

161 059 148 522

Special reserve with equity portion 8 11 014 10 768

Accruals 9

Accruals for pensions and similar obligations 110 111 104 977

Other accruals 67 842 65 297

177 953 170 274

Liabilities 11 65 626 83 854

415 652 413 418

1) T = thousand euros

64
 KSB Aktiengesellschaft: Profit and Loss Account 2001

Notes 2001 2000

T 1) T 1)

Sales 14 451 547 418 478

Changes in inventories 1 913 1 602

Own work capitalized 1 170 1 322

To t a l o u t p u t o f o p e r a t i o n s 454 630 418 198

Other operating income 15 35 437 43 698

Cost of materials 16 188 913 166 466

Personnel expenses 17 177 779 176 606

Depreciation on intangible and tangible assets 8 903 10 284

Other operating expenses 18 100 118 96 472

Other taxes 559 554

13 795 11 514

Income from interests held 19 8 065 6 859

Financial result 20 4 357 8 243

3 708 1 384

Results from ordinary activities 17 503 10 130

Taxes on income 21 138 124

Net income for the year 17 365 10 006

Profit brought forward from the previous year 67 2

Profit available for distribution 17 432 10 008

1) T = thousand euros

65
 D e v e l o p m e n t o f F i x e d A s s e t s i n t h e F i n a n c i a l Ye a r 2001

KSB Group Purchase/Manufacturing costs Depreciation Net book values

Changes in cons.
Balance enterprises Balance of the accumu- Balance Balance
1 Jan. 01 and currency Additions Disposals Transfers 31 Dec. 01 year lated 31 Dec. 01 31 Dec. 00
adjustment
T 1) T 1) T 1) T 1) T 1) T 1) T 1) T 1) T 1) T 1)

Intangible assets

Concessions, industrial and

similar rights and assets as

well as licences concerning

such rights and assets 11 303 97 1 051 1 332 3 586 14 705 1 716 9 558 5 147 2 608

Goodwill 10 834 6 358 55 17 247 1 047 4 312 12 935 7 652

Payments on account 30 1 75 106 30

22 167 6 456 1 181 1 332 3 480 31 952 2 763 13 870 18 082 10 290

Tangible assets

Land and buildings 150 003 1 062 1 447 1 217 2 586 148 709 3 759 95 615 53 094 57 443
Technical equipment and machinery 278 231 2 362 7 626 15 139 2 988 276 068 12 748 236 159 39 909 41 068

Other equipment, factory and

office equipment 121 380 1 142 10 054 11 849 1 851 122 578 10 109 102 880 19 698 17 965

Payments on account and assets

under construction 5 841 153 8 728 5 733 8 989 158 158 8 831 5 840

555 455 4 719 27 855 28 205 3 480 556 344 26 774 434 812 121 532 122 316

Financial assets

Shares in affiliated enterprises 16 769 7 715 20 9 034 57 2 753 6 281 14 061

Loans to affiliated enterprises 923 75 998 998 923

Other interests held 2 081 480 2 561 870 1 691 1 211

Long-term investments 1 054 32 8 12 1 082 105 183 899 975

Other loans 757 48 176 230 655 109 546 600

21 584 7 656 664 262 14 330 162 3 915 10 415 17 770

1) T = thousand euros 599 206 3 519 29 700 29 799 602 626 29 699 452 597 150 029 150 376

66
 D e v e l o p m e n t o f F i x e d A s s e t s i n t h e F i n a n c i a l Ye a r 2001

KSB Purchase/Manufacturing costs Depreciation Net book values

Aktiengesellschaft
Balance Balance of the accumu- Balance Balance
1 Jan. 01 Additions Disposals Transfers 31 Dec. 01 year lated 31 Dec. 01 31 Dec. 00

T 1) T 1) T 1) T 1) T 1) T 1) T 1) T 1) T 1)

Intangible assets
Concessions, industrial and

similar rights and assets as

well as licences concerning

such rights and assets 7 481 946 19 8 408 1 193 6 984 1 424 1 671

7 481 946 19 8 408 1 193 6 984 1 424 1 671

Tangible assets

Land and buildings 77 491 115 179 30 77 457 1 049 64 493 12 964 13 869

Technical equipment and machinery 122 916 2 557 10 284 107 115 296 3 230 106 955 8 341 9 013

Other equipment, factory and

office equipment 38 150 3 894 3 487 127 38 684 3 431 33 950 4 734 4 157
Payments on account and assets under construction 264 2 402 264 2 402 2 402 264

238 821 8 968 13 950 233 839 7 710 205 398 28 441 27 303

Financial assets

Shares in affiliated enterprises 128 761 541 1 129 301 5 913 123 388 122 848

Interests held 2 066 479 2 545 855 1 690 1 211

Other loans 444 205 239 32 207 374

131 271 1 020 206 132 085 6 800 125 285 124 433

1) T = thousand euros 377 573 10 934 14 175 374 332 8 903 219 182 155 150 153 407

