Company: KSB SE & Co. KGaA Vz
Industry: Pumps & Valves
Country: Germany
Sector: Industrials
Company type: SE & Co. KGaA
Revenue (EUR): 2819000000
Employees: 16407

Reported EU Taxonomy activities:
Manufacture of hydrogen
Electricity generation using solar photovoltaic technology
Renovation of existing buildings
Installation, maintenance and repair of energy efficiency equipment
Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)
Installation, maintenance and repair of renewable energy technologies
Acquisition and ownership of buildings

EU Taxonomy KPIs (currency: EUR, units: millions)
Turnover:
totalTurnover: value: 2819
percentage: 100.0
eligibleTurnover: percentage: –
alignedTurnover: percentage: –
nonEligibleTurnover: percentage: –
CapEx:
totalCapex: value: 135.6
percentage: 100.0
eligibleCapex: value: 62.7
percentage: 46.2
alignedCapex: percentage: 0.0
eligibleNotAlignedCapex: value: 62.7
percentage: 46.2
nonEligibleCapex: value: 72.9
percentage: 53.8
OpEx:
totalOpex: value: 118.4
percentage: 100.0
eligibleOpex: value: 6.3
percentage: 5.3
alignedOpex: percentage: 0.0
nonEligibleOpex: value: 112.1
percentage: 94.7

{0}------------------------------------------------

Image /page/0/Picture/0 description: The image shows the logo for KSB. The logo consists of two parts: a stylized graphic on the left and the text "KSB" on the right. The graphic on the left is a blue shape resembling a lowercase "b" enclosed within a gray square with rounded corners. The "b" shape has a small square extending from its base. The text "KSB" is in a sans-serif font and is colored gray with a metallic gradient effect.

Annual Report 2023

{1}------------------------------------------------

# <span id="page-1-0"></span>**KSB Profile**

KSB is a leading supplier of pumps, valves and related service. Its reliable, high-efficiency products are used in applications wherever fluids need to be transported or shut off, covering everything from building services, industry, petrochemicals and chemicals as well as water transport to waste water treatment, energy generation and mining. Founded in 1871 in Frankenthal, Germany, the company has a presence on all continents with its own sales and marketing organisations and manufacturing facilities. Wherever our customers are in the world, more than 190 service centres and around 3,500 service specialists are close at hand to provide spare parts, inspection, servicing, maintenance and repair services under the KSB SupremeServ brand. Our success is based on continuous innovation that is the fruit of the company's research and development activities.

Image /page/1/Figure/2 description: The image shows eight icons representing different industries and services. From left to right, the first icon is a factory representing "GENERAL INDUSTRY". The second icon is a building representing "BUILDING SERVICES". The third icon is a chemical flask and tubes representing "PETROCHEMICALS / CHEMICALS". The fourth icon is a water droplet representing "WATER". The fifth icon is an electrical plug representing "ENERGY". The sixth icon is two crossed pickaxes representing "MINING". The seventh icon is a valve representing "VALVES". The eighth icon is a turbine with a wrench representing "KSB SUPREMESERV".

Image /page/1/Picture/3 description: The image contains two symbols. The first symbol is an open book on top of a rectangular surface. The second symbol is a rectangle on top of a small rectangle.

#### **Digital Annual Report**

Online Annual Report [with additional functions:](http://ksb.com/online-report/2023) ksb.com/online-report

{2}------------------------------------------------

# <span id="page-2-0"></span>**2023 in Figures**

Image /page/2/Figure/1 description: The image shows four different business metrics: Order intake, Sales revenue, EBIT, and Employees. The order intake is €2,960 million, with an increase of €97.4 million or 3.4%. The sales revenue is €2,819 million, with an increase of €245.6 million or 9.5%. The EBIT is €223.9 million, with an increase of €54.8 million or 32.4%. The number of employees is 16,038 as of December 31, 2023.

**Digital Annual Report**

**GENERAL INDUSTRY**

**ENERGY**

**KSB Profile**

KSB is a leading supplier of pumps, valves and related service. Its reliable, high-efficiency products are used in applications wherever fluids need to be transported or shut off, covering everything from building services, industry, petrochemicals and chemicals as well as water transport to waste water treatment, energy generation and mining. Founded in 1871 in Frankenthal, Germany, the company has a presence on all continents with its own sales and marketing organisations and manufacturing facilities. Wherever our customers are in the world, more than 190 service centres and around 3,500 service specialists are close at hand to provide spare parts, inspection, servicing, maintenance and repair services under the KSB SupremeServ brand. Our success is based on continuous innovation that is the fruit of the company's research and development activities.

**MINING VALVES**

**PETROCHEMICALS / CHEMICALS**

**WATER**

**KSB SUPREMESERV**

 **BUILDING SERVICES**

Online Annual Report with additional functions: ksb.com/online-report

{3}------------------------------------------------

# <span id="page-3-0"></span>**Five-year Financial Summary**

#### **Business Development and Earnings**

|                                                                                              |     | 2023    | 2022    | 2021    | 2020    | 2019    |
|----------------------------------------------------------------------------------------------|-----|---------|---------|---------|---------|---------|
| Order intake                                                                                 | € m | 2,959.5 | 2,862.1 | 2,411.7 | 2,143.4 | 2,453.8 |
| Sales revenue                                                                                | € m | 2,819.0 | 2,573.4 | 2,343.6 | 2,207.9 | 2,383.2 |
| Orders on hand                                                                               | € m | 1,548.1 | 1,497.8 | 1,366.2 | 1,288.5 | 1,409.3 |
| Earnings before finance income / expense, income tax, depreciation and amortisation (EBITDA) | € m | 312.0   | 259.5   | 222.1   | 170.1   | 195.5   |
| Earnings before finance income / expense and income tax (EBIT)                               | € m | 223.9   | 169.1   | 141.2   | 70.2    | 113.6   |
| Earnings before income tax (EBT)                                                             | € m | 209.0   | 160.7   | 139.9   | 61.6    | 103.4   |
| Earnings after income tax                                                                    | € m | 176.6   | 127.3   | 110.3   | 4.4     | 58.5    |
| Free cash flow (cash flows from operating activities + cash flows from investing activities) | € m | 176.8   | -86.9   | 87.5    | 111.6   | 70.9    |
| Balance Sheet                                                                                |     |         |         |         |         |         |
|                                                                                              |     | 2023    | 2022    | 2021    | 2020    | 2019    |
| Balance sheet total                                                                          | € m | 2,669.8 | 2,478.9 | 2,314.4 | 2,140.0 | 2,327.0 |
| Investments                                                                                  | € m | 135.6   | 121.6   | 103.6   | 97.6    | 107.0   |
| Depreciation and amortisation                                                                | € m | 88.1    | 90.4    | 80.9    | 99.9    | 81.9    |
| Net financial position                                                                       | € m | 324.9   | 225.6   | 365.6   | 304.8   | 246.3   |
| Equity (incl. non-controlling interests)                                                     | € m | 1,216.9 | 1,125.6 | 869.1   | 703.8   | 862.6   |
| Equity ratio (incl. non-controlling interests)                                               | %   | 45.6    | 45.4    | 37.6    | 32.9    | 37.1    |
| Profitability                                                                                |     |         |         |         |         |         |
|                                                                                              |     | 2023    | 2022    | 2021    | 2020    | 2019    |
| EBT margin (sales revenue in relation to EBT)                                                | %   | 7.4     | 6.2     | 6.0     | 2.8     | 4.3     |
| EBIT margin (sales revenue in relation to EBIT)                                              | %   | 7.9     | 6.6     | 6.0     | 3.2     | 4.8     |
| Employees                                                                                    |     |         |         |         |         |         |
|                                                                                              |     | 2023    | 2022    | 2021    | 2020    | 2019    |
| Number of employees at 31 Dec.                                                               |     | 16,038  | 15,693  | 15,412  | 15,076  | 15,645  |
| Shares                                                                                       |     |         |         |         |         |         |
|                                                                                              |     | 2023    | 2022    | 2021    | 2020    | 2019    |
| Market capitalisation at 31 Dec.                                                             | € m | 1,092.9 | 644.3   | 727.8   | 441.9   | 536.1   |
| Earnings per ordinary share (EPS)                                                            | €   | 86.83   | 59.05   | 53.34   | -5.63   | 24.47   |
| Earnings per preference share (EPS)                                                          | €   | 87.09   | 59.31   | 53.60   | -5.37   | 24.73   |
| Dividend per ordinary no-par-value share                                                     | €   | 26.00   | 19.50   | 12.00   | 4.00    | 8.50    |
| Dividend per preference no-par-value share                                                   | €   | 26.26   | 19.76   | 12.26   | 4.26    | 8.76    |

Further information is provided in the Notes to the consolidated financial statements.

{4}------------------------------------------------

# <span id="page-4-0"></span>**Global Presence**

Backed up by production and assembly sites around the world, as well as a tight-knit sales and service network, KSB staff are always close at hand.

Image /page/4/Figure/2 description: This image shows a list of countries organized by region. The regions are Europe, Middle East/Africa, Asia/Pacific, and Americas. Each country is listed with a square next to it. Some of the squares are filled in blue, while others are not. At the bottom of the image, there is a key that indicates that the filled-in blue squares represent KSB production/assembly sites, and the empty squares represent KSB sales/service sites.

Image /page/4/Figure/3 description: This image is a world map with countries colored in different shades of blue and gray. The countries colored in dark blue include the United States, Canada, Brazil, Argentina, Russia, China, India, Australia, and South Africa. The countries colored in light blue include Mexico, Greenland, Saudi Arabia, and some countries in Europe. The remaining countries are colored in gray.

Chile

 Panama Peru USA

2023 2022 2021 2020 2019

2023 2022 2021 2020 2019

2023 2022 2021 2020 2019

2023 2022 2021 2020 2019

2023 2022 2021 2020 2019

**Five-year Financial Summary**

Order intake € m 2,959.5 2,862.1 2,411.7 2,143.4 2,453.8 Sales revenue € m 2,819.0 2,573.4 2,343.6 2,207.9 2,383.2 Orders on hand € m 1,548.1 1,497.8 1,366.2 1,288.5 1,409.3

depreciation and amortisation (EBITDA) € m 312.0 259.5 222.1 170.1 195.5

(EBIT) € m 223.9 169.1 141.2 70.2 113.6 Earnings before income tax (EBT) € m 209.0 160.7 139.9 61.6 103.4 Earnings after income tax € m 176.6 127.3 110.3 4.4 58.5

investing activities) € m 176.8 −86.9 87.5 111.6 70.9

Balance sheet total € m 2,669.8 2,478.9 2,314.4 2,140.0 2,327.0 Investments € m 135.6 121.6 103.6 97.6 107.0 Depreciation and amortisation € m 88.1 90.4 80.9 99.9 81.9 Net financial position € m 324.9 225.6 365.6 304.8 246.3 Equity (incl. non-controlling interests) € m 1,216.9 1,125.6 869.1 703.8 862.6 Equity ratio (incl. non-controlling interests) % 45.6 45.4 37.6 32.9 37.1

EBT margin (sales revenue in relation to EBT) % 7.4 6.2 6.0 2.8 4.3 EBIT margin (sales revenue in relation to EBIT) % 7.9 6.6 6.0 3.2 4.8

Number of employees at 31 Dec. 16,038 15,693 15,412 15,076 15,645

Market capitalisation at 31 Dec. € m 1,092.9 644.3 727.8 441.9 536.1 Earnings per ordinary share (EPS) € 86.83 59.05 53.34 −5.63 24.47 Earnings per preference share (EPS) € 87.09 59.31 53.60 −5.37 24.73 Dividend per ordinary no-par-value share € 26.00 19.50 12.00 4.00 8.50 Dividend per preference no-par-value share € 26.26 19.76 12.26 4.26 8.76

**Business Development and Earnings**

Free cash flow

**4**

**Balance Sheet**

**Profitability**

**Employees**

**Shares**

KSB Group / Annual Report 2023

Earnings before finance income / expense, income tax,

Earnings before finance income / expense and income tax

(cash flows from operating activities + cash flows from

Further information is provided in the Notes to the consolidated financial statements.

{5}------------------------------------------------

**1**

# <span id="page-5-0"></span>**1 [Management and Issues 2023](#page-6-0)**

- 8 [Management](#page-7-0)
- 10 [To Our Shareholders](#page-9-0)
- 14 [Report of the Supervisory Board](#page-13-0)
- 22 [A Look Back at 2023](#page-21-0)
- 26 [Combined Separate Non-financial Report](#page-25-0)
- [56 Limited Assurance Report on the](#page-55-0)  Combined Non-financial Report

# **2**

#### **[Combined Management Report](#page-60-0)**

- 62 [Basic Principles of the Group](#page-61-0)
- 62 Group Business Model
- 64 [Control System](#page-63-0)
- 65 [Research and Development](#page-64-0)
- 67 Economic Review
- [67 Macroeconomic Environment](#page-66-0)  and Sector View
- [69 Business Development and](#page-68-0)  Results of Operations
- 74 [Financial Position and Net Assets](#page-73-0)
- [79 Summary of the Performance in](#page-78-0)  the Financial Year
- 80 [Report on Expected Developments](#page-79-0)
- 82 [Opportunities and Risks Report](#page-81-0)
- 90 [Disclosures Relating to KSB SE & Co. KGaA \(HGB](#page-89-0))
- 96 [Acquisition-related Disclosures](#page-95-0)
- [98 Corporate Governance Statement \(Section 315d](#page-97-0) HGB in Conjunction with Section 289f HGB)
- [99 Statement on the Non-financial Report](#page-98-0)  (Section 315c in Conjunction with Sections 289c to 289e HGB)
- [100 Description of Key Features of the Internal](#page-99-0)  Control System, the Risk Management System and the Compliance Management System in Accordance with the A.5 DCKG 2023 Recommendation

# **3**

#### **[Consolidated Financial Statements](#page-102-0)**

- 104 [Balance Sheet](#page-103-0)
- 106 [Statement of Comprehensive Income](#page-105-0)
- 108 [Statement of Changes in Equity](#page-107-0)
- 110 [Statement of Cash Flows](#page-109-0)
- 111 [Notes](#page-110-0)
- 170 [List of Shareholdings](#page-169-0)
- 174 [Supervisory Board](#page-173-0)
- 176 [Legal Representatives](#page-175-0)
- [178 Proposal on the Appropriation](#page-177-0)  of the Net Retained Earnings of KSB SE & Co. KGaA

# **4**

#### **[General Information](#page-180-0)**

- [182 Responsibility Statement](#page-181-0)
- [183 Independent Auditor's Report](#page-182-0)
- 194 [Glossary](#page-193-0)
- 196 [Contacts](#page-195-0)
- 197 [Financial Calendar](#page-196-0)

#### **[Overviews](#page-1-0)**

- [I KSB Profile](#page-1-0)
- [II 2023 in Figures](#page-2-0)
- [III Five-year Financial Summary](#page-3-0)
- [IV Global Presence](#page-4-0)

#### **Key to Symbols**

Image /page/5/Picture/53 description: The image shows two lines of text with icons next to them. The first line has a blue arrow icon pointing to the right, followed by the text "Reference to table". The second line has a blue paperclip icon, followed by the text "Useful link".

 Interactive table of contents, links directly to the respective page 

{6}------------------------------------------------

**6**

**1**

**2**

**Management and Issues 2023**

14 Report of the Supervisory Board

**Combined Management Report**

62 Basic Principles of the Group 62 Group Business Model 64 Control System

65 Research and Development

 67 Macroeconomic Environment and Sector View 69 Business Development and Results of Operations 74 Financial Position and Net Assets 79 Summary of the Performance in the Financial Year 80 Report on Expected Developments 82 Opportunities and Risks Report

96 Acquisition-related Disclosures

289c to 289e HGB)

Recommendation

90 Disclosures Relating to KSB SE & Co. KGaA (HGB)

98 Corporate Governance Statement (Section 315d HGB in Conjunction with Section 289f HGB)

(Section 315c in Conjunction with Sections

Control System, the Risk Management System and the Compliance Management System in Accordance with the A.5 DCKG 2023

99 Statement on the Non-financial Report

100 Description of Key Features of the Internal

67 Economic Review

26 Combined Separate Non-financial Report 56 Limited Assurance Report on the

Combined Non-financial Report

8 Management 10 To Our Shareholders

22 A Look Back at 2023

**Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

**3**

104 Balance Sheet

111 Notes

**4**

194 Glossary 196 Contacts

**Overviews**

I KSB Profile II 2023 in Figures

IV Global Presence

**Key to Symbols**

 Reference to table Useful link

 Interactive table of contents, links directly to the respective page

**Consolidated Financial Statements**

106 Statement of Comprehensive Income 108 Statement of Changes in Equity 110 Statement of Cash Flows

178 Proposal on the Appropriation

KSB SE & Co. KGaA

of the Net Retained Earnings of

 170 List of Shareholdings 174 Supervisory Board 176 Legal Representatives

**General Information**

197 Financial Calendar

182 Responsibility Statement 183 Independent Auditor's Report

III Five-year Financial Summary

KSB Group / Annual Report 2023

<span id="page-6-0"></span>Image /page/6/Picture/2 description: The image shows a large white number 1 on a blue background. The bottom of the image shows the letters 'Man' in white.

# **Management and Issues 2023**

- 8 [Management](#page-7-0)
- 10 [To Our Shareholders](#page-9-0)
- 14 [Report of the Supervisory Board](#page-13-0)
- 22 [A Look Back at 2023](#page-21-0)
- 26 [Combined Separate Non-financial Report](#page-25-0)
- [56 Limited Assurance Report on](#page-55-0)  the Combined Non-financial Report

{7}------------------------------------------------

<span id="page-7-0"></span>Image /page/7/Picture/1 description: Two men in suits are standing on a lawn. The man on the left is wearing a blue suit and has his arms crossed. He is looking to the right and smiling. The man on the right is wearing a dark suit and has his hands in his pockets. He is looking forward and smiling. There are trees and bushes in the background.

**Dr. Matthias Schmitz** Managing Director of KSB Management SE (CFO) **Ralf Kannefass** Managing Director of KSB Management SE (CSO)

{8}------------------------------------------------

# **Management**

**Dr. Stephan Timmermann** Managing Director of KSB Management SE (CEO)

**Ralf Kannefass** Managing Director of KSB Management SE (CSO)

**Dr. Matthias Schmitz** Managing Director of KSB Management SE (CFO)

KSB Group / Annual Report 2023

**8 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

**Dr. Stephan Bross** Managing Director of KSB Management SE (CTO)

{9}------------------------------------------------

<span id="page-9-0"></span>Image /page/9/Picture/1 description: A man in a suit and tie is standing in front of a green background. He is smiling and looking at the camera. The background is out of focus, but it appears to be a park or garden. The man is wearing a dark blue suit, a white shirt, and a blue tie. He has a red handkerchief in his pocket. He is standing with his hands clasped in front of him.

Dr. Stephan Timmermann

# **Dear Shareholders and Business Partners,**

KSB is able to report on an exceptional financial year in which the company increased its key business figures despite difficult global political conditions.

#### **Tense global situation**

The start of the year continued to be marked by the global impact of the COVID-19 pandemic. Gas shortages combined with higher gas prices posed particular challenges for the manufacturing industry in Germany. On the procurement markets, the easing of the inflation wave and a slight improvement in the availability of important bought-in parts provided some relief.

Unfortunately, our hopes for an improvement in the global political situation remained unfulfilled. The war in Ukraine continued unabated. In the second quarter, fears about global economic relations intensified due to the simmering China-Taiwan conflict. Higher interest rates led to a decrease in investments. The Gaza region has been at war since the attack on Israel in October. These serious events led to a further shake-up of the usual global order and continuing uncertainty in the global economy.

Europe, and in particular Germany, suffered from inflation-related consumer reticence and general uncertainty. Overall, Germany experienced negative growth.

We have tackled the many challenges with confidence and have not only kept the company on a stable course, but also enabled it to advance.

{10}------------------------------------------------

Dr. Stephan Timmermann

**Tense global situation** 

in the global economy.

KSB Group / Annual Report 2023

**Dear Shareholders and Business Partners,**

improvement in the availability of important bought-in parts provided some relief.

business figures despite difficult global political conditions.

**10 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

uncertainty. Overall, Germany experienced negative growth.

stable course, but also enabled it to advance.

KSB is able to report on an exceptional financial year in which the company increased its key

The start of the year continued to be marked by the global impact of the COVID-19 pandemic. Gas shortages combined with higher gas prices posed particular challenges for the manufacturing industry in Germany. On the procurement markets, the easing of the inflation wave and a slight

Unfortunately, our hopes for an improvement in the global political situation remained unfulfilled. The war in Ukraine continued unabated. In the second quarter, fears about global economic relations intensified due to the simmering China-Taiwan conflict. Higher interest rates led to a decrease in investments. The Gaza region has been at war since the attack on Israel in October. These serious events led to a further shake-up of the usual global order and continuing uncertainty

Europe, and in particular Germany, suffered from inflation-related consumer reticence and general

We have tackled the many challenges with confidence and have not only kept the company on a

#### **Good market positioning**

KSB's global positioning once again proved to be a major strength in 2023. Thanks to our regional production plants organised in a global manufacturing network, we can quickly supply our customers in all key markets with high-quality products. By systematically aligning all activities with market requirements, we achieved a good order intake despite strong competition in nearly all Market Areas.

Economic downturns, such as in the construction industry and the German mechanical engineering industry, which particularly dampened growth in Building Services and General Industry, were offset by positive developments in the Mining, Petrochemicals / Chemicals, Energy and Water Market Areas. KSB's broad product range proved to be an advantage.

Our strong earnings position is supported by tight cost control across the Group. A consistent focus on the service and spare parts business under the KSB SupremeServ brand made a substantial contribution to the profitable growth of the entire Group.

This business success is reflected in the rising valuation of KSB on the financial markets, leading to its inclusion in the SDAX in December.

#### **Strategy 2030**

An important milestone was the adoption of the Mission TEN30 strategy. In addition to the goal of ten percent profitability by 2030, the strategy sets out numerous targets and measures to drive the company forward. Previous programmes, such as reducing costs at KSB SE & Co. KGaA, were successfully completed.

#### **Megatrends as opportunities**

With our many years of expertise in fluid handling, we are not only benefiting from the megatrends and major challenges in the world, but are also actively shaping them with new technologies.

The growing demand for electric motors required for e-mobility and the generation of solar and wind energy will increase the demand for copper and consequently for pumps in the mining industry. The Energy Market Area will also tap new potential as a result of the change in the energy mix. In the Petrochemicals / Chemicals Market Area, KSB will set technological standards in hydrogen production and carbon capture. The growing global population and urbanisation are placing huge demands on water supply and waste water disposal. Adding to this are weather extremes as a result of climate change, the consequences of which we can mitigate with futureoriented water management using pumps.

{11}------------------------------------------------

#### **Global investments**

KSB increased its global investment volume to 136 million euros in 2023, investing in the expansion and technological or energy-related modernisation of its locations in all key markets. In Frankenthal, KSB commissioned a new heating station, saving 900 tonnes of CO2 annually. At its Pegnitz location, KSB adopted a comprehensive concept for the future which saw an investment of 25 million euros in capacity expansion and sustainable production. In India, a new office complex commenced operations and in China construction work began on a cuttingedge production facility for chemical pumps.

#### **Employee engagement**

The satisfaction and engagement of our employees is a key pillar in the company's success – and a matter close to my heart. Successful corporate development is not possible without highly dedicated people who see change as an opportunity. At the same time, the meaningfulness of the company's business activities and its social competence are becoming increasingly important for attracting the best talent. We have therefore introduced a variety of measures worldwide to promote our corporate culture and strengthen loyalty to the company.

#### **The KSB brand**

Strengthened by the company's sustained positive development, strategic goals and marketleading position, KSB focused on raising brand awareness as a Global Champion in the reporting year. In order to visibly reflect this positive change in our brand image, we are currently revising our logo, the associated brand claim and our corporate values. Have a look at the exclusive initial preview on the next page.

#### **The 2024 financial year**

We anticipate a wide range of challenges in the new financial year, which will be dominated by political elections in key markets such as India, the USA, South Africa and Europe. Uncertain interest rate trends, global conflicts and the current lack of growth impetus in key countries mean that we are not expecting a significant upturn. However, our confidence in developing the company remains unwavering. KSB's positioning makes it resilient and we will once again generate substantial value for our shareholders, employees and business partners in the 2024 financial year.

Rilie

Dr. Stephan Timmermann, CEO

{12}------------------------------------------------

Image /page/12/Picture/1 description: The image shows the logo for KSB. The logo consists of a blue and gray square with a stylized "b" inside, followed by the letters "KSB" in gray. Below the logo is the text "Solutions. For Life." in blue.

#### **The new KSB logo**

**Global investments**

edge production facility for chemical pumps.

**12 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

**Employee engagement**

**The KSB brand**

financial year.

KSB Group / Annual Report 2023

initial preview on the next page.

**The 2024 financial year**

Dr. Stephan Timmermann, CEO

KSB increased its global investment volume to 136 million euros in 2023, investing in the expansion and technological or energy-related modernisation of its locations in all key markets.

At its Pegnitz location, KSB adopted a comprehensive concept for the future which saw an investment of 25 million euros in capacity expansion and sustainable production. In India, a new office complex commenced operations and in China construction work began on a cutting-

The satisfaction and engagement of our employees is a key pillar in the company's success – and a matter close to my heart. Successful corporate development is not possible without highly dedicated people who see change as an opportunity. At the same time, the meaningfulness of the company's business activities and its social competence are becoming increasingly important for attracting the best talent. We have therefore introduced a variety of measures worldwide to

Strengthened by the company's sustained positive development, strategic goals and marketleading position, KSB focused on raising brand awareness as a Global Champion in the reporting year. In order to visibly reflect this positive change in our brand image, we are currently revising our logo, the associated brand claim and our corporate values. Have a look at the exclusive

We anticipate a wide range of challenges in the new financial year, which will be dominated by political elections in key markets such as India, the USA, South Africa and Europe. Uncertain interest rate trends, global conflicts and the current lack of growth impetus in key countries mean that we are not expecting a significant upturn. However, our confidence in developing the company remains unwavering. KSB's positioning makes it resilient and we will once again generate substantial value for our shareholders, employees and business partners in the 2024

annually.

In Frankenthal, KSB commissioned a new heating station, saving 900 tonnes of CO2

promote our corporate culture and strengthen loyalty to the company.

Pride, strength, power and stability have been deeply embedded in the premium brand for more than 150 years. These elements are combined in the new KSB logo. The circulation symbol, which stands for comprehensive solutions, the lettering and the blue brand colour have been given a fresh new look. Our customer-first approach is emphasised by the circulation symbol placed prominently at the beginning. The KSB lettering has been significantly enlarged for greater impact, making it more prominent. A three-dimensional design underlines KSB's high quality and unique positioning.

#### **Solutions. For Life.**

**Pumps, valves and services from KSB have an impact on people's lives via a wide range of solutions.** Our new brand claim shines the spotlight on first-rate solutions for people's everyday needs worldwide – be it for water, electricity, raw materials or food.

{13}------------------------------------------------

<span id="page-13-0"></span>Image /page/13/Picture/4 description: A portrait of an older man with gray hair and a beard, wearing glasses, a dark suit, and a blue and white striped tie. He is smiling and looking directly at the camera. The background is an office setting with white walls, light fixtures, and a blurred view of other office spaces and plants.

Dr. Bernd Flohr (Chairman of the Supervisory Board)

KSB successfully continued its growth path of previous years in the 2023 financial year ("reporting year"), benefiting from its strong positioning in many Market Areas and Regions. Despite difficult economic conditions in some areas, order intake rose and sales revenue increased significantly; earnings reached a new high. Management once again used the year to drive important projects geared towards the future, in particular the corporate strategy, the revision of which was completed in 2023. The strategy forms an important basis for the company's continued success and maps out its development with targeted growth initiatives in selected markets. Sustainability is another key focus: As a manufacturing company, KSB strives to counteract climate change with efficient processes in its own factories. However, an even greater impact on decarbonising the industrial sector is being pursued through the energy-efficient and digital product portfolio with which KSB supplies many different industries. Management is working with great commitment to further strengthen the future viability and competitiveness of the company in a challenging economic and geopolitical environment. The Supervisory Board will continue to liaise closely with Management to this end in future.

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KSB successfully continued its growth path of previous years in the 2023 financial year ("reporting year"), benefiting from its strong positioning in many Market Areas and Regions. Despite difficult economic conditions in some areas, order intake rose and sales revenue increased significantly; earnings reached a new high. Management once again used the year to drive important projects geared towards the future, in particular the corporate strategy, the revision of which was completed in 2023. The strategy forms an important basis for the company's continued success and maps out its development with targeted growth initiatives in selected markets. Sustainability is another key focus: As a manufacturing company, KSB strives to counteract climate change with efficient processes in its own factories. However, an even greater impact on decarbonising the industrial sector is being pursued through the energy-efficient and digital product portfolio with which KSB supplies many different industries. Management is working with great commitment to further strengthen the future viability and competitiveness of the company in a challenging economic and geopolitical environment. The Supervisory Board will continue to liaise closely with Management

**Report of the Supervisory Board**

**14 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

to this end in future.

KSB Group / Annual Report 2023

Dr. Bernd Flohr (Chairman of the Supervisory Board)

Throughout the reporting year, the Supervisory Board performed its duties as set out by law, the Articles of Association and the Rules of Procedure with utmost diligence. It advised the general partner, KSB Management SE, acting through its Managing Directors, on corporate management issues and monitored its work. The Managing Directors informed the Supervisory Board about current developments, including but not limited to the company's business, financial and staffing situation, planned investments, corporate planning and strategy via written and oral reports prepared regularly and on an ad hoc basis in a comprehensive and timely manner.

The Supervisory Board discussed business transactions of significance to the company in depth on the basis of reports submitted by the Managing Directors. Any departures in business developments from the plans and targets were questioned and commented on in detail by the Managing Directors. The Supervisory Board also dealt with risk situations, risk management and compliance. Beyond the intensive work in plenary sessions and in the committees, the Chairman of the Supervisory Board in particular and other members of the Supervisory Board were in constant contact with the Managing Directors also between scheduled meetings. There was an ongoing exchange of information with the Administrative Board of KSB Management SE, including but not limited to its Chairman, on current business developments and on material transactions, as well as on questions of strategy and planning. The Chairman of the Administrative Board also participated regularly in the Supervisory Board meetings. The Chairman of the Supervisory Board and his deputy were guests of the Administrative Board on selected issues. The Supervisory Board also convened regularly in the absence of the Management.

The company continued to support the members of the Supervisory Board in their training measures during the reporting year, providing them with regular information about the rights, obligations and practice of the Supervisory Board. As part of the onboarding process, new members of the Supervisory Board are quickly familiarised with relevant company topics through introductory discussions with committee members and managers responsible for functional areas.

#### **Main focus of work in the Supervisory Board plenary sessions**

The Supervisory Board held five regular in-person meetings in the 2023 financial year; at three of these meetings, one respectively two Supervisory Board members attended via video conference. In addition, the Supervisory Board held a constituent meeting in personal attendance following the Annual General Meeting on 4 May 2023.

Key subjects of nearly all Supervisory Board meetings were the performance of the company and the KSB Group, primarily with regard to their business and financial situation, measures for securing future business development, major investment projects and risk management topics.

Regular consultations with the Managing Directors on business development included the analysis of developments in the Market Areas of the Pumps Segment, the Valves and the KSB SupremeServ Segments, as well as in the Regions. Suitable measures to improve results of operations were discussed, as were the growth initiatives presented by the Managing Directors.

The Managing Directors also provided regular information on the development of ongoing major investments in our production facilities at various sites. The focus in 2023 was on two Asian locations: In the second half of the year, construction work began on a pump factory in Shanghai, 

{15}------------------------------------------------

which will in particular supply China's significant chemical industry. At the Shirwal factory in India, the construction of the administration building and the remaining work on the new production halls were completed in 2023.

The Supervisory Board was also briefed regularly on the further development of the strategy, which was finalised in the fourth quarter of 2023 with the involvement of individual Supervisory Board members and then approved by the Administrative Board of KSB Management SE. Its implementation is to help to sustainably increase the return on sales to a level of at least ten percent by 2030 through targeted growth initiatives in the Segments and Market Areas. The operational plans are supported by overarching and centrally managed measures. In addition to the aforementioned sustainability goals, these include technological development, improving digital customer interfaces and intensifying application knowledge in Sales.

The following key topics were discussed at the individual Supervisory Board meetings:

The meeting in March 2023 particularly addressed the audit and approval of the annual financial statements for the 2022 financial year, including the combined management report and the combined separate non-financial report for the company and the KSB Group in accordance with Sections 315b, 315c in conjunction with Sections 289c to 289e HGB [*Handelsgesetzbuch* – German Commercial Code]; the auditors also explained the key audit areas and results. The Chairman of the Audit Committee gave a detailed account of the audit carried out on accounting processes for the period. The Supervisory Board agreed to the proposal on the appropriation of the net retained earnings presented by the general partner for the 2022 financial year. It also approved the remuneration report pursuant to Section 162 AktG [*Aktiengesetz* – German Public Companies Act] for the 2022 financial year. At this meeting, the Supervisory Board also discussed the development of a US service and re-engineering company acquired in 2010, which primarily supplies customers in the energy and refinery markets. In 2022, the company and the majority of its activities were relocated to a newly built site with a modern test facility and it has since then increasingly focused on growth.

In May, the Supervisory Board held a comprehensive review of business development in the countries of Northern, Eastern and Southeastern Europe, which KSB has combined into one area of responsibility. The strength of KSB SupremeServ's business there is very positive, representing an important pillar of the Group's earnings. The valve business is also developing at an aboveaverage rate in this region and reflects the high potential of this Segment. Another focus of the meeting was on the centralised measures for the development of Sales. The aim is to align its organisation and tools with customers' growing digital requirements while simultaneously improving efficiency at KSB.

At the meeting in July, the Supervisory Board discussed business development in two Regions. The core market of Europe continues to be of particular importance to the Group. The fact that the Europe-based parent company KSB SE & Co. KGaA achieved a significant improvement in its earnings capacity in 2023 was viewed by the Supervisory Board as very encouraging. The positive development is due, among other things, to the earnings enhancement programme that has been systematically implemented since 2020 and overseen by the Supervisory Board. The Managing 

{16}------------------------------------------------

which will in particular supply China's significant chemical industry. At the Shirwal factory in India, the construction of the administration building and the remaining work on the new

The Supervisory Board was also briefed regularly on the further development of the strategy, which was finalised in the fourth quarter of 2023 with the involvement of individual Supervisory Board members and then approved by the Administrative Board of KSB Management SE. Its implementation is to help to sustainably increase the return on sales to a level of at least ten percent by 2030 through targeted growth initiatives in the Segments and Market Areas. The operational plans are supported by overarching and centrally managed measures. In addition to the aforementioned sustainability goals, these include technological development, improving digital

production halls were completed in 2023.

**16 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

increasingly focused on growth.

improving efficiency at KSB.

KSB Group / Annual Report 2023

customer interfaces and intensifying application knowledge in Sales.

The following key topics were discussed at the individual Supervisory Board meetings:

The meeting in March 2023 particularly addressed the audit and approval of the annual financial statements for the 2022 financial year, including the combined management report and the combined separate non-financial report for the company and the KSB Group in accordance with Sections 315b, 315c in conjunction with Sections 289c to 289e HGB [*Handelsgesetzbuch* – German Commercial Code]; the auditors also explained the key audit areas and results. The Chairman of the Audit Committee gave a detailed account of the audit carried out on accounting processes for the period. The Supervisory Board agreed to the proposal on the appropriation of the net retained earnings presented by the general partner for the 2022 financial year. It also approved the remuneration report pursuant to Section 162 AktG [*Aktiengesetz* – German Public Companies Act] for the 2022 financial year. At this meeting, the Supervisory Board also discussed the development of a US service and re-engineering company acquired in 2010, which primarily supplies customers in the energy and refinery markets. In 2022, the company and the majority of its activities were relocated to a newly built site with a modern test facility and it has since then

In May, the Supervisory Board held a comprehensive review of business development in the countries of Northern, Eastern and Southeastern Europe, which KSB has combined into one area of responsibility. The strength of KSB SupremeServ's business there is very positive, representing an important pillar of the Group's earnings. The valve business is also developing at an aboveaverage rate in this region and reflects the high potential of this Segment. Another focus of the meeting was on the centralised measures for the development of Sales. The aim is to align its organisation and tools with customers' growing digital requirements while simultaneously

At the meeting in July, the Supervisory Board discussed business development in two Regions. The core market of Europe continues to be of particular importance to the Group. The fact that the Europe-based parent company KSB SE & Co. KGaA achieved a significant improvement in its earnings capacity in 2023 was viewed by the Supervisory Board as very encouraging. The positive development is due, among other things, to the earnings enhancement programme that has been systematically implemented since 2020 and overseen by the Supervisory Board. The Managing Directors see great potential in the Region Middle East / Africa, particularly in the Water Market Area; the company therefore plans to further expand its presence there.

In October, the Supervisory Board held a meeting at KSB ITUR Spain, S.A., Spain. The management reported on the development of the company acquired in 2003 and its strategic role within the KSB Group. The company – together with the companies in France and Portugal – is assigned to the Region Europe West; its development was also discussed in detail. Other topics on the agenda included the expansion of the e-sales business and the status of preparations for rolling out the ERP software SAP S/4HANA, which will replace SAP's ERP software currently used. The Managing Directors wish to combine this transformation with the implementation of even more efficient processes.

The Supervisory Board addressed the planning for the 2024 financial year and medium-term planning at the meeting in December. It received detailed reports on the corresponding goals, notably on order intake, sales revenue and earnings. Particular emphasis was placed on discussing the investment budget; this is largely earmarked for the extension of production capacities in growth markets and the modernisation of locations. Business development in the Region Asia / Pacific was also discussed: Thanks to the economic dynamics in individual countries, KSB achieved above-average growth there, particularly in the KSB SupremeServ Segment and in the Mining and Water Market Areas.

#### **Main focus of work in the committees**

In order to enable it to fulfil its duties efficiently, the Supervisory Board worked with four committees during the reporting year. These prepared the Supervisory Board's resolutions and the special topics to be discussed in the plenary sessions. In addition, they made their own decisions within the scope of their authorities. This allocation has proved worthwhile in practice. The Chairs of the committees regularly and comprehensively reported in the plenary sessions on the content and results of the work carried out in the committees.

#### **SUPERVISORY BOARD COMMITTEES**

and their Chairs, as well as number of meetings in the reporting year

#### **CORPORATE DEVELOPMENT COMMITTEE**

Chair: Klaus Kühborth No. of meetings: 5

#### **NOMINATION COMMITTEE**

Members: Dr. Bernd Flohr Klaus Kühborth No. of meetings: 1

#### **PERSONNEL COMMITTEE**

Chair: Dr. Bernd Flohr No. of meetings: 2

#### **AUDIT COMMITTEE**

Chair: Klaus Burchards No. of meetings: 6

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|                                 | Supervisory<br>Board | Nomination<br>Committee | Corporate<br>Development<br>Committee | Personnel<br>Committee | Audit<br>Committee |
|---------------------------------|----------------------|-------------------------|---------------------------------------|------------------------|--------------------|
| Dr. Bernd Flohr                 | 5/5                  | 1/1                     |                                       | 2/2                    | 6/6                |
| René Klotz (until May 2023)     | 2/5                  |                         | 2/5                                   |                        |                    |
| Claudia Augustin                | 5/5                  |                         |                                       | 2/2                    |                    |
| Klaus Burchards                 | 4/5                  |                         |                                       |                        | 6/6                |
| Arturo Esquinca                 | 5/5                  |                         | 5/5                                   |                        |                    |
| Klaus Kühborth                  | 5/5                  | 1/1                     | 5/5                                   |                        |                    |
| Birgit Mohme                    | 4/5                  |                         |                                       |                        | 4/6                |
| Thomas Pabst                    | 5/5                  |                         | 5/5                                   |                        |                    |
| Prof. Dr. Corinna Salander      | 4/5                  |                         | 3/5                                   |                        |                    |
| Harald Schöberl                 | 5/5                  |                         |                                       |                        | 6/6                |
| Volker Seidel                   | 5/5                  |                         | 5/5                                   | 2/2                    |                    |
| Gabriele Sommer                 | 4/5                  |                         |                                       | 2/2                    |                    |
| Jürgen Walther (since May 2023) | 3/5                  |                         | 3/5                                   |                        |                    |

#### **Attendance at meetings**

The **Audit Committee** convened six times in the reporting year, with five meetings held in person and one as a video conference. It discussed the 2022 annual and consolidated financial statements and the relevant audit reports submitted by the auditors. The combined separate non-financial report and remuneration report pursuant to Section 162 AktG were also discussed in detail. The committee meetings were generally attended by the Managing Directors and the managers of the relevant specialist departments, as well as, on multiple occasions, the auditors. The Audit Committee, in particular its Chairman, regularly exchanged ideas with the auditors in preparatory meetings, without participation of the Managing Directors. The committee prepared the independent examination by the Supervisory Board of the financial statements, the combined management reports and the proposal on profit appropriation. In addition, the Audit Committee submitted a recommendation for the selection of auditors by the 2023 Annual General Meeting to the Supervisory Board plenary session. The Audit Committee also commissioned the auditors with auditing the annual and consolidated financial statements for the 2023 financial year and defined specific key areas for the audit together with the auditors. It obtained the declaration of independence by the auditors and monitored the auditors' continued independence and performance of non-audit services. The committee also reviewed the quality of the annual financial statements on the basis of previously defined criteria.

In addition, the committee focused on reviewing accounting, monitoring the accounting process, the effectiveness of the internal control system, the risk management system and the internal audit system, as well as the auditing of the annual financial statements and compliance. In this context, it also debated the half-year financial report with the Managing Directors. It also focused regularly on the Internal Audits reports. Another focus of the committee meetings was the economic development of the Group and selected subsidiaries for which earnings enhancement programmes had been initiated. The committee discussed the development of the Group's tax rate, other tax

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The **Audit Committee** convened six times in the reporting year, with five meetings held in person and one as a video conference. It discussed the 2022 annual and consolidated financial statements and the relevant audit reports submitted by the auditors. The combined separate non-financial report and remuneration report pursuant to Section 162 AktG were also discussed in detail. The committee meetings were generally attended by the Managing Directors and the managers of the relevant specialist departments, as well as, on multiple occasions, the auditors. The Audit Committee, in particular its Chairman, regularly exchanged ideas with the auditors in preparatory meetings, without participation of the Managing Directors. The committee prepared the independent examination by the Supervisory Board of the financial statements, the combined management reports and the proposal on profit appropriation. In addition, the Audit Committee submitted a recommendation for the selection of auditors by the 2023 Annual General Meeting to the Supervisory Board plenary session. The Audit Committee also commissioned the auditors with auditing the annual and consolidated financial statements for the 2023 financial year and defined specific key areas for the audit together with the auditors. It obtained the declaration of independence by the auditors and monitored the auditors' continued independence and performance of non-audit services. The committee also reviewed the quality of the annual financial

**Nomination Committee**

Dr. Bernd Flohr 5/5 1/1 2/2 6/6

Klaus Burchards 4/5 6/6

Birgit Mohme 4/5 4/6

Harald Schöberl 5/5 6/6

**Corporate Development Committee**

**Personnel Committee**

**Audit Committee**

In addition, the committee focused on reviewing accounting, monitoring the accounting process, the effectiveness of the internal control system, the risk management system and the internal audit system, as well as the auditing of the annual financial statements and compliance. In this context, it also debated the half-year financial report with the Managing Directors. It also focused regularly on the Internal Audits reports. Another focus of the committee meetings was the economic development of the Group and selected subsidiaries for which earnings enhancement programmes had been initiated. The committee discussed the development of the Group's tax rate, other tax-

statements on the basis of previously defined criteria.