67
 Notes to the Financial Statements
GENERAL
The consolidated financial statements
and KSB AGs financial statements have
been prepared in accordance with the
relevant legislation and the accounting
principles governing the consolidated
financial statements of KSB AG.
The financial statements have for the
first time been prepared on euro basis.
As far as figures from previous financial
statements are indicated for purposes of
comparison, these have been converted
at the fixed official exchange rate of
DM 1.95583 for one euro.
For a clear presentation of the financial
statements we have summarized some
items shown in the balance sheet and
profit and loss account. These items are
discussed separately in the notes.
Other taxes are shown as part of the
Results from ordinary activities.
The development of fixed assets of the
KSB Group and KSB AG is outlined in
separate tables.
In order to simplify the notes and avoid
repetitions the explanations put forth in
the notes apply to the financial
statements of KSB AG and the KSB
Group, if not otherwise stated.
C O N S O L I D AT E D E N T E R P R I S E S
Compared with the previous years
consolidated financial statements, the
group of consolidated enterprises has
changed as follows:
In Italy Carmen Prima S.p.A. was
merged with KSB Italia S.p.A., and in
Luxemburg KSB Finanz AG S.A. with
KSB Finanz S.A. The consolidated
financial statements for the first time
include Uder Elektromechanik GmbH in
Friedrichsthal (Saar) / Germany, Techni
Pompe Service S.A. in Hoerdt / France,
Rotary Equipment Services Ltd. in
Loughborough / UK and KSB Pompy i
Armatura Sp. z o.o. in Warsaw / Poland.
KSB Armaturen Verwaltungs- und
Beteiligungs-GmbH in Frankenthal /
Germany did not have any business
activity and has not been consolidated
on the grounds of insignificance.
The group of consolidated enterprises
now comprises, as well as KSB AG, 42
domestic and foreign enterprises in
which we directly or indirectly hold the
majority of voting rights or have the
right to appoint the majority of the
members of the management.
The financial years of the consolidated
companies correspond to the calendar
year, except for two companies which
were consolidated on the basis of interim
financial statements.
29 enterprises (four of which associated)
with a low business volume or no busi-
ness activity have not been consolidated
because they were not significant for
presenting a true and fair view of the net
worth, financial position and results of
the Group.
All consolidated Group companies are
listed on page 60 of the present annual
report.
A list of all shareholdings is filed with
the Register of Companies of the
responsible municipal court Amtsgericht
Ludwigshafen (Rhein), HRB 1016.
C O N S O L I D AT I O N P R I N C I P L E S
Capital consolidation is effected accord-
ing to the book value method by off-
setting the cost of investment with the
corresponding share of the subsidiarys
equity alloted to the parent company at
the time of acquisition or at the time the
company became a subsidiary.
2001
Any resulting goodwill is being written
down over a period of five to fifteen
years. Goodwill added until 1995 was
deducted from the revenue reserves in
the year of acquisition.
Equity shares not held by KSB AG are
indicated under a separate item for
shares not held by the parent company.
Sales, expenses and income, as well as
receivables and liabilities applicable be-
tween the consolidated companies have
been consolidated. The changes in the
intercompany results from intercompany
deliveries or services and the differences
arising from the consolidation of
intercompany balances have been taken
into account in the consolidated annual
results.
A deferred taxation item has been set up
for valuation differences between the
local tax-oriented financial statements
of the consolidated enterprises and the
consolidated financial statements in line
with uniform valuation principles, as
well as for consolidation measures recog-
nized in income. Deferred taxes carried
as assets or liabilities have been offset.
FOREIGN CURRENCY
T R A N S L AT I O N
Assets, accruals and liabilities, as well
as expenses and income in currencies
of the member states of the European
Economic and Monetary Union are
valued at the conversion rates irrevoc-
ably fixed by the Council of the
European Union. Foreign currency
assets, accruals and liabilities are
stated at the purchase rates or, if
applicable, at the more unfavourable
rate at the balance sheet date as far as
the exchange rate has not been secured
by foreign exchange cover.
68
 Notes to the Financial Statements
Relevant items indicated in the balance
sheets of the consolidated subsidiaries
outside the EMU domain are stated at
the average exchange rate at the balance
sheet date; the same applies to depreci-
ation, taxes and the net income / loss for
the year indicated in the profit and loss
accounts.
The other expenses and income have
been translated at the average exchange
rate over the financial year. Resulting
translation differences have been in-
cluded under other operating income or
other operating expenses.
The differences resulting from currency
translation of assets, accruals and liabili-
ties have been taken directly to the
revenue reserves.
The financial statements of companies
operating in high-inflation countries
have been translated accordingly, after
taking country-specific inflation ad-
justments into due account.
GENERAL ACCOUNTING AND
VA L U AT I O N P R I N C I P L E S
Our accounting and valuation principles
remain unaltered in comparison with the
previous year and apply to all companies
included in the consolidated financial
statements.
Only movable tangible assets have been
subject to a change in valuation required
by new terms to be applied for their
useful life for tax purposes.
Intangible and tangible assets are
valued at the original purchase and /
or manufacturing costs, reduced by
systematic depreciation. Manufacturing
costs of self-produced assets include
direct material and production costs as
well as overheads to the extent re-
quired for tax purposes. Administra-
69
tion costs and interest have not been
capitalized.
Systematic depreciation is calculated at
the maximum tax-allowed rates. Starting
in the year under review, additions were
for the first time valued in accordance
with the new tax regulations. This did
not have any significant impact on the
companys net worth and results.
The useful life of buildings is 50 years
at the most. Technical equipment and
machinery are being written down
according to the declining-balance
method, assuming a useful life of
6-25 years. The same applies to factory
and office equipment with useful lives of
3-23 years. We change over from the
declining-balance method to the straight-
line method of depreciation in such cases
where the division of the net book value
into equal annual amounts for the
remaining life results in higher depre-
ciation amounts. For additions during
the first six months of the year the full
annual depreciation rate is written
down, for additions during the second
half of the year half of the annual
depreciation rate. Low-value items are
fully written off in the year of purchase
and are entered as disposal of assets in
the same year.
Shares in affiliated enterprises and
interests held as well as long-term
investments are valued at the cost of
acquisition or the lower fractional
values. Loans on interest are included in
the balance sheet at the nominal value,
low-interest or interest-free loans at the
cash value.
As far as inventories are concerned, raw
materials, consumables and supplies as
well as traded parts are valued in com-
pliance with relevant tax legislation at
2001
the average purchase costs or the lower
market prices effective on the balance
sheet date. Unfinished and finished
goods as well as work in process are
entered at manufacturing costs which,
apart from directly allocated costs,
include proportionate production and
material overheads as well as write-
downs. Devaluations for inventory risks
resulting from the duration of storage or
reduced usability are considered in the
full amount. Valuation free of loss is
applied in such cases where sales prices
do not cover the manufacturing costs
plus additionally accruing costs.
Payments received on account of orders
are offset against inventories as far as
they can be directly allocated.
Receivables and other assets are stated at
the nominal amount or the lower current
value; interest-free or low-interest receiv-
ables are discounted.
Anticipated risks are taken into consi-
deration by appropriate individual value
adjustments. In addition, the general
credit risk is covered by a lump-sum
value adjustment which is deducted
directly from the receivables.
Securities are stated at the purchase costs
or at the lower stock exchange or
market value.
The creation of special reserves with
equity portion is subject to the tax
regulations of the countries in question.
The accruals for pensions and similar
obligations in Germany are calculated in
accordance with actuarial principles
according to 6a EStG (German Income
Tax Act). The increase in accruals result-
ing from the application of the updated
1998 life expectancy index tables was
fully taken into account in the 1998
results. As far as required, the foreign
 Notes to the Financial Statements 2001