KSB Group / Annual Report 2023

**Attendance at meetings**

**Supervisory Board**

**18 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

René Klotz (until May 2023) 2/5 2/5

Arturo Esquinca 5/5 5/5 Klaus Kühborth 5/5 1/1 5/5

Thomas Pabst 5/5 5/5 Prof. Dr. Corinna Salander 4/5 3/5

Jürgen Walther (since May 2023) 3/5 3/5

Claudia Augustin 5/5 2/2

Volker Seidel 5/5 5/5 2/2 Gabriele Sommer 4/5 2/2 related topics and preparations for future requirements resulting from public Country-by-Country Reporting and the global minimum tax for multinational enterprises. Another key focus was on the planned implementation of the EU CSRD Directive, which will result in much more extensive sustainability reporting in future. Due to the legally required rotation of the auditors, the committee also dealt with the implementation of a transparent and non-discriminatory procedure for the selection of the auditors for the 2025 financial year. At its meeting on 8 November 2023, the committee decided to prepare and initiate a tender process in accordance with the legal requirements and commissioned the Managing Directors with its implementation.

The **Personnel Committee** held two in-person meetings in the reporting year. The committee focuses on subjects and challenges relating to Human Resources activities within the Group. It also decides in particular on the conducting of transactions for which the Supervisory Board has been appointed to represent the company pursuant to Section 112 AktG, as well as on matters relating to the remuneration of the Supervisory Board members. In the reporting year, the committee obtained information on the progress of the roll-out of a global HR system for nearly all KSB companies. It was also briefed on how KSB is adapting to changing conditions in personnel recruitment and investing in personnel development. Lastly, the committee also dealt with an issue relating to the Supervisory Board itself: Following an in-depth review of the Supervisory Board remuneration, which has remained unchanged since 2017, it came to the conclusion that it should be moderately increased, in particular due to the constantly growing demands and the associated increase in workload as well as inflation-induced loss in value. Together with the general partner, the Supervisory Board will propose this for resolution at the 2024 Annual General Meeting.

The **Corporate Development Committee** deals with strategic issues in the fields of technology, production and sales, among other things. It also advises on the budget and planning. It convened five times in the reporting year. The committee members met in person at four meetings, with one member joining one of the meetings via video conference. One meeting was held as a video conference. Guests and speakers were also regularly involved via video conference. During these sessions, the committee engaged in multiple discussions on planned investments in production facilities, service locations and sales units. One example was the expansion of circulator production at the location in Ankara, Turkey. Demand for these products has risen significantly following the boom in the heating market and in particular in the heat pump market. The committee also discussed the successful development of a company founded several years ago in India: KSB Tech Pvt. Ltd., an engineering and IT services company whose portfolio ranges from product development and design through to IT services and collaboration in strategic IT projects. The committee was also briefed on the planned procedure for the introduction of S/4HANA. As the preparatory work has largely been completed, detailed planning for this extensive transformation project will begin in the first half of 2024. Finally, the committee reviewed planning for 2024 and the annual investment budget including discussions of the current investment focus.

The **Nomination Committee** recommends to the Supervisory Board suitable candidates for election as Supervisory Board members, whom the Supervisory Board then proposes to the Annual General Meeting. In looking for and evaluating suitable candidates with the requisite expertise and experience of the industry, long-term succession planning is a key factor. The committee held one in-person meeting in the reporting year.

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#### **Corporate Governance and Statement of Compliance**

The Supervisory Board continuously monitored developments in corporate governance standards throughout the reporting year. The general partner, acting through its Managing Directors, and the Supervisory Board reported on the Company's corporate governance as part of the Corporate Governance Statement pursuant to Sections 289f (2 and 3) and 315d HGB. On 13 December 2023, they issued a joint updated Statement of Compliance in accordance with Section 161 AktG and made it permanently available to shareholders on the company's web site. The company complies with the German Corporate Governance Code's recommendations subject to a few justified exceptions.

In the reporting period, no conflicts of interest arose involving members of the Supervisory Board that would have been subject to disclosure in the report of the Supervisory Board.

#### **Audit of the 2023 Annual and Consolidated Financial Statements**

The Supervisory Board examined the annual financial statements of KSB SE & Co. KGaA for the year ended 31 December 2023, which were prepared in accordance with the provisions of the Handelsgesetzbuch (HGB), as well as the consolidated financial statements and the combined management report for both financial statements for the year ended 31 December 2023, which were prepared in accordance with the International Financial Reporting Standards (IFRSs), and the proposal by the general partner on the appropriation of net retained earnings. This also applies to the combined separate non-financial report.

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, based in Frankfurt am Main with an office in Mannheim, audited the annual financial statements of KSB SE & Co. KGaA for the year ended 31 December 2023, as well as the consolidated financial statements and the combined management report for the company and the Group for the year ended 31 December 2023, and issued an unqualified opinion. The key audit areas agreed with the Audit Committee for the consolidated financial statements for the reporting year included sales revenue based on the percentage of completion, provisions for expected losses, and impairment testing for deferred taxes. With regard to the annual financial statements, the audit focused on the measurement of equity investments, provisions for expected losses and the measurement of finished goods and work in progress, including their development. The combined separate non-financial report was reviewed by the auditors. The auditor reported on its findings both orally and in writing.

The accounting documentation, the proposal by the general partner on the appropriation of the net retained earnings, the non-financial report and the audit reports submitted by the auditors were provided in good time to all members of the Supervisory Board. They were discussed in detail by the Audit Committee on 5 and on 12 March 2024, as well as in the Supervisory Board plenary session on 20 March 2024, and explained in depth by the Managing Directors of the general partner. The auditors attended the meetings of both bodies, reported on the findings of the audit and were available to provide additional information.

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**Corporate Governance and Statement of Compliance** 

**20 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

justified exceptions.

to the combined separate non-financial report.

and were available to provide additional information.

KSB Group / Annual Report 2023

The Supervisory Board continuously monitored developments in corporate governance standards throughout the reporting year. The general partner, acting through its Managing Directors, and the Supervisory Board reported on the Company's corporate governance as part of the Corporate Governance Statement pursuant to Sections 289f (2 and 3) and 315d HGB. On 13 December 2023, they issued a joint updated Statement of Compliance in accordance with Section 161 AktG and made it permanently available to shareholders on the company's web site. The company complies with the German Corporate Governance Code's recommendations subject to a few

In the reporting period, no conflicts of interest arose involving members of the Supervisory Board

**Audit of the 2023 Annual and Consolidated Financial Statements**  The Supervisory Board examined the annual financial statements of KSB SE & Co. KGaA for the year ended 31 December 2023, which were prepared in accordance with the provisions of the Handelsgesetzbuch (HGB), as well as the consolidated financial statements and the combined management report for both financial statements for the year ended 31 December 2023, which were prepared in accordance with the International Financial Reporting Standards (IFRSs), and the proposal by the general partner on the appropriation of net retained earnings. This also applies

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, based in Frankfurt am Main with an office in Mannheim, audited the annual financial statements of KSB SE & Co. KGaA for the year ended 31 December 2023, as well as the consolidated financial statements and the combined management report for the company and the Group for the year ended 31 December 2023, and issued an unqualified opinion. The key audit areas agreed with the Audit Committee for the consolidated financial statements for the reporting year included sales revenue based on the percentage of completion, provisions for expected losses, and impairment testing for deferred taxes. With regard to the annual financial statements, the audit focused on the measurement of equity investments, provisions for expected losses and the measurement of finished goods and work in progress, including their development. The combined separate non-financial report was reviewed by the auditors. The auditor reported on its findings both orally and in writing.

The accounting documentation, the proposal by the general partner on the appropriation of the net retained earnings, the non-financial report and the audit reports submitted by the auditors were provided in good time to all members of the Supervisory Board. They were discussed in detail by the Audit Committee on 5 and on 12 March 2024, as well as in the Supervisory Board plenary session on 20 March 2024, and explained in depth by the Managing Directors of the general partner. The auditors attended the meetings of both bodies, reported on the findings of the audit

that would have been subject to disclosure in the report of the Supervisory Board.

The Supervisory Board concurs with the auditors' findings. Following the final results of the examination by the Audit Committee and its own review, the Supervisory Board raised no objections to the annual financial statements, consolidated financial statements, combined management report as well as the combined separate non-financial report. In accordance with the recommendation of the Audit Committee, the Supervisory Board approves the financial statements prepared by the general partner. The proposal of the general partner on the appropriation of the net retained earnings of KSB SE & Co. KGaA, and in particular the increase of the dividend to EUR 26.00 per ordinary no-par-value share and EUR 26.26 per preference no-par-value share, is deemed to be appropriate by the Supervisory Board in accordance with its own review; it concurs with it.

#### **Changes to the Supervisory Board**

As a result of the regular election of employee representatives to the Supervisory Board, there were changes to the composition of the Supervisory Board in the reporting period: Jürgen Walther was newly elected to the Supervisory Board with effect from 4 May 2023. He replaces René Klotz, who had been a member of the Supervisory Board since 15 May 2013 and served as its Deputy Chair since 20 January 2020. The Supervisory Board would like to thank René Klotz for his many years of close cooperation.

For the shareholder representatives, Klaus Kühborth, whose term of office expired at the close of the Annual General Meeting on 4 May 2023, was re-elected by the Annual General Meeting.

At its constituent meeting on 4 May 2023, the Supervisory Board elected Claudia Augustin as the new Deputy Chair. The composition of the committees changed with effect from 4 May 2023 as follows: Volker Seidel was elected to the Personnel Committee and Jürgen Walther to the Corporate Development Committee.

The election of employee representatives to the Supervisory Board conducted in 2023 will be repeated in 2024, because the result had been legally challenged over formal irregularities.

The Supervisory Board would like to thank the Managing Directors and the Administrative Board of the general partner, as well as the employees and employee representatives of all Group companies for their constructive and committed work during the past financial year.

Frankenthal, 20 March 2024

The Supervisory Board

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<span id="page-21-0"></span>**Q1**

Image /page/21/Picture/5 description: The image shows buildings that have been destroyed. The buildings are made of concrete and brick, and they are in a state of disrepair. There is rubble and debris scattered around the buildings. The sky is cloudy and overcast.

#### **Earthquake aid**

KSB donates 10,000 euros to German and Turkish organisations helping earthquake victims in south-eastern Turkey and northern Syria. The two institutions provide those in need with temporary accommodation, food and medical care. KSB also donates a number of pumps for the supply of water.

Image /page/21/Picture/8 description: A group of approximately 20 people are standing together indoors. Most of the people are men, but there are also a few women in the group. The people are dressed in a variety of casual clothing, including jeans, t-shirts, and sweaters. Some of the people are wearing work uniforms. The group is standing in what appears to be a warehouse or factory. There are shelves and boxes in the background.

#### **Acquisition**

By acquiring the Austrian company DAG – Dieselanlagen Service GmbH, KSB further consolidates its position in the European fire protection market. DAG produces sprinkler pump sets for fire protection systems and provides related services.

Image /page/21/Picture/11 description: This is an aerial shot of a large industrial complex. The complex consists of multiple buildings with flat roofs, some of which are dark gray and others are light gray. There are also several trees scattered throughout the complex, as well as some green fields in the background. The buildings are arranged in a grid-like pattern, and there are roads and parking lots in between them.

#### **Reducing energy**

Due to increased prices, KSB decides to organise three energy-saving weeks over the winter holiday season at its

headquarters in Frankenthal. Buildings that are only minimally occupied are not heated during this period, resulting in a 24 percent reduction in gas consumption compared with the previous year. KSB also reduces its energy costs by around 75,000 euros.

Image /page/21/Picture/15 description: A group of eight men are cutting a blue ribbon at what appears to be a grand opening or similar event. The men are dressed in suits and ties, and they are all smiling. The ribbon is stretched across the front of the group, and each man is holding a pair of scissors. The background is a blurred image of what appears to be a factory or laboratory setting.

#### **New technology centre**

KSB subsidiary SISTO Armaturen S.A. in Echternach, Luxembourg, inaugurates its new technology centre in the presence of Luxembourg's Minister of the Economy, Franz Fayot, and shareholder representatives. More than 3.5 million euros were invested in the 700-square-metre, climateneutral building. It includes test stands and experimental facilities specially tailored to the needs of the pharmaceutical and biotech industries.

Image /page/21/Picture/18 description: A group of people are gathered around a display at what appears to be a trade show or conference. The display features two large screens with text and images, possibly related to building services or technology. The crowd is diverse, with people of different ages and genders, and they seem to be engaged in a presentation or demonstration. The atmosphere is lively and professional, suggesting an informative and interactive event.

#### **ISH 2023**

"Crazy about building services!" is KSB's motto at ISH 2023 in Frankfurt, the world's leading trade fair for HVAC + Water and the first since the COVID-19 pandemic. The stand team presents a wide-ranging product portfolio for heating and cooling systems, drainage, water supply and fire protection. The compact and efficient EtaLine Pro for use in heating, air conditioning and water systems is also showcased to the general public for the first time.

{22}------------------------------------------------

Image /page/22/Picture/1 description: The image shows the text "Q2" in a large, bold, blue font. The "Q" is larger than the "2".

**Reducing energy**

headquarters in Frankenthal. Buildings that are only minimally occupied are not heated during this period, resulting in a 24 percent reduction in gas consumption compared with the previous year. KSB also reduces its energy costs by around

KSB subsidiary SISTO Armaturen S.A. in Echternach, Luxembourg, inaugurates its new technology centre in the presence of Luxembourg's Minister of the Economy, Franz Fayot, and shareholder representatives. More than 3.5 million euros were invested in the 700-square-metre, climateneutral building. It includes test stands and experimental facilities specially tailored to the needs of the pharmaceuti-

"Crazy about building services!" is KSB's motto at ISH 2023 in Frankfurt, the world's leading trade fair for HVAC + Water and the first since the COVID-19 pandemic. The stand team presents a wide-ranging product portfolio for heating and cooling systems, drainage, water supply and fire protection. The compact and efficient EtaLine Pro for use in heating, air conditioning and water systems is also showcased to the gen-

75,000 euros.

**New technology centre**

cal and biotech industries.

eral public for the first time.

**ISH 2023**

Due to increased prices, KSB decides to organise three energy-saving weeks over the winter holiday season at its

**16**

**Earthquake aid** 

**Acquisition**

services.

KSB Group / Annual Report 2023

KSB donates 10,000 euros to German and Turkish organisations helping earthquake victims in south-eastern Turkey and northern Syria. The two institutions provide those in need with temporary accommodation, food and medical care. KSB also donates a number of pumps for the supply of water.

**A Look Back at 2023**

**Q1**

By acquiring the Austrian company DAG – Dieselanlagen Service GmbH, KSB further consolidates its position in the European fire protection market. DAG produces sprinkler pump sets for fire protection systems and provides related

Image /page/22/Picture/2 description: A group of about a dozen people are standing together indoors. Most of them are wearing suits and ties, and they appear to be at a business event or conference. Some of them have name tags on their lapels. The background is a plain wall with a blue banner or flag hanging in the corner.

#### **Change in the VDMA board**

Dr. Stephan Bross (on the far right) takes over from Dr. Sönke Brodersen on the Board of Directors of the VDMA Pumps + Systems trade association. Sönke Brodersen, former Head of Committees and Associations at KSB, was a member of the trade association for 18 years and had served as its chairman since 2009. Digitalisation and striving to achieve a zero-carbon economy among industrial societies in Europe will continue to be important topics.

Image /page/22/Picture/5 description: A groundbreaking ceremony is taking place with a group of people in suits standing around a mound of dirt. They are holding shovels and appear to be participating in the ceremonial breaking of ground. In the center of the mound, there is a dark stone or plaque with writing on it. Behind the group, there is a large blue backdrop with text in a non-English language and a logo. The backdrop is part of a stage setup, and there are cannons visible on the right side of the image, adding to the ceremonial atmosphere.

#### **Groundbreaking**

More than 100 guests, including representatives of the Chinese government, external partners and employees, join KSB Shanghai to celebrate the groundbreaking ceremony for a new plant. Around 2,500 pumps of various type series for the petrochemical/chemical industry will be manufactured there from mid-2024. The Chinese chemical market is the largest and fastest growing market in the world. By expanding its capacity, KSB Shanghai aims to take a leading market position in this industry.

Image /page/22/Picture/8 description: A group of five men are standing in what appears to be a warehouse or industrial setting. The men are all dressed in business attire, with the first three men in the foreground wearing suits and ties. The man on the left is gesturing with his hand and holding a blue folder. The man in the middle is smiling and wearing glasses. The man on the right is holding a wallet or small notebook. The two men in the background are also wearing suits or blazers. The background of the image is filled with boxes and equipment, suggesting that the men are in a storage or manufacturing facility.

#### **An informative visit**

Jens Spahn, Deputy Chairman of the CDU / CSU parliamentary group in the German Bundestag, visits KSB's headquarters to find out more about the company. KSB requests that German politicians do more to reduce bureaucracy and speed up processes, for example for the employment of staff from abroad.

Image /page/22/Picture/11 description: A group of people are standing on a blue stage in front of a backdrop with the words "传承蝶代铸力新生 MAMMOUTH" written on it. The people are dressed in a variety of clothing, including blue shirts, suits, and dresses. The stage is decorated with blue carpet and there are two black speakers on the stage.

#### **Mammouth butterfly valves for Asia**

KSB now also offers Mammouth butterfly valves for the local market in China. The valves are manufactured in Changzhou. Business with these products for water supply and cooling circuits has grown rapidly in recent years. By manufacturing locally, KSB hopes to become even more competitive in the Asian market.

Image /page/22/Picture/14 description: A yellow industrial robot arm is shown inside of a manufacturing facility. The robot arm is positioned over a tray of black circular objects. The robot arm has a red and black end effector. The background shows the interior of the manufacturing facility, with white walls and various pieces of equipment.

**Investment in valve production**

KSB invests two million euros in new machining centres at its Frankenthal valve production plant, resulting in shorter cycle times and improved repeat accuracy as well as fast production ramp-up.

{23}------------------------------------------------

# **Q3**

Image /page/23/Picture/4 description: In an indoor shot, a group of men are seen in what appears to be a factory or industrial setting. All of them are wearing white hard hats, suggesting a safety-conscious environment. The central focus is on two men shaking hands, indicating a greeting, agreement, or acknowledgment. The man on the left is wearing a light blue shirt and dark pants, while the man on the right is in a tan shirt. The background reveals industrial equipment, pipes, and other workers, further emphasizing the factory setting.

#### **Innovation from India**

KSB receives its first European order for the MIL 90000 automatic recirculation valve. KSB MIL India is a driving force behind the technological development of control valves that will better meet the needs of KSB customers and ensure continued growth in the valve market. The automatic recirculation valve (ARV) is a multifunctional valve whose primary function is to ensure a pre-determined minimum flow through the centrifugal pump at all times.

Image /page/23/Picture/7 description: The image shows a lush, green landscape with a variety of trees and plants. In the foreground, there is a stone wall that appears to be holding back a hillside. The hillside is covered in dry grass and some pink flowers. Behind the stone wall, there are several trees, including palm trees and banana trees. The trees are all different sizes and shapes, and they create a dense canopy of green. The sky is blue and clear, and there are no clouds in sight.

#### **Green oasis created**

Twelve submersible motor pumps manufactured by KSB are being used in an irrigation system on a farm near the Indian city of Pune. In the dry season, the pumps transport water to 58,000-litre tanks at daytime temperatures of up to 40 °C. The farm operator uses photovoltaic panels on the farm roof to power the pumps. The previously dry and rocky ground with little vegetation is now a green and sustainably managed oasis.

Image /page/23/Picture/10 description: Five men are standing in front of a red backdrop with a large "40" on it. All of the men are wearing suits and ties. The man in the center is wearing a red tie, while the other men are wearing blue ties. The men are all smiling and looking at the camera.

#### **Contract won in China**

The SEC-KSB joint venture receives an order to supply six reactor coolant pumps for a Chinese nuclear power plant. They will be used in the primary circuit of two reactor units. Key factors in winning the order were the impressive quality of the products and professional production processes.

#### **First Capital Market Day**

Image /page/23/Picture/14 description: A man in a blue suit is speaking in front of a crowd. He is gesturing with his right hand and looking to his left. There is a bottle of Coca-Cola on a table to his left. The background is a blurred image of people and a wall with writing on it.

KSB holds its first Capital Market Day to encourage representatives of equity funds and banks to invest in the company. KSB shares have performed ex-

tremely well. The four Managing Directors present KSB's positive business development to the prospective investors and highlight the topics of sustainability, hydrogen and the integration of intelligent software in business models.

#### **KSB goes hydrogen**

The US subsidiary KSB, Inc. sells pumps manufactured in Châteauroux and

Pegnitz for one of the newest and largest electrolysers. The customer produces ten tonnes of hydrogen per day with its electrolyser.

{24}------------------------------------------------

# **Q4**

**18**

**Q3**

**Innovation from India**

electrolyser.

KSB Group / Annual Report 2023

KSB receives its first European order for the MIL 90000 automatic recirculation valve. KSB MIL India is a driving force behind the technological development of control valves that will better meet the needs of KSB customers and ensure continued growth in the valve market. The automatic recirculation valve (ARV) is a multifunctional valve whose primary function is to ensure a pre-determined minimum flow through the centrifugal pump at all times.

Pegnitz for one of the newest and largest electrolysers. The customer produces ten tonnes of hydrogen per day with its

**KSB goes hydrogen**

The US subsidiary KSB, Inc. sells pumps manufactured in Châteauroux and **Green oasis created**

sustainably managed oasis.

**First Capital Market Day**

Twelve submersible motor pumps manufactured by KSB are being used in an irrigation system on a farm near the Indian city of Pune. In the dry season, the pumps transport water to 58,000-litre tanks at daytime temperatures of up to 40 °C. The farm operator uses photovoltaic panels on the farm roof to power the pumps. The previously dry and rocky ground with little vegetation is now a green and

The SEC-KSB joint venture receives an order to supply six reactor coolant pumps for a Chinese nuclear power plant. They will be used in the primary circuit of two reactor units. Key factors in winning the order were the impressive quality of the products and professional production processes.

tremely well. The four Managing Directors present KSB's positive business development to the prospective investors and highlight the topics of sustainability, hydrogen and the integration of intelligent software in business models.

**Contract won in China**

KSB holds its first Capital Market Day to encourage representatives of equity funds and banks to invest in the company. KSB shares have performed ex-

Image /page/24/Picture/2 description: In an indoor shot, a group of six men are standing in what appears to be an industrial or mechanical room, possibly a factory or plant. The room is filled with large pipes, machinery, and equipment. The men are dressed in business attire, with some wearing suits and others in more casual clothing. They are positioned in front of the machinery, and some of them are pointing towards it. There are also banners or signs with logos and text visible in the background. The lighting is bright, and the overall composition suggests a professional or promotional photograph.

#### **New heating station**

In the presence of numerous guests, the four Managing Directors officially inaugurate the new, highly efficient heating station at KSB's main plant in Frankenthal. Fuelled with gas and wood chips, the 15-million-euro heating station will reduce energy consumption for heat generation by 900 tonnes of CO2 per year. It also features a photovoltaic system on the roof.

Image /page/24/Picture/5 description: The image shows an indoor exhibition hall with several booths. The booth in the foreground has the logo "KSB b" on a hanging sign. The booth also has a sign that says "KEEP IT COOL."

#### **Trade fair for the shipping industry**

Together with French subsidiary KSB S.A.S. and Indian subsidiary KSB MIL, South Korean subsidiary KSB Seil participates in KORMARINE, the world's leading maritime exhibition in Busan. For the KSB Group, it is a good opportunity to consolidate its position in the shipping industry. As the market leader for valves in LNG applications, KSB offers reliable solutions for ship owners and shipyards.

Image /page/24/Picture/8 description: The image shows a low-angle shot of two white flags with the text "KSB SupremeServ" written on them. The text is arranged vertically, with "KSB" in blue and "SupremeServ" in gray. The flags are waving in the wind against a bright blue sky with scattered white clouds. The flagpoles are visible at the bottom of the image.

#### **New service brands**

KSB launches five new service brands under the established KSB SupremeServ label:

KSB SupremeServ ReEngineering, KSB SupremeServ Logistics, KSB SupremeServ Efficiency Consulting, KSB SupremeServ Monitoring and KSB SupremeServ Academy. The aim is to highlight the comprehensive range of services offered by KSB Service to customers.

Image /page/24/Picture/12 description: A group of people are standing outside in front of a building. There are adults and children in the group. The adults are dressed in casual clothing, and the children are wearing school uniforms. The adults are holding a long, white object, and the children are clapping. There is a sign on the building behind the group.

#### **Donation of pumps**

KSB supports a drinking water project at Lake Baringo in Kenya by providing ten well pumps. The lake is contaminated with bacteria and the concentration of naturally occurring fluoride is too high. The pumps are installed in water filter systems that are powered by electricity from solar cells and supply around 5,000 people with clean water.

Image /page/24/Picture/15 description: The image shows a large, white, multi-story building with many windows. The building has a modern architectural style and appears to be well-maintained. The sky is visible in the background, with some clouds present. There is a crosswalk in front of the building.

#### **KSB share moves up to SDAX**

On 18 December, the KSB preference share is included in the SDAX.

The decisive criterion for its promotion is the market capitalisation of KSB's free float preference shares. Around 20 percent of the preference shares are held through Johannes und Jacob Klein GmbH as well as KSB Stiftung [KSB Foundation]. The KSB shares have been traded on the stock exchange since 1895. The KSB preference share price has almost tripled in the last three years.

{25}------------------------------------------------

# <span id="page-25-0"></span>**Combined Separate Non-financial Report**

Sustainability is one of KSB's strategic pillars and has always been a key focus of its business activities. The company understands sustainability to encompass the responsible use of resources and the environment as well as its responsibility to employees and corporate social commitment. These topics are covered in this combined separate non-financial report pursuant to Sections 289b(3) and 315b(3) HGB [*Handelsgesetzbuch* – German Commercial Code] and Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the Establishment of a Framework to Facilitate Sustainable Investment, and Amending Regulation (EU) 2019/2088 (hereinafter referred to as the EU Taxonomy Regulation). The report fulfils the requirements of the CSR Directive Implementation Act [*CSR-Richtlinie-Umsetzungsgesetz*] and combines the statement at company level with the Group statement outside of the management report.

In accordance with its business model, KSB supplies customers worldwide with high-quality pumps and valves as well as related support services. The company develops the vast majority of its products itself and manufactures them in factories on four continents. The products are sold via its own sales organisation, supported by dealer networks comprising selected partners. The business model is presented in the Group management report on page 62.

As a member of the UN Global Compact, KSB commits to aligning its business activities with ten universal principles. The Global Compact principles apply equally to managers and employees throughout the company as well as to all suppliers and business partners.

#### **Sustainability Management at KSB**

KSB has formulated its own corporate sustainability principles via a Group-wide sustainability policy. They are binding for all locations and all companies within the KSB Group. A committee chaired by the CEO regularly reviews progress on sustainability issues and the implementation of Group-wide sustainability goals. In addition, a global network with representatives from all nine KSB Regions ensures that sustainability issues are driven forward in their respective countries. They report on progress, local initiatives and measures, as well as the completion of objectives. Management also receives a compliance report twice a year as well as an annual review of management issues relating to quality, the environment and occupational health and safety.

The Sustainability Committee includes the CEO and management staff from Human Resources, Legal & Compliance, Production, Product Management, Purchasing, Communications, Strategy and Integrated Management. A Valves representative has been a member of the committee since 2023 in order to report on the development of sustainability issues in this Group segment.

KSB operates a global integrated management system in order to fulfil consistently high standards worldwide with regard to quality, risk, environment, occupational health and safety, and sustainability. It is process-oriented and complies with the requirements of the international ISO 9001, ISO 14001, ISO 26000 and ISO 45001 standards as well as the UN Global Compact. The management system governs organisational processes and workflows, responsibilities, procedures and processes at Group level and at our individual locations.

**KSB supports the 17 Sustainable Development Goals set out by the United Nations. Ten of these are particularly important for the company:**

Image /page/25/Figure/13 description: The image shows a collection of icons representing the United Nations Sustainable Development Goals (SDGs). Each icon is a square with a different color and a number in the top left corner, along with a short title and a corresponding graphic. The icons are arranged in two rows. The first row includes: SDG 1 (No Poverty) with a red background and a graphic of a family; SDG 2 (Zero Hunger) with a yellow background and a bowl of food; SDG 3 (Good Health and Well-Being) with a green background and a heart rate graphic; SDG 4 (Quality Education) with a red background and a book graphic; and SDG 5 (Gender Equality) with a red background and a gender symbol. The second row includes: SDG 6 (Clean Water and Sanitation) with a blue background and a water droplet graphic; SDG 7 (Affordable and Clean Energy) with a yellow background and a sun graphic; SDG 9 (Industry, Innovation and Infrastructure) with an orange background and a cube graphic; SDG 13 (Climate Action) with a green background and an eye graphic with the earth inside; and SDG 17 (Partnerships for the Goals) with a blue background and a flower graphic.

{26}------------------------------------------------

**Combined Separate Non-financial Report**

**26 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

pliance report twice a year as well as an annual review of management issues relating to quality, the environment and occu-

The Sustainability Committee includes the CEO and management staff from Human Resources, Legal & Compliance, Production, Product Management, Purchasing, Communications, Strategy and Integrated Management. A Valves representative has been a member of the committee since 2023 in order to report on the development of sustainability issues in this Group

KSB operates a global integrated management system in order to fulfil consistently high standards worldwide with regard to quality, risk, environment, occupational health and safety, and sustainability. It is process-oriented and complies with the requirements of the international ISO 9001, ISO 14001, ISO 26000 and ISO 45001 standards as well as the UN Global Compact. The management system governs organisational processes and workflows, responsibilities, procedures and processes at Group level and at our individual locations.

**KSB supports the 17 Sustainable Development Goals set out by the United Nations. Ten of these are particularly important for** 

pational health and safety.

segment.

**the company:**

Sustainability is one of KSB's strategic pillars and has always been a key focus of its business activities. The company understands sustainability to encompass the responsible use of resources and the environment as well as its responsibility to employees and corporate social commitment. These topics are covered in this combined separate non-financial report pursuant to Sections 289b(3) and 315b(3) HGB [*Handelsgesetzbuch* – German Commercial Code] and Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the Establishment of a Framework to Facilitate Sustainable Investment, and Amending Regulation (EU) 2019/2088 (hereinafter referred to as the EU Taxonomy Regulation). The report fulfils the requirements of the CSR Directive Implementation Act [*CSR-Richtlinie-Umsetzungsgesetz*] and combines the statement at company level with the

Group statement outside of the management report.

on page 62.

business partners.

KSB Group / Annual Report 2023

In accordance with its business model, KSB supplies customers worldwide with high-quality pumps and valves as well as related support services. The company develops the vast majority of its products itself and manufactures them in factories on four continents. The products are sold via its own sales organisation, supported by dealer networks comprising selected partners. The business model is presented in the Group management report

As a member of the UN Global Compact, KSB commits to aligning its business activities with ten universal principles. The Global Compact principles apply equally to managers and employees throughout the company as well as to all suppliers and

**Sustainability Management at KSB**

KSB has formulated its own corporate sustainability principles via a Group-wide sustainability policy. They are binding for all locations and all companies within the KSB Group. A committee chaired by the CEO regularly reviews progress on sustainability issues and the implementation of Group-wide sustainability goals. In addition, a global network with representatives from all nine KSB Regions ensures that sustainability issues are driven forward in their respective countries. They report on progress, local initiatives and measures, as well as the completion of objectives. Management also receives a com-

#### **Material sustainability issues for KSB**

Image /page/26/Figure/3 description: This figure is a scatter plot showing the impact on society versus the relevance for KSB's business activities. The x-axis is labeled "Relevance for KSB's business activities" and ranges from 1 to 5. The y-axis is labeled "Impact on society\*" and ranges from 1 to 5. There are several data points plotted on the scatter plot. "Resource efficiency" is plotted at approximately (2.5, 4.5). "Diversity" is plotted at approximately (3, 3.7). "Climate change mitigation" is plotted at approximately (2.7, 3.2). "Sustainable supply chains" is plotted at approximately (2.7, 2.7). "Social responsibility" is plotted at approximately (2.5, 2.2). "Respecting human rights" is plotted at approximately (3.5, 5). "Occupational health and safety" is plotted at approximately (4.5, 5). "Product responsibility" is plotted at approximately (4.2, 4.5). "Energy-efficient products" is plotted at approximately (4.2, 4.2). "Professional training and development" is plotted at approximately (4.2, 3.7). "Compliance" is plotted at approximately (4, 3.2). A legend indicates that blue squares represent ecological factors, light blue squares represent social factors, light-blue squares represent economic factors, and gray squares represent general factors. A footnote states "\* With regard to the environment, labour and social issues, human rights and anti-corruption".

#### **Sustainability Reporting**

The management concepts relating to material issues outlined here apply to both the Group and to KSB SE & Co.KGaA; any instances where this is not the case are duly indicated. All information in the non-financial report relates to KSB SE & Co. KGaA and the Group in 2023. References to information not included in the Group management report in this section represent supplementary information and are not part of the separate non-financial report. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft performed a limited assurance engagement on the information in this report in accordance with ISAE 3000 (Revised) and issued an independent assurance report; see page 56.

In the areas of human rights, labour standards, the environment, anti-corruption and sustainability in the supply chain, the concepts and activities set out in this report follow the principles of the UN Global Compact, as well as national and international regulations.

The non-financial report covers 29 material Group companies, unless otherwise stated. These were selected on the basis of their significant impact on aspects such as energy consumption and the number of employees. The 29 companies employ 87.9 % of the workforce and account for 97.8 % of Group-wide energy consumption. The remaining companies have no significant impact on non-financial aspects. KSB has therefore not expanded this report to include these Group companies as they have no material impact on the issues it covers in the reporting year. The 29 Group companies include all consolidated subsidiaries with production plants and two service companies with energy-intensive workshops.

As part of its corporate responsibility strategy, KSB is also committed to supporting a diverse range of social initiatives. The company chooses to report on these activities on an entirely voluntary basis, as these do not have any significant or material impact on its business success.

{27}------------------------------------------------

#### **Non-financial objectives up to 2025 and performance indicators**

| Aspects                               | Objectives up to 2025                                                                                                     | Performance indicators                                            |
|---------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|
| Resource efficiency                   | More than half of newly developed products are subject to ecological<br>assessment.                                       | Number of development projects                                    |
| Energy-efficient products             | KSB's water pumps save an annual 850,000 tonnes of CO2.                                                                   | CO2 savings for KSB water pumps with<br>variable speed drives     |
| Emissions                             | KSB production plants reduce their CO2 emissions by 30 %.<br>(Reference year: 2018)                                       | CO2 emissions at production sites                                 |
| Education and training                | Each employee invests at least 30 hours per year in training and development.                                             | Number of training hours per employee per year                    |
| Equal opportunities                   | Women make up at least 20 % of management staff.                                                                          | Proportion of women in management positions                       |
| Engagement                            | The employee satisfaction index is 80 %.                                                                                  | Engagement score according to<br>employee survey                  |
| Occupational health<br>and safety     | The number of working days lost due to occupational accidents is<br>reduced to fewer than 0.3 days per employee per year. | Number of days lost due to accidents<br>(lost time accident rate) |
| Social commitment                     | KSB is involved in at least 25 social projects worldwide every year.                                                      | Number of CSR projects                                            |
| Sustainability in the<br>supply chain | The sustainability performance of 90 % of the key regional and<br>global suppliers is assessed.                           | Proportion of suppliers assessed                                  |

\* The 17 Sustainable Development Goals of the United Nations take into account the three dimensions of sustainability: social, environmental and economic aspects. KSB's material sustainability issues relate to the goals addressing poverty (1), hunger (2), health and well-being (3), quality education (4), gender equality (5), clean water and sanitation (6), decent work conditions and economic growth (8), sustainable consumption and production (12) and climate action (13).

#### **Implementation of the Corporate Sustainability Reporting Directive**

Following the introduction of the Corporate Sustainability Reporting Directive (CSRD) and the associated European Sustainability Reporting Standards (ESRS), new rules for nonfinancial reporting by companies will apply from the 2024 reporting year. KSB made initial preparations for this in the reporting year. For example, the company commissioned a scientific study to develop a concept for the double materiality assessment required by the EU directive. In addition, experts from an auditing firm helped to identify the material issues for KSB. This involved interviews on the topics of the environment, social matters and corporate governance, validation of the range of topics and an assessment of material impacts, risks and opportunities. The implementation phase for the Corporate Sustainability Reporting Directive is being conducted in the current reporting year.

#### **Material Issues**

KSB communicates regularly with various stakeholders in order to identify their interests and expectations regarding the company. The material sustainability issues defined on this basis have been reviewed and confirmed for 2023 by specialist departments and the Sustainability Committee with oversight 

{28}------------------------------------------------

**Non-financial objectives up to 2025 and performance indicators**

**Implementation of the Corporate Sustainability Reporting Directive**

Following the introduction of the Corporate Sustainability Reporting Directive (CSRD) and the associated European Sustainability Reporting Standards (ESRS), new rules for nonfinancial reporting by companies will apply from the 2024 reporting year. KSB made initial preparations for this in the reporting year. For example, the company commissioned a scientific study to develop a concept for the double materiality assessment required by the EU directive. In addition, experts from an auditing firm helped to identify the material issues for KSB. This involved interviews on the topics of the environment,

**28 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

and sanitation (6), decent work conditions and economic growth (8), sustainable consumption and production (12) and climate action (13).

\* The 17 Sustainable Development Goals of the United Nations take into account the three dimensions of sustainability: social, environmental and economic aspects. KSB's material sustainability issues relate to the goals addressing poverty (1), hunger (2), health and well-being (3), quality education (4), gender equality (5), clean water

social matters and corporate governance, validation of the range of topics and an assessment of material impacts, risks and opportunities. The implementation phase for the Corporate Sustainability Reporting Directive is being conducted in the

KSB communicates regularly with various stakeholders in order to identify their interests and expectations regarding the company. The material sustainability issues defined on this basis have been reviewed and confirmed for 2023 by specialist departments and the Sustainability Committee with oversight

current reporting year.

**Material Issues**

KSB Group / Annual Report 2023

| Objectives up to 2025<br>Performance indicators                                                                                                                                                | Status as at 31 Dec. 2022                                                                    | Status as at 31 Dec. 2023                                                                    | Objective by 2025 | SDGs* |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|-------------------|-------|
| More than half of newly developed products are subject to ecological<br>assessment.<br>Number of development projects                                                                          | 52 %                                                                                         | 68 %                                                                                         | > 50 %            |       |
| CO2<br>savings for KSB water pumps with<br>KSB's water pumps save an annual 850,000 tonnes of CO2<br>variable speed drives                                                                     | 436,705 t CO2<br>** (2022 CO2<br>equivalent)<br>722,613 t CO2<br>** (2018 CO2<br>equivalent) | 459,321 t CO2<br>** (2022 CO2<br>equivalent)<br>813,813 t CO2<br>** (2018 CO2<br>equivalent) | 850,000 t CO2     |       |
| KSB production plants reduce their CO2<br>emissions by 30 %.<br>(Reference year: 2018)<br>CO2<br>emissions at production sites                                                                 | 21.4 %                                                                                       | 23.1 %                                                                                       | 30 %              |       |
|                                                                                                                                                                                                |                                                                                              |                                                                                              |                   |       |
| Each employee invests at least 30 hours per year in training and development.<br>Number of training hours per employee per year                                                                | 17 hours / year                                                                              | 21 hours / year                                                                              | 30 hours / year   |       |
| Women make up at least 20 % of management staff.<br>Proportion of women in management positions                                                                                                | 15 %                                                                                         | 14 %                                                                                         | 20 %              |       |
| Engagement score according to<br>The employee satisfaction index is 80 %.<br>employee survey                                                                                                   | Result from 2022: 65 %                                                                       | No survey in 2023                                                                            | 80 %***           |       |
| The number of working days lost due to occupational accidents is<br>Number of days lost due to accidents<br>reduced to fewer than 0.3 days per employee per year.<br>(lost time accident rate) | 0.32 days                                                                                    | 0.36 days                                                                                    | < 0.3 days        |       |
|                                                                                                                                                                                                |                                                                                              |                                                                                              |                   |       |
| KSB is involved in at least 25 social projects worldwide every year.<br>Number of CSR projects                                                                                                 | 36                                                                                           | 44                                                                                           | 25                |       |
|                                                                                                                                                                                                |                                                                                              |                                                                                              |                   |       |
|                                                                                                                                                                                                |                                                                                              |                                                                                              |                   |       |
| The sustainability performance of 90 % of the key regional and<br>Proportion of suppliers assessed                                                                                             | 57 %                                                                                         | > 67 %                                                                                       | 90 %              |       |

\*\* The basis for this calculation is provided on page 33 of this report.

\*\*\* In 2025 no global employee engagement survey will be conducted. Due to the change in the survey period from three to two years, the next survey is planned to take place in 2024.

from Management; see materiality matrix on page 27. The aspects and factors necessary for understanding the development and performance of the business and the position of the company as well as the impact of business activities on the following issues remain the same:

- Environment (resource efficiency, manufacturing of energyefficient products, climate change mitigation and product safety)
- Combating corruption and bribery (compliance)
- Respecting human rights (sustainable supply chains)
- Employee concerns (professional training and development, diversity, occupational health and safety)

These issues are related primarily to manufacturing, products, business partners and employees. KSB's products also make a direct contribution to protecting the environment, for example, by saving energy or via their use in waste water treatment.

{29}------------------------------------------------

#### **Energy consumption**

|                             | Total       | KSB SE &<br>Co. KGaA | Europe**    | Asia / Pacific | Americas    | Middle East /<br>Africa / Russia |
|-----------------------------|-------------|----------------------|-------------|----------------|-------------|----------------------------------|
| Total energy consumption*   | 276,021 MWh | 81,091 MWh           | 113,912 MWh | 40,264 MWh     | 110,975 MWh | 10,871 MWh                       |
| Total electricity           | 164,553 MWh | 33,915 MWh           | 50,834 MWh  | 32,101 MWh     | 73,247 MWh  | 8,370 MWh                        |
| Electricity from renewables | 89,280 MWh  | 27,645 MWh           | 42,559 MWh  | 10,215 MWh     | 33,313 MWh  | 3,194 MWh                        |
| CO2<br>emissions***         | 77,973 t    | 12,077 t             | 16,888 t    | 22,674 t       | 33,328 t    | 5,084 t                          |

\* Electricity, gas, fuel oil, district heating, wood, etc.; excluding vehicle fleet Source of emission factors: local energy suppliers, VDA data or AIB European Residual Mix

\*\* Including KSB SE & Co. KGaA

\*\*\* Exluding vehicle fleet

#### **Risks Related to Non-financial Aspects**

KSB does not see any material risks, as assessed based on the net risk method, associated with its own business and the business relations of the company or its products and services which, in all probability, have or could have a serious negative impact on non-financial aspects such as the environment, anti-corruption, human rights, employee concerns and social issues. All other risks affecting business activities are described in the Group management report from page 83.

#### **Goals for 2025**

KSB supports the United Nations' 17 Sustainable Development Goals. In 2019, the company developed nine specific sustainability objectives which are aligned with these Sustainable Development Goals and the material issues defined. The company aims to achieve them by 2025 at the latest.

The nine objectives adopted by Management cover environmental, employee, social and supply chain sustainability topics. They focus on climate change mitigation, the promotion of decent working conditions and sustainable economic growth, and health and well-being. In addition, KSB is committed to doing even more to promote equal opportunities. The company also intends to gather more comprehensive information on how suppliers deal with sustainability issues. KSB is dedicated to combating poverty and hunger as well as ensuring the availability of clean water and education through social projects. Developing the knowledge of employees is another binding goal. More information on the individual objectives and progress towards their completion at the end of the reporting year is provided in the overview on pages 28 /29, and in the respective sections of this non-financial report.

Management staff with specialist responsibility for Production, Product Management, Human Resources, Purchasing, Communications and Integrated Management have developed suitable plans and devised specific measures for achieving the objectives by 2025. The respective departments report their implemented and planned measures to the Sustainability Committee. With oversight from Management, the committee is updated at least twice a year on the status of measures taken and reviews progress towards the completion of each objective.

#### **Environment**

#### **CLIMATE CHANGE MITIGATION AND RESOURCE EFFICIENCY**

#### **Objectives:**

Mitigating the impact of climate change and protecting the environment are tasks that can only be achieved together. As a manufacturing company, KSB takes care to use natural

**Original** 

{30}------------------------------------------------

resources responsibly. This includes reducing the company's consumption of energy and raw materials as far as possible. In addition to mitigating negative environmental impacts, this also increases the company's profitability. Moreover, it minimises economic and legal risks which could potentially result from environmental damage and failure to comply with laws and regulations.

**Original** 

**Africa / Russia**

availability of clean water and education through social projects. Developing the knowledge of employees is another binding goal. More information on the individual objectives and progress towards their completion at the end of the reporting year is provided in the overview on pages 28 /29, and in the

**Europe\*\* Asia / Pacific Americas Middle East /**

Management staff with specialist responsibility for Production, Product Management, Human Resources, Purchasing, Communications and Integrated Management have developed suitable plans and devised specific measures for achieving the objectives by 2025. The respective departments report their implemented and planned measures to the Sustainability Committee. With oversight from Management, the committee is updated at least twice a year on the status of measures taken and reviews pro-

Mitigating the impact of climate change and protecting the environment are tasks that can only be achieved together. As a manufacturing company, KSB takes care to use natural

respective sections of this non-financial report.

gress towards the completion of each objective.

**CLIMATE CHANGE MITIGATION AND** 

**Environment**

**Objectives:**

**RESOURCE EFFICIENCY**

**Risks Related to Non-financial Aspects**

**Total KSB SE &** 

**30 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

\* Electricity, gas, fuel oil, district heating, wood, etc.; excluding vehicle fleet Source of emission factors: local energy suppliers, VDA data or AIB European Residual Mix

**Co. KGaA**

Total energy consumption\* 276,021 MWh 81,091 MWh 113,912 MWh 40,264 MWh 110,975 MWh 10,871 MWh Total electricity 164,553 MWh 33,915 MWh 50,834 MWh 32,101 MWh 73,247 MWh 8,370 MWh Electricity from renewables 89,280 MWh 27,645 MWh 42,559 MWh 10,215 MWh 33,313 MWh 3,194 MWh

emissions\*\*\* 77,973 t 12,077 t 16,888 t 22,674 t 33,328 t 5,084 t

KSB does not see any material risks, as assessed based on the net risk method, associated with its own business and the business relations of the company or its products and services which, in all probability, have or could have a serious negative impact on non-financial aspects such as the environment, anti-corruption, human rights, employee concerns and social issues. All other risks affecting business activities are described

KSB supports the United Nations' 17 Sustainable Development Goals. In 2019, the company developed nine specific sustainability objectives which are aligned with these Sustainable Development Goals and the material issues defined. The com-

The nine objectives adopted by Management cover environmental, employee, social and supply chain sustainability topics. They focus on climate change mitigation, the promotion of decent working conditions and sustainable economic growth, and health and well-being. In addition, KSB is committed to doing even more to promote equal opportunities. The company also intends to gather more comprehensive information on how suppliers deal with sustainability issues. KSB is dedicated to combating poverty and hunger as well as ensuring the

in the Group management report from page 83.

pany aims to achieve them by 2025 at the latest.

**Goals for 2025**

KSB Group / Annual Report 2023

**Energy consumption**

\*\* Including KSB SE & Co. KGaA \*\*\* Exluding vehicle fleet

CO²

By 2025, KSB intends to assess the environmental impact of more than 50 % of its development projects in accordance with the international ISO 14040 standard. This concerns new product developments and significant design modifications to existing type series.Detailed information on the life cycle assessments of new products can thus be determined.

A further goal is to reduce the CO2 emissions, excluding those of the vehicle fleet, produced by the main locations – which are chiefly the manufacturing plants – by 30 %, also by 2025 (based on the 2018 figure).

#### **Organisation, processes and measures:**

KSB follows the internationally recognised ISO 14001 environmental management system to continuously improve its environmental performance. To date, the company has implemented the environmental management system at 39 production and assembly locations (KSB SE & Co. KGaA: 3 locations); this represents 93 % coverage.

The EU Energy Efficiency Directive requires all large companies to carry out regular energy audits in order to contribute to the European energy and climate protection targets. KSB carries out these energy audits at its major European locations to reduce energy consumption and CO2 emissions. In the reporting year, audits took place at all five production locations in Germany. The resulting measures are designed to reduce the company's energy consumption. They include construction projects such as new buildings and renovations as well as energy-related measures such as insulation, the replacement of lighting systems with LEDs and the replacement of machinery and systems with low energy efficiency.

# In 2023, KSB's German employees travelled almost 600,000 kilometres by train for their business trips.

A new heating station was commissioned at the Group's largest location in Frankenthal in 2023. The 15-million-euro investment increases the share of renewable heat from biomass. In combination with the latest technology, this will yield energy savings of 3,700,000 kilowatt hours per year, equivalent to 900 tonnes of CO2.

KSB wants to increase the proportion of renewable energy in its energy consumption. Aiming to reduce climate-damaging greenhouse gas emissions, the company obtains its electricity in many places from renewable sources. At the end of the reporting year, 13 Group companies were already using solar modules to generate electricity. Six Group companies in Argentina, Australia, China, Indonesia, Spain and the USA took this initiative in 2023.

Today, many companies primarily use communication channels such as video conferencing and internet-based services for internal meetings and business contacts. KSB also makes the most of these facilities. When personal contact and business trips are necessary, employees opt for environmentally friendly transport wherever possible, such as the rail network of Deutsche Bahn, which uses 100 % green electricity in Germany. Based on Deutsche Bahn's environmental balance sheet, KSB was able to save more than 128 tonnes of CO2 in 2023 compared to journeys with conventional vehicles (previous year: more than 90 tonnes of CO2). In 2023, KSB's German employees travelled almost 600,000 kilometres by train for their business trips.

{31}------------------------------------------------

In terms of Group-wide electricity consumption, the share of renewable energies grew by 3.9 % to 54.3 % (KSB SE & Co. KGaA: +2.2 % to 82.1 %).

KSB regularly records and evaluates data on energy consumption and CO2 emissions. In 2023, energy consumption increased by 8,756 megawatt hours year on year to 276,021 megawatt hours. Compared with 2022, KSB SE & Co. KGaA reduced its energy consumption by 7,859 kilowatt hours to 81,091 kilowatt hours.

In terms of Group-wide electricity consumption, the share of renewable energies grew by 3.9 % to 54.3 % (KSB SE & Co. KGaA: +2.2 % to 82.1 %). KSB calculates CO2 emissions for Scope 1 and Scope 2 in accordance with the Greenhouse Gas Protocol (market-based). For the first time, KSB also took into account emissions from the company's own vehicle fleet amounting to 5,573 tonnes of CO2 for the Group. The Group's emissions in the reporting year thus totalled 83,546 tonnes of CO2 (KSB SE & Co. KGaA: 13,289 tonnes of CO2). KSB does not take the vehicle fleet emissions into account for its sustainability target for reducing emissions in the production plants. The respective values are 77,973 tonnes of CO2 (previous year: 79,673 tonnes of CO2) for the Group and 12,077 tonnes of CO2 (previous year: 14,574 tonnes of CO2) for KSB SE & Co. KGaA. "Out of scope" is the share of biomass that only relates to KSB SE & Co. KGaA; it amounted to 2,175 tonnes of CO2 in the reporting year.

In order to further reduce energy consumption, KSB appoints Energy Officers at its German locations. They can be contacted by all employees and advise their colleagues on potential energy savings during regular walks around the premises.

The vital task of protecting the environment can only be accomplished together. In the reporting year, the KSB Green Community was established, an employee initiative to promote sustainable behaviour within the company and implement ideas from the workforce. Around 202 people are engaged in this project.

KSB is progressively modernising its production facilities to reduce the amount of hazardous substances used in the manufacturing processes. If environmental pollution is identified at a location, the company sets aside provisions to meet obligations for necessary remediation. Provisions totalling € 966,000 were recognised for KSB SE & Co. KGaA in its annual financial statements.

Today, companies are paying more attention to the eco-balance of the products they buy. This also applies to pumps and valves that are used in many applications. In order to assess the environmental impact of products within the scope of new developments or significant design changes to existing type series in accordance with the ISO 14040 international standard, KSB has been using a suitable process to conduct life cycle assessments since 2020. By the end of 2023, this had been applied to 15 out of 22 newly developed products. The company thus assessed the environmental impact of more than two thirds of its development projects in accordance with the ISO 14040 international standard.

In the reporting year, the KSB Green Community was established, an employee initiative to promote sustainable behaviour within the company and implement ideas from the workforce.

{32}------------------------------------------------

In 2023, KSB increased the share of recycled aluminium and brass in a circulator pump to more than 90 % by selecting suitable suppliers.

The circular economy makes an important contribution to achieving economic growth despite increasingly scarce resources, ensuring that the materials and substances used in products are preserved for as long as possible. This approach to sustainable management protects the climate and reduces dependence on raw material imports. KSB therefore focuses on products with maximum durability that can be easily dismantled and broken down into separate material groups after use for comprehensive recycling. The company has adapted the product creation process for new developments accordingly. Each development is now analysed to determine the extent to which it is suitable for the circular economy. This process uses the material circularity indicator (MCI) to map the material flow's capacity for circularity. In 2022, KSB calculated this key indicator for five selected type series. The goal is to increase the current index value of the five series by a factor of 20 % by 2024. In the reporting year, the company increased the share of recycled aluminium and brass in a circulator pump to more than 90 % by selecting suitable suppliers. In the next step, KSB will determine the effects on the product's material circularity indicator.

#### **Results:**

KSB regularly records and evaluates data on energy consump-

In terms of Group-wide

grew by 3.9 % to 54.3 %

electricity consumption, the

share of renewable energies

(KSB SE & Co. KGaA: +2.2 %

by 8,756 megawatt hours year on year to 276,021 megawatt hours. Compared with 2022, KSB SE & Co. KGaA reduced its energy consumption by 7,859 kilowatt hours to 81,091 kilo-

In terms of Group-wide electricity consumption, the share of renewable energies grew by 3.9 % to 54.3 % (KSB SE & Co.

Scope 1 and Scope 2 in accordance with the Greenhouse Gas Protocol (market-based). For the first time, KSB also took into account emissions from the company's own vehicle fleet

emissions in the reporting year thus totalled 83,546 tonnes of

not take the vehicle fleet emissions into account for its sustainability target for reducing emissions in the production plants.

KGaA. "Out of scope" is the share of biomass that only relates to KSB SE & Co. KGaA; it amounted to 2,175 tonnes of CO2

In order to further reduce energy consumption, KSB appoints Energy Officers at its German locations. They can be contacted by all employees and advise their colleagues on potential energy

(KSB SE & Co. KGaA: 13,289 tonnes of CO2

The respective values are 77,973 tonnes of CO2

savings during regular walks around the premises.

(previous year: 14,574 tonnes of CO2

KGaA: +2.2 % to 82.1 %). KSB calculates CO2

amounting to 5,573 tonnes of CO2

79,673 tonnes of CO2

in the reporting year.

KSB Group / Annual Report 2023

emissions. In 2023, energy consumption increased

emissions for

**32 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

project.

statements.

international standard.

The vital task of protecting the environment can only be accomplished together. In the reporting year, the KSB Green Community was established, an employee initiative to promote sustainable behaviour within the company and implement ideas from the workforce. Around 202 people are engaged in this

KSB is progressively modernising its production facilities to reduce the amount of hazardous substances used in the manufacturing processes. If environmental pollution is identified at a location, the company sets aside provisions to meet obligations for necessary remediation. Provisions totalling € 966,000 were recognised for KSB SE & Co. KGaA in its annual financial

Today, companies are paying more attention to the eco-balance of the products they buy. This also applies to pumps and valves that are used in many applications. In order to assess the environmental impact of products within the scope of new developments or significant design changes to existing type series in accordance with the ISO 14040 international standard, KSB has been using a suitable process to conduct life cycle assessments since 2020. By the end of 2023, this had been applied to 15 out of 22 newly developed products. The company thus assessed the environmental impact of more than two thirds of its development projects in accordance with the ISO 14040

In the reporting year, the

established, an employee

ideas from the workforce.

initiative to promote

KSB Green Community was

sustainable behaviour within

the company and implement

). KSB does

(previous year:

) for KSB SE & Co.

for the Group. The Group's

) for the Group and 12,077 tonnes of CO2

tion and CO2

to 82.1 %).

watt hours.

CO2

- KSB has conducted life cycle assessments for 68 % of newly developed products.
- KSB once again increased the share of renewable energy in its electricity consumption. This increased from 50.4 % to 54.3 % in the Group compared with the previous year.
- KSB reduced carbon dioxide emissions, excluding those of the vehicle fleet, by 23 % compared with 2018.

#### **PRODUCTS**

#### **Objectives:**

Through its products, KSB wants to contribute to overcoming global challenges such as climate change. The company's solutions enable its customers to operate their systems efficiently and responsibly. KSB strives to maximise its range of products offering many years of operation characterised by reliability and low energy consumption.

By 2025, KSB aims to reduce the CO2 emissions generated through the operation of its water pumps by 850,000 tonnes per year in Europe alone by using variable speed drives.

#### **Organisation, processes and measures:**

To assess how much carbon dioxide KSB water pumps save during operation, Product Management determines the number of these pump sets in use based on the production volume since 2009, and calculates their average annual energy consumption. This estimate assumes 7,000 operating hours and a typical load profile for these applications as well as the average CO2 equivalent for Europe of 333 g/kWh according to the German Association of the Automotive Industry (VDA) for 2020 for the European Union electricity mix. As shown in the Energy Efficiency with Electric Drives study published in 2017 by the German Electrical and Electronic Manufacturers' Association (ZVEI), demand-oriented operation via the use of variable speed drives and high-efficiency motors allows energy savings averaging 30 % compared with conventional fixed-speed pump systems. The savings achieved with KSB standardised water pumps are often even higher than 30 %. The calculation will be continued.

With many countries seeing increased expansion of renewable energies and a renaissance in nuclear power, the electricity mix has changed considerably. The Sustainability Committee therefore agreed in 2022 to consider not only the current average CO2 equivalent (see above), but also the corresponding value from 2018 when determining CO2 emissions. The figure for 2018 was 590 g/kWh. This means that KSB water pumps are estimated to have saved over 459,000 tonnes of CO2 in 2023 (compared with the 2020 CO2 equivalent) or more than 810,000 tonnes (compared with the 2018 CO2 equivalent) thanks to their variable speed drives.

{33}------------------------------------------------

Based on a high-pressure pump that has been tried and tested for decades, KSB developed a new variant specifically for use in biomass power plants that was launched on the market in 2023.

When developing new products, KSB focuses holistically on sustainability – from production to recycling the raw materials required. This was systematically implemented for the first time in a fully integrated in-line water pump for use in building services that was launched on the market in 2022. Thanks to reductions in size and weight compared with the previous type series, the product requires fewer raw materials such as aluminium, copper and steel; the manufacturing process of the pump thus generates 43 % less carbon dioxide (using the example of a pump for Q 100 % = 19.4 m<sup>3</sup>/h and H 100 %). KSB offsets the unavoidable greenhouse gas emissions generated in production of the first type series by purchasing certificates in accordance with the Verified Carbon Standard. In operation, control modes make for high levels of energy efficiency. A modular design allows for the straightforward, mono-material dismantling and recycling of individual parts at the end of the pump's service life. In the reporting year, the company increased the number of countries where this innovation has been released for sale by 15 to a total of 24 (previous year: 9).

Renewable energies make an important contribution to climate change mitigation. KSB offers its customers worldwide high-quality solutions for this field of application in order to enable the economic and efficient use of renewable sources of energy for power generation. For example, based on a high-pressure pump that has been tried and tested for decades, KSB developed a new variant specifically for use in biomass power plants that was launched on the market in 2023.

KSB attaches great importance to the role of product quality and safety in preventing accidents and environmental pollution. In production, the company complies with recognised standards such as CE and a well-established quality management system in accordance with the ISO 9001 international standard. This allows processes to be designed such that systematic errors during product manufacturing can be avoided. In addition, the company's own Made by KSB<sup>1</sup> certification available at eleven locations designates a level of quality which exceeds the requirements of the international standard for quality management. The certification stands for quality, short delivery times, professional service and efficient manufacturing processes. In 2023, two locations in India and South Africa completed the first audit as part of their initial certification process. Following a successful second audit in the current reporting year, these two locations will receive the Made by KSB certification.

#### **Results:**

- KSB water pumps are estimated to have saved over 459,000 tonnes of CO2 in 2023 (compared with the 2020 CO2 equivalent) or more than 810,000 tonnes (compared with the 2018 CO2 equivalent) thanks to their variable speed drives.
- 122 KSB locations are certified to the ISO 9001:2015 quality management standard to ensure the reliability and safety of the products.

#### **Compliance**

#### **Objectives:**

For KSB, lawful conduct is an important and indispensable part of corporate social responsibility. Integrity and honest conduct is also something customers and business partners expect of the company. That is why compliance with legal regulations and Group-wide directives is part of KSB's core values.

The aim is to train all relevant employees on anti-trust/ cartel law and anti-corruption policies. Using a global matrix of requirements, KSB for example ensures that personnel with customer or supplier contact are regularly familiarised with these topics. The most recent Group-wide training programme started in 2022 and continued into the reporting year. Compliance training was continued throughout 2023 for new employees and employees who were transferred internally to relevant positions.

<sup>1</sup> The use and implementation of the company's internal certifications are outside the scope of the limited assurance engagement performed by PricewaterhouseCoopers GmbH.

{34}------------------------------------------------

The compliance system is designed to ensure that KSB and its employees always act in line with applicable laws and directives.

#### **Organisation, processes and measures:**

KSB attaches great importance to the role of product quality and safety in preventing accidents and environmental pollution. In production, the company complies with recognised standards such as CE and a well-established quality management system in accordance with the ISO 9001 international standard. This allows processes to be designed such that systematic errors during product manufacturing can be avoided. In addition, the

locations designates a level of quality which exceeds the requirements of the international standard for quality management. The certification stands for quality, short delivery times, professional service and efficient manufacturing processes. In 2023, two locations in India and South Africa completed the first audit as part of their initial certification process. Following a successful second audit in the current reporting year, these two locations will receive the Made by KSB certification.

KSB water pumps are estimated to have saved over

 122 KSB locations are certified to the ISO 9001:2015 quality management standard to ensure the reliability and safety of

For KSB, lawful conduct is an important and indispensable part of corporate social responsibility. Integrity and honest conduct is also something customers and business partners expect of the company. That is why compliance with legal regulations and

The aim is to train all relevant employees on anti-trust/ cartel law and anti-corruption policies. Using a global matrix of requirements, KSB for example ensures that personnel with customer or supplier contact are regularly familiarised with these topics. The most recent Group-wide training programme started in 2022 and continued into the reporting year. Compliance training was continued throughout 2023 for new employees and employees who were transferred internally to

<sup>1</sup> The use and implementation of the company's internal certifications are outside the scope of the limited assurance engagement performed by

Group-wide directives is part of KSB's core values.

equivalent) or more than 810,000 tonnes (compared

certification available at eleven

in 2023 (compared with the 2020

equivalent) thanks to their variable

company's own Made by KSB1

459,000 tonnes of CO2

with the 2018 CO2

speed drives.

the products.

**Compliance**

relevant positions.

PricewaterhouseCoopers GmbH.

**Objectives:**

**Results:**

Based on a high-pressure

tested for decades, KSB

power plants that was

2023.

a pump for Q 100 % = 19.4 m3

KSB Group / Annual Report 2023

developed a new variant

pump that has been tried and

**34 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

specifically for use in biomass

launched on the market in

When developing new products, KSB focuses holistically on sustainability – from production to recycling the raw materials required. This was systematically implemented for the first time in a fully integrated in-line water pump for use in building services that was launched on the market in 2022. Thanks to reductions in size and weight compared with the previous type series, the product requires fewer raw materials such as aluminium, copper and steel; the manufacturing process of the pump thus generates 43 % less carbon dioxide (using the example of

the unavoidable greenhouse gas emissions generated in production of the first type series by purchasing certificates in accordance with the Verified Carbon Standard. In operation, control modes make for high levels of energy efficiency. A modular design allows for the straightforward, mono-material dismantling and recycling of individual parts at the end of the pump's service life. In the reporting year, the company increased the number of countries where this innovation has been released

Renewable energies make an important contribution to climate change mitigation. KSB offers its customers worldwide high-quality solutions for this field of application in order to enable the economic and efficient use of renewable sources of energy for power generation. For example, based on a high-pressure pump that has been tried and tested for decades, KSB developed a new variant specifically for use in biomass power plants that was launched on the market in 2023.

for sale by 15 to a total of 24 (previous year: 9).

/h and H 100 %). KSB offsets

CO2

Lawful conduct is an integral element of KSB's corporate social responsibility. A binding compliance management system supports the compliant conduct of employees. It ensures compliance with legal provisions and internal regulations, thereby safeguarding the economic success of the company in the long term. The compliance system is designed to ensure that KSB and its employees always act in line with applicable laws and directives.

Group Management is responsible for organising compliance and is monitored by the Supervisory Board's Audit Committee. A Group Compliance Officer is responsible for compliance management and reports to Group Management on relevant topics every six months. Support is provided by a Group Compliance Committee, consisting of top-level managers from the company.

KSB's Compliance Manual describes structures and processes designed to ensure compliant conduct, and specifies responsibilities and instruments.

A core element of the compliance system is the KSB Code of Conduct, which applies across the entire Group. It was revised to meet the requirements of the *Lieferkettensorgfaltspflichtengesetz* [German Supply Chain Due Diligence Act] and published in the 2023 financial year. The Code of Conduct defines the key legal and business policy principles, providing employees with guidance for their actions. The Code also sets forth the corporate values which govern conduct in day-to-day work: honesty,

responsibility, professionalism, trust and appreciation. On this basis, KSB has formulated and communicated specific principles and rules of conduct.

In order to avoid risks resulting from a loss of reputation and legal repercussions, KSB issued two binding corporate directives, one covering compliance with cartel / anti-trust law and one dealing with the prevention of corruption. Both of these directives help to prevent potential violations. Employees receive corresponding training in recognising potential risks and practical guidance to ensure proper conduct.

In the event that employees become aware of violations or are unsure whether their actions are compliant, they refer the matter to the compliance organisation, and specifically to the designated Compliance Officer. If necessary, reports will be treated anonymously. In addition, any circumstances that give rise to legal or anti-trust concerns can be reported by any stakeholder directly to an independent ombudsperson, who can process potential cases without naming informants. Plausible evidence indicating infringements is investigated.

KSB does not tolerate any violations of compliance by its employees. If investigations reveal sufficient evidence of a violation, this will have consequences for the individual concerned. Depending on the severity, sanctions range from a disciplinary warning to immediate termination of employment and law enforcement agencies may also be involved.

#### **Results:**

- 2023 saw 2,500 employees across the Group successfully complete the compliance training e-learning modules launched in 2022.
- Reports of suspected compliance violations submitted via the ombudsperson and the compliance organisation triggered a clearly defined three-stage procedure in each case to clarify the facts and initiate the necessary measures.

{35}------------------------------------------------

Combined Management Rep

## **Human Rights / Sustainability in the Supply Chain**

#### **Objectives:**

KSB respects and protects human rights. The company recognises the obligations this entails – internally and along the entire value creation chain. It is KSB's declared goal to prevent all forms of discrimination on the basis of individual characteristics such as age, origin, religion, appearance, gender, sexual orientation, disability or marital status. KSB does not tolerate discrimination, harassment or reprisals of any kind in the work environment.

The company also refuses to accept human rights violations by its suppliers. KSB therefore aims to assess 90 % of its global and regional key suppliers in terms of their sustainability performance by 2025. This will focus on, but not be limited to, their safeguarding of human rights.

#### **Organisation, processes and measures:**

By signing the UN Global Compact, KSB has undertaken to protect and respect international human rights. The company also complies with the conventions of the International Labour Organisation (ILO). All KSB companies respect the freedom of association and the right to collective bargaining. The company also observes government sanctions such as embargoes, and communicates internal directives on export control.

KSB published a Human Rights Policy Statement. It documents the company's commitment with respect to employees, business partners and the public. The policy statement defines human rights criteria which must be observed in everyday business.

As required by the German Supply Chain Due Diligence Act, KSB has appointed a Human Rights Officer as an internal contact person. In 2022, the Group created an internal, globally valid documented procedure. It describes roles and responsibilities as well as the following processes: Due Diligence Process Supply Chain, Due Diligence Process Own Business Operations and General Risk Management Process. The document also defines the cooperation between Global Procurement and the Human Rights Officer. The first internal audit of Global Procurement regarding implementation of the German Supply Chain Due Diligence Act was undertaken in 2022 by Integrated

# KSB uses active supplier management to identify and avoid risks in the supply chain.

Management Systems. This internal review shall be carried out again in the current reporting year.

Basic conduct requirements among the workforce and with business partners are governed by the KSB Code of Conduct.

In 2023, Management again signed the UK Modern Slavery Act statement. This includes a commitment to ensure that all business conducted – including the supply chain – is free from all forms of forced labour, slavery or human trafficking.

KSB uses active supplier management to identify and avoid risks in the supply chain. Compliance with the company's own Code of Conduct, which corresponds to the human rights standards defined in the UN Global Compact, is an integral part of our business conditions and contracts, forming a fundamental basis for our business relations with external suppliers. Through these high standards, the company strives to minimise the risk of human rights violations in the supply chain. As a matter of principle, KSB does not work with companies that are known to violate human rights.

An online training course for buyers and employees from other relevant departments raises participants' awareness of human rights issues in the supply chain. The e-learning is compulsory for all employees in these departments. Since 2021, more than 80 % of employees involved in purchasing and supply chain activities have already successfully participated and received a certificate.

Purchasing uses questionnaires to assess human rights risks at suppliers. This allows potentially critical business partners to be identified throughout the Group, especially with regard to child labour and the use of conflict materials. By the end of 

{36}------------------------------------------------

**Human Rights / Sustainability in the** 

**36 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

KSB respects and protects human rights. The company recognises the obligations this entails – internally and along the entire value creation chain. It is KSB's declared goal to prevent all forms of discrimination on the basis of individual characteristics such as age, origin, religion, appearance, gender, sexual orientation, disability or marital status. KSB does not tolerate discrimination, harassment or reprisals of any kind in the work

The company also refuses to accept human rights violations by its suppliers. KSB therefore aims to assess 90 % of its global and regional key suppliers in terms of their sustainability performance by 2025. This will focus on, but not be limited to, Management Systems. This internal review shall be carried out

KSB uses active supplier

management to identify

and avoid risks in the

Basic conduct requirements among the workforce and with business partners are governed by the KSB Code of Conduct.

In 2023, Management again signed the UK Modern Slavery Act statement. This includes a commitment to ensure that all business conducted – including the supply chain – is free from all

KSB uses active supplier management to identify and avoid risks in the supply chain. Compliance with the company's own Code of Conduct, which corresponds to the human rights standards defined in the UN Global Compact, is an integral part of our business conditions and contracts, forming a fundamental basis for our business relations with external suppliers. Through these high standards, the company strives to minimise the risk of human rights violations in the supply chain. As a matter of principle, KSB does not work with companies that

An online training course for buyers and employees from other relevant departments raises participants' awareness of human rights issues in the supply chain. The e-learning is compulsory for all employees in these departments. Since 2021, more than 80 % of employees involved in purchasing and supply chain activities have already successfully participated and received a

Purchasing uses questionnaires to assess human rights risks at suppliers. This allows potentially critical business partners to be identified throughout the Group, especially with regard to child labour and the use of conflict materials. By the end of

forms of forced labour, slavery or human trafficking.

again in the current reporting year.

supply chain.

are known to violate human rights.

certificate.

By signing the UN Global Compact, KSB has undertaken to protect and respect international human rights. The company also complies with the conventions of the International Labour Organisation (ILO). All KSB companies respect the freedom of association and the right to collective bargaining. The company also observes government sanctions such as embargoes, and

KSB published a Human Rights Policy Statement. It documents the company's commitment with respect to employees, business partners and the public. The policy statement defines human rights criteria which must be observed in everyday business.

As required by the German Supply Chain Due Diligence Act, KSB has appointed a Human Rights Officer as an internal contact person. In 2022, the Group created an internal, globally valid documented procedure. It describes roles and responsibilities as well as the following processes: Due Diligence Process Supply Chain, Due Diligence Process Own Business Operations and General Risk Management Process. The document also defines the cooperation between Global Procurement and the Human Rights Officer. The first internal audit of Global Procurement regarding implementation of the German Supply Chain Due Diligence Act was undertaken in 2022 by Integrated

communicates internal directives on export control.

**Supply Chain**

**Objectives:**

environment.

KSB Group / Annual Report 2023

their safeguarding of human rights.

**Organisation, processes and measures:**

| Number of training hours |       |                   |        |                |          |                                  |  |  |
|--------------------------|-------|-------------------|--------|----------------|----------|----------------------------------|--|--|
|                          | Total | KSB SE & Co. KGaA | Europe | Asia / Pacific | Americas | Middle East /<br>Africa / Russia |  |  |
| Hours per employee       | 21    | 21                | 19     | 21             | 27       | 25                               |  |  |

2023, KSB had assessed around 95 % of its main suppliers for production materials, which represent 80 % of the supplier base and are predominantly classified as direct suppliers, and 43 % of its main suppliers for indirect purchasing. In this context, it must be taken into account that compared with the previous year the company adjusted the calculation method in the reporting year in order to assess only the most important main suppliers. The changes resulted in positive effects on the progress towards goal achievement.

KSB derives suitable measures from the self-disclosures requested from its suppliers via questionnaires. These include careful examination of how the issues are handled and monitoring of improvement measures taken.

KSB's employees can contact the compliance organisation or an ombudsperson regarding human rights issues, following the same procedure as for suspected compliance violations (see page 35). The Human Rights Officer is available as an additional contact person.

#### **Results:**

- An online training course raises participants' awareness of human rights issues in the supply chain. In the reporting year, 56 employees participated. Since 2021, a total of 372 participants across the Group have completed this training.
- By the end of the reporting year, KSB had assessed the sustainability performance of 67 % of its key global suppliers. This also includes the actions of business partners regarding human rights.

#### **Employees**

#### **GLOBAL COMMITMENT**

#### **Objectives:**

High-performing and motivated staff are the basis for a company's economic success. At KSB, more than 16,000 people work in a variety of ways around the globe to meet customers' needs in the best way possible. This is most effectively achieved with satisfied and committed employees. KSB is therefore striving to sustainably increase its engagement score, which measures employee satisfaction.

Diversity and open-mindedness are key components of a productive corporate culture. KSB celebrates the diversity of its workforce, because diverse teams contribute the greatest range of different perspectives to the company's success. As a mechanical engineering company with a traditionally low quota of women, KSB is seeking to develop the potential of its female employees in particular. The goal is to increase the proportion of women in management positions to at least 20 % by 2025 (2023: 14 %).

As KSB's success is largely dependent on qualified personnel, the company attaches great importance to targeted training and development. Increasing digitalisation requires continuous learning in order to remain economically successful in the future. By 2025, the company aims to increase the number of training hours per employee per year to 30 hours; in the reporting year this figure was 21 hours. The industry average determined by VDMA [German Mechanical Engineering Industry Association] is 16.8 hours (source: Business Advisory 2021).

#### **Organisation, processes and measures:**

Overall responsibility for human resources issues at KSB lies with the head of Human Resources, who reports on topics including non-financial issues directly to the CEO and coordinates Group-wide HR issues. Individual locations' human resources departments look after their local managers and employees.

When recruiting future employees, the company uses several channels. In addition to traditional job advertisements, contact with potential applicants is also established via online social networks and platforms as well as recruitment fairs. KSB also maintains cooperations with universities and schools to establish contact with potential candidates. Furthermore, KSB uses an employee recommendation programme to recruit suitable personnel.

{37}------------------------------------------------

KSB increased the number of vocational training positions in Germany by more than 20 % at the annual start of training in 2023.

In order to ensure demand for skilled staff is met in the long term, KSB continuously trains young people. The company increased the number of vocational training positions in Germany by more than 20 % at the annual start of training in the reporting year. Junior employees at KSB have the opportunity to complete part of their training at subsidiaries abroad. This improves their capacity for international cooperation and offers valuable experience gained in a different environment. At the end of 2023, 268 trainees and students in dual work/ degree programmes were preparing for professional life at KSB's German locations. In 2023, KSB spent € 9,256,000 on vocational training programmes (2022: € 8,207,000).

KSB continuously develops the skills and knowledge of its employees to prepare them for specialist and management positions. The company has developed a three-stage approach for this purpose. It distinguishes between Group-wide, departmental and individual professional training measures. Individual training requirements are mutually agreed between managers and employees at annual performance evaluation interviews. Qualification measures cover engineering, business administration, information technology, social competence, communication and leadership.

Developing employees and preparing them for future challenges are core elements of People Development at KSB. The concept is aimed at encouraging the exchange of thoughts and ideas with employees and continuously discussing prospects within the company. Through this initiative, KSB strives to create motivating development opportunities for its employees and staff positions in the best way possible.

In order to inform employees about available training, KSB intensified its communication about training opportunities. These include training modules, courses, workshops and time for free self-study and knowledge exchange between staff. An additional e-learning course for managers raises awareness of the training opportunities. In 2023, employees invested an average of 21 hours (KSB SE & Co. KGaA: 21 hours) into professional development activities (previous year: 17 hours; KSB SE & Co. KGaA: 13 hours).

A one-year fellowship programme focusing on the digital transformation provides employees with current information, background knowledge and explanations about the most important topics of digitalisation.

KSB's internal distance learning programme for interested engineers and technicians, which has been in place for more than ten years, offers participants with relevant experience an opportunity to become experts in the field of pump applications. KSB has been offering the internal professional development opportunity since 2021 as an external distance learning course in cooperation with the technical universities in Berlin and Graz.

In 2023, employees invested an average of 21 hours (KSB SE & Co. KGaA: 21 hours) into professional development activities (previous year: 17 hours; KSB SE & Co. KGaA: 13 hours).

{38}------------------------------------------------

# In the reporting year, KSB's Global Learning Center offered 1,888 different training courses.

A Group-wide HR tool automates and standardises the personnel processes of all KSB Group companies. In the reporting year, KSB added additional functions to this system. Employees now log their absences such as holiday and flexitime via this platform, eliminating the need for paper-based forms. Further functions for recruitment and People Development were added in 2023 with the aim of filling vacancies even faster. Managers also use the web-based application to promote training for their team members. In addition, all users can update information on their knowledge and skills in their personal profile. This increases the visibility of knowledge available in the company.

In order to ensure demand for skilled staff is met in the long term, KSB continuously trains young people. The company increased the number of vocational training positions in Germany by more than 20 % at the annual start of training in the reporting year. Junior employees at KSB have the opportunity to complete part of their training at subsidiaries abroad. This improves their capacity for international cooperation and offers valuable experience gained in a different environment. At the end of 2023, 268 trainees and students in dual work/ degree programmes were preparing for professional life at KSB's German locations. In 2023, KSB spent € 9,256,000 on vocational train-

KSB increased the number of

**38 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

vocational training positions

in Germany by more than

training in 2023.

20 % at the annual start of

In order to inform employees about available training, KSB intensified its communication about training opportunities. These include training modules, courses, workshops and time for free self-study and knowledge exchange between staff. An additional e-learning course for managers raises awareness of the training opportunities. In 2023, employees invested an average of 21 hours (KSB SE & Co. KGaA: 21 hours) into professional development activities (previous year: 17 hours;

A one-year fellowship programme focusing on the digital transformation provides employees with current information, background knowledge and explanations about the most important

KSB's internal distance learning programme for interested engineers and technicians, which has been in place for more than ten years, offers participants with relevant experience an opportunity to become experts in the field of pump applications. KSB has been offering the internal professional development opportunity since 2021 as an external distance learning course in cooperation with the technical universities in Berlin and

In 2023, employees invested

(KSB SE & Co. KGaA: 21 hours)

into professional development

17 hours; KSB SE & Co. KGaA:

an average of 21 hours

activities (previous year:

13 hours).

KSB SE & Co. KGaA: 13 hours).

topics of digitalisation.

Graz.

KSB continuously develops the skills and knowledge of its employees to prepare them for specialist and management positions. The company has developed a three-stage approach for this purpose. It distinguishes between Group-wide, departmental and individual professional training measures. Individual training requirements are mutually agreed between managers and employees at annual performance evaluation interviews. Qualification measures cover engineering, business administration, information technology, social competence, communi-

Developing employees and preparing them for future challenges are core elements of People Development at KSB. The concept is aimed at encouraging the exchange of thoughts and ideas with employees and continuously discussing prospects within the company. Through this initiative, KSB strives to create motivating development opportunities for its employees and

ing programmes (2022: € 8,207,000).

staff positions in the best way possible.

cation and leadership.

KSB Group / Annual Report 2023

Besides conventional classroom training, KSB employees mainly acquire new knowledge through e-learning and online training. In the reporting year, KSB's Global Learning Center offered 1,888 different training courses. More than 15,300 users from 71 countries had access to the company's own internet-based learning platform, marking a further increase in the reach of this online training facility. In addition, the company's Market Areas have introduced their own academies to impart specific expertise via virtual training courses.

Equal opportunities and diversity are viewed as key factors for innovation and sustainable economic growth. KSB's binding human resources principles align with the Conventions of the International Labour Organisation (ILO) and apply to all Group companies. The company selects candidates for positions exclusively on the basis of necessary professional requirements and the individual performance and potential of the applicant. Clear responsibilities were defined to support this process. Management works to ensure that the principles of equal opportunities and diversity are realised in company practice. Human Resources communicates these principles within

the Group and adapts them where required. HR also fosters an awareness of this important topic and offers corresponding training and advice.

KSB focuses on equal opportunities when filling management positions. In 2023, the proportion of female managers in the Group was 14 % (KSB SE & Co. KGaA: 11 %), a decrease of 1 percentage point year on year. Women make up 16 % of the total workforce (KSB SE & Co. KGaA: 20 %). At KSB, this key indicator refers to management positions with at least one direct report.

Committed female employees from different departments and locations maintain a global women's network to promote gender diversity at KSB. Its aims include establishing a framework for strengthening internal networking among women within the company and creating a space for their professional interaction and further development. The establishment of two regional communities in North America and the Middle East / Africa began in the reporting year. As at 31 December 2023, the network had 228 employees from 24 countries worldwide.

Special training and development programmes provide female employees with greater clarity about their career opportunities

As at 31 December 2023, 228 employees from 24 countries worldwide had joined KSB's women's network.

{39}------------------------------------------------

and prepare them for their future career path. In addition, KSB is increasingly seeking to appoint women to management positions if applicants are equally qualified. Human Resources and Management make concerted efforts to approach potential female candidates, make them aware of their prospects and encourage them to take advantage of opportunities.

In order to achieve a more balanced mix of men and women in management, KSB implemented several measures in the reporting year. Once again, these included local and global events for promising candidates attended by members of Management. This supports KSB's efforts to ensure that talented women and men are seen and heard within the company.

KSB provides its employees with mobile working options, including working from home. This can help facilitate a balance between family and work commitments. Under the Group works agreement on mobile working, up to 40 % of individual working hours can be spent away from company premises. In addition, many employees have access to flexible working time models, allowing them to care for their family members for example.

Employees who enjoy their work achieve more. KSB therefore attaches great importance to ensuring committed and satisfied employees who are passionate about making a contribution to the company's success. As an attractive employer, KSB strives to create a motivating working environment in which employees can perform to the best of their ability. KSB regularly analyses employee satisfaction. The company had previously conducted a Group-wide employee survey every three years. In the reporting year, Management decided to reduce the time until the next survey to two years. The engagement index, which measures an employee's emotional attachment to work and the workplace, will therefore be analysed again in 2024. In 2022, the figure was 65 % (2019: 57 %).

The global employee engagement survey in 2022 provided valuable information on potential for improvement to further improve satisfaction. Following the results, the CEO and the Chief Engagement Officer discussed the local insights with more than 70 Managing Directors of Group companies and Regional Executive Officers around the world in the reporting year. Based on the findings, numerous measures were agreed at country and departmental level to increase engagement. In 2023, a total of 50 short surveys, known as KSB Pulse surveys, were also conducted in individual countries and Regions to obtain feedback from employees on current and strategic topics. This active feedback culture reflects how employees and their opinions are valued and appreciated.

Measures to promote employee engagement were once again undertaken in all companies in 2023, for example joint team events. Local Managing Directors reported regularly to KSB Group Management on their implementation and further planned measures, including during personal meetings, joint appointments and in conversation via e-mail and video calls. Furthermore, a global network of Engagement Ambassadors ensures that defined measures are followed through and their successful implementation is publicised in all KSB Regions.

#### **Results:**

 The number of completed training courses recorded via the company's own online learning platform increased to 42,469 in 2023 as a result of intensified communication measures (2022: 29,830). This corresponds to an increase of over 42 %. A total of 11,675 (2022: 7,533) employees participated in the training courses, which is over 54 % more than in the previous year.

#### **OCCUPATIONAL HEALTH AND SAFETY**

#### **Objectives:**

Employee health and safety are top priorities for KSB. The company's goal is to protect staff from risks at work and to keep the number of occupational accidents as low as possible. By 2025, KSB aims to permanently reduce the number of working days lost due to occupational accidents to fewer than 0.3 days per employee. In addition, the company offers employees a range of health-focused services.