companies set up accruals in accordance basis of the commercial prudence

with comparable principles. All old age concept.
pension obligations are fully covered. Liabilities are valued at the repayable
For the assessment of other accruals, all amount.
anticipated risks are considered on the

Explanations to the Balance Sheets

1 I N TA N G I B L E AND
TA N G I B L E A S S E T S
The increase in goodwill in the conso-
lidated financial statements resulted
from the expansion of the group of
consolidated enterprises as outlined
above.
As in the previous years, the real estate
leased by the French KSB S.A. was
capitalized in the consolidated
financial statements and at the same
time carried as liability, since it will
become the legal property of the
company after expiry of the contract
duration.
2 FINANCIAL ASSETS
The financial statements show
additions totalling 1.0 million to
the shares in affiliated enterprises and
interests held by KSB AG.
This basically covers the increase in
shares held in our companies in Turkey
and Finland, as well as a capital in-
crease of the company in Abu Dhabi.
The decline in the shares in affiliated
enterprises shown in the consolidated
financial statements is like the
corresponding increase in goodwill
mentioned above attributable to the
expansion of the group of consolidated
enterprises.

KSB Group KSB AG

3 INVENTORIES 2001 2000 2001 2000
million million million million

Raw materials, consumables and supplies 77.2 66.4 25.3 23.6

Unfinished goods, work in process 96.8 95.1 38.0 39.0
Finished goods and merchandise 62.6 63.3 11.5 8.7
Payments on account 3.9 2.5 1.3 0.5
Payments received on account of orders and offset 33.1 24.4 10.3 8.3
207.4 202.9 65.8 63.5

70
 Notes to the Financial Statements 2001

4 R E C E I VA B L E S A N D KSB Group KSB AG of the Supervisory Board, by a total

OTHER ASSETS 2001 2000 2001 2000
million million million million of up to 15 338 756.44 in one or