#### **Organisation, processes and measures:**

At the beginning of the reporting year, the COVID-19 pandemic continued to have a limited local impact on KSB in certain individual locations and Regions. In March 2023, the company's interdisciplinary COVID-19 task force was disbanded due to the improved situation. The task force members jointly analysed the company's crisis management during the pandemic and discussed potential improvements. These insights will help KSB to be even better prepared for similar crisis situations in 

{40}------------------------------------------------

In 2023, more than 70 production managers at KSB focused intensively on occupational health and safety at the global manufacturing conference in Brazil.

and prepare them for their future career path. In addition, KSB is increasingly seeking to appoint women to management positions if applicants are equally qualified. Human Resources and Management make concerted efforts to approach potential female candidates, make them aware of their prospects and

**40 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

were also conducted in individual countries and Regions to obtain feedback from employees on current and strategic topics. This active feedback culture reflects how employees and

Measures to promote employee engagement were once again undertaken in all companies in 2023, for example joint team events. Local Managing Directors reported regularly to KSB Group Management on their implementation and further planned measures, including during personal meetings, joint appointments and in conversation via e-mail and video calls. Furthermore, a global network of Engagement Ambassadors ensures that defined measures are followed through and their successful implementation is publicised in all KSB Regions.

 The number of completed training courses recorded via the company's own online learning platform increased to 42,469 in 2023 as a result of intensified communication measures (2022: 29,830). This corresponds to an increase of over 42 %. A total of 11,675 (2022: 7,533) employees participated in the training courses, which is over 54 %

Employee health and safety are top priorities for KSB. The company's goal is to protect staff from risks at work and to keep the number of occupational accidents as low as possible. By 2025, KSB aims to permanently reduce the number of working days lost due to occupational accidents to fewer than 0.3 days per employee. In addition, the company offers employees a

At the beginning of the reporting year, the COVID-19 pandemic continued to have a limited local impact on KSB in certain individual locations and Regions. In March 2023, the company's interdisciplinary COVID-19 task force was disbanded due to the improved situation. The task force members jointly analysed the company's crisis management during the pandemic and discussed potential improvements. These insights will help KSB to be even better prepared for similar crisis situations in

their opinions are valued and appreciated.

more than in the previous year.

range of health-focused services.

**Organisation, processes and measures:**

**OCCUPATIONAL HEALTH AND SAFETY**

**Results:** 

**Objectives:**

In order to achieve a more balanced mix of men and women in management, KSB implemented several measures in the reporting year. Once again, these included local and global events for promising candidates attended by members of Management. This supports KSB's efforts to ensure that talented women and

KSB provides its employees with mobile working options, including working from home. This can help facilitate a balance between family and work commitments. Under the Group works agreement on mobile working, up to 40 % of individual working hours can be spent away from company premises. In addition, many employees have access to flexible working time models, allowing them to care for their family members for

Employees who enjoy their work achieve more. KSB therefore attaches great importance to ensuring committed and satisfied employees who are passionate about making a contribution to the company's success. As an attractive employer, KSB strives to create a motivating working environment in which employees can perform to the best of their ability. KSB regularly analyses employee satisfaction. The company had previously conducted a Group-wide employee survey every three years. In the reporting year, Management decided to reduce the time until the next survey to two years. The engagement index, which measures an employee's emotional attachment to work and the workplace, will therefore be analysed again in 2024. In 2022, the figure

The global employee engagement survey in 2022 provided valuable information on potential for improvement to further improve satisfaction. Following the results, the CEO and the Chief Engagement Officer discussed the local insights with more than 70 Managing Directors of Group companies and Regional Executive Officers around the world in the reporting year. Based on the findings, numerous measures were agreed at country and departmental level to increase engagement. In 2023, a total of 50 short surveys, known as KSB Pulse surveys,

encourage them to take advantage of opportunities.

men are seen and heard within the company.

example.

was 65 % (2019: 57 %).

KSB Group / Annual Report 2023

the future. All measures and rules adopted during the pandemic were discontinued.

The focus of accident prevention in everyday work at KSB is in the production areas due to their increased risk. Appropriate training, instruction and other preventive measures are implemented regularly. In the reporting year, 39 production and assembly sites (including all factories of KSB SE & Co. KGaA) were certified to the ISO 45001 international occupational health and safety standard. This represents 93 % of the company's locations.

To reduce the number of occupational accidents, KSB introduced the global Vision Zero concept from the International Social Security Association (ISSA) in its production departments. This aims to increase involvement of management staff so as to raise awareness of improved occupational health and safety. Managers learn about suitable measures that they can apply individually to their production facilities.

In 2023, more than 70 production managers at KSB focused intensively on occupational health and safety at the global manufacturing conference in Brazil. At the event, the participants defined their most important topics in this area according to the rules set out in the Vision Zero concept. The focus was on aspects with the highest potential for improvement at the respective locations. After the conference, the production managers were tasked with deriving measures and implementing them in their area of responsibility. Integrated Management will support the global locations in this process and verify the results in the current reporting year. The aim is to establish a sustainable safety culture within the company.

KSB maintains an active occupational health management system with a holistic approach. As well as fulfilling the company's legal occupational health and safety obligations, this framework enables KSB to provide voluntary health-focused services. These include ongoing health initiatives such as vaccinations, support for giving up smoking, preventive health care courses and confidential psychosocial counselling from the company's Health Management department. The implementation of the company's return-to-work programme makes a significant contribution to promoting health in the workplace and restoring employees' ability to work. Addiction prevention services are provided by KSB's Health Management and local addiction support teams.

The mental health of employees is becoming a key focus of many companies. A positive state of well-being is essential for actively participating in private and professional life and for dealing appropriately with challenging situations. In 2023, KSB expanded an initiative to strengthen the mental health of its workforce. The campaign supported employees and managers in maintaining their health and well-being. The measures aimed to raise awareness and acceptance of mental stresses and jointly develop solutions. Multiple workshops, information events and participative activities were held at various locations.

Employees who spend most of their working time sitting benefit from an Internet-based health programme that includes exercises to prevent back problems. In the reporting year, KSB added mindfulness exercises to the programme that provide tips on how to confidently deal with stressful phases in daily working life in a relaxed manner.

In 2023, the focus of KSB's prevention services was on skin health. Employees were invited to participate in preventive examinations, informative presentations and activities.

The focus of prevention services for employees was on skin health.

{41}------------------------------------------------

Cycling keeps you fit, saves energy and reduces your personal carbon footprint. Since the middle of the reporting year, KSB has been offering its German employees a cycle-to-work bike leasing scheme to promote healthy mobility. Interest among staff was huge: by the end of 2023, 577 employees had taken up the offer. KSB also supported participation in the annual city cycling event. Over 240 employees from various locations took part in the Germany-wide competition.

Joint sports activities not only strengthen team spirit among employees, but also their health. KSB therefore encourages company sports, participation in sports events and organises sports events at its locations.

#### **Results:**

- The company medical service in Germany organised a total of 897 vaccinations in the reporting year. The majority of these were vaccinations against influenza (555) and shingles (126). 53 employees were also vaccinated against COVID-19.
- The company's Health Management department in Germany provided counselling sessions in 2023, primarily in connection with mental stress and dealing with crises.
- The number of accident-related days lost per employee and year in 2023 was slightly higher than in the previous year at 0.36 (lost time accident rate).
- As part of the reporting year's initiative focusing on skin health in Germany, 433 employees took up the offer of skin cancer screening.

#### **Society**

#### **Objectives:**

KSB seeks to make an active contribution to society through its commitment to social initiatives. This includes financial contributions to organisations engaged in social projects. With its charitable commitments, KSB seeks to contribute to the development of the common good. By 2025, the company intends to support at least 25 social projects every year. KSB defines a project as an undertaking fulfilling at least three of the following five criteria:

- Humanitarian aid benefiting third parties
- Support for education (child, youth and adult education)
- Project-related support of more than € 5,000
- Personal engagement of KSB employees
- Long-term or permanent aid (e.g. in the field of ecology)

Social activities that meet fewer than three of the above criteria are classified by the company as social initiatives.

#### **Organisation, processes and measures:**

KSB's binding Donation Directive sets out for which purposes and under which conditions the company may make financial or material commitments. In this context, the focus is on supporting organisations, projects and measures dedicated to the education, social support and protection of children and young people. The company is also committed to helping the disadvantaged. In the event of disasters it provides assistance to both people and organisations. In the reporting year, KSB expanded the potential group of recipients to include organisations and projects that promote local sports and are committed to sustainability and environmental protection.

The education of young people is one of the most important issues for the future. KSB therefore once again supported relevant projects worldwide in 2023. This not only took the form of direct financial aid, but also imparting knowledge to teachers or representatives of state institutions. Furthermore, the company is committed to helping people in need in order to improve their living conditions. For example, KSB donated

In the reporting year, KSB expanded the potential group of donation recipients to include organisations and projects that promote local sports and are committed to sustainability and environmental protection.

{42}------------------------------------------------

The company's social engagement sees KSB making a contribution towards achieving the United Nations' 17 Sustainable Development Goals.

Cycling keeps you fit, saves energy and reduces your personal carbon footprint. Since the middle of the reporting year, KSB has been offering its German employees a cycle-to-work bike leasing scheme to promote healthy mobility. Interest among staff was huge: by the end of 2023, 577 employees had taken up the offer. KSB also supported participation in the annual city cycling event. Over 240 employees from various locations took

**42 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

Social activities that meet fewer than three of the above criteria

KSB's binding Donation Directive sets out for which purposes and under which conditions the company may make financial or material commitments. In this context, the focus is on supporting organisations, projects and measures dedicated to the education, social support and protection of children and young people. The company is also committed to helping the disadvantaged. In the event of disasters it provides assistance to both people and organisations. In the reporting year, KSB expanded the potential group of recipients to include organisations and projects that promote local sports and are committed to sus-

The education of young people is one of the most important issues for the future. KSB therefore once again supported relevant projects worldwide in 2023. This not only took the form of direct financial aid, but also imparting knowledge to teachers or representatives of state institutions. Furthermore, the company is committed to helping people in need in order to improve their living conditions. For example, KSB donated

In the reporting year, KSB

of donation recipients to

include organisations and

sports and are committed

environmental protection.

to sustainability and

projects that promote local

expanded the potential group

are classified by the company as social initiatives.

**Organisation, processes and measures:**

tainability and environmental protection.

Joint sports activities not only strengthen team spirit among employees, but also their health. KSB therefore encourages company sports, participation in sports events and organises

 The company medical service in Germany organised a total of 897 vaccinations in the reporting year. The majority of these were vaccinations against influenza (555) and shingles (126). 53 employees were also vaccinated against

 The company's Health Management department in Germany provided counselling sessions in 2023, primarily in connection with mental stress and dealing with crises. The number of accident-related days lost per employee and year in 2023 was slightly higher than in the previous year

 As part of the reporting year's initiative focusing on skin health in Germany, 433 employees took up the offer of skin

KSB seeks to make an active contribution to society through its commitment to social initiatives. This includes financial contributions to organisations engaged in social projects. With its charitable commitments, KSB seeks to contribute to the development of the common good. By 2025, the company intends to support at least 25 social projects every year. KSB defines a project as an undertaking fulfilling at least three of the follow-

Support for education (child, youth and adult education)

Long-term or permanent aid (e.g. in the field of ecology)

part in the Germany-wide competition.

at 0.36 (lost time accident rate).

Humanitarian aid benefiting third parties

 Project-related support of more than € 5,000 Personal engagement of KSB employees

sports events at its locations.

**Results:** 

COVID-19.

cancer screening.

**Society Objectives:**

ing five criteria:

KSB Group / Annual Report 2023

employees of KSB SE & Co KGaA (including employees of the German Group companies) and their immediate families in cases of urgent financial need, for example, by providing grants for health care treatment and medical aids.

#### **Results:**

 In 2023, KSB participated in 44 social projects and 37 charitable initiatives worldwide.

More information on social commitment is available at **www.ksb.com/csr-en**.

€ 10,000 to Christmas fund-raising campaigns at its Pegnitz location. The company was once again able to support development projects with contributions in kind, for example by donating pumps for a drinking water project in Africa.

Natural disasters have a direct and devastating impact on the lives of those affected. KSB provides fast and targeted help. In the reporting year, for example, the company donated € 10,000 and multiple pumps to supply people with water following an earthquake in Turkey.

KSB's Indian companies have traditionally been strongly committed to charitable organisations and institutions in the vicinity of their locations. The projects primarily focus on improving the lives of children and women in schools and social institutions, for example through grants for infrastructure and the purchase of study materials. KSB offers particular support for people with disabilities, those in need and the elderly.

The company's social engagement sees KSB making a contribution towards achieving the United Nations' 17 Sustainable Development Goals. The focuses of the supported projects and measures were, in descending order, the goals of quality education (goal 4), industry, innovation and infrastructure (goal 9) and good health and well-being (goal 3).

Founded in 1942, the Geheimrat Dr. Jacob Klein-Unterstützungseinrichtung e.V. benevolent fund originally functioned to finance the KSB pension scheme. Since 1999, the charitable organisation has continued to support current and former

{43}------------------------------------------------

Combined Management Rep

# **EU Taxonomy Regulation**

The European Union has set itself the goal of becoming climate-neutral by 2050. As part of the Green Deal, the Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the Establishment of a Framework to Facilitate Sustainable Investment, and Amending Regulation (EU) 2019/2088, hereinafter referred to as the EU Taxonomy Regulation, entered into force in 2020.

The taxonomy sets out a classification system for environmentally sustainable economic activities and defines six environmental objectives:

- 1) Climate change mitigation (CCM)
- 2) Climate change adaptation (CCA)
- 3) Sustainable use and protection of water and marine resources (WTR)
- 4) Transition to a circular economy (CE)
- 5) Pollution prevention and control (PPC)
- 6) Protection and restoration of biodiversity and ecosystems (BIO)

Since 2023, the new Environmental Delegated Act has complemented the EU Taxonomy Regulation. It defines the economic activities and the associated technical screening criteria for environmental objectives (3) to (6). The Climate Delegated Act and the Disclosures Delegated Act were also amended pursuant to Article 8.

Economic activities qualify as taxonomy-eligible if they correspond to at least one of the activity descriptions set out in the aforementioned Delegated Acts.

If the taxonomy-eligible economic activities also:

- 1. Make a substantial contribution to the fulfilment of one or more of the six environmental objectives
- 2. Do not significantly affect the fulfilment of the five other EU environmental objectives (Do No Significant Harm, or DNSH)
- 3. Comply with the minimum safeguards

they are classified as taxonomy-aligned.

The assessment of whether an economic activity makes a substantial contribution to one of the environmental objectives and does no significant harm to the five other environmental objectives shall be made on the basis of technical screening criteria.

Information on taxonomy eligibility for the six environmental objectives must be provided for the 2023 financial year. In addition, information on taxonomy alignment must be provided for the first two environmental objectives. Information on the alignment of activities added or changed in 2023 has not been provided in the reporting year.

Delegated Regulation (EU) 2021/2178 requires companies to report information on the key indicators of sales revenue, capital expenditure (CapEx) and operating expenditure (OpEx) relating to taxonomy-eligible and taxonomy-aligned economic activities as well as to publish additional quantitative and qualitative information.

The capital expenditure and operating expenditure indicators are classified into the following categories:

- **Category A:** Capital or operating expenditure related to assets or processes associated with taxonomy-aligned economic activities
- **Category B:** Capital or operating expenditure that is part of a plan to expand taxonomy-aligned economic activities or to allow taxonomy-eligible economic activities to become taxonomy-aligned economic activities
- **Category C:** Capital or operating expenditure related to the purchase of output from taxonomy-aligned economic activities and individual measures enabling certain target activities to become low-carbon or to lead to greenhouse gas reductions

#### **Procedure in the Reporting Year**

The impact analysis is updated annually and the newly published economic activities were added in the financial year. In order to identify taxonomy-eligible economic activities, all activities listed in the annexes to the Climate Delegated Act and the Environmental Delegated Act were assessed for relevance to KSB. Experts from specialist departments including Product Development, Sales, Facility Management and IT

{44}------------------------------------------------

The assessment of whether an economic activity makes a substantial contribution to one of the environmental objectives and does no significant harm to the five other environmental objectives shall be made on the basis of technical screening

Information on taxonomy eligibility for the six environmental objectives must be provided for the 2023 financial year. In addition, information on taxonomy alignment must be provided for the first two environmental objectives. Information on the alignment of activities added or changed in 2023 has

Delegated Regulation (EU) 2021/2178 requires companies to report information on the key indicators of sales revenue, capital expenditure (CapEx) and operating expenditure (OpEx) relating to taxonomy-eligible and taxonomy-aligned economic activities as well as to publish additional quantitative

The capital expenditure and operating expenditure indicators

 **Category A:** Capital or operating expenditure related to assets or processes associated with taxonomy-aligned eco-

 **Category B:** Capital or operating expenditure that is part of a plan to expand taxonomy-aligned economic activities or to allow taxonomy-eligible economic activities to be-

 **Category C:** Capital or operating expenditure related to the purchase of output from taxonomy-aligned economic activities and individual measures enabling certain target activities to become low-carbon or to lead to greenhouse

come taxonomy-aligned economic activities

**Procedure in the Reporting Year** 

The impact analysis is updated annually and the newly published economic activities were added in the financial year. In order to identify taxonomy-eligible economic activities, all activities listed in the annexes to the Climate Delegated Act and the Environmental Delegated Act were assessed for relevance to KSB. Experts from specialist departments including Product Development, Sales, Facility Management and IT

not been provided in the reporting year.

are classified into the following categories:

and qualitative information.

nomic activities

gas reductions

criteria.

**44 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

**EU Taxonomy Regulation**

Regulation, entered into force in 2020.

1) Climate change mitigation (CCM) 2) Climate change adaptation (CCA)

4) Transition to a circular economy (CE) 5) Pollution prevention and control (PPC)

mental objectives:

resources (WTR)

(BIO)

to Article 8.

DNSH)

KSB Group / Annual Report 2023

aforementioned Delegated Acts.

The European Union has set itself the goal of becoming climate-neutral by 2050. As part of the Green Deal, the Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the Establishment of a Framework to Facilitate Sustainable Investment, and Amending Regulation (EU) 2019/2088, hereinafter referred to as the EU Taxonomy

The taxonomy sets out a classification system for environmentally sustainable economic activities and defines six environ-

3) Sustainable use and protection of water and marine

6) Protection and restoration of biodiversity and ecosystems

Since 2023, the new Environmental Delegated Act has complemented the EU Taxonomy Regulation. It defines the economic activities and the associated technical screening criteria for environmental objectives (3) to (6). The Climate Delegated Act and the Disclosures Delegated Act were also amended pursuant

Economic activities qualify as taxonomy-eligible if they correspond to at least one of the activity descriptions set out in the

1. Make a substantial contribution to the fulfilment of one or

2. Do not significantly affect the fulfilment of the five other EU environmental objectives (Do No Significant Harm, or

If the taxonomy-eligible economic activities also:

more of the six environmental objectives

3. Comply with the minimum safeguards

they are classified as taxonomy-aligned.

were consulted for this assessment. Responsibility for the data collection and reporting process lies with the Finance department.

The following findings regarding KSB's economic activities were made as part of the impact analysis in connection with the performance indicators relevant to the EU taxonomy:

KSB's core sales activities almost exclusively comprise the manufacture of pumps and valves, and provision of related spare parts and support services. The EU taxonomy currently in force in particular covers economic activities that have a material impact on the environment. As this is largely not the case with mechanical engineering, KSB cannot allocate its sales activities to such economic activities. In particular, it was assessed whether the new economic activities of environmental objective (4) Transition to a circular economy from Section 5. Services could be relevant for KSB. However, the NACE codes listed in the activity descriptions to narrow down the products considered for this activity do not fall within the scope of the Group's activities. The economic activities added to the other environmental objectives were also assessed and do not correspond to the Group-wide sales revenue-generating economic activities.

Furthermore, KSB does not engage in any of the economic activities described in the European Commission Delegated Regulation 2022/1214 in connection with the production of energy from fossil gas or nuclear energy. KSB therefore has not used the specific reporting forms for these activities in accordance with Annex XII of the European Commission Delegated Regulation 2021/2178.

Accordingly, as in previous years, KSB will not report any taxonomy-eligible or taxonomy-aligned sales revenue in the 2023 financial year.

Capital expenditure and operating expenditure relating to assets or processes associated with taxonomy-aligned economic activities (Category A) therefore also cannot be reported. Furthermore, there is no CapEx plan to expand a taxonomy-aligned activity or upgrade a taxonomy-eligible activity to become a taxonomy-aligned activity. Thus, no category B capital expenditure or operating expenses are reported.

With regard to capital expenditure and operating expenditure in category C, from the purchase of taxonomy-aligned products and individual measures, the following taxonomy-eligible economic activities were identified in the impact analysis for the KSB Group:

#### **Taxonomy-eligible economic activities:**

| Economic activities according to the EU taxonomy                                                                                                   | Examples of activities at KSB                                          |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|
| Manufacturing / Production of goods                                                                                                                |                                                                        |
| CCM 3.9 Manufacturing of iron and steel                                                                                                            | Operation of foundries                                                 |
| Transport                                                                                                                                          |                                                                        |
| CCM 6.5 Transport by motorbikes, passenger cars and light commercial vehicles                                                                      | Purchasing and leasing of passenger cars                               |
| Construction and real estate                                                                                                                       |                                                                        |
| CCM 7.2 / CE 3.2 Renovation of existing buildings                                                                                                  | Renovation of administrative buildings                                 |
| CCM 7.3 Installation, maintenance and repair of energy efficiency equipment                                                                        | Replacement of existing windows with new energy-efficient windows      |
| CCM 7.4 Installation, maintenance and repair of charging stations for electric<br>vehicles in buildings (and parking spaces attached to buildings) | Purchasing and installation of charging stations for electric vehicles |
| CCM 7.6 Installation, maintenance and repair of renewable energy technologies                                                                      | Purchasing and installation of solar power systems                     |
| CCM 7.7 Acquisition and ownership of buildings                                                                                                     | Purchasing and leasing of non-residential buildings                    |

{45}------------------------------------------------

The identified taxonomy-eligible economic activities were primarily allocated to environmental objective (1) Climate change mitigation, as KSB has a greater influence on the contribution to this environmental objective.

Despite the corresponding activity description, the activities of environmental objective (2) Climate change adaptation were not reported as taxonomy-eligible because they are not enabling activities or there is no separable, specific capital expenditure or operating expenditure for climate change adaptation.

#### **Assessment of Taxonomy Eligibility and Alignment**

The basis for determining taxonomy-eligible and taxonomyaligned economic activities are the actually identified capital expenditure and operating expenditure calculated for the fully consolidated companies in the Group, which were assessed and audited in terms of a cost-benefit ratio. The relevant performance indicators were determined using a questionnaire prepared by KSB in which the potential taxonomy-eligible economic activities identified in the impact analysis were assessed. When validating the questionnaires, particular care was taken to ensure that the figures reported by the companies were not counted twice.

The analysis of capital expenditure showed that economic activities amounting to € 62.8 million (46.3 % of total investments) (previous year: € 38.5 million, 31.7 % of total investments) correspond to the activity descriptions of the Delegated Acts and therefore constitute taxonomy-eligible capital expenditure.

#### **Breakdown of capital expenditure by environmental objectives**

|                                        | Proportion of CapEx / Total CapEx |                                |
|----------------------------------------|-----------------------------------|--------------------------------|
|                                        | Taxonomy-aligned per objective    | Taxonomy-aligned per objective |
| Climate change mitigation (CCM)        | -                                 | 46.3 %                         |
| Climate change adaptation (CCA)        | -                                 | -                              |
| Water (WTR)                            | -                                 | -                              |
| Circular economy (CE)                  | -                                 | 13.8 %                         |
| Pollution prevention and control (PPC) | -                                 | -                              |
| Biodiversity (BIO)                     | -                                 | -                              |

{46}------------------------------------------------

The identified taxonomy-eligible economic activities were primarily allocated to environmental objective (1) Climate change mitigation, as KSB has a greater influence on the contribution

**46 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

audited in terms of a cost-benefit ratio. The relevant performance indicators were determined using a questionnaire prepared by KSB in which the potential taxonomy-eligible economic activities identified in the impact analysis were assessed. When validating the questionnaires, particular care was taken to ensure that the figures reported by the companies

The analysis of capital expenditure showed that economic activities amounting to € 62.8 million (46.3 % of total investments) (previous year: € 38.5 million, 31.7 % of total investments) correspond to the activity descriptions of the Delegated Acts and therefore constitute taxonomy-eligible

were not counted twice.

capital expenditure.

Climate change mitigation (CCM) − 46.3 % Climate change adaptation (CCA) − − Water (WTR) − − Circular economy (CE) − 13.8 % Pollution prevention and control (PPC) − − Biodiversity (BIO) − −

**Proportion of CapEx / Total CapEx**

**Taxonomy-aligned per objective Taxonomy-aligned per objective**

Despite the corresponding activity description, the activities of environmental objective (2) Climate change adaptation were not reported as taxonomy-eligible because they are not enabling activities or there is no separable, specific capital expenditure or operating expenditure for climate change adaptation.

**Assessment of Taxonomy Eligibility** 

The basis for determining taxonomy-eligible and taxonomyaligned economic activities are the actually identified capital expenditure and operating expenditure calculated for the fully consolidated companies in the Group, which were assessed and

**Breakdown of capital expenditure by environmental objectives**

to this environmental objective.

**and Alignment**

KSB Group / Annual Report 2023

**Proportion of OpEx / Total OpEx**

#### **Breakdown of operating expenditure by environmental objectives**

|                                        | Taxonomy-aligned per objective | Taxonomy-eligible per objective |
|----------------------------------------|--------------------------------|---------------------------------|
| Climate change mitigation (CCM)        | −                              | 5.3 %                           |
| Climate change adaptation (CCA)        | −                              | −                               |
| Water (WTR)                            | −                              | −                               |
| Circular economy (CE)                  | −                              | −                               |
| Pollution prevention and control (PPC) | −                              | −                               |
| Biodiversity (BIO)                     | −                              | −                               |
|                                        |                                |                                 |

Taxonomy-eligible operating expenditure amounted to € 6.3 million (5.3 % of total operating expenditure) in the reporting year (previous year: € 4.0 million, 6.2 % of total operating expenditure).

In addition, the identified taxonomy-eligible economic activities were analysed with regard to their **substantial contribution** as part of the taxonomy alignment assessment. As the identified taxonomy-eligible economic activities relate to the acquisition of products from taxonomy-aligned economic activities (Category C), the assessment of alignment (except for economic activities CCM 7.4 and CCM 7.6) is dependent on the provision of relevant proof by external third parties and cannot be carried out independently by KSB. Suppliers were therefore contacted to verify compliance with the technical screening criteria. It was also checked whether the other environmental objectives were caused any significant harm by the specified economic activity. The documents required by the Delegated Acts could not be provided by the external third parties to a sufficient extent.

For the economic activities CCM 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings and CCM 7.6 Installation, maintenance and repair of renewable energy technologies, KSB meets the substantial contribution criteria. However, the suppliers were unable to provide proof of compliance with EU taxonomy alignment.

As a result, KSB cannot report any taxonomy-aligned capital expenditure and operating expenditure in the 2023 financial year.

The EU Taxonomy Regulation defines **minimum safeguard requirements** for companies, in particular with regard to the issues of human rights, corruption, bribery, taxation and antitrust law. KSB's actions are in line with the requirements. Among other things, this is reflected by KSB's compliance with the following internationally recognised standards:

- The Ten Principles of the United Nations Global Compact (UNGC) and its 17 Sustainable Development Goals (SDGs)
- The UN Guiding Principles on Business and Human Rights (UNGP)
- The United Nations Universal Declaration of Human Rights
- The eight fundamental Conventions of the International Labour Organisation (ILO)
- The OECD Guidelines for Multinational Enterprises

{47}------------------------------------------------

KSB stands up for human rights, equal treatment and decent working conditions worldwide and documents this in policy statements, guidelines and commitments. For further details, please refer to the Human Rights / Sustainability in the Supply Chain section in this part of the report.

In addition, all information on perceived compliance violations is taken seriously and followed up in accordance with the stipulations of KSB's Code of Conduct. Compliance with applicable cartel / anti-trust law is also part of the core KSB values set out in the KSB Code of Conduct. Further information is provided in the Compliance section of this part of the report.

As an globally operating Group, KSB also observes all relevant tax law provisions. KSB sets transfer prices using globally recognised principles and compares them with the terms and conditions of external third parties. Employees on international assignments are obliged to comply with the tax laws that apply to them personally in line with the company's Expatriate Assignment Directive.

In the reporting year, KSB experienced no proven violations or convictions relating to human rights, compliance (corruption and bribery), cartel / anti-trust law or tax law.

The results demonstrate the appropriateness and effectiveness of the processes and systems established throughout the Group for identifying and mitigating potential risks or breaches of the minimum safeguards.

#### **Calculation of Performance Indicators**

The **sales revenue** performance indicator was calculated as the proportion of sales revenue derived from products and services generated by taxonomy-eligible and -aligned economic activities (numerator) divided by the sales revenue 

{48}------------------------------------------------

to them personally in line with the company's Expatriate

In the reporting year, KSB experienced no proven violations or convictions relating to human rights, compliance (corrup-

The results demonstrate the appropriateness and effectiveness of the processes and systems established throughout the Group for identifying and mitigating potential risks or

**Calculation of Performance Indicators** 

The **sales revenue** performance indicator was calculated as the proportion of sales revenue derived from products and services generated by taxonomy-eligible and -aligned economic activities (numerator) divided by the sales revenue

tion and bribery), cartel / anti-trust law or tax law.

breaches of the minimum safeguards.

Assignment Directive.

KSB stands up for human rights, equal treatment and decent working conditions worldwide and documents this in policy statements, guidelines and commitments. For further details, please refer to the Human Rights / Sustainability in the Supply

**48 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

In addition, all information on perceived compliance violations is taken seriously and followed up in accordance with the stipulations of KSB's Code of Conduct. Compliance with applicable cartel / anti-trust law is also part of the core KSB values set out in the KSB Code of Conduct. Further information is provided in the Compliance section of this part of the report.

As an globally operating Group, KSB also observes all relevant tax law provisions. KSB sets transfer prices using globally recognised principles and compares them with the terms and conditions of external third parties. Employees on international assignments are obliged to comply with the tax laws that apply

Chain section in this part of the report.

KSB Group / Annual Report 2023

generated in the reporting year (denominator). The denominator of the sales revenue performance indicator is provided in the Statement of Comprehensive Income in the Consolidated Financial Statements section. As described above, no taxonomy-eligible and -aligned economic activities can be reported in relation to sales revenue.

The **capital expenditure (CapEx)** performance indicator is defined as capital expenditure in taxonomy-aligned and -eligible economic activities (numerator) divided by total capital expenditure made in the financial year (denominator). Total capital expenditure includes additions to property, plant and equipment (IAS 16), intangible assets (IAS 38) and right-of-use assets (IFRS 16). A breakdown of the composition of capital expenditure by asset class is presented in the Consolidated Financial Statements, Section IV. Balance Sheet Disclosures, Subsections "1. Intangible assets", "2. Right-of-use assets" and "3. Property, plant and equipment".

The **operating expenses (OpEx)** performance indicator is defined as operating expenses in taxonomy-aligned and -eligible economic activities (numerator) divided by total operating expenses (denominator). The denominator of operating expenses comprises direct, non-capitalised costs related to research and development, maintenance and short-term lease expenses. Maintenance expenses include both services provided by third parties and maintenance work performed by KSB employees.

Given the dynamic situation relating to the relevant legislation, KSB points out that the impact analysis and interpretation of the financial indicators to be determined may be subject to adjustments in the future.

{49}------------------------------------------------

#### **Proportion of sales revenue from products or services associated with taxonomy-aligned economic activities – Disclosures for the 2023 financial year**

|                                                                                                                                   |                | 2023                    |                                                     |                                        |                                             |              | Substantial contribution criteria |                  |                                                |
|-----------------------------------------------------------------------------------------------------------------------------------|----------------|-------------------------|-----------------------------------------------------|----------------------------------------|---------------------------------------------|--------------|-----------------------------------|------------------|------------------------------------------------|
| Economic activities (1)                                                                                                           | Code(s)<br>(2) | Sales<br>revenue<br>(3) | Proportion<br>of<br>sales<br>revenue<br>2023<br>(4) | Climate<br>change<br>mitigation<br>(5) | Climate<br>change<br>adap-<br>tation<br>(6) | Water<br>(7) | Circular<br>economy<br>(8)        | Pollution<br>(9) | Bio<br>diversity<br>and eco<br>systems<br>(10) |
|                                                                                                                                   |                | € millions              | %                                                   | Y;N;N/EL                               | Y;N;N/EL                                    | Y;N;N/EL     | Y;N;N/EL                          | Y;N;N/EL         | Y;N;N/EL                                       |
| A. Taxonomy-eligible activities                                                                                                   |                |                         |                                                     |                                        |                                             |              |                                   |                  |                                                |
| A.1. Environmentally sustainable activities<br>(taxonomy-aligned)                                                                 |                |                         |                                                     |                                        |                                             |              |                                   |                  |                                                |
| Sales revenue from environmentally sustain-<br>able activities (taxonomy-aligned) (A.1)                                           |                | –                       | –                                                   | –                                      | –                                           | –            | –                                 | –                | –                                              |
| Of which enabling activities                                                                                                      |                | –                       | –                                                   | –                                      | –                                           | –            | –                                 | –                | –                                              |
| Of which transitional activities                                                                                                  |                | –                       | –                                                   | –                                      | –                                           | –            | –                                 | –                | –                                              |
| A.2. Taxonomy-eligible but not environ-<br>mentally sustainable activities<br>(not taxonomy-aligned activities)                   |                |                         |                                                     |                                        |                                             |              |                                   |                  |                                                |
| Sales revenue from taxonomy-eligible but<br>not environmentally sustainable activities<br>(not taxonomy-aligned activities) (A.2) |                | –                       | –                                                   | EL;N/EL                                | EL;N/EL                                     | EL;N/EL      | EL;N/EL                           | EL;N/EL          | EL;N/EL                                        |
| A. Sales revenue from taxonomy-eligible<br>activities (A.1 + A.2)                                                                 |                | –                       | –                                                   | –                                      | –                                           | –            | –                                 | –                | –                                              |
| B. Taxonomy-non-eligible activities                                                                                               |                |                         |                                                     |                                        |                                             |              |                                   |                  |                                                |
| Sales revenue from taxonomy-<br>non-eligible activities                                                                           |                | 2,819.0                 | 100.0                                               |                                        |                                             |              |                                   |                  |                                                |
| Total                                                                                                                             |                | 2,819.0                 | 100.0                                               |                                        |                                             |              |                                   |                  |                                                |

Y Yes, taxonomy-eligible and, in relation to the relevant environmental objective, taxonomy-aligned activity

N No, taxonomy-eligible but, in relation to the relevant environmental objective, not taxonomy-aligned activity

N/EL Non-eligible, taxonomy-non-eligible activity in relation to the relevant environmental objective

EL Eligible, taxonomy-eligible activity in relation to the relevant environmental objective 

Category Transitional activities (20)

{50}------------------------------------------------

| DNSH criteria ("Do No Significant Harm")         |                                                  |                        |                                      |                            |                                                 |                                        |                                                                                                                              |                                                 |                                                     |
|--------------------------------------------------|--------------------------------------------------|------------------------|--------------------------------------|----------------------------|-------------------------------------------------|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|-----------------------------------------------------|
| Climate<br>change<br>mitigation<br>(11)<br>Y / N | Climate<br>change<br>adaptation<br>(12)<br>Y / N | Water<br>(13)<br>Y / N | Circular<br>economy<br>(14)<br>Y / N | Pollution<br>(15)<br>Y / N | Biodiversity<br>and ecosystems<br>(16)<br>Y / N | Minimum<br>safeguards<br>(17)<br>Y / N | Taxonomy-<br>aligned<br>(A.1.) or<br>taxonomy-<br>eligible<br>(A.2.)<br>proportion<br>of sales<br>revenue,<br>2022 (18)<br>% | Category<br>Enabling<br>activities<br>(19)<br>E | Category<br>Transitional<br>activities<br>(20)<br>T |
|                                                  |                                                  |                        |                                      |                            |                                                 |                                        |                                                                                                                              |                                                 |                                                     |
|                                                  |                                                  |                        |                                      |                            |                                                 |                                        | -                                                                                                                            | E                                               |                                                     |
|                                                  |                                                  |                        |                                      |                            |                                                 |                                        | -                                                                                                                            |                                                 | T                                                   |
|                                                  |                                                  |                        |                                      |                            |                                                 |                                        |                                                                                                                              |                                                 |                                                     |
|                                                  |                                                  |                        |                                      |                            |                                                 |                                        |                                                                                                                              |                                                 |                                                     |
|                                                  |                                                  |                        |                                      |                            |                                                 |                                        |                                                                                                                              |                                                 |                                                     |
|                                                  |                                                  |                        |                                      |                            |                                                 |                                        |                                                                                                                              |                                                 |                                                     |

**Proportion of sales revenue from products or services associated with taxonomy-aligned economic activities –**

**50 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

activities (A.1 + A.2) – – – – – – – –

**Disclosures for the 2023 financial year**

**non-eligible activities 2,819.0 100.0 Total 2,819.0 100.0**

Y Yes, taxonomy-eligible and, in relation to the relevant environmental objective, taxonomy-aligned activity N No, taxonomy-eligible but, in relation to the relevant environmental objective, not taxonomy-aligned activity

N/EL Non-eligible, taxonomy-non-eligible activity in relation to the relevant environmental objective EL Eligible, taxonomy-eligible activity in relation to the relevant environmental objective

B. Taxonomy-non-eligible activities **Sales revenue from taxonomy-**

KSB Group / Annual Report 2023

{51}------------------------------------------------

#### **Proportion of CapEx from products or services associated with taxonomy-aligned economic activities –**

**Disclosures for the 2023 financial year**

|                                                                                                                                                  |                     | 2023                    |                                          | Substantial contribution criteria |                                        |                                        |              |                            |                  |                                            | 2023<br>Substantial contribution criteria                                                                                                                                                                                                                                                                 | DNSH criteria ("Do No Significant Harm") |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
|--------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|-------------------------|------------------------------------------|-----------------------------------|----------------------------------------|----------------------------------------|--------------|----------------------------|------------------|--------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------|---------------------------------------------|---------------|-----------------------------|-------------------|------------------------------------------------|-----------------------------------|------------------------------------------------------------------------------------------------------------|--------------------------------------------|----------------------------------------------------|
|                                                                                                                                                  |                     |                         |                                          |                                   | Climate<br>change<br>mitigation<br>(5) | Climate<br>change<br>adaptation<br>(6) | Water<br>(7) | Circular<br>economy<br>(8) | Pollution<br>(9) | Biodiversity<br>and eco<br>systems<br>(10) | Climate<br>Bio<br>diversity<br>Climate<br>change<br>Proportion<br>change<br>adap<br>Circular<br>and eco<br>Code(s)<br>of CapEx,<br>mitigation<br>tation<br>Water<br>economy<br>Pollution<br>systems<br>Economic activities (1)<br>(2)<br>CapEx (3)<br>2023 (4)<br>(5)<br>(6)<br>(7)<br>(8)<br>(9)<br>(10) | Climate<br>change<br>mitigation<br>(11)  | Climate<br>change<br>adap<br>tation<br>(12) | Water<br>(13) | Circular<br>economy<br>(14) | Pollution<br>(15) | Bio<br>diversity<br>and eco<br>systems<br>(16) | Minimum<br>safe<br>guards<br>(17) | Taxonomy<br>aligned<br>(A.1.) or<br>taxonomy<br>eligible<br>(A.2.)<br>proportion<br>of CapEx,<br>2022 (18) | Category<br>Enabling<br>activities<br>(19) | Category<br>Transi<br>tional<br>activities<br>(20) |
| Economic activities (1)                                                                                                                          | Code(s)<br>(2)      | CapEx (3)<br>€ millions | Proportion<br>of CapEx,<br>2023 (4)<br>% |                                   | Y;N;N/EL                               | Y;N;N/EL                               | Y;N;N/EL     | Y;N;N/EL                   | Y;N;N/EL         | Y;N;N/EL                                   | € millions<br>%<br>Y;N;N/EL<br>Y;N;N/EL<br>Y;N;N/EL<br>Y;N;N/EL<br>Y;N;N/EL<br>Y;N;N/EL                                                                                                                                                                                                                   | Y / N                                    | Y / N                                       | Y / N         | Y / N                       | Y / N             | Y / N                                          | Y / N                             | %                                                                                                          | E                                          | T                                                  |
| A. Taxonomy-eligible activities                                                                                                                  |                     |                         |                                          |                                   |                                        |                                        |              |                            |                  |                                            | A. Taxonomy-eligible activities<br>A.1. Environmentally sustainable activities<br>(taxonomy-aligned)                                                                                                                                                                                                      |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| A.1. Environmentally sustainable activities<br>(taxonomy-aligned)                                                                                |                     |                         |                                          |                                   |                                        |                                        |              |                            |                  |                                            | CapEx of environmentally sustainable                                                                                                                                                                                                                                                                      |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| CapEx of environmentally sustainable<br>activities (taxonomy-aligned) (A.1)                                                                      |                     | –                       | –                                        |                                   | –                                      | –                                      | –            | –                          | –                | –                                          | activities (taxonomy-aligned) (A.1)<br>–<br>–<br>–<br>–<br>–<br>–<br>–<br>–<br>Of which enabling activities<br>–<br>–<br>–<br>–<br>–<br>–<br>–<br>–                                                                                                                                                       |                                          |                                             |               |                             |                   |                                                |                                   | –<br>–                                                                                                     | E                                          |                                                    |
| Of which enabling activities                                                                                                                     |                     | –                       | –                                        |                                   | –                                      | –                                      | –            | –                          | –                | –                                          | Of which transitional activities<br>–<br>–<br>–                                                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   | –                                                                                                          |                                            | T                                                  |
| Of which transitional activities                                                                                                                 |                     | –                       | –                                        |                                   | –                                      | –                                      | –            | –                          | –                | –                                          | A.2. Taxonomy-eligible but not environ                                                                                                                                                                                                                                                                    |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| A.2. Taxonomy-eligible but not environmentally sustainable activities<br>(not taxonomy-aligned activities)                                       |                     |                         |                                          |                                   |                                        |                                        |              |                            |                  |                                            | mentally sustainable activities<br>(not taxonomy-aligned activities)                                                                                                                                                                                                                                      |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
|                                                                                                                                                  |                     |                         |                                          |                                   | EL;N/EL                                | EL;N/EL                                | EL;N/EL      | EL;N/EL                    | EL;N/EL          | EL;N/EL                                    | EL;N/EL<br>EL;N/EL<br>EL;N/EL<br>EL;N/EL<br>EL;N/EL<br>EL;N/EL                                                                                                                                                                                                                                            |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| Manufacturing of iron and steel                                                                                                                  | CCM 3.9             | 0.2                     | 0.1                                      |                                   | EL                                     | N/EL                                   | N/EL         | N/EL                       | N/EL             | N/EL                                       | CCM 3.9<br>0.2<br>0.1<br>EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL                                                                                                                                                                                                                                       |                                          |                                             |               |                             |                   |                                                |                                   | –                                                                                                          |                                            |                                                    |
| Transport by motorbikes, passenger cars<br>and light commercial vehicles                                                                         | CCM 6.5             | 14.7                    | 10.9                                     |                                   | EL                                     | N/EL                                   | N/EL         | N/EL                       | N/EL             | N/EL                                       | Transport by motorbikes, passenger cars<br>CCM 6.5<br>14.7<br>10.9<br>EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL                                                                                                                                                                                          |                                          |                                             |               |                             |                   |                                                |                                   | 4.1                                                                                                        |                                            |                                                    |
| Renovation of existing buildings                                                                                                                 | CCM 7.2 /<br>CE 3.2 | 18.7                    | 13.8                                     |                                   | EL                                     | N/EL                                   | N/EL         | N/EL                       | EL               | N/EL                                       | CCM 7.2 /<br>CE 3.2<br>18.7<br>13.8<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>EL<br>EL                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   | 9.0                                                                                                        |                                            |                                                    |
| Installation, maintenance and repair<br>of energy efficiency equipment                                                                           | CCM 7.3             | 5.8                     | 4.3                                      |                                   | EL                                     | N/EL                                   | N/EL         | N/EL                       | N/EL             | N/EL                                       | CCM 7.3                                                                                                                                                                                                                                                                                                   |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| Installation, maintenance and repair of<br>charging stations for electric vehicles in<br>buildings (and parking spaces attached<br>to buildings) | CCM 7.4             | 0.0*                    | 0.0*                                     |                                   | EL                                     | N/EL                                   | N/EL         | N/EL                       | N/EL             | N/EL                                       | 5.8<br>4.3<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>EL                                                                                                                                                                                                                                                  |                                          |                                             |               |                             |                   |                                                |                                   | 0.8                                                                                                        |                                            |                                                    |
| Installation, maintenance and repair<br>of renewable energy technologies                                                                         | CCM 7.6             | 1.0                     | 0.7                                      |                                   | EL                                     | N/EL                                   | N/EL         | N/EL                       | N/EL             | N/EL                                       |                                                                                                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| Acquisition and ownership of buildings                                                                                                           | CCM 7.7             | 22.3                    | 16.4                                     |                                   | EL                                     | N/EL                                   | N/EL         | N/EL                       | N/EL             | N/EL                                       | CCM 7.4<br>0.0*<br>0.0*<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>EL                                                                                                                                                                                                                                     |                                          |                                             |               |                             |                   |                                                |                                   | 0.0                                                                                                        |                                            |                                                    |
| CapEx of taxonomy-eligible but not<br>environmentally sustainable activities<br>(not taxonomy-aligned activities) (A.2)                          |                     | 62.7                    | 46.2                                     |                                   | 46.2 %                                 | 0.0 %                                  | 0.0 %        | 0.0 %                      | 0.0 %            | 0.0 %                                      | CCM 7.6                                                                                                                                                                                                                                                                                                   |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| A. CapEx of taxonomy-eligible activities<br>(A.1 + A.2)                                                                                          |                     | 62.7                    | 46.2                                     |                                   | 46.2 %                                 | 0.0 %                                  | 0.0 %        | 0.0 %                      | 0.0 %            | 0.0 %                                      | 1.0<br>0.7<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>EL<br>22.3<br>16.4<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>N/EL<br>EL                                                                                                                                                                                    |                                          |                                             |               |                             |                   |                                                |                                   | 0.6<br>17.0                                                                                                |                                            |                                                    |
| B. Taxonomy-non-eligible activities                                                                                                              |                     |                         |                                          |                                   |                                        |                                        |              |                            |                  |                                            |                                                                                                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| CapEx of taxonomy-non-eligible activities                                                                                                        |                     | 72.9                    | 53.8                                     |                                   |                                        |                                        |              |                            |                  |                                            |                                                                                                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| 62.7<br>46.2<br>46.2 %<br>0.0 %<br>0.0 %<br>0.0 %<br>0.0 %<br>0.0 %                                                                              |                     |                         |                                          |                                   |                                        |                                        |              |                            |                  |                                            |                                                                                                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
| 62.7<br>46.2<br>46.2 %<br>0.0 %<br>0.0 %<br>0.0 %<br>0.0 %<br>0.0 %                                                                              |                     |                         |                                          |                                   |                                        |                                        |              |                            |                  |                                            |                                                                                                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |
|                                                                                                                                                  |                     |                         |                                          |                                   |                                        |                                        |              |                            |                  |                                            |                                                                                                                                                                                                                                                                                                           |                                          |                                             |               |                             |                   |                                                |                                   |                                                                                                            |                                            |                                                    |