Trade receivables 288.8 262.6 62.1 57.6 several steps by issuing new ordinary
of which with a remaining term of more than 1 year (2.5) (4.1) (1.8) (0.8) shares and new non-voting preference
Receivables from affiliated enterprises 12.7 15.6 68.8 72.8 shares against contribution in cash
of which with a remaining term of more than 1 year (0.2) (0.2) () (0.1)
until 30 June 2003 (authorized
Receivables from minority shareholdings 4.3 2.8 0.9 1.4
of which with a remaining term of more than 1 year () (0.1) () () capital). The newly issued non-voting

Other assets
of which with a remaining term of more than 1 year
Total
of which with a remain. term of more than 1 year
Other assets cover receivables from
employees and fiscal authorities,
5 LIQUID ASSETS
The liquid assets comprise above all
short-term fixed deposits and call
deposits.
6 DEFFERRED ITEMS
The capitalized deferred items shown in
the consolidated financial statements
include deferred taxes of 20.5 million
( 16.2 million in 2000). 16.3 million
( 11.6 million in 2000) of the deferred
taxes result from valuation differences in
the commercial and tax balance sheets of
individual companies, as well as from
adjustments in line with uniform valua-
tion principles applied to the consolidat-
ed financial statements. The remaining
4.2 million ( 4.6 million in 2000)
result from consolidation measures.
19.7 21.6 3.9
(2.8) (3.8) (0.5)
325.5 302.6 135.7
(5.5) (8.2) (2.3)
capitalized deferred interest items and
other claims.
7 EQUITY
Development of equity
within the Group
Balance 1 Jan. 2001
Net income for the year
(before third-party shares)
Prior-year dividend of KSB AG and
dividend payments to third parties
Miscellaneous (basically changes result.
from balance sheet currency transl. and
adjustments not affecting the results) 1.9
Balance 31 Dec. 2001
KSB AGs share capital has remained
unaltered compared with the previous
year.
In accordance with the Articles of
Association, it totals 44 771 963.82.
It is divided into 886 615 ordinary no-
par-value shares and 864 712
preference no-par-value shares.
Each no-par-value share represents an
identical part of the share capital.
Holders of preference shares are
entitled to an independent cumulative
participation in the profits and a
graduated additional dividend.
The Board of Management has been
authorized to increase the companys
share capital, subject to the approval
5.3 preference shares shall be endowed
(0.4) with the same statutory rights as the
137.1 preference shares already issued. The
(1.3)
shareholders shall have a subscription
right. If both ordinary shares and
preference shares are issued, the Board
of Management shall be entitled,
subject to the Supervisory Boards
approval, to declare holders of one
type of shares ineligible to subscribe
for the other type of shares, if equal
subscription ratios have been fixed for
million both types of share. In addition, the
261.9
Board of Management shall be en-
25.7 titled to exclude fractional amounts
from the shareholders subscription
6.6
right.
By resolution at last years Annual
General Meeting, DM 10.0 million
279.1
(this equals 5.1 million) of the profit
available for distribution in 2000 have
been transferred to the revenue reserves
of KSB AG.
Since the subsidiaries proportionate
results have been transferred to the
Groups revenue reserves, the consoli-
dated net retained profit corresponds
to KSB AGs profit available for
distribution.
The major portion of the separate item
for shares not held by the parent
company covers PAB GmbH and the
interests it holds.

71
 Notes to the Financial Statements 2001

8 S P E C I A L R E S E RV E WITH the transfer of book profits resulting Another 0.2 million resulting from the
EQUITY PORTION from the disposal of assets which was disposal of undeveloped land at the
The special reserve with equity portion effected by KSB AG in accordance with Pegnitz site were transferred to this item
is almost exclusively attributable to 6b EStG (German Income Tax Act). in the year under review.

9 ACCRUALS KSB Group KSB AG

2001 2000 2001 2000
million million million million

Accruals for pensions and similar obligations 139.8 129.6 110.1 105.0
Tax accruals 4.2 3.9 0.2 0.2
Other accruals 137.4 139.6 67.7 65.1
281.4 273.1 178.0 170.3

The increase in the accruals for
pensions is above all attributable to
adjustments and improvements im-
plemented in the pension schemes of
the German Group companies. The
effets resulting from the application of
the updated life expectancy index
tables had already been fully taken
into account in previous years.
The KSB Groups accruals for pensions
also cover obligations of our US
subsidiaries for health insurance costs
incurred for retired employees.
Tax accruals include the additions of
the current year and residual amounts
of previous years.
Other accruals comprise provisions
for warranties, impending losses from
pending business, profit bonuses,
holiday and pre-retirement part-time
work remuneration obligations,
obligations on account of early
retirement and redundancy payment
schemes and compensation
agreements, future jubilee benefits to
staff and other uncertain liabilities.