\* Rounded 0.0

 

Y Yes, taxonomy-eligible and, in relation to the relevant environmental objective, taxonomy-aligned activity

N No, taxonomy-eligible but, in relation to the relevant environmental objective, not taxonomy-aligned activity

N/EL Non-eligible, taxonomy-non-eligible activity in relation to the relevant environmental objective

EL Eligible, taxonomy-eligible activity in relation to the relevant environmental objective

Category Transitional activities (20)

{52}------------------------------------------------

**Proportion of CapEx from products or services associated with taxonomy-aligned economic activities –** 

**52 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

**economic** 

**CapEx of taxonomy-non-eligible activities 72.9 53.8 Total 135.6 100.0** 

Y Yes, taxonomy-eligible and, in relation to the relevant environmental objective, taxonomy-aligned activity N No, taxonomy-eligible but, in relation to the relevant environmental objective, not taxonomy-aligned activity

N/EL Non-eligible, taxonomy-non-eligible activity in relation to the relevant environmental objective EL Eligible, taxonomy-eligible activity in relation to the relevant environmental objective

**Disclosures for the 2023 financial year**

B. Taxonomy-non-eligible activities

\* Rounded 0.0

KSB Group / Annual Report 2023

{53}------------------------------------------------

#### **Proportion of OpEx from products or services associated with taxonomy-aligned economic activities –**

**Disclosures for the 2023 financial year**

|                                                                                                                        | 2023           |            |                                    | Substantial contribution criteria      |                                             |              |                            |                  |                                                  |  |
|------------------------------------------------------------------------------------------------------------------------|----------------|------------|------------------------------------|----------------------------------------|---------------------------------------------|--------------|----------------------------|------------------|--------------------------------------------------|--|
| Economic activities (1)                                                                                                | Code(s)<br>(2) | OpEx (3)   | Proportion<br>of OpEx,<br>2023 (4) | Climate<br>change<br>mitigation<br>(5) | Climate<br>change<br>adap-<br>tation<br>(6) | Water<br>(7) | Circular<br>economy<br>(8) | Pollution<br>(9) | Bio-<br>diversity<br>and eco-<br>systems<br>(10) |  |
|                                                                                                                        |                | € millions | %                                  | Y;N;N/EL                               | Y;N;N/EL                                    | Y;N;N/EL     | Y;N;N/EL                   | Y;N;N/EL         | Y;N;N/EL                                         |  |
| A. Taxonomy-eligible activities                                                                                        |                |            |                                    |                                        |                                             |              |                            |                  |                                                  |  |
| A.1. Environmentally sustainable activities<br>(taxonomy-aligned)                                                      |                |            |                                    |                                        |                                             |              |                            |                  |                                                  |  |
| OpEx of environmentally sustainable<br>activities (taxonomy-aligned) (A.1)                                             |                | –          | –                                  | –                                      | –                                           | –            | –                          | –                | –                                                |  |
| Of which enabling activities                                                                                           |                | –          | –                                  | –                                      | –                                           | –            | –                          | –                | –                                                |  |
| Of which transitional activities                                                                                       |                | –          | –                                  | –                                      | –                                           | –            | –                          | –                | –                                                |  |
| A.2. Taxonomy-eligible but not environ-<br>mentally sustainable activities<br>(not taxonomy-aligned activities)        |                |            |                                    |                                        |                                             |              |                            |                  |                                                  |  |
|                                                                                                                        |                |            |                                    | EL;N/EL                                | EL;N/EL                                     | EL;N/EL      | EL;N/EL                    | EL;N/EL          | EL;N/EL                                          |  |
| Manufacturing of iron and steel                                                                                        | CCM 3.9        | 0.2        | 0.1                                | EL                                     | N/EL                                        | N/EL         | N/EL                       | N/EL             | N/EL                                             |  |
| Transport by motorbikes, passenger cars<br>and light commercial vehicles                                               | CCM 6.5        | 0.4        | 0.3                                | EL                                     | N/EL                                        | N/EL         | N/EL                       | N/EL             | N/EL                                             |  |
| Renovation of existing buildings                                                                                       | CCM 7.2        | 3.1        | 2.6                                | EL                                     | N/EL                                        | N/EL         | N/EL                       | N/EL             | N/EL                                             |  |
| Installation, maintenance and repair of                                                                                |                |            |                                    |                                        |                                             |              |                            |                  |                                                  |  |
| energy efficiency equipment                                                                                            | CCM 7.3        | 1.4        | 1.2                                | EL                                     | N/EL                                        | N/EL         | N/EL                       | N/EL             | N/EL                                             |  |
| Acquisition and ownership of buildings                                                                                 | CCM 7.7        | 1.2        | 1.0                                | EL                                     | N/EL                                        | N/EL         | N/EL                       | N/EL             | N/EL                                             |  |
| OpEx of taxonomy-eligible but not<br>environmentally sustainable activities<br>(not taxonomy-aligned activities) (A.2) |                | 6.3        | 5.3                                | 5.3 %                                  | 0.0 %                                       | 0.0 %        | 0.0 %                      | 0.0 %            | 0.0 %                                            |  |
| A. OpEx of taxonomy-eligible activities<br>(A.1 + A.2)                                                                 |                | 6.3        | 5.3                                | 5.3 %                                  | 0.0 %                                       | 0.0 %        | 0.0 %                      | 0.0 %            | 0.0 %                                            |  |
| B. Taxonomy-non-eligible activities                                                                                    |                |            |                                    |                                        |                                             |              |                            |                  |                                                  |  |
| OpEx of taxonomy-non-eligible activities                                                                               |                | 112.1      | 94.7                               |                                        |                                             |              |                            |                  |                                                  |  |
| Total                                                                                                                  |                | 118.4      | 100.0                              |                                        |                                             |              |                            |                  |                                                  |  |

Y Yes, taxonomy-eligible and, in relation to the relevant environmental objective, taxonomy-aligned activity

N No, taxonomy-eligible but, in relation to the relevant environmental objective, not taxonomy-aligned activity

N/EL Non-eligible, taxonomy-non-eligible activity in relation to the relevant environmental objective

EL Eligible, taxonomy-eligible activity in relation to the relevant environmental objective

  Category Transitional activities (20)

{54}------------------------------------------------

| DNSH criteria ("Do No Significant Harm") |                                              |               |                             |                   |                                             |                                    |                                                                                                             |                                            |
|------------------------------------------|----------------------------------------------|---------------|-----------------------------|-------------------|---------------------------------------------|------------------------------------|-------------------------------------------------------------------------------------------------------------|--------------------------------------------|
| Climate<br>change<br>mitigation<br>(11)  | Climate<br>change<br>adap-<br>tation<br>(12) | Water<br>(13) | Circular<br>economy<br>(14) | Pollution<br>(15) | Biodiversity<br>and eco-<br>systems<br>(16) | Minimum<br>safe-<br>guards<br>(17) | Taxonomy-<br>aligned<br>(A.1.) or<br>taxonomy-<br>eligible<br>(A.2.)<br>proportion<br>of OpEx,<br>2022 (18) | Category<br>Enabling<br>activities<br>(19) |
| Y / N                                    | Y / N                                        | Y / N         | Y / N                       | Y / N             | Y / N                                       | Y / N                              | %                                                                                                           | E                                          |
|                                          |                                              |               |                             |                   |                                             |                                    | -                                                                                                           |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    | -                                                                                                           | E                                          |
|                                          |                                              |               |                             |                   |                                             |                                    | -                                                                                                           |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    |                                                                                                             |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    | -                                                                                                           |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    | 0.7                                                                                                         |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    | 3.0                                                                                                         |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    | 1.4                                                                                                         |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    | 1.1                                                                                                         |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    |                                                                                                             |                                            |
|                                          |                                              |               |                             |                   |                                             |                                    |                                                                                                             |                                            |

**Proportion of OpEx from products or services associated with taxonomy-aligned economic activities –**

**54 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

(A.1 + A.2) 6.3 5.3 5.3 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

**Disclosures for the 2023 financial year**

**OpEx of taxonomy-non-eligible activities 112.1 94.7 Total 118.4 100.0** 

Y Yes, taxonomy-eligible and, in relation to the relevant environmental objective, taxonomy-aligned activity N No, taxonomy-eligible but, in relation to the relevant environmental objective, not taxonomy-aligned activity

N/EL Non-eligible, taxonomy-non-eligible activity in relation to the relevant environmental objective EL Eligible, taxonomy-eligible activity in relation to the relevant environmental objective

B. Taxonomy-non-eligible activities

KSB Group / Annual Report 2023

{55}------------------------------------------------

# <span id="page-55-0"></span>**Limited Assurance Report on the Combined Non-financial Report**

To KSB SE & Co. KGaA, Frankenthal

#### **Independent Practitioner's Report on a Limited Assurance Engagement on Non-financial Reporting1**

We have performed a limited assurance engagement on the combined separate non-financial report of KSB SE & Co. KGaA, Frankenthal, (hereinafter the "Company") for the period from 1 January to 31 December 2023 (hereinafter the "Combined Separate Non-financial Report").

Not subject to our assurance engagement are the external sources of documentation or expert opinions mentioned in the Combined Separate Non-financial Report, which are marked as unassured.

#### **RESPONSIBILITY OF THE EXECUTIVE DIRECTORS**

The executive directors of the Company are responsible for the preparation of the Combined Separate Non-financial Report in accordance with §§ (Articles) 315c in conjunction with 289c to 289e HGB ("Handelsgesetzbuch": "German Commercial Code") and Article 8 of REGULA-TION (EU) 2020/852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 18. June 2020 on establishing a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (hereinafter the "EU Taxonomy Regulation") and the Delegated Acts adopted thereunder, as well as for making their own interpretation of the wording and terms contained in the EU Taxonomy Regulation and the Delegated Acts adopted thereunder, as set out in section EU-Taxonomy of the Combined Separate Non-financial Report.

This responsibility includes the selection and application of appropriate non-financial reporting methods and making assumptions and estimates about individual non-financial disclosures of the Group that are reasonable in the circumstances. Furthermore, the executive directors are responsible for such internal control as the executive directors consider necessary to enable the preparation of a Combined Separate Non-financial Report that is free from material misstatement whether due to fraud or error.

<sup>1</sup> PricewaterhouseCoopers GmbH has performed a limited assurance engagement on the German version of the combined separate non-financial report and issued an independent practitioner`s report in German language, which is authoritative. The following text is a translation of the independent practitioner`s report.

{56}------------------------------------------------

To KSB SE & Co. KGaA, Frankenthal

unassured.

whether due to fraud or error.

KSB Group / Annual Report 2023

**Independent Practitioner's Report on a Limited Assurance** 

**Limited Assurance Report on the** 

**Combined Non-financial Report** 

We have performed a limited assurance engagement on the combined separate non-financial report of KSB SE & Co. KGaA, Frankenthal, (hereinafter the "Company") for the period from 1 January to 31 December 2023 (hereinafter the "Combined Separate Non-financial Report").

Not subject to our assurance engagement are the external sources of documentation or expert opinions mentioned in the Combined Separate Non-financial Report, which are marked as

The executive directors of the Company are responsible for the preparation of the Combined Separate Non-financial Report in accordance with §§ (Articles) 315c in conjunction with 289c to 289e HGB ("Handelsgesetzbuch": "German Commercial Code") and Article 8 of REGULA-TION (EU) 2020/852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 18. June 2020 on establishing a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (hereinafter the "EU Taxonomy Regulation") and the Delegated Acts adopted thereunder, as well as for making their own interpretation of the wording and terms contained in the EU Taxonomy Regulation and the Delegated Acts adopted thereunder, as set out in section

This responsibility includes the selection and application of appropriate non-financial reporting methods and making assumptions and estimates about individual non-financial disclosures of the Group that are reasonable in the circumstances. Furthermore, the executive directors are responsible for such internal control as the executive directors consider necessary to enable the preparation of a Combined Separate Non-financial Report that is free from material misstatement

<sup>1</sup> PricewaterhouseCoopers GmbH has performed a limited assurance engagement on the German version of the combined separate non-financial report and issued an independent practitioner`s report in German language,

which is authoritative. The following text is a translation of the independent practitioner`s report.

**Engagement on Non-financial Reporting1**

**56 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

**RESPONSIBILITY OF THE EXECUTIVE DIRECTORS** 

EU-Taxonomy of the Combined Separate Non-financial Report.

The EU Taxonomy Regulation and the Delegated Acts issued thereunder contain wording and terms that are still subject to considerable interpretation uncertainties and for which clarifications have not yet been published in every case. Therefore, the executive directors have disclosed their interpretation of the EU Taxonomy Regulation and the Delegated Acts adopted thereunder in section EU-Taxonomy of the Combined Separate Non-financial Report. They are responsible for the defensibility of this interpretation. Due to the immanent risk that indeterminate legal terms may be interpreted differently, the legal conformity of the interpretation is subject to uncertainties.

#### **AUDIT FIRM'S INDEPENDENCE AND QUALITY MANAGEMENT**

We have complied with the German professional provisions regarding independence as well as other ethical requirements.

Our audit firm applies the national legal requirements and professional standards – in particular the Professional Code for German Public Auditors and German Chartered Auditors ("Berufssatzung für Wirtschaftsprüfer und vereidigte Buchprüfer": "BS WP/vBP") as well as the Standard on Quality Management 1 published by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany; IDW): Requirements to quality management for audit firms (IDW Qualitätsmanagementstandard 1: Anforderungen an das Qualitätsmanagement in der Wirtschaftsprüferpraxis - IDW QMS 1 (09.2023)), which requires the audit firm to design, implement and operate a system of quality management that complies with the applicable legal requirements and professional standards.

#### **RESPONSIBILITY OF THE ASSURANCE PRACTITIONER**

Our responsibility is to express a conclusion with limited assurance on the Combined Separate Non-financial Report based on our assurance engagement.

We conducted our assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised): Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the IAASB. This Standard requires that we plan and perform the assurance engagement to obtain limited assurance about whether any matters have come to our attention that cause us to believe that the Company's Combined Separate Nonfinancial Report, other than the external sources of documentation or expert opinions mentioned in the Combined Separate Non-financial Report, is not prepared, in all material respects, in 

{57}------------------------------------------------

accordance with §§ 315c in conjunction with 289c to 289e HGB] and the EU Taxonomy Regulation and the Delegated Acts issued thereunder as well as the interpretation by the executive directors disclosed in section EU-Taxonomy of the Combined Separate Non-financial Report. In a limited assurance engagement the procedures performed are less extensive than in a reasonable assurance engagement, and accordingly a substantially lower level of assurance is obtained. The selection of the assurance procedures is subject to the professional judgement of the assurance practitioner.

In the course of our assurance engagement, we have, amongst other things, performed the following assurance procedures and other activities:

- Gain an understanding of the structure of the Group's sustainability organisation and stakeholder engagement
- Inquiries of the executive directors and relevant employees involved in the preparation of the Combined Separate Non-financial Report about the preparation process, about the internal control system relating to this process and about disclosures in the Combined Separate Non-financial Report
- Identification of likely risks of material misstatement in the Combined Separate Non-financial Report
- Analytical procedures on selected disclosures in the Combined Separate Non-financial Report
- Reconciliation of selected disclosures with the corresponding data in the consolidated financial statements and group management report
- Evaluation of the presentation of the Combined Separate Non-financial Report
- Evaluation of the process to identify taxonomy-eligible and taxonomy-aligned economic activities and the corresponding disclosures in the Combined Separate Non-financial Report
- Inquiries on the relevance of climate-risks
- Evaluation of CO2 compensation certificates exclusively with regard to their existence, but not with regard to their impact

{58}------------------------------------------------

accordance with §§ 315c in conjunction with 289c to 289e HGB] and the EU Taxonomy Regulation and the Delegated Acts issued thereunder as well as the interpretation by the executive directors disclosed in section EU-Taxonomy of the Combined Separate Non-financial Report. In a limited assurance engagement the procedures performed are less extensive than in a reasonable assurance engagement, and accordingly a substantially lower level of assurance is obtained. The selection of the assurance procedures is subject to the professional judgement of the assurance

In the course of our assurance engagement, we have, amongst other things, performed the

Gain an understanding of the structure of the Group's sustainability organisation and stake-

 Inquiries of the executive directors and relevant employees involved in the preparation of the Combined Separate Non-financial Report about the preparation process, about the internal control system relating to this process and about disclosures in the Combined

Identification of likely risks of material misstatement in the Combined Separate Non-finan-

 Analytical procedures on selected disclosures in the Combined Separate Non-financial Report Reconciliation of selected disclosures with the corresponding data in the consolidated finan-

 Evaluation of the process to identify taxonomy-eligible and taxonomy-aligned economic activities and the corresponding disclosures in the Combined Separate Non-financial Report

compensation certificates exclusively with regard to their existence, but

Evaluation of the presentation of the Combined Separate Non-financial Report

practitioner.

holder engagement

cial Report

Evaluation of CO2

KSB Group / Annual Report 2023

Separate Non-financial Report

following assurance procedures and other activities:

**58 Management and Issues 2023** Combined Management Report Consolidated Financial Statements General Information

cial statements and group management report

Inquiries on the relevance of climate-risks

not with regard to their impact

In determining the disclosures in accordance with Article 8 of the EU Taxonomy Regulation, the executive directors are required to interpret undefined legal terms. Due to the immanent risk that undefined legal terms may be interpreted differently, the legal conformity of their interpretation and, accordingly, our assurance engagement thereon are subject to uncertainties.

#### **ASSURANCE OPINION**

Based on the assurance procedures performed and evidence obtained, nothing has come to our attention that causes us to believe that the Combined Separate Non-financial Report of the Company for the period from 1 January to 31 December 2023 is not prepared, in all material respects, in accordance with §§ 315c in conjunction with 289c to 289e HGB and the EU Taxonomy Regulation and the Delegated Acts issued thereunder as well as the interpretation by the executive directors disclosed in section EU-Taxonomy of the Combined Separate Nonfinancial Report.

We do not express an assurance opinion on the external sources of documentation or expert opinions mentioned in the Combined Separate Non-financial Report.

#### **RESTRICTION OF USE**

We draw attention to the fact that the assurance engagement was conducted for the Company's purposes and that the report is intended solely to inform the Company about the result of the assurance engagement. Consequently, it may not be suitable for any other purpose than the aforementioned. Accordingly, the report is not intended to be used by third parties for making (financial) decisions based on it. Our responsibility is to the Company. We do not accept any responsibility to third parties. Our assurance opinion is not modified in this respect.

Frankfurt am Main, 12 March 2024

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft

Nicolette Behncke ppa. Meike Beenken Wirtschaftsprüferin [German public auditor]

ppa. Meike Beenken

{59}------------------------------------------------

{60}------------------------------------------------

# <span id="page-60-0"></span>**Combined Management Report**

- 62 [Basic Principles of the Group](#page-61-0)
- 62 Group Business Model
- 64 [Control System](#page-63-0)
- 65 [Research and Development](#page-64-0)
- 67 Economic Review

KSB Group / Annual Report 2022

2023**60** 2023

Management and Issues 2022 **Combined Management Report** Consolidated Financial Statements General Information

- [67 Macroeconomic Environment and Sector View](#page-66-0)
- 69 [Business Development and Results of Operations](#page-68-0)
- 74 [Financial Position and Net Assets](#page-73-0)
- [79 Summary of the Performance in the Financial Year](#page-78-0)
- 80 [Report on Expected Developments](#page-79-0)
- 82 [Opportunities and Risks Report](#page-81-0)
- 90 [Disclosures Relating to KSB SE & Co. KGaA \(HGB\)](#page-89-0)
- 96 [Acquisition-related Disclosures](#page-95-0)
- 98 Corporate Governance Statement
- [\(Section 315d HGB in Conjunction with Section](#page-97-0) 289f HGB) 99 Statement on the Non-financial Report
- [\(Section 315c in Conjunction with Sections 289c to 289e HGB\)](#page-98-0)
- 100 Description of Key Features of the Internal Control System, [the Risk Management System and the Compliance Management](#page-99-0)  System in Accordance with the A.5 DCKG 2022 Recommendation

{61}------------------------------------------------

# <span id="page-61-0"></span>**Basic Principles of the Group**

## **Group Business Model**

This management report combines the management reports for KSB SE & Co. KGaA, Frankenthal / Pfalz, Germany, and the KSB Group (Combined Management Report).

The KSB Group's (hereinafter "KSB" or "Group") mission is to supply customers around the world with top-quality pumps and valves as well as related systems. It also offers a broad service and spare parts portfolio to users of these products.

KSB SE & Co. KGaA, as the parent, directly or indirectly holds the shares in the companies belonging to the Group. Besides it, 10 domestic and 78 foreign companies are fully consolidated; another 5 companies are accounted for under the equity method. KSB is currently represented in 53 countries with its own subsidiaries.

As well as KSB SE & Co. KGaA itself, the companies in the KSB Group with the highest sales revenue are

- KSB S.A.S., Gennevilliers (Paris), France
- KSB Limited, Pimpri (Pune), India
- GIW Industries, Inc., Grovetown / Georgia, USA
- KSB Shanghai Pump Co., Ltd., Shanghai, China
- KSB Service GmbH, Frankenthal, Germany
- KSB BRASIL LTDA., Várzea Paulista, Brazil
- D.P. Industries B.V., Alphen aan den Rijn, Netherlands

The basic business model has not changed during the reporting year. External economic and political changes, however, have had a partial effect on business. These are – where relevant and material to KSB – described in the following sections.

#### **ORGANISATION, MANAGEMENT AND CONTROL**

KSB SE & Co. KGaA was formed from KSB Aktiengesellschaft by entry in the *Handelsregister* [German Commercial Register] on 17 January 2018. The *Kommanditgesellschaft auf Aktien* (KGaA) [partnership limited by shares] is a common legal form in Germany for companies with a family- and foundation-dominated ownership structure. The general partner is KSB Management SE, a European public limited company. The shares in this company are wholly owned by Klein, Schanzlin & Becker GmbH, Frankenthal / Pfalz. Klein, Schanzlin & Becker GmbH is subject to the joint management of its two shareholders, the non-profit KSB Stiftung, Stuttgart, and the non-profit Kühborth-Stiftung GmbH, Stuttgart. KSB SE & Co. KGaA and with it the KSB Group are managed via KSB Management SE. The company's bodies are the Managing Directors, the Administrative Board and the Annual General Meeting.

All organisational units in the KSB Group act with the aim of ensuring sustainable, profitable growth to secure both KSB's financial independence and its medium- and long-term future. KSB is monitored by a Supervisory Board consisting of twelve members. The Annual General Meeting of shareholders appoints six members of the Supervisory Board, with the remaining six being delegated by the employees under the terms of the *Mitbestimmungsgesetz* [German Co-determination Act].

The basic structure of the Group is summarised in the following illustration.

**Bodies / structure** 

{62}------------------------------------------------

**Basic Principles of the Group** 

**62** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

This management report combines the management reports for KSB SE & Co. KGaA, Frankenthal / Pfalz, Germany, and **ORGANISATION, MANAGEMENT AND CONTROL**  KSB SE & Co. KGaA was formed from KSB Aktiengesell-

Handelsregister

All organisational units in the KSB Group act with the aim of ensuring sustainable, profitable growth to secure both KSB's financial independence and its medium- and long-term future. KSB is monitored by a Supervisory Board consisting of twelve members. The Annual General Meeting of shareholders appoints six members of the Supervisory Board, with the remaining six being delegated by the employees under the

Mitbestimmungsgesetz

The basic structure of the Group is summarised in the

 (KGaA) [partnership limited by shares] is a common legal form in Germany for companies with a family- and foundation-dominated ownership structure. The general partner is KSB Management SE, a European public limited company. The shares in this company are wholly owned by Klein, Schanzlin & Becker GmbH, Frankenthal / Pfalz. Klein, Schanzlin & Becker GmbH is subject to the joint management of its two shareholders, the non-profit KSB Stiftung, Stuttgart, and the non-profit Kühborth-Stiftung GmbH, Stuttgart. KSB SE & Co. KGaA and with it the KSB Group are managed via KSB Management SE. The company's bodies are the Managing Directors, the Administrative Board and the Annual

[German Commercial

Kommanditgesellschaft auf

[German Co-determi-

schaft by entry in the

General Meeting.

terms of the

following illustration. **Bodies / structure** 

nation Act].

Aktien

Register] on 17 January 2018. The

The KSB Group's (hereinafter "KSB" or "Group") mission is to supply customers around the world with top-quality pumps and valves as well as related systems. It also offers a broad service and spare parts portfolio to users of these products.

KSB SE & Co. KGaA, as the parent, directly or indirectly holds the shares in the companies belonging to the Group. Besides it, 10 domestic and 78 foreign companies are fully consolidated; another 5 companies are accounted for under the equity method. KSB is currently represented in 53 countries

As well as KSB SE & Co. KGaA itself, the companies in the

KSB Group with the highest sales revenue are

 KSB S.A.S., Gennevilliers (Paris), France KSB Limited, Pimpri (Pune), India

 GIW Industries, Inc., Grovetown / Georgia, USA KSB Shanghai Pump Co., Ltd., Shanghai, China KSB Service GmbH, Frankenthal, Germany KSB BRASIL LTDA., Várzea Paulista, Brazil

material to KSB – described in the following sections.

D.P. Industries B.V., Alphen aan den Rijn, Netherlands

The basic business model has not changed during the reporting year. External economic and political changes, however, have had a partial effect on business. These are – where relevant and

the KSB Group (Combined Management Report).

**Group Business Model**

with its own subsidiaries.

KSB Group / Annual Report 2023

#### **Bodies / Structure**

Image /page/62/Figure/3 description: This image shows a diagram of the organizational structure of KSB. The diagram shows the relationships between the KSB shareholders, the Annual General Meeting, the Supervisory Board, KSB Management SE, and KSB SE & Co. KGaA. The KSB shareholders are limited partners. KSB Management SE is the general partner. The KSB shareholders report to the Annual General Meeting, which reports to the Supervisory Board. The Supervisory Board monitors KSB SE & Co. KGaA. KSB Management SE manages KSB SE & Co. KGaA.

Management of KSB SE & Co. KGaA is the responsibility of KSB Management SE, the individually liable general partner. The responsibilities of the bodies are governed by law and the the bodies are governed by law and the Articles of Association. This is the basis for efficient corporate governance, which contributes to Management of KSB SE & KGaA is the responsibility of KSB Management SE, the individually liable general partner. The responsibilities of sustainable corporate development.

The KSB Group organises its business activities in the following Segments: Pumps, Valves and KSB SupremeServ.

The Pumps Segment comprises new business with single-stage and multistage pumps, submersible pumps and the associated control and drive systems. The applications are assigned to the Market Areas of Energy and Mining and to the Market Areas of Water, Building Services, Petrochemicals / Chemicals and General Industry, which are grouped together in the organisational and reporting structure of the Group as Standard Markets.

The Valves Segment combines the Group's business activities with regard to new business in butterfly valves, globe valves, gate valves, control valves, diaphragm valves and ball valves. as well as associated actuators and control systems. The basic applications for these products are identical to those for pumps.

The KSB SupremeServ Segment on the one hand comprises the spare parts business for pumps and valves. On the other hand, KSB's service activities are allocated to this Segment. These include the installation, commissioning, inspection, servicing, maintenance, reverse engineering and repair of pumps, related systems and valves, as well as modular service concepts and system analyses for complete plants.

**1** 

Managing the Group using this new structure is aimed in particular at strategically strengthening the individual divisions and leveraging market potential. This primarily relates to the business activities of the KSB SupremeServ Segment. In addition, KSB is using its organisational and segment structure to focus on market-specific and customer-specific applications in the solutions it offers. For the Pumps Segment, this is ensured by considering individual Market Areas separately for internal control purposes.

In addition to the segment information, this management report contains supplementary quantitative explanations on the Group's performance at the reporting regions level.

{63}------------------------------------------------

**3** 

#### <span id="page-63-0"></span>**MARKETS AND LOCATIONS**

In the KSB Group, sales revenue is generated mainly from goods and services relating to centrifugal pumps. These pumps, as well as valves, are sold to engineering contractors, OEMs and end users or, in some cases, distributed via dealers. The same applies to control and monitoring systems, and to package units with pumps and valves.

The largest and best developed sales market for these products is Europe, where KSB operates its main manufacturing facilities in Germany and France. The main plant of the present KSB SE & Co. KGaA in Frankenthal is its largest in Europe, ahead of the production sites in Pegnitz (Bavaria) and Halle (Saxony-Anhalt) in Germany, and La Roche-Chalais in France.

The second-largest market for KSB products is the Region Asia / Pacific, followed by the Region Americas and the Region Middle East / Africa / Russia. Outside Europe, KSB's biggest production sites are in Brazil, China, India and the USA.

KSB manufactures and assembles products and components in a total of 25 countries; they are sold through the Group's own companies or agencies in more than 100 countries. With their products, the Group companies serve customers in industry including the chemical and petrochemical industries, in the energy sector, in construction / building services, in water and waste water management, and in mining. In 2023, the most important markets were general industry, energy and water.

As the largest company in the KSB Group, KSB SE & Co. KGaA serves all the Group's Regions and markets.

In order to be able to offer KSB products at favourable prices, the Group's purchasing requirements are combined and affordable suppliers sourced around the world who meet the relevant quality standards. The KSB Group is able to maintain its market position as one of the leading pump and valve manufacturers through its good and long-term relationships with customers and suppliers. Well trained and motivated employees as well as the high quality of products have also helped cement this reputation.

#### **Control System**

Based upon a matrix organisation, the key financial performance indicators are determined as follows:

Management decisions for the Group as a whole and for the Pumps, Valves and KSB SupremeServ Segments are made on the basis of the following key indicators: order intake, sales revenue and EBIT. EBIT is defined as earnings before finance income / expense and income tax. When specifying key indicators, Management is guided on the one hand by developments in the markets and on the other by its main competitors.

Management decisions for KSB SE & Co. KGaA are made on the basis of the same control metrics as for the Group.

No non-financial performance indicators are consulted for controlling the Group.

{64}------------------------------------------------

**MARKETS AND LOCATIONS** 

package units with pumps and valves.

In the KSB Group, sales revenue is generated mainly from goods and services relating to centrifugal pumps. These pumps, as well as valves, are sold to engineering contractors, OEMs and end users or, in some cases, distributed via dealers. The same applies to control and monitoring systems, and to

**64** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**Control System** 

controlling the Group.

and

Based upon a matrix organisation, the key financial perfor-

Management decisions for the Group as a whole and for the Pumps, Valves and KSB SupremeServ Segments are made on the basis of the following key indicators: order intake, sales revenue and EBIT. EBIT is defined as earnings before finance income / expense and income tax. When specifying key indicators, Management is guided on the one hand by developments in the markets and on the other by its main competitors.

Management decisions for KSB SE & Co. KGaA are made on the basis of the same control metrics as for the Group.

No non-financial performance indicators are consulted for

mance indicators are determined as follows:

The largest and best developed sales market for these products is Europe, where KSB operates its main manufacturing facilities in Germany and France. The main plant of the present KSB SE & Co. KGaA in Frankenthal is its largest in Europe, ahead of the production sites in Pegnitz (Bavaria) and Halle (Saxony-Anhalt) in Germany, and La Roche-Chalais in France.

The second-largest market for KSB products is the Region Asia / Pacific, followed by the Region Americas and the Region Middle East / Africa / Russia. Outside Europe, KSB's biggest production sites are in Brazil, China, India and the USA.

KSB manufactures and assembles products and components in a total of 25 countries; they are sold through the Group's own companies or agencies in more than 100 countries. With their products, the Group companies serve customers in industry including the chemical and petrochemical industries, in the energy sector, in construction / building services, in water and waste water management, and in mining. In 2023, the most important markets were general industry, energy and water.

As the largest company in the KSB Group, KSB SE & Co.

In order to be able to offer KSB products at favourable prices, the Group's purchasing requirements are combined and affordable suppliers sourced around the world who meet the relevant quality standards. The KSB Group is able to maintain its market position as one of the leading pump and valve manufacturers through its good and long-term relationships with customers and suppliers. Well trained and motivated employees as well as the high quality of products have also

KGaA serves all the Group's Regions and markets.

helped cement this reputation.

KSB Group / Annual Report 2023

production.

#### <span id="page-64-0"></span>**Research and Development Research and Development**

Research and development are vital for KSB. The research and the development of innovative products and solutions are the development of innovative products and solutions are
critical to maintaining and expanding the Group's competitiveness. They are key to KSB's long-term success, as the customers' needs and market requirements develop continuously and the sales portfolio needs to be adjusted as required to meet
them. Based on KSB's business areas, the research and developthem. Based on KSB's business areas, the research and development work focuses predominantly on the areas of digitalisation, materials, drives, actuators and hydraulics as well as manufacturing technology.

#### **MANUFACTURING TECHNOLOGY AND MATERIALS**

manufacturing technology.

less energy.

Additive manufacturing has come to be an indispensable manufacturing method for KSB. Initially, additive manufacturing technology was used to produce commonly available components using the laser fusion process. Today, design engineers are employing this method to create completely new technical solutions. Containment shrouds produced using additive manufacturing are a particularly impressive example. By using this production method, disadvantages such as heating and eddy current losses in these complex components can be avoided, while significantly increasing the level of safety. The lower temperature rise and eddy current losses allow the pumps to be operated while consuming considerably less energy. turing technology was used to produce commonly available components using the laser fusion process. Today, design engineers are employing this method to create completely new technical solutions. Containment shrouds produced using additive manufacturing are a particularly impressive example. By using this production method, disadvantages such as heating and eddy current losses in these complex components can be avoided, while significantly increasing the level of safety. The lower temperature rise and eddy current losses allow the pumps to be operated while consuming considerably

In addition to further tests with pump components, tests with additively manufactured valve bodies for pharmaceutical and hydrogen applications were also carried out in 2023.

hydrogen applications were also carried out in 2023.

To make additive manufacturing more interesting and costeffective for other components, KSB conducted fundamental research in the reporting year into the qualification of additional materials. In one project, the materials experts undertook extensive testing using various stainless steel powders with the aim of reducing production costs. They succeeded in with the aim of reducing production costs. They succeeded in using water-atomised stainless steel powder, which is con-

siderably more cost-effective than conventional gas-atomised

siderably more cost-effective than conventional gas-atomised

Research and development expenses in € millions Research and development expenses in € millions

**3** 

powder. Following successful testing and determination of the 60.6 and development expenses in €

#### **DRIVES AND HYDRAULIC SYSTEMS**

growing demands on waste water systems.

for various waste water pumps were improved.

material properties, the material is now available for ecosystems and guarantee clean water for human consumption and the environment. It is also much more energy-efficient to treat waste water than to desalinate seawater. Climate-related heavy rainfall events and population growth are placing ever growing demands on waste water systems. Waste water treatment is an important process to protect ecosystems and guarantee clean water for human consumption and the environment. It is also much more energy-efficient to treat waste water than to desalinate seawater. Climate-related heavy rainfall events and population growth are placing ever

Taking these developments into account, KSB further exproduction. more efficient hydraulic systems and improved the output per size for two type series. An additional, radial multi-vane impeller has been added to the programme range of other type series. This is used primarily for handling fluids containing solid substances and long fibres. In addition, the electric drives for various waste water pumps were improved. panded its portfolio of waste water pumps. It developed even more efficient hydraulic systems and improved the output per size for two type series. An additional, radial multi-vane impeller has been added to the programme range of other type series. This is used primarily for handling fluids containing solid substances and long fibres. In addition, the electric drives

In 2023, the development teams also worked on components Waste water treatment is an important process to protect panded its portfolio of waste water pumps. It developed even identify and eliminate clogging in the hydraulic system automatically in the future. This can save service costs for KSB's customers. matically in the future. This can save service costs for KSB's

#### **DIGITALISATION**

reliability and durability.

customers.

Despite highly developed computer simulation, test facilities for pumps and valves are still the predominant instrument used to verify the quality, reliability and safety of the actual units produced. Computer simulation helps predict the behaviour of pumps and valves under different conditions. Despite its effectiveness, pumps and valves still need to be tested in real test facilities, in order to definitively ensure their performance, reliability and durability. Despite highly developed computer simulation, test facilities for pumps and valves are still the predominant instrument used to verify the quality, reliability and safety of the actual units produced. Computer simulation helps predict the behaviour of pumps and valves under different conditions. Despite its effectiveness, pumps and valves still need to be tested in real test facilities, in order to definitively ensure their performance,

As part of the Standardising Test Facilities Worldwide project, KSB worked on improving the testing processes for pumps, valves and individual components in the reporting year. Together with the Testing Engineering department in Frankenthal, the specialist departments that look after the global test facilities on site were involved in the planning, design, engineering, implementation, commissioning and documentaengineering, implementation, commissioning and documentation of new test facilities. This also included preparing design and engineering requirements, as well as harmonising the data As part of the Standardising Test Facilities Worldwide project, KSB worked on improving the testing processes for pumps, valves and individual components in the reporting year.

**4** 

{65}------------------------------------------------

**5** 

will make it easier for KSB and its customers to compare the measurement results of the different test facilities.

Launched a few years ago, KSB Guard is a smart monitoring service for pumps and other rotating machinery. It comprises a sensor component that is attached to a pump or other rotating machinery, a transmission unit and an app that allows users to remotely review a pump's condition and operating data. KSB Guard records and analyses important data. It prevents potential damage from happening before it can lead to costly disruptions.

Previously, only measurements with a manually selectable time interval were carried out by KSB Guard. In the reporting year, the KSB specialists worked on advanced functions, such as repeat measurement. If an unusual value is detected in the pump's performance during a measurement, the system triggers further measurements. This generates a better database for diagnosing the related machine behaviour.

Even though KSB Guard is primarily aimed at monitoring pumps, steps must also be taken to ensure that the sensor unit itself works reliably. Advanced functions are therefore used to monitor transmission reliability and battery battery charge condition.

Overall, the Group spent € 60.6 million on research and acquisition process and associated test stand software. This sales revenue. KSB SE & Co. KGaA invested € 42.6 million in research and development in the reporting year, which equates development in the reporting year. This equates to 2.1 % of
to around 4.8 % of sales revenue. Across the Group, 445 staff were employed in research and development on average over the year. At KSB SE & Co. KGaA, 285 staff worked in research and development in the reporting year.