10 LIABILITIES KSB GROUP 2001 2000

Total Remaining term
up to 1 year more than 5 years
million million million million

Loans 2.0 0.5 2.3

Liabilities to banks 58.4 36.1 9.6 61.6
Payments received on account of orders 16.3 15.4 19.2
of which from affiliated enterprises and minority shareholdings () () () (0.2)
Trade payables 99.3 92.4 3.2 92.1
Liabilities from bills accepted and drawn 17.4 17.3 16.5
Payables to affiliated enterprises 4.7 4.7 3.5
Payables to minority shareholdings 0.9 0.9 0.2
Other liabilities 34.1 34.0 0.1 33.1
of which taxes (8.9) (8.9) () (9.6)
of which relating to social security (11.6) (11.6) () (10.9)
233.1 201.3 12.9 228.5

72
 Notes to the Financial Statements 2001

11 LIABILITIES KSB AG 2001 2000

Total Remaining term
up to 1 year more than 5 years
million million million million

Liabilities to banks 0.2 0.2

Payments received on account of orders 9.7 9.4 11.7
of which from affiliated enterprises and minority shareholdings (0.2) (0.2) () (0.3)
Trade payables 22.9 22.7 25.9
Payables to affiliated enterprises 23.8 23.8 35.2
Payables to minority shareholdings 0.8 0.8 0.2
Other liabilities 8.2 8.1 0.1 10.9
of which taxes (2.2) (2.2) () (3.0)
of which relating to social security (3.9) (3.9) () (4.0)
65.6 65.0 0.1 83.9

The other liabilities cover long-term ployees invested in the company within bear the usual interest and are secured
loans totalling 1.5 million ( 2.8 the framework of the German Law on according to the legal requirements.
million in 2000) which KSB AG em- the Formation of Capital. These loans

12 CONTINGENT LIABILITIES AND C O L L AT E R A L KSB Group KSB AG

million million

Contingent liabilities from bills 0.1

Contingent liabilities from guarantees 12.8
Contingent liabilities from warranty deeds 8.0 21.8
Contingent liabilities from providing collateral for third-party liabilities 1.5 1.5
22.4 23.3

In the KSB Group, assets amounting to to provide collateral for bank and
8.6 million were pledged as security other liabilities.

13 O T H E R F I N A N C I A L O B L I G AT I O N S KSB Group KSB AG

million million

The following obligations for rental and leasing contracts will fall due in later years:
2002 4.1 2.9
2003-2006 5.7 4.9
2007-2012 5.1 5.1

The annual financial obligations result- two to three years. The order commit- bution obligations to affiliated enter-
ing from IT services contracts total ments for fixed assets total 5.7 mil- prises amount to 1.5 million.
12.6 million at KSB and 16.9 mil- lion, with a share of 2.4 million for
lion for the KSB Group over a term of KSB AG. KSB AGs capital contri-

73
 Notes to the Financial Statements 2001

Explanations to the Profit and Loss Accounts

14 SALES
Our sales comprise payments for
products and services invoiced to
customers including licence earnings,
less sales reductions. The sales of KSB to 52.7 % in 2001. The sales break-
AG totalled 451.5 million, up from down for the KSB Group is presented
418.5 million in 2000. The share of in the Segment Information.
export sales rose from 49.8 % in 2000

1 5 O T H E R O P E R AT I N G damages paid by insurance companies, for 2000 included major special

INCOME
Other operating income mainly in-
cludes income from services rendered,
income from commissions, income
from rental and leasing contracts, re-
versal of accruals no longer required,
reversal of value adjustments on receiv-
ables, as well as income from the dis-
posal of fixed assets. It also includes
currency and exchange rate profits,
as well as allowances and bonuses. The
data for KSB AG additionally include
the allocation of taxes on income to
German Group companies.
Both the consolidated financial state-
ments and KSB AGs financial state-
ments show a considerable decline in
other operating income.
For proper evaluation, it must be taken
into account that the figures presented
factors. At KSB AG, these covered
book profits from the disposal of
tangible assets, as those related to the
closure of the production facilities at
the Homburg site. The consolidated
financial statements also included book
profits, as well as income from the
reversal of accruals of our companies
in France and Italy.

16 COST OF M AT E R I A L S KSB Group KSB AG

2001 2000 2001 2000
million million million million

Expenses for raw materials, consumables and supplies, as well as for purchased goods 422.8 391.9 171.3 150.5
Expenses for purchased services 23.3 21.3 17.6 16.0
446.1 413.2 188.9 166.5

74
 Notes to the Financial Statements 2001

17 PERSONNEL EXPENSES KSB Group KSB AG

2001 2000 2001 2000
million million million million

Wages and salaries 337.7 334.1 146.3 147.3

Social security contributions and voluntary benefits 77.0 76.3 27.3 28.0
Expenses for old-age pensions 9.5 4.5 4.2 1.3
424.2 414.9 177.8 176.6

The interest included in the transfers The increase in the expenses for implemented in the pension schemes of
to the accruals for pensions is shown as old-age pensions is attributable to the German Group companies.
part of the financial result. adjustments and improvements

KSB Group KSB AG

2001 2000 2001 2000

Employees, annual average

Wage earners 5 969 5 980 1 281 1 315
Salaried employees 5 921 6 138 1 726 1 777
Apprentices 345 376 237 236
12 235 12 494 3 244 3 328

1 8 O T H E R O P E R AT I N G
EXPENSES
Other operating expenses basically
include administration and marketing
costs, purchased services, maintenance
expenses, rents and leases, warranties and
transfers to the accruals, as far as they
do not have to be charged to other items.
In KSB AGs profit and loss account, this transferred to the special reserve with
item also includes a tax credit resulting equity portion in accordance with
from group relief for the losses incurred 6b EStG (German Income Tax Act).
by KSB Fluid Systems GmbH.
In the year under review, book profits
resulting from the disposal of tangible
assets and totalling 0.2 million were

19 INCOME FROM INTERESTS HELD KSB Group KSB AG

2001 2000 2001 2000
million million million million

Income from interests held 1.2 1.0 2.5 4.8

of which from affiliated enterprises (1.1) (1.0) (2.3) (4.8)
Income from results transfer agreements 6.5 6.1
Expenses incurred for taking over losses 0.9 4.0
1.2 1.0 8.1 6.9

75
 Notes to the Financial Statements 2001

2 0 F I N A N C I A L R E S U LT KSB Group KSB AG

2001 2000 2001 2000
million million million million

Income from long-term investments and loans 0.1 0.2 0.1

Other interest and similar income 6.0 6.7 3.2 3.4

of which from affiliated enterprises (0.1) (0.1) (2.0) (2.1)

Amortization of financial assets and

securities classified as current assets 0.2 4.2

Interest and similar expenses 14.5 14.1 7.6 7.5

of which to affiliated enterprises () () ( 1.0) ( 0.9)
8.6 7.2 4.4 8.2

The amount of 4.2 million shown The expenses for interest on accruals amounted to 8.1 million ( 7.8 mil-
by KSB AG under amortization of for old-age pensions have been charged lion in 2000) and for KSB AG to 6.4
financial assets in the year 2000 referred to interest and similar expenses. million ( 6.3 million in 2000).
to KSB Shanghai Pump Co. Ltd. For the KSB Group, these expenses

2 1 TA X E S ON INCOME dependent taxes of the consolidated year under review as a consequence of

The taxes on income shown in the
financial statements of KSB AG
exclusively cover foreign tax collected
at source.
In the consolidated financial state-
ments, this item includes all income-
companies, as well as deferred taxes.
Tax-allowed extraordinary deprecia-
tion effected in the previous years
resulted in an improvement of approxi-
mately 1 million in the results both
of the KSB Group and KSB AG in the
a reduction in depreciation shown in
the financial statements. The effects
thereof will be repeated in years to
come at increasingly lower amounts.

76
 Notes to the Financial Statements 2001

Segment Information

The information on segments has been
structured in accordance with the Ger-
man Accounting Standards No. 3
(DRS 3) issued by the German Account-
ing Standards Committee [Deutsches
Rechnungslegungs Standards
Committee e.V., Berlin (DRSC)].
We are presenting selected data of
the consolidated financial statements
according to individual segments.
Segmentation as outlined below reflects
our internal management structure.
PUMPS WESTERN EUROPE
This segment covers all the pump-
related activities of our West European
Group companies, i.e. the develop-
ment, production, marketing and sale
of pumps for building services, indus-
trial applications, process engineering,
water supply, waste water disposal,
as well as energy applications. The seg-
ment also includes the relevant service
and systems engineering activities.
V A LV E S W E S T E R N E U R O P E
Included in this segment is the valves
business of the West European Group
companies, i.e. the development,
production, marketing and sale of
globe, gate, butterfly, diaphragm and
control valves for building services,
industrial applications, process
engineering, biotechnology and power
generation applications.
REGION AMERICAS
This segment covers all pump, valve
and service activities of the KSB Group
companies located in this region, with
the valves business playing but a minor
role.
R E G I O N A S I A / PA C I F I C / A F R I C A
As described for the Region Americas.
The data given for the individual seg-
ments have been established in accord-
ance with the accounting and valuation
principles applied to the consolidated
financial statements on which they are
based. Values within one segment have
been consolidated. For proper compa-
rability with the figures indicated in
the consolidated financial statements,
the inter-segmental consolidation
elements are shown in the Other
column. This column also includes the
data for Group companies not assigned
to a particular segment.

Pumps Valves Region Region Other Total

Western Western Americas Asia / Pacific /
Europe Europe Africa
(Values in million) 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000
External sales of the Group companies
by segment 653.8 606.7 186.9 180.3 185.3 186.6 120.5 119.3 15.5 4.2 1 162.0 1 097.1
by geographic area
Western Europe 519.7 503.8 145.8 145.4 4.3 3.3 0.6 0.6 670.4 653.1
Asia / Pacific / Africa 33.2 30.9 25.8 20.0 2.6 7.6 108.7 113.5 170.3 172.0
Americas 13.6 10.6 5.2 4.0 178.3 175.7 0.3 0.1 197.4 190.4
Eastern Europe / Middle East 87.3 61.4 10.1 10.9 0.1 10.9 5.1 15.5 4.2 123.9 81.6