{66}------------------------------------------------

# <span id="page-66-0"></span>**Economic Review**

## **Macroeconomic Environment and Sector View**

The forecast for global economic growth in 2023 was below the growth rate of the previous year from the outset and therefore also below the growth path before the COVID-19 pandemic. In the course of the year, the International Monetary Fund (IMF), whose figures are used for planning, increased its estimate only slightly to 3.1 %. This compares with the forecast of 2.9 % for global economic growth at the start of the year. Factors for lower growth included the longterm consequences of the pandemic, the effects of the war in Ukraine and the growing geopolitical fragmentation. In addition and especially in the past year, the restrictive monetary policy that is aimed at reducing inflation was a drag on growth. Inflation worldwide eased to 6.8 % but was still above the expectation of 6.6 % at the start of the year.

The IMF raised its growth estimate slightly for the group of economically advanced countries to 1.6 % in 2023. At the beginning of the year the forecast was still at 1.2 %. Economic growth in the emerging markets and developing countries was 4.1 %, which slightly exceeded the forecast at the start of the year (+ 4.0 %).

Europe continued to be of major importance for the KSB business in 2023. In what is KSB's largest market, the global energy crisis triggered by the war in Ukraine and the associated price increases had the greatest impact and curbed economic growth, which was 0.5 % in the euro zone. Economic output in France and Italy grew by 0.8 % and 0.7 % respectively. Spain achieved a higher growth rate of 2.4 % compared with other European countries, reflecting its lower dependence on imports of natural gas from Russia. In contrast, the economy in Germany contracted by - 0.3 %. The high share of exports coupled with weaker growth in demand globally, falling production in energy-intensive industries and the weakening of capital-intensive and interest rate-sensitive sectors contributed to this development. The UK reported lower growth of 0.5 % in view of higher key interest rates and high energy costs.

Economic growth of 2.5 % in the USA was significantly higher than the expectations of 1.4 % at the start of the year. This was supported by higher capital expenditure and robust growth in consumer spending.

**5** 

**World market of centrifugal pumps and valves**

Image /page/66/Figure/8 description: The image is a pie chart showing the distribution of something across different regions. Asia/Pacific accounts for 41%, Americas accounts for 25%, Middle East/Africa/Russia accounts for 15%, and Europe accounts for 19%.

Source: KSB estimate (February 2024)

China's economy recovered only moderately after the pandemic and grew by 5.2 %. Nevertheless, growth, which was slowed by the property market crisis, a high level of youth unemployment and weaker exports in some sectors, met expectations at the beginning of the year.

Supported by higher consumer spending, growth in India of 6.7 % was higher than expected at the start of the year. The economies of the five economically most important countries in South East Asia – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – grew by 4.2 % overall, which was only marginally lower than start-of-the-year expectations.

Growth expectations at the beginning of the year for South America could not be met on average. Chile's economy declined by - 0.5 %, with a significant decrease reported in private consumer spending and investment. Thanks to the good harvest and recovery in the services sector, economic output of 3.1 % in Brazil exceeded expectations at the start of the year.

Economic developments in the countries in the Region Middle East / Africa / Russia remained below expectations at the beginning of the year. In Turkey, the economy grew more than expected by 4.0 %, bolstered by robust private consumer spending. Power cuts and weaker exports led to a decline in growth to 0.6 % in South Africa. For Saudi Arabia, likewise a large sales market for KSB, the IMF reported a decline of – 1.1 % as a result of falling crude oil prices and production. This was significantly lower than expected at the start of the year.

Even though KSB Guard is primarily aimed at monitoring pumps, steps must also be taken to ensure that the sensor unit itself works reliably. Advanced functions are therefore used to monitor transmission reliability and battery battery charge

Overall, the Group spent € 60.6 million on research and development in the reporting year. This equates to 2.1 % of sales revenue. KSB SE & Co. KGaA invested € 42.6 million in research and development in the reporting year, which equates to around 4.8 % of sales revenue. Across the Group, 445 staff were employed in research and development on average over the year. At KSB SE & Co. KGaA, 285 staff worked in

research and development in the reporting year.

condition.

**66** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

will make it easier for KSB and its customers to compare the

Launched a few years ago, KSB Guard is a smart monitoring service for pumps and other rotating machinery. It comprises a sensor component that is attached to a pump or other rotating machinery, a transmission unit and an app that allows users to remotely review a pump's condition and operating data. KSB Guard records and analyses important data. It prevents potential damage from happening before it can lead

Previously, only measurements with a manually selectable time interval were carried out by KSB Guard. In the reporting year, the KSB specialists worked on advanced functions, such as repeat measurement. If an unusual value is detected in the pump's performance during a measurement, the system triggers further measurements. This generates a better database

for diagnosing the related machine behaviour.

measurement results of the different test facilities.

to costly disruptions.

KSB Group / Annual Report 2023

{67}------------------------------------------------

KSB Group / Annual Report 2023

While production rose in Asia and in particu
the Middle East, it stagnated in North Ame
in Europe. The chemical industry also record

#### **MODEST GROWTH IN ALL SALES MARKETS**

All markets and regions in which KSB operates reported modest year-on-year growth.

In general industry, which covers a series of cyclical sectors in the manufacturing industry, production and investment rose in the past year. The production of capital goods was curbed by inflation and higher interest rates, but increased nonetheless. The pharmaceutical industry, which was one of the winners of the pandemic, were unable to reach the high growth rates of previous years. Given the weaker previous year and existing orders on hand, the automotive industry performed above expectations at the beginning of the year.

The water and waste water industry, in which economic fluctuations are more moderate than in other economic sectors, posted modest growth in terms of production value. This was dampened by the weaker development in industry as well as the rise in costs in this sector. Investment in municipal water and waste water management was driven by digitalisation and the use of artificial intelligence, as well as by requirements to expand the use of waste water.

The war in Ukraine and its impact on energy prices affected the energy industry again last year. Global production increased only slightly, given lower economic growth and lower demand especially from Europe and the USA. Electrification in the transport sector and for building heat experienced a strong boost. Investments in expanding storage technologies also increased. The increase in new capacities for generating renewable energies accelerated strongly. Coal-fired electricity generation increased, including as a substitute to hydropower and led by Asia, in particular China and India. Electricity generation from natural gas increased only slightly. In contrast, electricity generation from nuclear energy rose again following the decline in the previous year. Investment in nuclear energy continued to rise worldwide. New nuclear power plants were commissioned in China and the USA, among other countries, and construction work started on others in the past year.

Global oil production rose somewhat more strongly than expected at the beginning of the year, supported by stronger demand from China. Gas production worldwide was down slightly from the previous year's level, as the structural changes since the outbreak of the war in Ukraine continued. Production in Russia continued to fall. This was offset by the USA, the Middle East and Asia. Liquefied gas exports from the USA increased once again. Worldwide refinery capacity utilisation increased marginally, albeit with major regional differences. While production rose in Asia and in particular China and in the Middle East, it stagnated in North America and declined in Europe. The chemical industry also recorded weak growth worldwide in response to weaker demand from key sectors. China proved to be a material regional driver, while the chemical industry in Europe declined once again due to high energy and raw material costs.

Despite lower expectations at the start of the year, the construction industry was able to grow at a higher rate year on year. This development was supported by stimulus spending on expanding infrastructure in many countries. Despite lower real income and higher interest rates, residential building construction increased. However, momentum was lower than in other sectors. Growth was also reported in nonresidential construction. Clear regional differences were evident in the development of the two sectors.

Mining continued to be supported by strong demand for metals that are required for producing green technologies. There was a significant increase in the demand for metals required for electromobility, renewable energy generation and grid expansion, and for the production of storage technologies. These include copper, aluminium, nickel and lithium. The strong growth in demand was partially reflected in a sharp increase in the extraction of these metals. The demand and global trade in iron continued to grow, too, supported by high demand from China. Coal mining also expanded, driven by Asia, particularly with a strong increase in production in India. The extraction of oil sands was marginally higher than in the previous year. The growth momentum of investment in mining slackened on the back of higher interest rates and inflation.

#### **MECHANICAL ENGINEERING STAGNATED**

The slowdown in investment led to below-average demand for mechanical engineering products. According to the German Mechanical Engineering Industry Association (VDMA), global sales revenue in the mechanical engineering sector stagnated in real terms in 2023, albeit with significant regional differences. While Asian countries achieved considerable growth, sales revenue in Europe and North America declined.

According to VDMA, sales revenue in the German mechanical engineering sector fell by – 0.1 % in real terms. Based on the provisional calculations of the German Federal Statistical Office, production up to November rose very slightly by 0.1 % in real terms. Capacity utilisation was down on the previous year.

In the liquid pumps sector, VDMA recorded real sales revenue growth of 0.3 % among German pump manufacturers. Sales revenue with industrial valves was down – 5.8 % on the previous year, while building services valves saw sales revenue fall by – 13.9 %.

{68}------------------------------------------------

worldwide in response to weaker demand from key sectors. China proved to be a material regional driver, while the chemical industry in Europe declined once again due to high energy

Despite lower expectations at the start of the year, the construction industry was able to grow at a higher rate year on year. This development was supported by stimulus spending on expanding infrastructure in many countries. Despite lower real income and higher interest rates, residential building construction increased. However, momentum was lower than in other sectors. Growth was also reported in nonresidential construction. Clear regional differences were

Mining continued to be supported by strong demand for metals that are required for producing green technologies. There was a significant increase in the demand for metals required for electromobility, renewable energy generation and grid expansion, and for the production of storage technologies. These include copper, aluminium, nickel and lithium. The strong growth in demand was partially reflected in a sharp increase in the extraction of these metals. The demand and global trade in iron continued to grow, too, supported by high demand from China. Coal mining also expanded, driven by Asia, particularly with a strong increase in production in India. The extraction of oil sands was marginally higher than in the previous year. The growth momentum of investment in mining slackened on the back of higher interest rates and inflation.

evident in the development of the two sectors.

**MECHANICAL ENGINEERING STAGNATED** 

a

revenue in Europe and North America declined.

year.

fall by – 13.9 %.

The slowdown in investment led to below-average demand for mechanical engineering products. According to the German Mechanical Engineering Industry Association (VDMA), global sales revenue in the mechanical engineering sector stagnated in real terms in 2023, albeit with significant regional differences. While Asian countries achieved considerable growth, sales

According to VDMA, sales revenue in the German mechanical engineering sector fell by – 0.1 % in real terms. Based on the provisional calculations of the German Federal Statistical Office, production up to November rose very slightly by 0.1 % in real terms. Capacity utilisation was down on the previous

In the liquid pumps sector, VDMA recorded real sales revenue growth of 0.3 % among German pump manufacturers. Sales revenue with industrial valves was down – 5.8 % on the previous year, while building services valves saw sales revenue

and raw material costs.

**MODEST GROWTH IN ALL SALES MARKETS** 

above expectations at the beginning of the year.

requirements to expand the use of waste water.

others in the past year.

KSB Group / Annual Report 2023

modest year-on-year growth.

All markets and regions in which KSB operates reported

**68** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

In general industry, which covers a series of cyclical sectors in the manufacturing industry, production and investment rose in the past year. The production of capital goods was curbed by inflation and higher interest rates, but increased nonetheless. The pharmaceutical industry, which was one of the winners of the pandemic, were unable to reach the high growth rates of previous years. Given the weaker previous year and existing orders on hand, the automotive industry performed

The water and waste water industry, in which economic fluctuations are more moderate than in other economic sectors, posted modest growth in terms of production value. This was dampened by the weaker development in industry as well as the rise in costs in this sector. Investment in municipal water and waste water management was driven by digitalisation and the use of artificial intelligence, as well as by

The war in Ukraine and its impact on energy prices affected the energy industry again last year. Global production increased only slightly, given lower economic growth and lower demand especially from Europe and the USA. Electrification in the transport sector and for building heat experienced a strong boost. Investments in expanding storage technologies also increased. The increase in new capacities for generating renewable energies accelerated strongly. Coal-fired electricity generation increased, including as a substitute to hydropower and led by Asia, in particular China and India. Electricity generation from natural gas increased only slightly. In contrast, electricity generation from nuclear energy rose again following the decline in the previous year. Investment in nuclear energy continued to rise worldwide. New nuclear power plants were commissioned in China and the USA, among other countries, and construction work started on

Global oil production rose somewhat more strongly than expected at the beginning of the year, supported by stronger demand from China. Gas production worldwide was down slightly from the previous year's level, as the structural changes since the outbreak of the war in Ukraine continued. Production in Russia continued to fall. This was offset by the USA, the Middle East and Asia. Liquefied gas exports from the USA increased once again. Worldwide refinery capacity utilisation increased marginally, albeit with major regional differences. While production rose in Asia and in particular China and in the Middle East, it stagnated in North America and declined in Europe. The chemical industry also recorded weak growth

## <span id="page-68-0"></span>**Business Development and Results of Operations**

The 2023 financial year was defined by global political tensions due to the ongoing war in Ukraine, the China-Taiwan conflict and the outbreak of war in the Gaza region as a result of the attack on Israel. High interest rates led to uncertainty and a decrease in investment. In Germany, the manufacturing industry continued to be challenged by higher gas prices. At the same time, the situation on the procurement markets eased somewhat with regard to price and availability of bought-in parts.

Thanks to the company's broad global positioning across several market areas, economic downturns were offset by positive developments. The KSB SupremeServ Segment made a significant contribution to order intake growth.

Overall, there was a substantial increase in sales revenue and EBIT compared with the previous year. Despite signs of a slowdown in demand in the Standard Markets in the second half of the year, mainly in Europe, total order intake was considerably higher than in the previous year. The reasons for the changes are explained in the sections on order intake, sales revenue and EBIT.

#### **ORDER INTAKE**

The volume of incoming orders rose significantly by € 97.4 million (+ 3.4 %) to € 2,959.5 million in the financial year. The order intake would have been € 83.4 million higher excluding exchange rate effects (excluding the hyperinflationary economies of Argentina and Turkey). This increase is mainly attributable to the positive development of order intake in the KSB SupremeServ Segment.

The largest percentage growth was reported in the Region Americas with a plus of € 62.0 million (+ 12.0 %) and the Region Asia / Pacific with a plus of € 38.2 million (+ 5.1 %). Order intake in the Region Europe remained at the previous year's level with plus € 8.0 million (+ 0.6 %). On the other hand, the companies in the Region Middle East / Africa / Russia reported a decline of € 10.9 million (– 6.5 %). The marked reduction was largely due to unfavourable exchange rate effects.

#### **Pumps**

Order intake in the Pumps Segment amounted to € 1,576.5 million compared with € 1,585.7 million in the previous year. The order intake in this Segment is therefore marginally lower than in the prior-year period, which had been impacted positively by several major orders. The Standard Markets accounted for € 1,263.9 million (previous year: € 1,256.3 million) of the total order intake in the Pumps Segment. Order intake in the Water Market Area declined due to a major order in the previous year that was not matched by comparable order intake in the reporting year. Despite the economic slowdown, which led to a weaker second half of the year, increases were achieved in all other Standard Markets. Significant growth was recorded in General Industry in particular, due to the positive development in the Region Asia / Pacific as a result of the relocation of production by many companies from China to India, among other things. In the Energy and Mining operating segments, which include project business in particular, order intake amounted to € 312.6 million (previous year: € 329.5 million). The Mining operating segment recorded substantial growth, thanks to several major orders and positive development of order intake in Brazil. In contrast, order intake in the Energy operating segment declined sharply, because the prior-year figure included two important major orders.

#### **Segment reporting**

**7** 

| € thousands             | Order intake |           | Sales revenue |           | EBIT    |         |
|-------------------------|--------------|-----------|---------------|-----------|---------|---------|
|                         | 2023         | 2022      | 2023          | 2022      | 2023    | 2022    |
| Pumps Segment           | 1,576,483    | 1,585,727 | 1,513,653     | 1,390,192 | 52,301  | 27,718  |
| Valves Segment          | 392,573      | 359,676   | 361,435       | 333,072   | -7,522  | -4,635  |
| KSB SupremeServ Segment | 990,418      | 916,684   | 943,900       | 850,123   | 179,123 | 146,020 |
| Total                   | 2,959,474    | 2,862,087 | 2,818,988     | 2,573,387 | 223,902 | 169,103 |

{69}------------------------------------------------

Combined Management Report

Image /page/69/Figure/4 description: This image is a donut chart titled "Sales revenue by segment". The chart shows the sales revenue for three segments: KSB SupremeServ, Valves, and Pumps. KSB SupremeServ accounts for 33.5% of the sales revenue, Valves accounts for 12.8% of the sales revenue, and Pumps accounts for 53.7% of the sales revenue.

The Region Europe contributed the largest share of order intake of the Pumps Segment with € 732.7 million (previous year: € 775.6 million), followed by the Region Asia / Pacific with € 489.7 million (previous year: € 490.4 million) and the Regions Americas and Middle East / Africa / Russia each with lower contributions in absolute terms. The highest growth rate was reported in the Region Americas, while the Region Europe posted a marked decline. This is partly due to the aforementioned major order in the Water Market Area in the previous year.

#### **Valves**

Order intake in the Valves Segment amounted to € 392.6 million compared with € 359.7 million in the previous year. The growth is driven by the very positive development of the project business, while the Standard Markets remained stable. The largest positive contribution was recorded in the energy industry, where major investments were made in the power plant market. Investment activity was also stepped up in the marine market. The largest Region by far is Europe with € 229.5 million (previous year: € 222.7 million), followed by Asia / Pacific with € 123.3 million (previous year: € 105.2 million) and the Regions Americas and Middle East / Africa / Russia each with lower contributions in absolute terms.

#### **KSB SupremeServ**

Order intake in the KSB SupremeServ Segment – which covers all service and spare parts activities – reached € 990.4 million and is thus considerably higher than in the previous year (€ 916.7 million). This increase is due to the positive development of the spare parts business. Higher order levels in the nuclear sector, in particular, as well as extensive service assignments as part of maintenance inspections of larger plants in the chemicals / petrochemicals industry contributed to the increase.

In the KSB SupremeServ Segment, too, the Region Europe made the greatest contribution to order intake with € 470.4 million (previous year: € 426.4 million), followed by Americas with € 292.3 million (previous year: € 276.4 million) and Asia / Pacific and Middle East / Africa / Russia. The highest growth rate was reported in the Region Asia / Pacific.

#### **SALES REVENUE**

The Group's consolidated sales revenue, which lags behind order intake, grew strongly by € 245.6 million (+ 9.5 %) to € 2,819.0 million). Sales revenue would have been € 77.3 million higher excluding exchange rate effects (excluding the hyperinflationary economies of Argentina and Turkey).

All the Regions contributed to this sales revenue growth. Europe remained by far the largest Region with sales revenue of € 1,427.8 million (previous year: € 1,271.7 million, followed by Asia / Pacific with € 708.1 million (previous year: € 646.4 million), Americas with € 523.7 million (previous year: € 498.1 million) and the Region Middle East / Africa / Russia with € 159.3 million (previous year: € 157.2 million). The largest percentage increase was reported in the Region Europe with € 156.1 million (+ 12.3 %), followed by the Region Asia / Pacific with € 61.7 million (+ 9.5 %). The Region Americas also developed well with a plus of € 25.6 million (+ 5.1 %). The companies in the Region Middle East / Africa / Russia remained stable with an increase of € 2.1 million (+ 1.4 %).

#### **Pumps**

Sales revenue in the Pumps Segment amounted to € 1,513.7 million (previous year: € 1,390.2 million). The Standard Markets accounted for € 1,232.0 million and the Energy and Mining operating segments together for € 281.6 million. The sharp increase in sales revenue in the Pumps Segment is attributable in particular to the positive development in the Water and General Industry Market Areas. In the Water Market Area, the major order received in the previous year was completed. Order intake increased in the General Industry Market Area, especially in the Region Europe, due to sales revenue recognition of orders from the previous year. Europe remains by far the largest Region with sales revenue of € 755.9 million (previous year: € 670.1 million), followed by Asia / Pacific with € 434.4 million (previous year: € 407.4 million), then the Region Americas and the Region Middle East / Africa / Russia.

Image /page/69/Picture/17 description: The image shows the number 2.8 in a blue sans-serif font. The number is centered on a white background.

Consolidated sales revenue in € billions

{70}------------------------------------------------

#### **Valves**

with € 292.3 million (previous year: € 276.4 million) and Asia / Pacific and Middle East / Africa / Russia. The highest

The Group's consolidated sales revenue, which lags behind order intake, grew strongly by € 245.6 million (+ 9.5 %) to € 2,819.0 million). Sales revenue would have been € 77.3 million higher excluding exchange rate effects (excluding the hyperinflationary economies of Argentina and Turkey).

All the Regions contributed to this sales revenue growth. Europe remained by far the largest Region with sales revenue of € 1,427.8 million (previous year: € 1,271.7 million, followed by Asia / Pacific with € 708.1 million (previous year: € 646.4 million), Americas with € 523.7 million (previous year: € 498.1 million) and the Region Middle East / Africa / Russia with € 159.3 million (previous year: € 157.2 million). The largest percentage increase was reported in the Region Europe with € 156.1 million (+ 12.3 %), followed by the Region Asia / Pacific with € 61.7 million (+ 9.5 %). The Region Americas also developed well with a plus of € 25.6 million (+ 5.1 %). The companies in the Region Middle East / Africa / Russia remained stable with an increase of € 2.1 mil-

Sales revenue in the Pumps Segment amounted to € 1,513.7 million (previous year: € 1,390.2 million). The Standard Markets accounted for € 1,232.0 million and the Energy and Mining operating segments together for € 281.6 million. The sharp increase in sales revenue in the Pumps Segment is attributable in particular to the positive development in the Water and General Industry Market Areas. In the Water Market Area, the major order received in the previous year was completed. Order intake increased in the General Industry Market Area, especially in the Region Europe, due to sales revenue recognition of orders from the previous year. Europe remains by far the largest Region with sales revenue of € 755.9 million (previous year: € 670.1 million), followed by Asia / Pacific with € 434.4 million (previous year: € 407.4 million), then the Region Americas and the Region Middle East /

2.8

largest

Consolidated sales revenue in € billions

growth rate was reported in the Region Asia / Pacific.

**SALES REVENUE**

Pumps **53.7 %**

**70** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

lion (+ 1.4 %).

Africa / Russia.

**Pumps** 

In the Valves Segment, sales revenue was € 361.4 million after € 333.1 million in the previous year. This increase is due to the very positive development of the project business, while development in the Standard Markets remained stable. The damage caused by the hail storm at the La Roche-Chalais site in France in 2022 led to delays in production during the reporting year. These delays were reduced significantly by the end of the year by introducing a more effective production layout. Europe remains by far the largest Region with sales revenue of € 213.8 million (previous year: € 199.7 million), followed by Asia / Pacific with € 116.3 million (previous year: € 102.2 million), then the Region Americas and the Region Middle East / Africa / Russia. Strong double-digit growth rates were achieved in the Regions Asia / Pacific and Middle East / Africa / Russia.

#### **KSB SupremeServ**

**9** 

The Region Europe contributed the largest share of order intake of the Pumps Segment with € 732.7 million (previous year: € 775.6 million), followed by the Region Asia / Pacific with € 489.7 million (previous year: € 490.4 million) and the Regions Americas and Middle East / Africa / Russia each with lower contributions in absolute terms. The highest growth rate was reported in the Region Americas, while the Region Europe posted a marked decline. This is partly due to the aforementioned major order in the Water Market Area in the

Order intake in the Valves Segment amounted to € 392.6 million compared with € 359.7 million in the previous year. The growth is driven by the very positive development of the project business, while the Standard Markets remained stable. The largest positive contribution was recorded in the energy industry, where major investments were made in the power plant market. Investment activity was also stepped up in the marine market. The largest Region by far is Europe with € 229.5 million (previous year: € 222.7 million), followed by Asia / Pacific with € 123.3 million (previous year: € 105.2 million) and the Regions Americas and Middle East / Africa / Russia each with lower contributions in absolute terms.

Order intake in the KSB SupremeServ Segment – which covers all service and spare parts activities – reached € 990.4 million and is thus considerably higher than in the previous year (€ 916.7 million). This increase is due to the positive development of the spare parts business. Higher order levels in the nuclear sector, in particular, as well as extensive service assignments as part of maintenance inspections of larger plants in the chemicals / petrochemicals industry contributed to the

In the KSB SupremeServ Segment, too, the Region Europe made the greatest contribution to order intake with € 470.4 million (previous year: € 426.4 million), followed by Americas

previous year.

KSB SupremeServ **33.5 %**

**Sales revenue by segment**

Valves **12.8 %**

**KSB SupremeServ** 

increase.

KSB Group / Annual Report 2023

**Valves** 

Sales revenue in the KSB SupremeServ Segment amounted to € 943.9 million (previous year: € 850.1 million). This strong increase was a result of the positive development of the spare parts business in the Energy and Mining operating segments. Spare parts orders from previous years were invoiced in the Energy operating segment and the Mining operating segment benefited from the strong capacity utilisation of the mines as well as new long-term service contracts. The largest Region by far is Europe with sales revenue of € 458.1 million (previous year: € 401.9 million), followed by Americas with € 280.8 million (previous year: € 257.9 million), then Asia / Pacific and Middle East / Africa / Russia. The Region Asia / Pacific achieved the strongest growth rate.

#### **EARNINGS BEFORE FINANCE INCOME / EXPENSE AND INCOME TAX (EBIT)**

The KSB Group achieved earnings before finance income / expense and income tax (EBIT) of € 223.9 million (previous year: € 169.1 million). The earnings improvement is primarily attributable to growth and margin strength in the KSB SupremeServ Segment.

#### **Pumps**

EBIT in the Pumps Segment amounted to € 52.3 million (previous year: € 27.7 million), with the Standard Markets in particular contributing to the very good performance. The main drivers were higher sales revenue and a better profit quality. The EBIT margin achieved was 3.5 % (previous year: 2.0 %).

#### **Valves**

EBIT in the Valves Segment was € – 7.5 million (previous year: € – 4.6 million) and it therefore € 2.9 million lower than in the previous year. The development is largely attributable to project provisions and the after-effects of the damage caused by hail at the French site in La Roche-Chalais in the 2022 financial year. These negative effects could only be partially offset by the higher volume of sales revenue and insurance compensation paid out in 2023 for the hail damage in La Roche-Chalais. The EBIT margin achieved was – 2.1 % (previous year: – 1.4 %).

#### **KSB SupremeServ**

Thanks to the profitable growth in the spare parts business, especially in the energy and chemicals industry, EBIT was increased by € 33.1 million to € 179.1 million (previous year: € 146.0 million). This equates to an EBIT margin of 19.0 % (previous year: 17.2 %).

223.9 Consolidated earnings (EBIT) in € millions

{71}------------------------------------------------

#### **INCOME STATEMENT**

| € thousands                                                                | 2023       | 2022       | Percentage<br>change |
|----------------------------------------------------------------------------|------------|------------|----------------------|
| Sales revenue                                                              | 2,818,988  | 2,573,387  | 9.5                  |
| Changes in inventories                                                     | 24,271     | 99,412     | −75.6                |
| Work performed and capitalised                                             | 1,959      | 1,716      | 14.2                 |
| Total output of operations                                                 | 2,845,217  | 2,674,515  | 6.4                  |
| Other income                                                               | 44,384     | 34,462     | 28.8                 |
| Cost of materials                                                          | −1,153,651 | −1,156,292 | −0.2                 |
| Staff costs                                                                | −960,699   | −901,551   | 6.6                  |
| Depreciation and amortisation                                              | −88,094    | −90,419    | −2.6                 |
| Other expenses                                                             | −463,257   | −391,612   | 18.3                 |
| Earnings before finance income / expense and income tax (EBIT)             | 223,902    | 169,103    | 32.4                 |
| Finance income                                                             | 9,382      | 7,461      | 25.7                 |
| Finance expense                                                            | −29,656    | −17,712    | 67.4                 |
| Income from / expense to investments accounted for using the equity method | 5,361      | 1,816      | 195.2                |
| Finance income / expense                                                   | −14,913    | −8,435     | 76.8                 |
| Earnings before income tax (EBT)                                           | 208,989    | 160,668    | 30.1                 |
| Taxes on income                                                            | −32,376    | −33,330    | −2.9                 |
| Earnings after income tax                                                  | 176,613    | 127,338    | 38.7                 |
| Attributable to:                                                           |            |            |                      |
| Non-controlling interests                                                  | 24,318     | 23,689     | 2.7                  |
| Shareholders of KSB SE & Co. KGaA                                          | 152,295    | 103,649    | 46.9                 |
|                                                                            |            |            |                      |
| Diluted and basic earnings per ordinary share (€)                          | 86.83      | 59.05      | 47.0                 |
| Diluted and basic earnings per preference share (€)                        | 87.09      | 59.31      | 46.8                 |

Further information is provided in the Notes to the consolidated financial statements.

#### **TOTAL OUTPUT OF OPERATIONS**

Total output of operations amounted to € 2,845.2 million compared with € 2,674.5 million in the previous year. While sales revenue increased by € 245.6 million, the change in inventories of € 24.3 million (previous year: € 99.4 million) reduced the total output of operations by € 75.1 million.

#### **INCOME AND EXPENSES**

Other income rose by € 9.9 million year on year to € 44.4 million (previous year: € 34.5 million). This was mainly due to the insurance compensation received in connection with hail damage at the French plant in La Roche-Chalais in 2022.

The cost of materials as a percentage of total output of operations fell from 43.2 % in the previous year to 40.5 % in the reporting year. The cost of materials remained at the previous year's level, while sales revenue increased year on year. This was due to sales revenue growth in the KSB SupremeServ Segment, among other things. In addition, procurement costs, some of which were slightly lower, had an effect.

Staff costs rose from € 901.6 million to € 960.7 million in the financial year (a rise of € 59.1 million). The increase is largely attributable to the higher headcount, increased profit bonuses for employees and general wage and salary increases. The number of employees rose from 15,643 to 15,938 on average over the year. On average in the reporting year, the KSB Group had 295 employees (1.9 %) more than in the previous year. Asia / Pacific reported the greatest increase in the number of employees with a plus of 209. The number of employees in the Region Europe rose by 123. On the other hand, employee numbers in the Region Middle East / Africa / Russia fell by 115. Despite the higher number of employees, the total output of operations per employee rose from € 171 thousand to € 179 thousand, due to the 6.4 % increase in the total output of operations.

Depreciation and amortisation fell by € 2.3 million to € 88.1 million compared with the prior-year period. This is due to a € 5.3 million reduction in impairment losses. At € 87.8 million, scheduled depreciation and amortisation, by contrast, was € 3.0 million higher than in the previous year (€ 84.8 million).

{72}------------------------------------------------

**Percentage change** 

**INCOME STATEMENT** 

Attributable to:

Further information is provided in the Notes to the consolidated financial statements.

Total output of operations amounted to € 2,845.2 million compared with € 2,674.5 million in the previous year. While sales revenue increased by € 245.6 million, the change in inventories of € 24.3 million (previous year: € 99.4 million) reduced the total output of operations by € 75.1 million.

Other income rose by € 9.9 million year on year to € 44.4 million (previous year: € 34.5 million). This was mainly due to the insurance compensation received in connection with hail damage at the French plant in La Roche-Chalais in 2022.

The cost of materials as a percentage of total output of operations fell from 43.2 % in the previous year to 40.5 % in the reporting year. The cost of materials remained at the previous year's level, while sales revenue increased year on year. This was due to sales revenue growth in the KSB SupremeServ Segment, among other things. In addition, procurement costs,

some of which were slightly lower, had an effect.

**TOTAL OUTPUT OF OPERATIONS** 

**INCOME AND EXPENSES** 

**€ thousands 2023 2022** 

**72** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**Sales revenue 2,818,988 2,573,387 9.5**  Changes in inventories 24,271 99,412 −75.6 Work performed and capitalised 1,959 1,716 14.2 **Total output of operations 2,845,217 2,674,515 6.4**  Other income 44,384 34,462 28.8 Cost of materials −1,153,651 −1,156,292 −0.2 Staff costs −960,699 −901,551 6.6 Depreciation and amortisation −88,094 −90,419 −2.6 Other expenses −463,257 −391,612 18.3 **Earnings before finance income / expense and income tax (EBIT) 223,902 169,103 32.4**  Finance income 9,382 7,461 25.7 Finance expense −29,656 −17,712 67.4 Income from / expense to investments accounted for using the equity method 5,361 1,816 195.2 **Finance income / expense −14,913 −8,435 76.8 Earnings before income tax (EBT) 208,989 160,668 30.1**  Taxes on income −32,376 −33,330 −2.9 **Earnings after income tax 176,613 127,338 38.7** 

Non-controlling interests 24,318 23,689 2.7 **Shareholders of KSB SE & Co. KGaA 152,295 103,649 46.9** 

Diluted and basic earnings per ordinary share (€) 86.83 59.05 47.0 Diluted and basic earnings per preference share (€) 87.09 59.31 46.8

operations.

(€ 84.8 million).

Staff costs rose from € 901.6 million to € 960.7 million in the financial year (a rise of € 59.1 million). The increase is largely attributable to the higher headcount, increased profit bonuses for employees and general wage and salary increases. The number of employees rose from 15,643 to 15,938 on average over the year. On average in the reporting year, the KSB Group had 295 employees (1.9 %) more than in the previous year. Asia / Pacific reported the greatest increase in the number of employees with a plus of 209. The number of employees in the Region Europe rose by 123. On the other hand, employee numbers in the Region Middle East / Africa / Russia fell by 115. Despite the higher number of employees, the total output of operations per employee rose from € 171 thousand to € 179 thousand, due to the 6.4 % increase in the total output of

Depreciation and amortisation fell by € 2.3 million to € 88.1 million compared with the prior-year period. This is due to a € 5.3 million reduction in impairment losses. At € 87.8 million, scheduled depreciation and amortisation, by contrast, was € 3.0 million higher than in the previous year At € 463.3 million, other expenses exceeded the prior-year level (€ 391.6 million) by € 71.7 million. This is largely attributable to € 30.0 million higher administrative and selling expenses. Higher consulting costs and an increase in travel activity contributed to the increase. € 20.0 million higher maintenance costs and third-party services were also incurred. Expenses for warranties rose by € 17.5 million as a result of provisions for several projects. As a percentage of total output of operations, expenses increased only moderately from 14.6 % in the previous year to 16.3 % in the financial year.

The finance income / expense amounted to € – 14.9 million (previous year: € – 8.4 million), largely because of the € 9.1 million increase in interest expenses on pension claims.

#### **EARNINGS**

**11** 

million increase in interest expenses on pension claims.

million. Income from deferred taxes is largely defined by the full reversal of impairment losses on deferred tax assets in the previous year for loss carryforwards and temporary differences in the KSB SE & Co. KGaA tax group. The income tax rate fell again to 15.5 % after 20.7 % in the previous year, which was due, in particular, to the reversal of impairment losses. Overall, earnings after income tax rose from € 127.3 million in the previous year to € 176.6 million in the reporting year.

At € 24.3 million, earnings attributable to non-controlling interests rose by € 0.6 million compared with the previous year. The ratio of non-controlling interests to earnings after income tax declined noticeably from 18.6 % to 13.8 %.

Earnings attributable to shareholders of KSB SE & Co. KGaA (€ 152.3 million) were € 48.7 million higher than in the previous year (€ 103.6 million).

Earnings per ordinary share were € 86.83, compared with € 59.05 in the previous year, and € 87.09 per preference share, compared with € 59.31 in 2022.

{73}------------------------------------------------

## <span id="page-73-0"></span>**Financial Position and Net Assets**

#### **STATEMENT OF CASH FLOWS**

| € thousands                                                                    | 2023     | 2022     | Percentage<br>change |
|--------------------------------------------------------------------------------|----------|----------|----------------------|
| Earnings after income tax                                                      | 176,613  | 127,338  | 38.7                 |
| Taxes on income                                                                | 32,376   | 33,330   | -2.9                 |
| Finance income / expense                                                       | 20,274   | 10,251   | 97.8                 |
| Depreciation and amortisation                                                  | 88,094   | 90,419   | -2.6                 |
| Gain / loss on disposal of intangible assets and property, plant and equipment | 153      | -305     | -150.2               |
| Change in working capital                                                      | -1,676   | -206,525 | -99.2                |
| Change in other assets and liabilities as well as provisions                   | 22,230   | -12,970  | -271.4               |
| Income tax paid                                                                | -65,058  | -45,789  | 42.1                 |
| Interest received                                                              | 7,298    | 6,360    | 14.7                 |
| Cash flows from operating activities                                           | 280,304  | 2,109    | 13.190.8             |
| Payments to acquire intangible assets and property, plant and equipment        | -106,461 | -102,393 | 4.0                  |
| Change in deposits                                                             | 1,251    | 10,638   | -88.2                |
| Change in the other items from investing activities                            | 1,674    | 2,718    | -38.4                |
| Cash flows from investing activities                                           | -103,536 | -89,037  | 16.3                 |
| Dividends paid                                                                 | -40,687  | -30,032  | 35.5                 |
| Change in financial liabilities (including lease liabilities)                  | -19,454  | -41,942  | -53.6                |
| Interest paid                                                                  | -3,347   | -3,866   | -13.4                |
| Cash flows from financing activities                                           | -63,488  | -75,840  | -16.3                |
| Changes in cash and cash equivalents                                           | 113,280  | -162,768 | 169.6                |
| Effects of exchange rate changes on cash and cash equivalents                  | -3,001   | 4,252    | -170.6               |
| Effects of changes in consolidated Group                                       | 1,571    | 403      | 289.8                |
| Cash and cash equivalents at beginning of period                               | 228,570  | 386,683  | -40.9                |
| Cash and cash equivalents at end of period                                     | 340,420  | 228,570  | 48.9                 |

Further information is provided in Section VII. Statement of Cash Flows in the Notes to the consolidated financial statements.

#### **FINANCIAL POSITION**

The KSB Group's financial position remains very good. Equity increased in the reporting year and amounted to € 1,216.9 million (previous year: €1,125.6 million). The equity ratio of 45.6 % was at the previous year's level (45.4 %).

#### **Liquidity**

KSB recorded cash flows from operating activities of € 280.3 million compared with € 2.1 million in the previous year. This very positive development is mainly due to the good financial position and working capital management. While an outflow of € 206.5 million was recorded in the 2022 financial year, KSB kept working capital almost stable despite the significant increase in business volume in the financial year. In addition, the € 49.3 million increase in earnings after income tax contributed to the inflow of funds.

The outflows from investing activities rose by € – 14.5 million from € – 89.0 million in the previous year to € – 103.5 million in the reporting year. This is attributable to a € 4.1 million increase in payments to acquire intangible assets and property, plant and equipment on the one hand, and a € 9.4 million decrease in net proceeds from deposits with an original maturity of more than three months on the other hand.

Despite the € 10.7 million increase in dividend payments, cash outflows in the cash flows from financing activities were € 12.4 million lower than in the previous year. The final tranche of the loan against borrower's note was repaid in the previous year, leading to a cash outflow of € 22.0 million in the 2022 financial year.

Overall, cash and cash equivalents increased sharply from € 228.6 million in the previous year to € 340.4 million in the reporting year.

{74}------------------------------------------------

**Financial Position and Net Assets** 

**€ thousands 2023 2022** 

**74** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

Further information is provided in Section VII. Statement of Cash Flows in the Notes to the consolidated financial statements.

The KSB Group's financial position remains very good. Equity increased in the reporting year and amounted to € 1,216.9 million (previous year: €1,125.6 million). The equity ratio of

KSB recorded cash flows from operating activities of € 280.3 million compared with € 2.1 million in the previous year. This very positive development is mainly due to the good financial position and working capital management. While an outflow of € 206.5 million was recorded in the 2022 financial year, KSB kept working capital almost stable despite the significant increase in business volume in the financial year. In addition, the € 49.3 million increase in earnings after income tax

The outflows from investing activities rose by € – 14.5 million from € – 89.0 million in the previous year to € – 103.5 million

45.6 % was at the previous year's level (45.4 %).

contributed to the inflow of funds.

KSB Group / Annual Report 2023

Earnings after income tax 176,613 127,338 38.7 Taxes on income 32,376 33,330 −2.9 Finance income / expense 20,274 10,251 97.8 Depreciation and amortisation 88,094 90,419 −2.6 Gain / loss on disposal of intangible assets and property, plant and equipment 153 −305 −150.2 Change in working capital −1,676 −206,525 −99.2 Change in other assets and liabilities as well as provisions 22,230 −12,970 −271.4 Income tax paid −65,058 −45,789 42.1 Interest received 7,298 6,360 14.7 **Cash flows from operating activities 280,304** 2,109 13.190.8 Payments to acquire intangible assets and property, plant and equipment −106,461 −102,393 4.0 Change in deposits 1,251 10,638 −88.2 Change in the other items from investing activities 1,674 2,718 −38.4 **Cash flows from investing activities −103,536** −89,037 16.3 Dividends paid −40,687 −30,032 35.5 Change in financial liabilities (including lease liabilities) −19,454 −41,942 −53.6 Interest paid −3,347 −3,866 −13.4 **Cash flows from financing activities −63,488 −75,840 −16.3** Changes in cash and cash equivalents 113,280 −162,768 169.6 Effects of exchange rate changes on cash and cash equivalents −3,001 4,252 −170.6 Effects of changes in consolidated Group 1,571 403 289.8 Cash and cash equivalents at beginning of period 228,570 386,683 −40.9 **Cash and cash equivalents at end of period 340,420 228,570** 48.9

**STATEMENT OF CASH FLOWS** 

**FINANCIAL POSITION** 

**Liquidity** 

From the current perspective, the KSB Group's finance management continues to assume that it meets its goal of ensuring liquidity at all times essentially without any additional external financing measures. In addition, a syndicated loan has been in place since December 2018 to protect against potential liquidity risk and cover the need for bank guarantees of the KSB Group. The credit line can be used at any time and has a fixed term of five years with the option to renew twice by one year each time. In the 2020 financial year, KSB availed itself of this option for the second time and extended the fixed term of the line early, until the end of 2025. For more information on liquidity management (such as credit lines) see the section on Risk Reporting on the Utilisation of Financial Instruments elsewhere in this group management report.

#### **Investments**

The additions to intangible assets amounting to € 9.8 million are above the prior-year level (€ 5.2 million).

Investments in property, plant and equipment of € 99.9 million in the reporting year are € 1.1 million lower than in the previous year (€ 101.0 million). At € 34.8 million, the highest additions related to advance payments and assets under construction, as in the previous year (€ 38.1 million). Another € 23.0 million related to other equipment, operating and office equipment (previous year: € 20.5 million), while € 22.4 million related to technical equipment and machinery (previous year: € 22.7 million). As in 2022, the focus of capital investment activity was the Region Europe, mainly Germany, the Netherlands and France. Outside Europe, the highest additions were made at the plants in India, the USA and China.

#### **Net financial position**

**13** 

**Percentage change** 

in the reporting year. This is attributable to a € 4.1 million increase in payments to acquire intangible assets and property, plant and equipment on the one hand, and a € 9.4 million decrease in net proceeds from deposits with an original maturity of more than three months on the other hand.

Despite the € 10.7 million increase in dividend payments, cash outflows in the cash flows from financing activities were € 12.4 million lower than in the previous year. The final tranche of the loan against borrower's note was repaid in the previous year, leading to a cash outflow of € 22.0 million in

Overall, cash and cash equivalents increased sharply from € 228.6 million in the previous year to € 340.4 million in the

the 2022 financial year.

reporting year.