Inter-segment sales 40.4 29.2 7.5 6.0 2.5 2.8 4.3 3.0 54.7 41.0

Income (EBIT) 24.4 17.7 7.1 0.5 7.1 10.2 3.3 6.3 3.6 0.9 38.3 35.6
of which
Depreciation 14.2 15.2 4.4 5.6 5.5 5.7 4.7 4.5 0.8 0.6 29.6 31.6
Other items not affecting cash flow 5.0 1.5 0.4 0.3 3.1 0.1 0.2 1.3 0.1 0.5 7.6 2.1
Results from group companies accounted for
under the equity method
Income from other interests held 1.2 1.0 1.2 1.0

Assets 439.6 411.6 119.5 127.4 125.9 123.1 115.1 110.7 4.7 1.7 804.8 774.5

Liabilities 352.3 343.3 70.8 84.3 58.8 53.6 64.3 58.5 26.1 32.6 520.1 507.1

Capital expenditure 14.5 10.4 5.1 3.5 6.2 6.9 3.1 3.4 0.1 5.5 29.0 29.7

Employees (annual average) 5 405 5 294 1 234 1 311 1 655 1 792 3 837 4 041 104 56 12 235 12 494

77
 Notes to the Financial Statements
I N F O R M AT I O N ON THE I N D I V I D U A L S E G M E N T D ATA
External sales of the Group companies
by segment
This item shows sales to external
customers and Group companies not
included in the consolidated financial
statements.
External sales of the Group companies
by geographic area
The segments sales to external cus-
tomers and Group companies not in-
cluded in the consolidated financial
statements are shown by geographic
area. For this purpose, the individual
customer locations have been assigned
to the Regions Western Europe, Asia /
Pacific / Africa, Americas and Eastern
Europe / Middle East.
Funds Flow Statement
For the preparation of the funds flow
statement we have applied the rules
laid down in the German Accounting
Standards No. 2 (DRS 2). The funds
flow statement is included in the
Management Report on page 15.
Inter-segment sales
This item covers all sales of the
segments to other segments.
Income (EBIT)
The segmental income corresponds to
the income for the year before
interest and income taxes (EBIT)
including the profit applicable to
minority interests.
Assets
The assets correspond to the total
assets shown in the consolidated
balance sheet. As far as assets of the
consolidated companies are used by
several segments, these have been allo-
cated on the basis of available contri-
2001
butory accounting records. Where this
has not been possible, they have been
allocated pro rata in line with sales.
Liabilities
The liabilities cover the total outside
capital; the special reserve with equity
portion is included at half its amount.
The liabilities have been allocated to
segments according to the principles
described for the assets.
Capital expenditure
The capital expenditure covers invest-
ments in tangible and intangible assets.
78
 Notes to the Financial Statements 2001

Additional Information

The majority interest in our company is
held by Klein Pumpen GmbH, Franken-
thal. The consolidated financial state-
ments of KSB AG are included in the
parent companys consolidated financial
statements submitted to the responsible
Register of Companies, Handelsregister
Ludwigshafen (Rhein).
The total Supervisory Board remunera-
tion for the financial year 2001 amounts
to 285 thousand ( 274 thousand in
2000) and the total Board of Manage-
ment remuneration to 1 748 thousand
( 1 402 thousand in 2000).
For pension obligations towards former
Board of Management members and
their surviving dependents 12 716
thousand ( 13 798 thousand in 2000)
have been reserved; their current
remuneration totalled 952 thousand
( 822 thousand in 2000) during the
financial year under review.
The members of the Supervisory Board
and the Board of Management are listed
on page 9.

Profit Appropriation Proposal

We will propose to the Annual General Meeting to use the profit available
for distribution, which includes a profit brought forward of 67 139, as follows
Payment of dividend to shareholders of
4.00 per ordinary no-par-value share = 3 546 460
and, as set out in the Articles of Association,
4.26 per preference no-par-value share = 3 683 673
Total 7 230 133

Transfer to revenue reserves 10 000 000

17 230 133
The balance of 202 241
to be carried forward to the new financial statements.
17 432 374

Frankenthal, March 2002

The Board of Management

79
 Notes to the Financial Statements
Independent Auditors Report
We have audited the annual financial
statements, together with the book-
keeping system, of the KSB Aktienge-
sellschaft, Frankenthal (Pfalz) as well as
the consolidated financial statements
and its report on the position of the
Company and the Group prepared by
the Company for the business year from
1 January to 31 December 2001. The
preparation of these documents in ac-
cordance with German commercial law
is the responsibility of the Companys
management. Our responsibility is to
express an opinion on the annual finan-
cial statements, together with the book-
keeping system, as well as on the con-
solidated financial statements and the
report on the position of the Company
and the Group based on our audit.
We conducted our audit of the annual
and consolidated financial statements
in accordance with 317 HGB [Han-
delsgesetzbuch: German Commercial
Code] and the German generally ac-
cepted standards for the audit of finan-
cial statements promulgated by the
Institut der Wirtschaftsprfer (IDW).
Those standards require that we plan
and perform the audit such that mis-
statements materially affecting the pre-
sentation of the net assets, financial
position and results of operations in
the annual and the consolidated finan-
cial statements in accordance with Ger-
man principles of proper accounting
and in the report on the position of the
Company and the Group are detected
with reasonable assurance. Knowledge
of the business activities and the eco-
nomic and legal environment of the
Company and the Group and evalua-
tions of possible misstatements are
taken into account in the determina-
tion of audit procedures. The effec-
tiveness of the internal control system
relating to the accounting system and
the evidence supporting the disclosures
in the books and records, the annual
and consolidated financial statements
and the report on the position of the
Company and the Group are examined
primarily on a test basis within the
framework of the audit. The audit
includes assessing the accounting and
consolidation principles used and signi-
ficant estimates made by management,
as well as evaluating the overall pre-
sentation of the annual and the conso-
lidated financial statements and the
report on the position of the Company
and the Group. We believe that our
2001
audit provides a reasonable basis for
our opinion.
Our audit has not led to any reserva-
tions.
In our opinion, the annual and the con-
solidated financial statements give a
true and fair view of the net assets,
financial position and results of opera-
tions of the Company and the Group,
respectively, in accordance with Ger-
man principles of proper accounting.
On the whole the report on the posi-
tion of the Company and the Group
provides a suitable understanding of
the Companys and the Groups posi-
tion and suitably presents the risks of
future development.
Mannheim, 22 March 2002
KPMG
Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprfungsgesellschaft
von Hohnhorst Benz
German Public Auditor German Public Auditor
80
 Ke y C o r p o r a t e a n d Te c h n i c a l Te r m s, A b b r e v i a t i o n s 2001

Key corporate and technical terms

AMRI: Under the AMRI brand, KSB sells its butterfly valves manufactured in
France, Spain and the United States. AMRI products also include pneuma-
tic, hydraulic and electric valve actuators, as well as control systems.

Pressure Equipment Directive: As from 29 May 2002, specific valve types must be in compliance with
this new EU directive. By applying the CE symbol, the supplier confirms
that the valves have been designed, manufactured, tested and documented
in accordance with the applicable rules and regulations.

Great Man-Made River: A large-scale project to transfer fossil ground water from the Libyan
Sahara to the agricultural production centres in the coastal regions.

Competence centres: In the framework of its global strategy, KSB has established competence
centres whose staff assume regional responsibility for defined product
groups, prepare quotations and process orders. If they have the necessary
equipment and know-how, these centres also assemble products and
modify them to meet country-specific standards.

Life cycle costs: Total system cost incurred over the life of that system. These include the
cost of investment, installation, energy, operation, maintenance, downtimes
and decommissioning.

Nano coatings: Nanotechnology refers to the ability to use physical effects at the level of
atoms in order to create new materials or change material structures.

Microstructuring: Nano coatings can be used to produce microstructures that are, for
example, dirt-repellent, scratch-proof or corrosion-resistant.

Resident engineer: Local representative who provides customer service and technical support.

Synchronous motor: Electric motor whose rotational speed corresponds exactly to the mains
frequency.

Total Pump Management: A comprehensive service concept for pumps, valves and related machinery.
The concept's modular design allows to offer service packages tailored to
the our customers' individual needs.

Abbreviations API American Petroleum Institute

BIG Business Integration Go is the name of a KSB project set up to im-
plement the SAP R/3 software in the European companies. This is
aimed to improve processes.
DVFA/SG Deutsche Vereinigung fr Finanzanalyse und Anlageberatung e.V. /
Schmalenbach-Gesellschaft (German Association of Financial
Analysis and Investment Consulting)
ISO International Organization for Standardization

81
2001

82
 Shareholder Information 2001

Important Dates:
Interim report January March 2002 May 2002
Annual General Meeting 2002:
CongressForum Frankenthal
Stephan-Cosacchi-Platz 5, 67227 Frankenthal 6 June 2002, 3 p.m.
Dividend payment as from June 2002
Interim report January June 2002 August 2002
Interim report January September 2002 November 2002

This Annual Report is also available in German.

Excerpts from the Annual Report and the interim reports mentioned above will be published
at our web site.

Contact Address:

KSB Aktiengesellschaft
Johann-Klein-Strae 9
67227 Frankenthal
Web site: www.ksb.com

Investor Relations
Dr. Wolfgang Schmitt
Telephone: +49 (62 33) 86 25 54
Fax: +49 (62 33) 86 34 93

Public Relations
Ullrich Bingenheimer
Telephone: +49 (62 33) 86 21 38
Fax: +49 (62 33) 86 34 56

83
 A n n u a l R e p o r t 2001
KSB Aktiengesellschaft

KSB Aktiengesellschaft
67225 Frankenthal (Germany)
Telephone +49 (62 33 ) 8 60 Fax +49 (62 33 ) 86 34 01 www.ksb.com