At € 324.9 million, the net financial position rose substantially by € 99.3 million from € 225.6 million in the previous year. It is derived from the balance of interest-bearing financial liabilities and financial assets (mainly cash and cash equivalents and receivables from deposits). The increase in the net financial position is attributable to the significant rise in cash flows from operating activities, in particular.

#### **Contingent liabilities and other financial obligations**

Contingent liabilities as at the reporting date totalled € 27.2 million and were therefore € 6.7 million lower (previous year: € 33.9 million).

There are no other obligations and commitments beyond the reporting date. Further financial obligations arose only within the normal scope from purchase commitments amounting to € 27.9 million (previous year: € 27.3 million).

#### **NET ASSETS**

Around 31.9 % of funds is attributable to non-current assets (previous year: 30.6 %). Intangible assets and property, plant and equipment with a historical cost of € 1,711.0 million (previous year: € 1,657.0 million) had carrying amounts of € 677.9 million (previous year: € 651.2 million). Total intangible assets rose from € 72.7 million in the previous year to € 75.7 million. In the reporting year, impairment of goodwill in the Pumps Segment of € 0.4 million (previous year: € 0.8 million) and of € 0.2 million (previous year: € 0.9 million) in the KSB SupremeServ Segment was reported.

Right-of-use assets for leases (€ 46.9 million) were up on the prior-year level (€ 40.2 million).

Property, plant and equipment increased from € 578.5 million to € 602.2 million as a result of capital expenditure (€ 99.9 million) in excess of depreciation of € 62.0 million. Currency translation effects had a negative impact of € – 12.9 million.

Image /page/74/Picture/15 description: The image shows the number 324.9 in a large, sans-serif font. The numbers and decimal point are all in a dark blue color.

Net financial position in € millions

{75}------------------------------------------------

#### **ASSETS**

| € thousands                                       | 2023      | 2022      | Percentage change |
|---------------------------------------------------|-----------|-----------|-------------------|
| Non-current assets                                |           |           |                   |
| Intangible assets                                 | 75,716    | 72,673    | 4.2               |
| Right-of-use assets                               | 46,939    | 40,220    | 16.7              |
| Property, plant and equipment                     | 602,166   | 578,512   | 4.1               |
| Non-current financial assets                      | 1,227     | 1,191     | 3.0               |
| Other non-financial assets                        | 7,728     | 7,319     | 5.6               |
| Investments accounted for using the equity method | 24,480    | 20,833    | 17.5              |
| Deferred tax assets                               | 94,040    | 37,074    | 60.6              |
|                                                   | 852,295   | 757,822   | 12.5              |
| Current assets                                    |           |           |                   |
| Inventories                                       | 748,393   | 719,221   | 4.1               |
| Contract assets                                   | 58,969    | 80,018    | -26.3             |
| Trade receivables                                 | 554,583   | 579,539   | -4.3              |
| Other financial assets                            | 70,888    | 71,517    | -0.9              |
| Other non-financial assets                        | 44,272    | 42,203    | 4.9               |
| Cash and cash equivalents                         | 340,420   | 228,570   | 48.9              |
|                                                   | 1,817,524 | 1,721,069 | 5.6               |
|                                                   | 2,669,819 | 2,478,890 | 7.7               |

Further information is provided in the Notes to the consolidated financial statements.

The carrying amount of financial assets, investments accounted for using the equity method and non-current other non-financial assets was € 33.4 million. At € 24.5 million, the investments accounted for using the equity method were up € 3.7 million on the previous year's level (€ 20.8 million).

Deferred tax assets rose by € 56.9 million to € 94.0 million (previous year: € 37.1 million), in particular as a result of the reversal of impairment losses on deferred tax assets in the KSB SE & Co. KGaA tax group.

Inventories amounted to € 748.4 million (previous year: € 719.2 million) so that the figure recognised was € 29.2 million higher. The change is due to the higher volume of business, with the 4.1 % increase in inventories being lower overall than that of total output of operations (6.4 %).

Contract assets declined from € 80.0 million in the previous year to € 59.0 million, owing to the sharper decline in KSB's contract progress relative to the associated advance payments received compared with the reporting date.

Trade receivables were down despite the growth in sales revenue from € 579.5 million at the end of the previous year to € 554.6 million, as the high sales revenue dominated the end of the previous year.

At € 70.9 million, other financial assets were largely at the prior-year level (previous year: € 71.5 million). Other nonfinancial assets amounted to € 44.3 million, up € 2.1 million on the prior-year level (previous year: € 42.2 million). This increase is attributable to slightly higher recoverable taxes.

Cash and cash equivalents accounted for around 13.0 % of assets, totalling € 340.4 million (previous year: € 228.6 million). The reasons for the increase are explained in the Liquidity section of the management report.

Total assets rose by 7.7 % to € 2,669.8 million, mainly due to the € 96.4 million increase in current assets and € 94.5 million increase in non-current assets. In addition to the € 111.8 million increase in cash and cash equivalents, the € 29.2 million increase in inventories also contributed to the increase in current assets, while trade receivables declined by € 25.0 million.

Non-current assets were mainly impacted by the increase of € 56.9 million in deferred tax assets and of € 23.7 million in property, plant and equipment.

{76}------------------------------------------------

#### **EQUITY**

**Percentage change** 

**852,295 757,822 12.5** 

**1,817,524 1,721,069 5.6 2,669,819 2,478,890 7.7** 

At € 70.9 million, other financial assets were largely at the prior-year level (previous year: € 71.5 million). Other nonfinancial assets amounted to € 44.3 million, up € 2.1 million on the prior-year level (previous year: € 42.2 million). This increase is attributable to slightly higher recoverable taxes.

Cash and cash equivalents accounted for around 13.0 % of assets, totalling € 340.4 million (previous year: € 228.6 million). The reasons for the increase are explained in the

Total assets rose by 7.7 % to € 2,669.8 million, mainly due to the € 96.4 million increase in current assets and € 94.5 million increase in non-current assets. In addition to the € 111.8 million increase in cash and cash equivalents, the € 29.2 million increase in inventories also contributed to the increase in current assets, while trade receivables declined by € 25.0 million.

Non-current assets were mainly impacted by the increase of € 56.9 million in deferred tax assets and of € 23.7 million in

Liquidity section of the management report.

property, plant and equipment.

**ASSETS**

**Non-current assets** 

**Current assets** 

Further information is provided in the Notes to the consolidated financial statements.

The carrying amount of financial assets, investments accounted for using the equity method and non-current other non-financial assets was € 33.4 million. At € 24.5 million, the investments accounted for using the equity method were up € 3.7 million on the previous year's level (€ 20.8 million).

Deferred tax assets rose by € 56.9 million to € 94.0 million (previous year: € 37.1 million), in particular as a result of the reversal of impairment losses on deferred tax assets in the KSB

Inventories amounted to € 748.4 million (previous year: € 719.2 million) so that the figure recognised was € 29.2 million higher. The change is due to the higher volume of business, with the 4.1 % increase in inventories being lower overall than that of total output of operations (6.4 %).

Contract assets declined from € 80.0 million in the previous year to € 59.0 million, owing to the sharper decline in KSB's contract progress relative to the associated advance payments

Trade receivables were down despite the growth in sales revenue from € 579.5 million at the end of the previous year to € 554.6 million, as the high sales revenue dominated the end

received compared with the reporting date.

SE & Co. KGaA tax group.

of the previous year.

**€ thousands 2023 2022** 

**76** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

Intangible assets 75,716 72,673 4.2 Right-of-use assets 46,939 40,220 16.7 Property, plant and equipment 602,166 578,512 4.1 Non-current financial assets 1,227 1,191 3.0 Other non-financial assets 7,728 7,319 5.6 Investments accounted for using the equity method 24,480 20,833 17.5 Deferred tax assets 94,040 37,074 60.6

Inventories 748,393 719,221 4.1 Contract assets 58,969 80,018 −26.3 Trade receivables 554,583 579,539 −4.3 Other financial assets 70,888 71,517 −0.9 Other non-financial assets 44,272 42,203 4.9 Cash and cash equivalents 340,420 228,570 48.9 KSB Group equity amounts to € 1,216.9 million (previous year: € 1,125.6 million). This includes KSB SE & Co. KGaA's subscribed capital of € 44.8 million as in the previous year. The capital reserve remains unchanged at € 66.7 million. Revenue reserves increased by a total of € 84.5 million. The net profit for the year of € 176.6 million had a particular impact in this context. On the other hand, the remeasurement of defined benefit plans in the amount of € 39.4 million led to a reduction in equity.

This was contrasted by the taxes on income of € 27.6 million attributable to the remeasurement of defined benefit plans. This includes the reversal of impairment losses that were recognised in the previous year on deferred tax assets in the KSB SE & Co. KGaA tax group; the reversal of € 15.3 million was recognised under other comprehensive income. Dividend payments to shareholders of KSB SE & Co. KGaA of € 34.4 million were € 13.2 million higher than in the previous year (previous year: € 21.2 million).

#### **EQUITY AND LIABILITIES**

| € thousands                                              | 31 Dec. 2023 | 31 Dec. 2022 | Percentage<br>change |
|----------------------------------------------------------|--------------|--------------|----------------------|
| Equity                                                   |              |              |                      |
| Subscribed capital                                       | 44,772       | 44,772       | –                    |
| Capital reserve                                          | 66,663       | 66,663       | –                    |
| Revenue reserves                                         | 888,998      | 804,484      | 10.5                 |
| Equity attributable to shareholders of KSB SE & Co. KGaA | 1,000,434    | 915,919      | 9.2                  |
| Non-controlling interests                                | 216,465      | 209,653      | 3.2                  |
|                                                          | 1,216,899    | 1,125,572    | 8.1                  |
| Non-current liabilities                                  |              |              |                      |
| Deferred tax liabilities                                 | 9,857        | 12,010       | –17.9                |
| Provisions for employee benefits                         | 496,114      | 451,568      | 9.9                  |
| Other provisions                                         | 15,703       | 16,715       | –6.1                 |
| Financial liabilities                                    | 28,960       | 24,116       | 20.1                 |
|                                                          | 550,634      | 504,409      | 9.2                  |
| Current liabilities                                      |              |              |                      |
| Other provisions                                         | 120,781      | 98,999       | 22.0                 |
| Financial liabilities                                    | 26,053       | 26,630       | –2.2                 |
| Contract liabilities                                     | 202,619      | 186,477      | 8.7                  |
| Trade payables                                           | 324,723      | 333,361      | –2.6                 |
| Other financial liabilities                              | 27,659       | 23,921       | 15.6                 |
| Other non-financial liabilities                          | 181,804      | 164,604      | 10.4                 |
| Income tax liabilities                                   | 18,649       | 14,918       | 25.0                 |
|                                                          | 902,286      | 848,910      | 6.3                  |
|                                                          | 2,669,819    | 2,478,890    | 7.7                  |

Further information is provided in the Notes to the consolidated financial statements.

{77}------------------------------------------------

#### **Balance sheet structure**

Image /page/77/Figure/2 description: This image shows two stacked bar charts, one for assets and one for equity and liabilities, both in percentages for the years 2023 and 2022. The assets chart for 2023 shows the following percentages: Non-current assets at 31.9%, Inventories at 28.0%, Contract assets, receivables and current assets at 27.4%, and Cash and cash equivalents at 12.7%. For 2022, the assets chart shows: Non-current assets at 30.6%, Inventories at 29.0%, Contract assets, receivables and current assets at 31.2%, and Cash and cash equivalents at 9.2%. The equity and liabilities chart for 2023 shows: Equity at 45.6%, Non-current liabilities at 20.6%, and Current liabilities at 33.8%. For 2022, the equity and liabilities chart shows: Equity at 45.4%, Non-current liabilities at 20.4%, and Current liabilities at 34.2%.

Currency translation effects led to a loss of € 33.4 million in the reporting year (previous year: gains of € 12.5 million). The revenue reserves include the proportion of earnings after income tax attributable to KSB SE & Co. KGaA shareholders, at € 152.3 million (previous year: € 103.6 million). Out of total equity, € 216.5 million (previous year: € 209.7 million) is attributable to non-controlling interests. The equity ratio is stable at 45.6 % (previous year: 45.4 %).

The non-controlling interests mainly relate to the following companies: KSB Limited, India, KSB Shanghai Pump Co., Ltd., China and the PAB subgroup. The latter consists of Pumpenund Armaturen-Beteiligungsgesellschaft mbH, Frankenthal, and its US subsidiaries.

#### **Inflation and exchange rate effects**

Of the Group's consolidated companies, the annual financial statements of the Argentinian and the Turkish company had to be adjusted for the effects of inflation. The net loss from the monetary depreciation of the affected monetary assets and liabilities to be taken into account under IAS 29, amounting to € 6.9 million (previous year: € 4.6 million), is included in the income statement under other finance expense within finance income / expense.

Image /page/77/Picture/7 description: The image shows the number 45.6 in a large, blue font. Below the number, the text "Equity ratio in percent" is written in a smaller, blue font.

Currency translation of financial statements of consolidated companies that are not prepared in euro gave rise to a difference of € – 33.4 million (previous year: € + 12.5 million). The total of currency translation differences was taken directly to equity.

#### **Liabilities**

The largest item under liabilities continues to be pension provisions, which increased by € 44.5 million from € 451.6 million to € 496.1 million. Higher interest rates account for this increase. This effect was reported in actuarial losses at € 39.4 million (previous year: € – 158.4 million). Obligations for current pensioners and vested benefits of employees who have left the company account for about 49.9 % of the amount recognised in the balance sheet. The rest is attributable to defined benefit obligations for current employees.

Non-current financial liabilities fell slightly by € 4.9 million year on year to € 29.0 million (previous year: € 24.1 million).

Other non-current and current provisions increased from € 115.7 million in 2022 to € 136.5 million in 2023. This is mainly attributable to the € 18.8 million increase in provisions for warranties and contractual penalties.

Current liabilities rose overall by € 53.4 million to € 902.3 million compared with € 848.9 million at the end of 2022. The share of current liabilities relative to total equity and liabilities fell marginally to 33.8 % (previous year: 34.2 %).

Current financial liabilities of € 26.1 million are largely unchanged from the previous year's level (€ 26.6 million).

{78}------------------------------------------------

**17** 

Currency translation of financial statements of consolidated companies that are not prepared in euro gave rise to a difference of € – 33.4 million (previous year: € + 12.5 million). The total of currency translation differences was taken directly

20.6 33.8

The largest item under liabilities continues to be pension provisions, which increased by € 44.5 million from € 451.6 million to € 496.1 million. Higher interest rates account for this increase. This effect was reported in actuarial losses at € 39.4 million (previous year: € – 158.4 million). Obligations for current pensioners and vested benefits of employees who have left the company account for about 49.9 % of the amount recognised in the balance sheet. The rest is attributable to

Non-current financial liabilities fell slightly by € 4.9 million year on year to € 29.0 million (previous year: € 24.1 million).

Other non-current and current provisions increased from € 115.7 million in 2022 to € 136.5 million in 2023. This is mainly attributable to the € 18.8 million increase in provisions

Current liabilities rose overall by € 53.4 million to € 902.3 million compared with € 848.9 million at the end of 2022. The share of current liabilities relative to total equity and liabilities

Current financial liabilities of € 26.1 million are largely unchanged from the previous year's level (€ 26.6 million).

fell marginally to 33.8 % (previous year: 34.2 %).

defined benefit obligations for current employees.

for warranties and contractual penalties.

to equity.

45.4 20.4 34.2

31.9 28.0 27.4 12.7

30.6 29.0 31.2 9.2

**Liabilities** 

Currency translation effects led to a loss of € 33.4 million in the reporting year (previous year: gains of € 12.5 million). The revenue reserves include the proportion of earnings after income tax attributable to KSB SE & Co. KGaA shareholders, at € 152.3 million (previous year: € 103.6 million). Out of total equity, € 216.5 million (previous year: € 209.7 million) is attributable to non-controlling interests. The equity ratio is

45.6

Equity Non-current liabilities Current liabilities

Non-current assets Inventories Contract assets, receivables and current assets Cash and cash equivalents

**78** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

The non-controlling interests mainly relate to the following companies: KSB Limited, India, KSB Shanghai Pump Co., Ltd., China and the PAB subgroup. The latter consists of Pumpenund Armaturen-Beteiligungsgesellschaft mbH, Frankenthal,

Of the Group's consolidated companies, the annual financial statements of the Argentinian and the Turkish company had to be adjusted for the effects of inflation. The net loss from the monetary depreciation of the affected monetary assets and liabilities to be taken into account under IAS 29, amounting to € 6.9 million (previous year: € 4.6 million), is included in the income statement under other finance expense within finance

45.6

Equity ratio in percent

stable at 45.6 % (previous year: 45.4 %).

**Inflation and exchange rate effects** 

and its US subsidiaries.

Assets (in %)

Equity and liabilities (in %)

**Balance sheet structure**

**2023**

2022

**2023**

2022

income / expense.

<span id="page-78-0"></span>Contract liabilities increased from € 186.5 million in the previous year to € 202.6 million. This is attributable to a € 9.9 million reduction in the level of completion of customer contracts and to a € 6.2 million increase in advance payments.

Trade payables fell by € 8.7 million to € 324.7 million (previous year: € 333.4 million).

Other non-financial liabilities increased by € 17.2 million, above all due to higher personnel liabilities.

## **Summary of the Performance in the Financial Year**

The marked increase in order intake from € 2,862.1 million to € 2,959.5 million placed it within the forecast range between € 2,750 million and € 3,000 million. KSB is very satisfied with the order intake achieved in the reporting year. The order intake figures of the individual Segments have developed better than originally expected. The Pumps Segment reported a stable development contrary to the anticipated noticeable decline. Order intake figures for the Valves and KSB SupremeServ Segments also showed strong growth. A slight to tangible increase was forecast for the Valves Segment, while KSB anticipated slight growth in the KSB SupremeServ Segment.

The forecast for sales revenue provided in the 2022 Annual Report, which was expected to be in a range between € 2,500 million and € 2,850 million, was confirmed. The Group is very satisfied with the sales revenue achieved of € 2,819.0 million (previous year: € 2,573.4 million). The forecast of a strong increase for the Pumps Segment was achieved with growth of 8.9 %. Instead of the slight to noticeable growth forecast for the Valves Segment and the stable to slight increase for the KSB SupremeServ Segment, both Segments recorded strong growth. In an ad hoc statement, the forecast for EBIT in the 2022 Annual Report, which was expected to be in a range of € 165.0 million to € 200.0 million, was adjusted to a range of € 210.0 million to € 230.0 million. At € 223.9 million, EBIT in the 2023 financial year was therefore in the upper half of the adjusted forecast range. The basis for the adjustment of the forecast was the positive development in the KSB SupremeServ Segment, which was more pronounced than originally assumed. The strong growth forecast for the Pumps Segment was achieved in the financial year. EBIT in the Valves Segment was expected to increase strongly but declined significantly instead. However, this was more than offset by the very positive development in the KSB SupremeServ Segment, for which KSB predicted a stable to slight increase, with strong growth in the reporting year. Detailed information on the reasons for the EBIT performance is provided in the "Earnings before finance income / expense and income tax (EBIT)" section.

The assumption made in the previous year's financial statements that global economic growth would be decisive for the development of the key indicators has largely materialised. The growth in sales revenue also exceeded the growth in order intake, as predicted. KSB expected EBIT growth to be driven primarily by the Standard Markets. However, EBIT growth was mainly attributable to the positive development in the KSB SupremeServ Segment already described above. The company can confirm the expected contribution to earnings from the Region Europe. The Management of the KSB Group is therefore very satisfied with business performance in the reporting year.

KSB continues to have a healthy financial basis for the future.

{79}------------------------------------------------

<span id="page-79-0"></span>In its current forecast for global economic growth, the International Monetary Fund (IMF) most recently anticipated an increase of + 3.1 % in real terms for 2024, which equates to the prior-year growth rate. Despite the restrictive monetary policy measures, which resulted in higher interest rates in order to curb inflation, the economies in the USA and China in particular are resilient. The medium-term outlook for economic growth remains the lowest seen in decades. Inflation is expected to fall further, which should lead to a reduction in interest rates in the current year. expected to fall further, which should lead to a reduction in

While the downside risks to this forecast still prevail, they have diminished in view of the resilience of the global economy recently observed. Looking ahead to 2024, inflation risks and the risks of a financial crisis and associated recession risks in particular eased over the course of the past year. Geopolitical risks have increased at the same time. Besides current regional conflicts and intensification of the mutual decoupling between the USA and China, the war in Gaza heightened the risk of escalation in the Middle East. Further risks to global economic growth include economic developments in China and its government's approach to addressing the property crisis, as well as possible turbulence on the commodities markets. The latter could be triggered either by geopolitical escalation, including further attacks in the Red Sea, or extreme climatic conditions. interest rates in the current year. including further attacks in the Red Sea, or extreme climatic

The IMF is projecting an overall growth rate of + 4.1 % for the emerging markets and developing countries. conditions.

At + 1.5 % in 2024, expected growth in the industrialised nations is lower than in 2023. Growth expectations in the USA are at + 2.1 %. These were raised again recently to take account of robust consumer spending and investments. At the beginning of the year the forecast was at  $1.0$ %. The forecast for the Canadian economy was lowered slightly to  $+ 1.4$ %. the emerging markets and developing countries.

Growth in the euro zone will pick up only slightly to  $+ 0.9$ %. For Germany, the most recent forecast was for growth of  $+ 0.5$ %. In France, economic growth is anticipated at  $+ 1.0$ %. For Spain, the forecast is  $+ 1.5$ %. Modest growth of 0.6 % is forecast for the UK. for the Canadian economy was lowered slightly to + 1.4 %. + 1.0 %. For Spain, the forecast is + 1.5 %. Modest growth of

The IMF expects growth in Turkey to slow down to  $+ 3.1$ %. At  $2.7$ %, Saudi Arabia's economic growth is projected to significantly exceed the prior-year year level. 0.6 % is forecast for the UK.

significantly exceed the prior-year year level.

#### **Gross domestic product growth**

Image /page/79/Figure/11 description: This image shows a bar chart comparing the growth forecasts for different regions in 2023 and 2024. For the world, the growth is +3.1% in both 2023 and 2024 (forecast). For the European Union, the growth is +0.6% in both 2023 and 2024 (forecast). For the USA, the growth is +1.6% in 2023 and +1.5% (forecast) in 2024. For Latin America, the growth is +2.5% in 2023 and +1.9% (forecast) in 2024. For Asia (excl. Japan), the growth is +5.4% in 2023 and +5.2% (forecast) in 2024. For emerging markets, the growth is +4.1% in both 2023 and 2024 (forecast).

Source: International Monetary Fund (January 2024) \*Source: EU Commission (November 2023)

pated grow by + 1.6 %.

VDMA forecast is – 2 %.

In Asia, the growth rate is expected to be down slightly overall from the previous year, which is attributable to lower year-on-In Asia, the growth rate is expected to be down slightly overall year growth in China. The most recent forecast of + 4.6 % for from the previous year, which is attributable to lower year-on-China is well below the pre-pandemic level. The IMF antici-year growth in China. The most recent forecast of + 4.6 % for pates a growth rate of + 6.5 % for India in the current year. China is well below the pre-pandemic level. The IMF antici-

Growth of + 4.7 % is expected for the ASEAN countries, which also include important sales markets for KSB. Growth of + 4.7 % is expected for the ASEAN countries, pates a growth rate of + 6.5 % for India in the current year.

The Latin American countries are also expected to grow overall by + 1.9 %, as in the previous year. Growth of only The Latin American countries are also expected to grow + 1.7 % is projected in Brazil. The economy in Chile is antici-overall by + 1.9 %, as in the previous year. Growth of only pated grow by + 1.6 %. which also include important sales markets for KSB. + 1.7 % is projected in Brazil. The economy in Chile is antici-

Given the weakening of global economic growth, the growth in demand for capital goods is expected to be lower. VDMA Given the weakening of global economic growth, the growth expects global machinery sales revenue to stagnate at 0 % in in demand for capital goods is expected to be lower. VDMA real terms. An increase is anticipated at the largest production facilities in Asia, which should offset the decline in the other regions. In China, sales revenue is expected to grow by + 2 %. A decline of – 2 % is expected for the USA. For Germany, the VDMA forecast is – 2 %. A decline of – 2 % is expected for the USA. For Germany, the

**19** 

{80}------------------------------------------------

**Report on Expected** 

**Report on Expected** 

In its current forecast for global economic growth, the International Monetary Fund (IMF) most recently anticipated an increase of + 3.1 % in real terms for 2024, which equates to the prior-year growth rate. Despite the restrictive monetary policy measures, which resulted in higher interest rates in order to curb inflation, the economies in the USA and China in particular are resilient. The medium-term outlook for economic growth remains the lowest seen in decades. Inflation is expected to fall further, which should lead to a reduction in

In its current forecast for global economic growth, the International Monetary Fund (IMF) most recently anticipated an increase of + 3.1 % in real terms for 2024, which equates to the prior-year growth rate. Despite the restrictive monetary policy measures, which resulted in higher interest rates in order to curb inflation, the economies in the USA and China in particular are resilient. The medium-term outlook for economic growth remains the lowest seen in decades. Inflation is expected to fall further, which should lead to a reduction in

While the downside risks to this forecast still prevail, they have diminished in view of the resilience of the global economy recently observed. Looking ahead to 2024, inflation risks and the risks of a financial crisis and associated recession risks in particular eased over the course of the past year. Geopolitical risks have increased at the same time. Besides current regional conflicts and intensification of the mutual decoupling between the USA and China, the war in Gaza heightened the risk of escalation in the Middle East. Further risks to global economic growth include economic developments in China and its government's approach to addressing the property crisis, as well as possible turbulence on the commodities markets. The latter could be triggered either by geopolitical escalation, including further attacks in the Red Sea, or extreme climatic

While the downside risks to this forecast still prevail, they have diminished in view of the resilience of the global economy recently observed. Looking ahead to 2024, inflation risks and the risks of a financial crisis and associated recession risks in particular eased over the course of the past year. Geopolitical risks have increased at the same time. Besides current regional conflicts and intensification of the mutual decoupling between the USA and China, the war in Gaza heightened the risk of escalation in the Middle East. Further risks to global economic growth include economic developments in China and its government's approach to addressing the property crisis, as well as possible turbulence on the commodities markets. The latter could be triggered either by geopolitical escalation, including further attacks in the Red Sea, or extreme climatic

The IMF is projecting an overall growth rate of + 4.1 % for

The IMF is projecting an overall growth rate of + 4.1 % for

At + 1.5 % in 2024, expected growth in the industrialised nations is lower than in 2023. Growth expectations in the USA are at + 2.1 %. These were raised again recently to take account of robust consumer spending and investments. At the beginning of the year the forecast was at 1.0 %. The forecast for the Canadian economy was lowered slightly to + 1.4 %.

At + 1.5 % in 2024, expected growth in the industrialised nations is lower than in 2023. Growth expectations in the USA are at + 2.1 %. These were raised again recently to take account of robust consumer spending and investments. At the beginning of the year the forecast was at 1.0 %. The forecast for the Canadian economy was lowered slightly to + 1.4 %.

Growth in the euro zone will pick up only slightly to + 0.9 %. For Germany, the most recent forecast was for growth of + 0.5 %. In France, economic growth is anticipated at + 1.0 %. For Spain, the forecast is + 1.5 %. Modest growth of

Growth in the euro zone will pick up only slightly to + 0.9 %. For Germany, the most recent forecast was for growth of + 0.5 %. In France, economic growth is anticipated at + 1.0 %. For Spain, the forecast is + 1.5 %. Modest growth of

The IMF expects growth in Turkey to slow down to + 3.1 %. At 2.7 %, Saudi Arabia's economic growth is projected to

The IMF expects growth in Turkey to slow down to + 3.1 %. At 2.7 %, Saudi Arabia's economic growth is projected to

significantly exceed the prior-year year level.

significantly exceed the prior-year year level.

the emerging markets and developing countries.

the emerging markets and developing countries.

0.6 % is forecast for the UK.

0.6 % is forecast for the UK.

KSB Group / Annual Report 2023

**Developments**

**Developments**

interest rates in the current year.

interest rates in the current year.

conditions.

conditions.

**19** 

**19** 

In Asia, the growth rate is expected to be down slightly overall from the previous year, which is attributable to lower year-onyear growth in China. The most recent forecast of + 4.6 % for China is well below the pre-pandemic level. The IMF anticipates a growth rate of + 6.5 % for India in the current year.

**+ 1.9 % (Forecast)**

+ 2.5 %

**+ 1.5 % (Forecast)**

+ 1.6 %

**+3.1 % (Forecast)** + 3.1 %

> **+ 4.1 % (Forecast)** + 4.1 %

**+ 5.2 % (Forecast)**

+ 5.4 %

In Asia, the growth rate is expected to be down slightly overall from the previous year, which is attributable to lower year-onyear growth in China. The most recent forecast of + 4.6 % for China is well below the pre-pandemic level. The IMF anticipates a growth rate of + 6.5 % for India in the current year.

Growth of + 4.7 % is expected for the ASEAN countries,

Growth of + 4.7 % is expected for the ASEAN countries,

The Latin American countries are also expected to grow overall by + 1.9 %, as in the previous year. Growth of only + 1.7 % is projected in Brazil. The economy in Chile is antici-

The Latin American countries are also expected to grow overall by + 1.9 %, as in the previous year. Growth of only + 1.7 % is projected in Brazil. The economy in Chile is antici-

Given the weakening of global economic growth, the growth in demand for capital goods is expected to be lower. VDMA expects global machinery sales revenue to stagnate at 0 % in real terms. An increase is anticipated at the largest production facilities in Asia, which should offset the decline in the other regions. In China, sales revenue is expected to grow by + 2 %. A decline of – 2 % is expected for the USA. For Germany, the

Given the weakening of global economic growth, the growth in demand for capital goods is expected to be lower. VDMA expects global machinery sales revenue to stagnate at 0 % in real terms. An increase is anticipated at the largest production facilities in Asia, which should offset the decline in the other regions. In China, sales revenue is expected to grow by + 2 %. A decline of – 2 % is expected for the USA. For Germany, the

which also include important sales markets for KSB.

Source: International Monetary Fund (January 2024) \*Source: EU Commission (November 2023)

**Emerging markets**

**Asia (excl. Japan)**

**Latin America**

**Gross domestic product growth**

**+ 0.6 % (Forecast) European Union\***

+ 0.6 %

**World**

**USA**

**2024** 2023

**80** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**2024** 2023

**2024**

2023

**2024** 2023

**2024**

**2024** 2023

2023

which also include important sales markets for KSB.

pated grow by + 1.6 %.

pated grow by + 1.6 %.

VDMA forecast is – 2 %.

VDMA forecast is – 2 %.

For manufacturers of liquid pumps in Germany, VDMA foresees a below-average growth of + 0 % in nominal terms in the current year. It predicts a decline of – 1 % for industrial valves. Sales revenue from building services valves is expected to fall by – 2 % in nominal terms.

#### **SUMMARY OF EXPECTED DEVELOPMENT**

For the 2024 financial year, KSB expects to achieve the key financial performance indicators presented in the table below:

| Expected development |             |               |
|----------------------|-------------|---------------|
| € millions           | Actual 2023 | Forecast 2024 |
| Order intake         | 2,959.5     | 2,800 – 3,150 |
| Sales revenue        | 2,819.0     | 2,700 – 3,050 |
| EBIT                 | 223.9       | 210 – 245     |

KSB expects to grow in terms of order intake and sales revenue in the 2024 financial year. The growth in order intake will be driven by the Regions Asia / Pacific and Middle East / Africa / Russia. By contrast, KSB expects slight growth in order intake in Europe, its largest market. The highest growth in sales revenue is expected in the Region Europe and – in line with order intake – in the Region Asia / Pacific. The Group expects higher EBIT, largely from the Regions Europe and Asia / Pacific.

For the 2024 financial year, the Group anticipates a substantial increase in orders received by the Pumps Segment, which achieved an order intake of € 1,576.5 million in the reporting year. This growth will be supported mainly by the Standard Markets operating segment. By contrast, KSB anticipates a slight increase in order intake in the Valves Segment, which amounted to € 392.6 million in the reporting year. KSB expects a slight increase in the order intake of € 990.4 million in the reporting year for the KSB SupremeServ Segment in 2024.

The Pumps Segment contributed € 1,513.7 million to the Group's consolidated sales revenue in the reporting year. KSB anticipates a marked increase in this Segment for the 2024 financial year. It expects a marked to strong increase in 2024 for the Valves Segment, which achieved sales revenue of € 361.4 million in the reporting year. The KSB SupremeServ Segment contributed € 943.9 million to consolidated sales revenue. KSB forecasts moderately higher sales revenue for this Segment.

The Pumps Segment generated earnings before finance income / expense and income tax (EBIT) of € 52.3 million in the 2023 reporting year. KSB is planning a tangible increase in EBIT in this Segment for the 2024 financial year. It also expects a strong increase in the Vales Segment. In the reporting year, the Valves Segment achieved EBIT of € – 7.5 million. In the KSB SupremeServ Segment, which contributed € 179.1 million to EBIT in the reporting year, KSB expects a slight to tangible increase in EBIT.

The forecast may be influenced in particular by the ongoing geopolitical tensions, which are explained in more detail in the Opportunities and Risks Report.

#### **FORWARD-LOOKING STATEMENTS**

This report contains forward-looking statements and information that are based upon the assumptions of Management. They express current forecasts and expectations with regard to future events. As a result, these forward-looking statements and information are exposed to risks and uncertainties that lie outside the Management's sphere of influence. KSB wishes to point out that actual events or results may differ materially from the forward-looking statements and information presented, if one or more of the following opportunities or risks, or other opportunities, risks and uncertainties should materialise, or if the assumptions underlying the statements prove to be inaccurate.

{81}------------------------------------------------

<span id="page-81-0"></span>As an organisation that operates throughout the world, the KSB Group is exposed to macroeconomic, sector-typical, financial and business-specific risks. The risk policy is designed to enable KSB to grow sustainably and profitably. The KSB Group aims to reduce the risks associated with its business and where possible avoid them completely. At the same time its global alignment and extensive product range also offer opportunities. This includes those opportunities that arise on the basis of research and development activities, as well as any that are linked to the quality and cost effectiveness of products. KSB's competitive position is also being strengthened by optimising the global sales and production network. In this context, opportunities are constantly examined to further increase KSB's global presence, by establishing new companies or expanding KSB SupremeServ sites and by acquisitions. Customer focus is the key principle in this context.

The Group sees opportunities and risks as possible future developments or events that may lead to departures from forecast or targets. The departure can be both positive and negative. In order to manage the varied opportunities and risks professionally and efficiently, the Group aligns its actions accordingly and focuses upon the respective situation when selecting the persons responsible. In doing so, Controlling, Legal, Finance and Accounting as well as Internal Audits perform important monitoring tasks. The following section describes the processes related to the Group-wide opportunities and risk management system, which is based on the Auditing Standards 340 (IDW PS 340 n. F.) and 981 (IDW PS 981) issued by the Institute of Public Auditors in Germany.

#### **RISK MANAGEMENT SYSTEM**

KSB has implemented a Group-wide risk management system for identifying and assessing relevant risks in the different areas of responsibility and reporting these to Group headquarters. The risk management process of the KSB Group consists of the successive phases of identification, assessment, management, control, documentation and communication of risks. The six phases form a continuous and IT-based closedloop system. This is documented in KSB's Risk Management Manual, as well as the management responsibility and the description of all relevant tasks. In this manual, KSB also formalises the risk strategy that was specified in detail in 2023. The Managing Directors of KSB Management SE are responsible for determining, implementing and releasing the risk management system that is effective throughout the Group. The risk strategy is reviewed regularly to ensure it is oriented on the Group strategy and meets the regulatory requirements. Changes to the risk strategy require the approval of the Managing Directors of KSB Management SE.

KSB's risk strategy serves as a basis for evaluating business decisions and is based on normative guiding principles. These guiding principles include, among other things, a clear commitment to promoting an interdisciplinary and Groupwide risk culture, efficient and time-critical risk communication processes and a stakeholder-centred focus on value creation and preservation. These qualitative criteria are supplemented by a quantitative approach to analysing the riskbearing capacity.

KSB defines the risk-bearing capacity as an aggregated risk potential that can be absorbed in the medium term without posing a threat to the business continuity of KSB. A corresponding concept for risk-bearing capacity, taking into account the overall risk strategy, was established within the Group. It specifically examines whether and to what extent developments could jeopardise the continued existence of the KSB Group with regard to its equity and / or liquidity position.

The regular derivation of the risk-bearing capacity and its communication to management is an integral process of the risk management system and is the responsibility of the Risk Manager. Changes require the approval of the Managing Directors of KSB Management SE. If the analysis of the riskbearing capacity reveals a need for additional requirements for risk provisioning, equity or liquidity, further measures are defined to ensure that adequate account is taken of the KSB Group's risk-bearing capacity in accordance with its risk strategy. In addition to risk-bearing capacity, KSB defines risk appetite as part of the risk strategy as a level of risk that it is prepared to bear over a certain period of time.

{82}------------------------------------------------

**Opportunities and Risks Report**

**82** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

The Managing Directors of KSB Management SE are responsible for determining, implementing and releasing the risk management system that is effective throughout the Group. The risk strategy is reviewed regularly to ensure it is oriented on the Group strategy and meets the regulatory requirements. Changes to the risk strategy require the approval of the Managing Directors of KSB Management SE.

KSB's risk strategy serves as a basis for evaluating business decisions and is based on normative guiding principles. These guiding principles include, among other things, a clear commitment to promoting an interdisciplinary and Groupwide risk culture, efficient and time-critical risk communication processes and a stakeholder-centred focus on value creation and preservation. These qualitative criteria are supplemented by a quantitative approach to analysing the risk-

KSB defines the risk-bearing capacity as an aggregated risk potential that can be absorbed in the medium term without posing a threat to the business continuity of KSB. A corresponding concept for risk-bearing capacity, taking into account the overall risk strategy, was established within the Group. It specifically examines whether and to what extent developments could jeopardise the continued existence of the KSB Group with regard to its equity and / or liquidity position.

The regular derivation of the risk-bearing capacity and its communication to management is an integral process of the risk management system and is the responsibility of the Risk Manager. Changes require the approval of the Managing Directors of KSB Management SE. If the analysis of the riskbearing capacity reveals a need for additional requirements for risk provisioning, equity or liquidity, further measures are defined to ensure that adequate account is taken of the KSB Group's risk-bearing capacity in accordance with its risk strategy. In addition to risk-bearing capacity, KSB defines risk appetite as part of the risk strategy as a level of risk that it is

prepared to bear over a certain period of time.

bearing capacity.

As an organisation that operates throughout the world, the KSB Group is exposed to macroeconomic, sector-typical, financial and business-specific risks. The risk policy is designed to enable KSB to grow sustainably and profitably. The KSB Group aims to reduce the risks associated with its business and where possible avoid them completely. At the same time its global alignment and extensive product range also offer opportunities. This includes those opportunities that arise on the basis of research and development activities, as well as any that are linked to the quality and cost effectiveness of products. KSB's competitive position is also being strengthened by optimising the global sales and production network. In this context, opportunities are constantly examined to further increase KSB's global presence, by establishing new companies or expanding KSB SupremeServ sites and by acquisitions.

Customer focus is the key principle in this context.

issued by the Institute of Public Auditors in Germany.

KSB has implemented a Group-wide risk management system for identifying and assessing relevant risks in the different areas of responsibility and reporting these to Group headquarters. The risk management process of the KSB Group consists of the successive phases of identification, assessment, management, control, documentation and communication of risks. The six phases form a continuous and IT-based closedloop system. This is documented in KSB's Risk Management Manual, as well as the management responsibility and the description of all relevant tasks. In this manual, KSB also formalises the risk strategy that was specified in detail in 2023.

**RISK MANAGEMENT SYSTEM** 

KSB Group / Annual Report 2023

The Group sees opportunities and risks as possible future developments or events that may lead to departures from forecast or targets. The departure can be both positive and negative. In order to manage the varied opportunities and risks professionally and efficiently, the Group aligns its actions accordingly and focuses upon the respective situation when selecting the persons responsible. In doing so, Controlling, Legal, Finance and Accounting as well as Internal Audits perform important monitoring tasks. The following section describes the processes related to the Group-wide opportunities and risk management system, which is based on the Auditing Standards 340 (IDW PS 340 n. F.) and 981 (IDW PS 981) KSB uses risk management software to support these analytical processes and to enhance the efficiency and effectiveness of risk management. This supports the systematic identification, assessment, management and monitoring of Group-wide risks and enables the precise and immediate recording of risk information.

Managers are encouraged to take timely action to define and implement measures to limit or avoid damage that may result from the occurrence of risk events. All corporate and central functions and Group companies, including Group companies that are not consolidated, are included in the risk management system. The responsible managers are required to supply their relevant key business and financial indicators each month. As well as creating forecasts during the year on business performance, they also report twice a year to the central Risk Manager on all recognised risks in the categories of market and competitive risks, technological risks, project- and product-related risks, financial risks, procurement risks, ESG (Environmental, Social and Governance) risks, other businessspecific risks and long-term strategic risks in a bottom-up process. The monitoring period was divided into three cycles. In the first cycle, the risks are to be reported for the following financial year or, as part of the risk assessment during the course of the year, for the remainder of the financial year. Accordingly, the second cycle covers the risks that are seen within a time period of up to 24 months. Where applicable, any long-term risks are considered in the third cycle, such as strategic risks that have been a greater focal point of KSB's risk management since 2023. In addition, regular management reporting on day-to-day business-related risk developments and issues is provided by the respective corporate and central functions to the Managing Directors of the KSB Group, in order to ensure from a management perspective that such risks are addressed in an action-oriented manner and are continually tracked between the reporting dates.

The regular identification and updating of risks in all the Group companies and in the respective corporate and central functions ensure that risk awareness within the KSB Group remains at a high level across the board. A distinction is made between qualitative and quantitative risks.

Qualitative risks are developments that cannot or cannot yet be thoroughly quantified due to a lack of precise information. However, to be able to evaluate them for further analysis steps, the scope is assessed using defined evaluation intervals. The mean value of these evaluation intervals is used to determine the significance of these risks for the Group.

**21** 

Quantitative risks are risks for which the potential monetary impact on the earnings and/or liquidity of the KSB Group can be estimated. They are evaluated taking into account the specifically calculated probability of occurrence in combination with the potential amount of loss. The scope or amount of loss describes the potential influence of the individual risk on the key indicator of earnings before finance income / expense and income tax (EBIT) or liquidity of the KSB Group or the respective Group company. In 2023, KSB further developed the risk assessment methodology, by evaluating the amount of loss using three scenarios rather than one scenario (one-point evaluation): worst case, most likely case and best case. A distinction is also made between a gross method before taking into account any corrective action that has been taken, and a net method after taking into account such measures. Risk assessment at KSB covers all relevant risk areas for internal and external risks arising from the KSB business and the Group's inherent risk profile. In this context, gross impacts on EBIT of all individual and similar risks of € 500 thousand or more before countermeasures in the most likely case scenario are to be reported uniformly throughout the Group at the earliest possible time, regardless of how the risk is assessed in terms of probability of occurrence. Purely casheffective risks are reported as from a gross impact of € 5.0 million or more (in the most likely case).

KSB defines as material all risks or aggregate risks, for which the product of the probability of occurrence and the most probable amount of loss, after deducting the amount of countermeasures, is greater than € 5.0 million. This applies to qualitative and quantitative risks. The materiality threshold of € 5.0 million presented replaces the previous materiality thresholds for individual risks, which were categorised as "medium" or "high" based on the defined classification from the previous year. As a result of the new evaluation scheme, risks that were still categorised as high in the previous year according to the risk matrix are no longer material. New reported risks, that would have been classified as high in the former evaluation scheme, fall below the newly defined materiality threshold in the reporting year.

{83}------------------------------------------------

#### **Risk management at KSB**

Image /page/83/Figure/5 description: The image shows a diagram of an organizational structure. At the top is a box labeled "Supervisory Board", which is connected by an arrow to a box labeled "KSB Management SE". This box is connected by an arrow to a box labeled "Risk Managers", which contains a bulleted list: "Controlling the risk management process", "Analyzing the risk reports", and "Reporting to the Managing Directors". To the right of the "Risk Managers" box is an arrow pointing to a box labeled "Internal Audits", which contains the bulleted list "Monitoring of proper functioning and effectiveness". The "Risk Managers" box is connected by an arrow to a box labeled "Risk Owners", which contains a bulleted list: "Risk identification", "Risk evaluation", "Risk control and monitoring (incl. implementation of measures)", "Risk recording", and "Risk communication / Ad hoc reporting".

The bodies to which specific responsibilities and competencies were assigned in KSB's risk management system in the reporting year are presented and explained in the above diagram. **Risk management system of the KSB Group** 

As the legal representative, KSB Management SE assumes overall responsibility for risk management. KSB Management SE reports to the Supervisory Board of KSE SE & Co. KGaA via its Managing Directors during regular Audit Committee meetings and is monitored by the latter. The Managing Directors are supported by the Chief Compliance Officer and the Group Finance and Accounting department of KSB SE & Co. KGaA. The latter coordinates the risk management process at Group level and checks all risks reported for relevance to the preparation of financial statements. This ensures that there is a systematic link with the Group accounting process. The Managing Directors, the Administrative Board and the Supervisory Board's Audit Committee receive two risk reports per financial year. These reports include all the risks classed as material that exceed pre-defined threshold values individually or collectively, taking into consideration any corrective action that has been taken (net risk), as well as further significant developments. The net method enables the Managing Directors to focus specifically on the reported risks. Additionally, the risk-bearing capacity of the KSB Group is regularly monitored on the basis of the overall risk position, which is developed by aggregating all the risks recorded. This makes it possible to identify early on any developments that could threaten business continuity in the period under review. Particularly time-critical risks and new or changed risks that are classified as significant are to be reported by the responsible managers to the Risk Managers on an ad hoc basis. The latter review the information and pass it on to the Managing Directors of KSB Management SE. Opportunities are also taken into account in KSB's current risk management system and are reported in line with the specifications for risk assessment.

With regard to financial risks KSB makes use of additional risk identification, assessment, management and communication. The central Finance department is responsible for this task, which is described in further detail later in this section.

Compliance risks are dealt with by the Chief Compliance Officer, who is assigned to the Legal and Compliance, Patents and Trademarks staff function. The Chief Compliance Officer is supported by the members of the Compliance Committee and the Compliance Managers of the individual companies.

{84}------------------------------------------------

Relevant risks from both corporate and central functions as well as other specialised corporate and central functions are transferred to and integrated within the KSB Group's risk management system, thus systematically ensuring a holistic overall risk inventory. The Internal Audits department is integrated into the risk management system as part of the internal control system. When planning audits, it prioritises areas according to potential risks and is provided with all the necessary information. The auditors ensure that all audited units adhere to the applicable guidelines, actively participate in the risk management system, and control or avoid their risks. Information obtained by Internal Audits on both the identified risks and the corrective action initiated in response forms an integral part of the reporting to the Managing Directors and to the Audit Committee of the Supervisory Board. The risk management system is updated promptly if need be, for example in the event of relevant legal or organisational changes. In addition, the auditors examine the early risk detection system within the scope of the audit of the annual financial statements, establishing that it is in place and checking that it is fit for purpose. Relevant basic documents on risk management are archived in accordance with the statutory applicable deadline and in the statutory required formats.

#### **INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT SYSTEM RELATING TO THE GROUP ACCOUNTING PROCESS**

The accounting-related internal control system (ICS) contributes towards ensuring proper financial reporting. The aim is to ensure that the consolidated financial statements and group management report comply with all relevant regulations. Key elements of the ICS are – as well as the risk management system described above – guidelines and regulations, which include standard accounting and measurement policies. They must be applied to the full extent by all Group companies. There is a segregation of duties and a double-check system is in place. This is ensured by the audits carried out by the Internal Audits department.

In addition, Accounting and Controlling carry out regular analytical plausibility checks of the financial information requested from the companies as well as actual / budget variance analyses. This enables KSB to identify significant changes early on, which are examined for accounting and measurement discrepancies. The resulting findings are then discussed at management level.

The responsibility for Group accounting lies with the employees in the central Accounting KSB Group department. The services of qualified external reviewers are employed to evaluate complex issues (such as the calculation of pension

**23** 

regularly monitored on the basis of the overall risk position, which is developed by aggregating all the risks recorded. This makes it possible to identify early on any developments that could threaten business continuity in the period under review. Particularly time-critical risks and new or changed risks that are classified as significant are to be reported by the responsible managers to the Risk Managers on an ad hoc basis. The latter review the information and pass it on to the Managing Directors of KSB Management SE. Opportunities are also taken into account in KSB's current risk management system and are reported in line with the specifications for risk

• Monitoring of proper functioning and effectiveness

**Risk Managers Internal Audits**

With regard to financial risks KSB makes use of additional risk identification, assessment, management and communication. The central Finance department is responsible for this task, which is described in further detail later in this section.

Compliance risks are dealt with by the Chief Compliance Officer, who is assigned to the Legal and Compliance, Patents and Trademarks staff function. The Chief Compliance Officer is supported by the members of the Compliance Committee and the Compliance Managers of the individual companies.

assessment.

The bodies to which specific responsibilities and competencies were assigned in KSB's risk management system in the reporting year are presented and explained in the above diagram.

**Risk management at KSB**

**Supervisory Board**

**84** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**KSB Management SE**

• Controlling the risk management

**Risk Owners**

• Risk communication / Ad hoc reporting

• Analysing the risk reports • Reporting to the Managing Directors

• Risk identification • Risk evaluation • Risk control and monitoring (incl. implementation of measures)

• Risk recording

process

As the legal representative, KSB Management SE assumes overall responsibility for risk management. KSB Management SE reports to the Supervisory Board of KSE SE & Co. KGaA via its Managing Directors during regular Audit Committee meetings and is monitored by the latter. The Managing Directors are supported by the Chief Compliance Officer and the Group Finance and Accounting department of KSB SE & Co. KGaA. The latter coordinates the risk management process at Group level and checks all risks reported for relevance to the preparation of financial statements. This ensures that there is a systematic link with the Group accounting process. The Managing Directors, the Administrative Board and the Supervisory Board's Audit Committee receive two risk reports per financial year. These reports include all the risks classed as material that exceed pre-defined threshold values individually or collectively, taking into consideration any corrective action that has been taken (net risk), as well as further significant developments. The net method enables the Managing Directors to focus specifically on the reported risks. Additionally, the risk-bearing capacity of the KSB Group is

**Risk management system of the KSB Group** 

KSB Group / Annual Report 2023

obligations) as part of the preparation of the financial statements.

Binding schedules and guidelines apply to accounting within the KSB Group and to accounting at each individual subsidiary. The accounting and measurement methods that must be applied to compile the consolidated financial statements are defined in writing in a manual that is updated and revised on a continual basis. This includes guidelines for posting intra-Group transactions. New accounting principles and other official announcements are continually analysed with regard to their relevance and impact on the consolidated financial statements. Guidelines and manual are adapted where necessary and any changes communicated immediately to the companies. Group Accounting likewise monitors compliance with requirements. This reduces the risk of compiling inappropriate financial statements or failing to publish them by the defined deadlines.

The financial statement information for all Group companies is automatically processed using certified and tested standard consolidation software. Systematic checks are implemented to help validate the data. Employees in Accounting KSB Group verify any warning signals that arise before using the data. The sequence of the processing steps is strictly specified through the use of the consolidation monitor within the IT system. This ensures the correct processing of data.

To enable a seamless and accurate accounting process, only employees who have the appropriate specialist know-how are assigned to this task. These employees are trained on a regular basis to make sure that their expert knowledge remains up to date.

Access authorisations have been defined for the accountingrelated IT system. This protects the data against unauthorised access as well as improper usage and modification. In addition, the checks at many stages ensure the quality of processing and help to limit operational risks.

#### **INDIVIDUALLY ASSESSED OPPORTUNITIES AND RISKS**

The categories presented below include the net risks classified as material and other net risks that are relevant to the Group as well as the material opportunities for the 2024 financial year. If risks are not flagged as material, they are considered to be of secondary importance. Unless otherwise stated, the following risks relate to all Segments.

#### **Markets / Competition**

The forecast for the 2024 financial year is based on the expectations and assumptions regarding general economic performance and the development of global GDP as described

{85}------------------------------------------------

Combined Management R

in the Report on Expected Developments. Risks for the Group's business arising from high inflation rates have eased considerable but they continue to exist. The Group manages the risk of fluctuations in the economy and in demand by remaining active in several markets and industries with different economic cycles. Furthermore KSB monitors the development of the economic environment for its markets. If necessary, capacities are adjusted, production facilities relocated and cost-cutting measures implemented.

Other risks arise in particular through current geopolitical uncertainty resulting from trade conflicts and numerous global flashpoints. KSB classifies in particular the further development of the conflicts in Ukraine and in the Middle East as a risk with regard to duration and potential escalation, as it is currently not possible to estimate the effects on the global economy and thus on the Group's business activities and further escalation cannot be ruled out. To make use of potential opportunities arising from strategic mergers or acquisitions, KSB continuously monitors the current market situation as well as forecast developments. This allows it to expand market shares or tap into new areas of application.

#### **Projects / Products**

Regular market analysis and monitoring, together with continuous quality management, generally minimise the risk that products will become technically obsolete, are offered at prices not acceptable in the market or that developments on the markets are missed.

In KSB's business, there are special requirements when it comes to the processing of technically complex large-scale projects with long contract terms. These typically involve potential risks. There may be cost overruns, tighter import and export regulations or sanctions, staff shortages, technical difficulties or quality problems – including potential contractual penalties – that reduce the margins. KSB therefore continuously trains its employees in project management and equips them with specialist knowledge. This is designed to enable them to identify the risks associated with longer-term orders at an early stage. In addition, project managers are provided with appropriate management tools. Decisions are made in conjunction with clearly structured authorisation processes. Furthermore, there is central monitoring of projects exposed to risk across all KSB companies.

There are also technical and financial risks to orders with newly designed products. Technical risks are limited to the extent that intermediate steps for development work are defined and partial solutions are subjected to assessments. Commercial risks are minimised by using appropriate contractual clauses. KSB's goal is to ensure that advance payments and collateral provided by customers are structured in such a way that they at least cover the costs incurred. KSB reports contingent liabilities of € 1.8 million (previous year: € 5.1 million) for risks that result from warranty obligations and contractual penalties risks and that were not covered by corresponding provisions. Of this amount, € 0 million is attributable to KSB SE & Co. KGaA, as in the previous year. Beyond this KSB sees no material residual risk (net risk).

#### **Finance / Liquidity**

The Group's international focus is associated with exchange rate risks. Besides the euro, the most important currencies for KSB are the US dollar, the Indian rupee, the Brazilian real and the Chinese yuan. The liquidity risk arising from foreign currency transactions is hedged by using derivative financial instruments. The hedges are based on fixed contracts and on forecasts about future payment streams, the occurrence of which is uncertain.

Economic downturns or newly emerging crisis may adversely affect the financial situation of customers. Delayed payments and defaults on receivables as a result of this can burden the earnings. The same effect might occur if the foreign exchange regulations become stricter for individual countries. KSB counters this by means of a strict receivables management system and intensive customer contacts.

As regards tax matters, the global orientation of the activities of the KSB Group must be taken into consideration. Based on its operative activities in numerous countries with varying tax laws and administrative interpretation, differentiated assessment is required for measuring tax obligations of every jurisdiction. Uncertainty could arise due to different factual interpretations by taxable entities on the one hand and local finance authorities on the other, as well as due to unclear legislative texts. These may come to light during audits. By cooperating closely with external local tax specialists, KSB counteracts the risk of having to pay back taxes. As KSB continually monitors unclear issues, it can generally classify the probability of occurrence. Should a need for subsequent payment arise, the corresponding tax liabilities are recognised in good time. In the Notes to the consolidated financial statements, KSB also reports contingent liabilities of € 1.1 million (previous year: € 0.2 million) from risks associated with income taxes. Of this amount, € 0 million is attributable to KSB SE & Co. KGaA, as in the previous year. € 13.4 million (previous year: € 13.2 million) are reported as contingent liabilities for risks from other tax matters. Of this amount, € 0 million is attributable to KSB SE & Co. KGaA, as in the previous year.

{86}------------------------------------------------

and collateral provided by customers are structured in such a way that they at least cover the costs incurred. KSB reports contingent liabilities of € 1.8 million (previous year: € 5.1 million) for risks that result from warranty obligations and contractual penalties risks and that were not covered by corresponding provisions. Of this amount, € 0 million is attributable to KSB SE & Co. KGaA, as in the previous year. Beyond this KSB sees no material residual risk (net risk).

The Group's international focus is associated with exchange rate risks. Besides the euro, the most important currencies for KSB are the US dollar, the Indian rupee, the Brazilian real and the Chinese yuan. The liquidity risk arising from foreign currency transactions is hedged by using derivative financial instruments. The hedges are based on fixed contracts and on forecasts about future payment streams, the occurrence of

Economic downturns or newly emerging crisis may adversely affect the financial situation of customers. Delayed payments and defaults on receivables as a result of this can burden the earnings. The same effect might occur if the foreign exchange regulations become stricter for individual countries. KSB counters this by means of a strict receivables management

As regards tax matters, the global orientation of the activities of the KSB Group must be taken into consideration. Based on its operative activities in numerous countries with varying tax laws and administrative interpretation, differentiated assessment is required for measuring tax obligations of every jurisdiction. Uncertainty could arise due to different factual interpretations by taxable entities on the one hand and local finance authorities on the other, as well as due to unclear legislative texts. These may come to light during audits. By cooperating closely with external local tax specialists, KSB counteracts the risk of having to pay back taxes. As KSB continually monitors unclear issues, it can generally classify the probability of occurrence. Should a need for subsequent payment arise, the corresponding tax liabilities are recognised in good time. In the Notes to the consolidated financial statements, KSB also reports contingent liabilities of € 1.1 million (previous year: € 0.2 million) from risks associated with income taxes. Of this amount, € 0 million is attributable to KSB SE & Co. KGaA, as in the previous year. € 13.4 million (previous year: € 13.2 million) are reported as contingent liabilities for risks from other tax matters. Of this amount, € 0 million is attributable to

system and intensive customer contacts.

KSB SE & Co. KGaA, as in the previous year.

**Finance / Liquidity** 

which is uncertain.

in the Report on Expected Developments. Risks for the Group's business arising from high inflation rates have eased considerable but they continue to exist. The Group manages the risk of fluctuations in the economy and in demand by remaining active in several markets and industries with different economic cycles. Furthermore KSB monitors the development of the economic environment for its markets. If necessary, capacities are adjusted, production facilities relo-

**86** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

Other risks arise in particular through current geopolitical uncertainty resulting from trade conflicts and numerous global flashpoints. KSB classifies in particular the further development of the conflicts in Ukraine and in the Middle East as a risk with regard to duration and potential escalation, as it is currently not possible to estimate the effects on the global economy and thus on the Group's business activities and further escalation cannot be ruled out. To make use of potential opportunities arising from strategic mergers or acquisitions, KSB continuously monitors the current market situation as well as forecast developments. This allows it to expand market shares or tap into new areas of application.

Regular market analysis and monitoring, together with continuous quality management, generally minimise the risk that products will become technically obsolete, are offered at prices not acceptable in the market or that developments on

In KSB's business, there are special requirements when it comes to the processing of technically complex large-scale projects with long contract terms. These typically involve potential risks. There may be cost overruns, tighter import and export regulations or sanctions, staff shortages, technical difficulties or quality problems – including potential contractual penalties – that reduce the margins. KSB therefore continuously trains its employees in project management and equips them with specialist knowledge. This is designed to enable them to identify the risks associated with longer-term orders at an early stage. In addition, project managers are provided with appropriate management tools. Decisions are made in conjunction with clearly structured authorisation processes. Furthermore, there is central monitoring of projects exposed

There are also technical and financial risks to orders with newly designed products. Technical risks are limited to the extent that intermediate steps for development work are defined and partial solutions are subjected to assessments. Commercial risks are minimised by using appropriate contractual clauses. KSB's goal is to ensure that advance payments

cated and cost-cutting measures implemented.

**Projects / Products** 

the markets are missed.

to risk across all KSB companies.

KSB Group / Annual Report 2023

#### **Procurement**

Commodity prices and procurement times are subject to strong market-related fluctuations. An increase in costs for raw materials and components can have a negative impact on the earnings situation if the cost increases cannot be compensated for or passed on to customers. Ineffective supply chains, defined by supply bottlenecks and capacity restrictions, can lead to production bottlenecks and delays in delivery, and adversely affect KSB's business activities. In its procurement strategy KSB seeks to prevent dependencies on suppliers and thereby counter any bottlenecks and delays. If local conditions mean that it is impossible to ensure sufficient diversification in this regard, KSB will make use of additional foreign business partners.

#### **Technology / Research and Development**

It is essential to future success to have a product and service range that is suited to the market in terms of technology, price and delivery time. The changing needs of customers together with new standards and regulations – especially in promising markets – require the continuous development and improvement of products and services. The research and development required for adjustments consumes significant financial and human resources, with no guarantee of success in either the medium or the long term.

To avoid any negative impact on earnings, it is important to recognise the market-related or technical risks early on. To this end, the KSB Group is constantly updating the development process, which incorporates various control levels. As sales employees are regularly included in this process, risks arising from changes in markets or applications can be taken into account in good time in the evaluation.

#### **Environmental, Social and Governance (ESG)**

**25** 

ESG – short for Environmental, Social and Governance – refers to a comprehensive set of standards covering environmental, social and governance aspects for assessing the Group's sustainable and ethical activities. KSB's business activities, primarily in the area of production, are subject to numerous environmental protection laws and regulations. Environmental damage of any kind (for example, groundwater contamination, renovation needed due to outdated construction materials or unpleasant odours arising from the use of chemicals) may result in costs not covered by insurance policies. Therefore, at all company sites officers monitor compliance with laws and regulations as well as with internal KSB rules. If KSB discovers any contamination, it sets aside provisions to be able to meet obligations for necessary remediation.

In markets with tightening environmental regulations, there is a risk that KSB products and its in-house or purchased services might give rise to infringements and that the necessary authorisation for the relevant business might be lost and KSB's reputation might be damaged as a result. Legal requirements or restrictions related to products, such as RoHS (Restriction of Certain Hazardous Substances according to EU Directive 2011/65/EU), may lead to a restriction or – in a worst-case scenario – to a ban on selling individual products containing hazardous substances. KSB categorises this risk, which was identified for the first time in the reporting year, as material and is monitoring the current legal situations closely. Identified risks are addressed by continually adjusting the product design in order to be able to offer products that comply with market requirements. A change in rules on liability in environmental protection can also increase the risks for business success. As a member of national and international professional associations the KSB Group becomes aware of imminent changes in environmental law early on. The legal frameworks that are in place in its Operational Units are continually updated, enabling KSB to ensure that its employees always abide by the applicable law. This is monitored by external auditors as part of the management certifications.

In addition, KSB is exposed to risks from climate and natural hazards. In a first step, KSB evaluates its sites with regard to these risks, which include earthquakes, flooding, lightning strikes and wildfires. The occurrence of these risks would lead to disruptions in ongoing business operations at the respective sites. Sites identified to be exposed to risks based on this evaluation are examined in greater detail in relation to risks from climate and natural hazards, in order to develop and implement individual solutions. Basically KSB counters risks from climate and natural hazards by means of a differentiated production network. This facilitates a flexible response to breakdowns at production sites.

Investments in plant and machinery are made on the basis of resource efficiency and environmental and health protection in order to optimise energy costs throughout the entire use phase as well as to prevent any follow-on costs incurred through damage to the environment and/or to health.

To achieve its growth and profitability business objectives, KSB needs qualified employees at all locations, including technical specialists. Due to the demographic change in some countries, the competition for these and other highly skilled professionals is increasing, KSB counters this risk with demand-oriented measures, systematic human resources planning and international recruitment programmes.

{87}------------------------------------------------

**27** 

Other potential risks associated with the activities of KSB's employees include dishonest conduct or violations of laws, which could damage the image of KSB. The KSB Group counters these risks and safeguards its reputation among customers by organising regular compliance training and through individual initiatives in critical regions.

Legal disputes cannot always be avoided within the framework of business activities. These risks are usually disputes arising from operative business, generally involving unclear warranty issues or labour law disputes. In some cases, the continuous further and new development of products can lead to similarities with competitors' products. KSB limits the risk of resulting legal dispute by submitting patent applications at an early stage of the product development. If as a result of these issues KSB expects negative effects on the success of its business with a probability of occurrence of more than 50 %, corresponding provisions are set aside, which cover not only the anticipated amount of loss, but also the costs of proceedings.

In addition, KSB reports contingent liabilities in the amount of € 2.3 million (previous year: € 3.1 million) in the Notes to the consolidated financial statements, € 1.0 million of this is attributable to KSB SE & Co. KGaA (previous year: € 2.0 million).

KSB seeks to counter external fraud activities by raising awareness of its employees and through internal controls. At the same time, KSB continues to develop its compliance organisation. Maintaining its competitive advantage and protecting trade and business secrets is of considerable economic significance to the company. The company responds with specific requirements on conduct to take into account the different protection needs.

#### **Other business-specific opportunities and risks – Information technology**

The worldwide increase in threats to IT security and cyber crime entail a risk in terms of the security of systems and networks, as well as the confidentiality and availability of data. KSB plans to further expand IT security in the years ahead as part of a multi-year programme to continuously extend the protection of the IT systems.

The digitalisation of processes helps to make them transparent. KSB uses a process mining tool for this purpose. This innovative approach specifically demonstrates the company processes and identifies any weaknesses and where there is room for improvement. This forms the basis for the continuous development of the internal workflows from start to end of a process.

#### **Strategic opportunities and risks**

Strategic risks are uncertainties and threats arising from strategic decisions and the business environment, which can adversely affect a company's long-term performance and competitiveness. They are closely linked with a company's long-term objectives, orientation and success. Strategic risks typically arise from the complexity and dynamics of the business environment. The occurrence of such risks can be farreaching and impact a company's long-term growth, profitability and image, among other things. It is therefore crucial to recognise and evaluate strategic risks in order to take appropriate measures. The strategic risks presented here are longterm in nature and therefore mainly affect time horizons that extend beyond the following financial year.

As was already described in the Environmental, Social and Governance (ESG) section, tighter environmental regulations, which will only come into force in a few years' time, can have negative implications for KSB's business. To counter such risks in good time, relevant measures are defined to identify and subsequently eliminate any violations.

If the continuous monitoring of the current market situation and forecast developments lead to acquisition plans, there is always a risk that these will fail before a contract is concluded. This can result in a loss of planned income within the scope of strategic planning.

Long-term opportunities stem from the fact that hydrogen is playing an increasingly important role in reducing CO2 as a climate-neutral energy source. KSB participates in this technological trend by providing products for use in hydrogen production and storage. This offers opportunities for the Energy Market Area.

{88}------------------------------------------------

Other potential risks associated with the activities of KSB's employees include dishonest conduct or violations of laws, which could damage the image of KSB. The KSB Group counters these risks and safeguards its reputation among customers by organising regular compliance training and through

**88** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**Strategic opportunities and risks** 

extend beyond the following financial year.

subsequently eliminate any violations.

strategic planning.

Energy Market Area.

Strategic risks are uncertainties and threats arising from strategic decisions and the business environment, which can adversely affect a company's long-term performance and competitiveness. They are closely linked with a company's long-term objectives, orientation and success. Strategic risks typically arise from the complexity and dynamics of the business environment. The occurrence of such risks can be farreaching and impact a company's long-term growth, profitability and image, among other things. It is therefore crucial to recognise and evaluate strategic risks in order to take appropriate measures. The strategic risks presented here are longterm in nature and therefore mainly affect time horizons that

As was already described in the Environmental, Social and Governance (ESG) section, tighter environmental regulations, which will only come into force in a few years' time, can have negative implications for KSB's business. To counter such risks in good time, relevant measures are defined to identify and

If the continuous monitoring of the current market situation and forecast developments lead to acquisition plans, there is always a risk that these will fail before a contract is concluded. This can result in a loss of planned income within the scope of

Long-term opportunities stem from the fact that hydrogen is playing an increasingly important role in reducing CO2 as a climate-neutral energy source. KSB participates in this technological trend by providing products for use in hydrogen production and storage. This offers opportunities for the

Legal disputes cannot always be avoided within the framework of business activities. These risks are usually disputes arising from operative business, generally involving unclear warranty issues or labour law disputes. In some cases, the continuous further and new development of products can lead to similarities with competitors' products. KSB limits the risk of resulting legal dispute by submitting patent applications at an early stage of the product development. If as a result of these issues KSB expects negative effects on the success of its business with a probability of occurrence of more than 50 %, corresponding provisions are set aside, which cover not only the anticipated amount of loss, but also the costs of

In addition, KSB reports contingent liabilities in the amount of € 2.3 million (previous year: € 3.1 million) in the Notes to the consolidated financial statements, € 1.0 million of this is attributable to KSB SE & Co. KGaA (previous year: € 2.0

KSB seeks to counter external fraud activities by raising awareness of its employees and through internal controls. At the same time, KSB continues to develop its compliance organisation. Maintaining its competitive advantage and protecting trade and business secrets is of considerable economic significance to the company. The company responds with specific requirements on conduct to take into account the

**Other business-specific opportunities and risks –** 

extend the protection of the IT systems.

The worldwide increase in threats to IT security and cyber crime entail a risk in terms of the security of systems and networks, as well as the confidentiality and availability of data. KSB plans to further expand IT security in the years ahead as part of a multi-year programme to continuously

The digitalisation of processes helps to make them transparent. KSB uses a process mining tool for this purpose. This innovative approach specifically demonstrates the company processes and identifies any weaknesses and where there is room for improvement. This forms the basis for the continuous development of the internal workflows from start to end

individual initiatives in critical regions.

proceedings.

million).

different protection needs.

**Information technology** 

of a process.

KSB Group / Annual Report 2023

#### **RISK REPORT ON THE UTILISATION OF FINANCIAL INSTRUMENTS**

Central Finance Management in the KSB Group performs its duties within the framework of the guidelines laid down by KSB Management SE as the legal representative. The KSB Group bases the nature and scope of all financial transactions exclusively on the requirements of its business. It does not lend itself to business of a speculative nature. The aim is to ensure liquidity at all times and to finance activities under optimal conditions. In export business transactions, foreign exchange and credit risks are hedged. KSB continuously improves its receivables management methods with the goal of settling outstanding amounts by their due dates.

KSB is exposed to the following financial risks as a consequence of its business activities.

KSB is exposed to credit risk, which is defined as potential default or delays in the receipt of contractually agreed payments. KSB is also exposed to liquidity risk which is the risk that an entity will be unable to meet its financial obligations, or will be unable to meet them in full. In addition, KSB is exposed to market price risk. Exchange rate or interest rate changes may adversely affect the economic position of the Group. Risks from fluctuations in the prices of financial instruments are not material.

Foreign exchange hedges are used to reduce the risks from transactions involving different currencies. These are generally currency forwards, which KSB uses both for transactions that have already been recognised and for future cash flows from orders still to be processed. At year end, the notional volume of currency forwards used to hedge exchange rate risks totalled € 249.9 million (previous year: € 224.0 million). € 179.9 million of this is attributable to KSB SE & Co. KGaA (previous year: € 160.2 million). The hedged currency risk is mainly in US dollars. A global network of production sites in the local sales markets reduces potential currency risks.

All these risks are limited through an appropriate risk management system, defining how these risks are addressed through guidelines and work instructions. In addition, the current risk characteristics are continuously monitored and the information obtained in this way is provided to the Managing Directors and the Supervisory Board in the form of standardised reports and individual analyses.

For more information on the three risk areas and the impact on the balance sheet, see the Notes, Section VI. Additional Disclosures on Financial Instruments.

**27** 

#### **OVERALL ASSESSMENT OF OPPORTUNITIES AND RISKS**

The assessment of the KSB Group's overall opportunity and risk situation is summarised in a consolidated appraisal. Compared with the previous year, there was no material change in the overall risk situation for KSB, which is essentially measured in terms of value at risk.

More stringent legal requirements to be met by the materials used in products in order to lower the environmental impact represent the primary risk for the KSB Group. Risks also arise from the future development of current flashpoints, such as Russia's war of aggression against Ukraine and the conflict in the Middle East. The risk of rising prices of commodities and materials, which was still considered one of the biggest risks at the end of the previous year, has become much less significant due to price adjustments and better availability.

The risk management system in place as well as the related organisational measures allow KSB Management SE as the legal representative to identify risks in a timely manner and to take adequate measures. The focus of activities in 2024 will be on the material risks described above. On the basis of the risk management system established by the KSB Group, and taking into account the regulatory requirements (IDW PS 340 n. F.), the legal representative states that at the present time, according to the analysis of the KSB Group's overall risk position and risk-bearing capacity, no threat has been identified to business continuity.

{89}------------------------------------------------

# <span id="page-89-0"></span>**Balance Sheet**

#### **Assets**

| € thousands                                | 31 Dec. 2023 | 31 Dec. 2022 |
|--------------------------------------------|--------------|--------------|
| Fixed assets                               |              |              |
| Intangible assets                          | 38,437       | 38,276       |
| Property, plant and equipment              | 175,660      | 157,067      |
| Financial assets                           | 346,053      | 337,838      |
|                                            | 560,150      | 533,181      |
| Current assets                             |              |              |
| Inventories                                | 283,330      | 300,754      |
| Advances received from customers           | -68,142      | -88,664      |
|                                            | 215,188      | 212,090      |
| Receivables and other assets               | 339,293      | 362,283      |
| Cash and balances with credit institutions | 102,868      | 34,704       |
|                                            | 442,161      | 396,987      |
| Prepaid expenses                           | 4,258        | 3,970        |
|                                            | 1,221,757    | 1,146,228    |

#### **Equity and liabilities**

| € thousands                      | 31 Dec. 2023 | 31 Dec. 2022 |
|----------------------------------|--------------|--------------|
| Equity                           |              |              |
| Subscribed capital               | 44,772       | 44,772       |
| Capital reserve                  | 66,663       | 66,663       |
| Revenue reserves                 | 136,180      | 136,180      |
| Net retained profits             | 88,641       | 73,637       |
|                                  | 336,257      | 321,253      |
| Provisions                       |              |              |
| Pensions and similar obligations | 517,464      | 504,498      |
| Miscellaneous other provisions   | 128,524      | 111,046      |
|                                  | 645,987      | 615,544      |
| Liabilities                      |              |              |
| Deferred income                  | –            | 1,260        |
|                                  | 1,221,757    | 1,146,228    |

{90}------------------------------------------------

**Disclosures Relating to KSB SE & Co. KGaA (HGB)** 

**90** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**€ thousands 31 Dec. 2023 31 Dec. 2022** 

Intangible assets 38,437 38,276 Property, plant and equipment 175,660 157,067 Financial assets 346,053 337.838

Inventories 283,330 300,754 Advances received from customers −68,142 −88,664

Receivables and other assets 339,293 362,283

Cash and balances with credit institutions 102,868 34,704

**Prepaid expenses 4,258 3,970** 

**€ thousands 31 Dec. 2023 31 Dec. 2022** 

Subscribed capital 44,772 44,772 Capital reserve 66,663 66,663 Revenue reserves 136,180 136,180 Net retained profits 88,641 73,637

Pensions and similar obligations 517,464 504,498 Miscellaneous other provisions 128,524 111,046

**Liabilities 239,513 208,171**  Deferred income – 1,260

**Balance Sheet** 

**Assets** 

**Fixed assets** 

**Current assets** 

**Equity and liabilities** 

**Equity** 

**Provisions** 

KSB Group / Annual Report 2023

# **Income Statement**

#### **Income statement**

**29** 

**560,150 533,181** 

**215,188 212,090** 

**442,161 396,987** 

**1,221,757 1,146,228** 

**336,257 321,253** 

**645,987 615,544** 

**1,221,757 1,146,228** 

| € thousands                             | 2023     | 2022     |
|-----------------------------------------|----------|----------|
| Sales revenue                           | 996,306  | 899,583  |
| Changes in inventories                  | -16,118  | 18,012   |
| Work performed and capitalised          | 1,683    | 1,244    |
| Total output of operations              | 981,871  | 918,839  |
| Other operating income                  | 22,558   | 33,322   |
| Cost of materials                       | -418,203 | -414,807 |
| Staff costs                             | -379,718 | -368,642 |
| Depreciation and amortisation expense   | -21,163  | -20,056  |
| Other operating expenses                | -191,097 | -163,544 |
|                                         | -5,752   | -14,887  |
| Income from equity investments          | 61,613   | 93,320   |
| Other finance income / expense          | 1,791    | -16,863  |
|                                         | 63,404   | 76,457   |
| Taxes on income                         | -6,889   | -5,910   |
| Earnings after taxes                    | 50,763   | 55,660   |
| Other taxes                             | -1,383   | -1,715   |
| Net profit / loss for the year          | 49,380   | 53,945   |
| Profit / loss carried forward           | 39,262   | 19,692   |
| Appropriation to other revenue reserves | –        | –        |
| Net retained earnings                   | 88,641   | 73,637   |

{91}------------------------------------------------

#### **Business Model**

KSB SE & Co. KGaA, as the parent, directly or indirectly holds the shares in the companies belonging to the KSB Group. The KSB Group is managed via KSB SE & Co. KGaA, which is at the same time the Group's largest operative company. The central administrative offices are located at the company's seat (registered office) in Frankenthal; branch operations are located in Bremen, Halle and Pegnitz.

KSB SE & Co. KGaA is associated via control and profit transfer agreements with the following German service companies: KSB Service GmbH, Frankenthal, KSB Service GmbH, Schwedt, Uder Elektromechanik GmbH, Friedrichsthal, Dynamik-Pumpen GmbH, Stuhr, PMS BERCHEM GmbH, Neuss, Pumpen Service Bentz GmbH, Reinbek, and KAGEMA Industrieausrüstungen GmbH, Pattensen. These companies are therefore under single management by KSB SE & Co. KGaA. Their annual earnings are transferred to KSB SE & Co. KGaA.

The annual financial statements of KSB SE & Co. KGaA have been prepared in accordance with the provisions of the Handelsgesetzbuch (HGB) [German Commercial Code] and the Aktiengesetz (AktG) [German Public Companies Act] including the German principles of proper accounting.

Differences between the accounting methods under HGB and the International Financial Reporting Standards (IFRSs), which are the basis of preparation for the consolidated financial statements of KSB, arise primarily from the recognition over time of revenue from customer contracts under IFRS 15, in the calculation of pension provisions, from the recognition of leases under IFRS 16 and in the capitalisation of deferred taxes. Furthermore, differences arise in the recognition of assets and liabilities and of income statement items; under HGB there is expanded scope for the recognition of sales revenue.

## **Business Development and Results of Operations**

The 2023 financial year was defined by global political tensions due to the ongoing war in Ukraine, the China-Taiwan conflict and the outbreak of war in the Gaza region as a result of the attack on Israel. High interest rates led to uncertainty and a decrease in investment. In Germany, the manufacturing industry continued to be challenged by higher gas prices. At the same time, the situation on the procurement markets eased somewhat with regard to price and availability of bought-in parts.

In Europe, inflation and general uncertainty led to a noticeable slowdown in demand, particularly in the standard business.

Thanks to the company's global and broad positioning across several market areas, economic downturns were offset by positive developments.

Sales revenue and EBIT under IFRS were significantly higher than in the previous year. Order intake remained largely unchanged. The key performance indicators – order intake, EBIT and sales revenue under IFRS – are, as described in the Control System section, the material financial performance indicators, which are also used for controlling KSB SE & Co. KGaA.

#### **ORDER INTAKE**

The volume of orders received by KSB SE & Co. KGaA rose by € 5.7 million to € 863.8 million in the reporting year, an increase of 0.7 %. Despite the economic slowdown, which led to a weaker second half of the year, KSB SE Co. KGaA's diversification across numerous regions and markets helped keep the order intake at a high level.

#### **SALES REVENUE**

At € 996.3 million, total sales revenue under HGB was up € 96.7 million on the prior-year figure of € 899.6 million.

The disclosures below refer only to sales revenue from the sale of pumps, valves and spare parts as well as services. Sales revenue of € 916.3 million generated in the 2023 financial year represents a year-on-year increase of € 87.5 million (10.6 %).

70.0 % of sales revenue relates to new business with Pumps, 9.4 % to new business with Valves, and 20.6 % to KSB SupremeServ which comprises all the service and spare parts business. The breakdown of sales revenue is broadly similar to that of the previous year.

Under IFRS, sales revenue rose from € 796.0 million in the previous year to € 884.4 million. This is attributable to improved business in the Standard Markets and higher sales revenue from large-scale projects.

{92}------------------------------------------------

**Business Model** 

Handelsgesetzbuch

of sales revenue.

KSB Group / Annual Report 2023

Aktiengesetz

the

located in Bremen, Halle and Pegnitz.

KSB SE & Co. KGaA, as the parent, directly or indirectly holds the shares in the companies belonging to the KSB Group. The KSB Group is managed via KSB SE & Co. KGaA, which is at the same time the Group's largest operative company. The central administrative offices are located at the company's seat (registered office) in Frankenthal; branch operations are

KSB SE & Co. KGaA is associated via control and profit transfer agreements with the following German service companies: KSB Service GmbH, Frankenthal, KSB Service GmbH, Schwedt, Uder Elektromechanik GmbH, Friedrichsthal, Dynamik-Pumpen GmbH, Stuhr, PMS BERCHEM GmbH, Neuss, Pumpen Service Bentz GmbH, Reinbek, and KAGEMA Industrieausrüstungen GmbH, Pattensen. These companies are therefore under single management by KSB SE & Co. KGaA. Their annual earnings are transferred to KSB SE & Co. KGaA.

The annual financial statements of KSB SE & Co. KGaA have been prepared in accordance with the provisions of the

Differences between the accounting methods under HGB and the International Financial Reporting Standards (IFRSs), which are the basis of preparation for the consolidated financial statements of KSB, arise primarily from the recognition over time of revenue from customer contracts under IFRS 15, in the calculation of pension provisions, from the recognition of leases under IFRS 16 and in the capitalisation of deferred taxes. Furthermore, differences arise in the recognition of assets and liabilities and of income statement items; under HGB there is expanded scope for the recognition

The 2023 financial year was defined by global political tensions due to the ongoing war in Ukraine, the China-Taiwan conflict and the outbreak of war in the Gaza region as a result of the attack on Israel. High interest rates led to uncertainty and a decrease in investment. In Germany, the manufacturing industry continued to be challenged by higher gas prices. At the same time, the situation on the procurement markets eased

including the German principles of proper accounting.

**Business Development and** 

**Results of Operations** 

(HGB) [German Commercial Code] and

(AktG) [German Public Companies Act]

**31** 

somewhat with regard to price and availability of bought-in

In Europe, inflation and general uncertainty led to a noticeable slowdown in demand, particularly in the standard business.

Thanks to the company's global and broad positioning across several market areas, economic downturns were offset by

Sales revenue and EBIT under IFRS were significantly higher than in the previous year. Order intake remained largely unchanged. The key performance indicators – order intake, EBIT and sales revenue under IFRS – are, as described in the Control System section, the material financial performance indicators, which are also used for controlling KSB SE & Co.

The volume of orders received by KSB SE & Co. KGaA rose by € 5.7 million to € 863.8 million in the reporting year, an increase of 0.7 %. Despite the economic slowdown, which led to a weaker second half of the year, KSB SE Co. KGaA's diversification across numerous regions and markets helped

At € 996.3 million, total sales revenue under HGB was up € 96.7 million on the prior-year figure of € 899.6 million.

The disclosures below refer only to sales revenue from the sale of pumps, valves and spare parts as well as services. Sales revenue of € 916.3 million generated in the 2023 financial year represents a year-on-year increase of € 87.5 million (10.6 %).

70.0 % of sales revenue relates to new business with Pumps, 9.4 % to new business with Valves, and 20.6 % to KSB SupremeServ which comprises all the service and spare parts business. The breakdown of sales revenue is broadly similar to

Under IFRS, sales revenue rose from € 796.0 million in the previous year to € 884.4 million. This is attributable to improved business in the Standard Markets and higher sales

parts.

**92** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

KGaA.

**ORDER INTAKE** 

**SALES REVENUE** 

that of the previous year.

revenue from large-scale projects.

keep the order intake at a high level.

positive developments.

#### **INCOME AND EXPENSES**

Other operating income declined from € 33.3 million to € 22.6 million. This decline was mainly due to lower currency translation gains.

At € 418.2 million, the cost of materials was almost unchanged from the prior-year level of € 414.8 million. The cost of materials as a percentage of total output of operations fell from 45.1 % in the previous year to 42.6 % in the reporting year. This is due in particular to procurement costs, some of which were slightly lower.

Staff costs increased in absolute terms by € 11.1 million to € 379.7 million. Higher wages and salaries due to the collectively agreed pay adjustment as from June 2023 as well as provisions for profit bonuses and the collectively agreed, one-off payment of the inflation compensation bonus had an impact here. At 38.7%, staff costs as a percentage of total output of operations were down on the previous year's figure of 40.1 %.

Other operating expenses of € 191.1 million showed a marked increase after € 163.5 million in the previous year. In addition to a general increase in costs, additions to provisions for warranties and penalties (€ 16.5 million) and expenses for maintenance of buildings and machinery (€ 4.9 million) contributed significantly to this increase. Expenses from exchange rate losses showed a contrary trend.

Overall, the income from equity investments, at € 61.6 million, was well below the prior-year level (€ 93.3 million). In the 2022 financial year, income of € 37.6 million from the spin-off of the operational business activities at KSB Finanz S.A., Luxembourg, and subsequent integration into KSB SE & Co. KGaA, had been reported under this item. The item includes profit transfers from the German service companies of € 19.0 million (previous year: € 14.6 million) and dividend income from affiliates and equity investments of € 42.7 million.

#### **NET PROFIT / LOSS FOR THE YEAR UNDER HGB**

Operating earnings improved from - € 14.9 million to - € 5.8 million, especially due to the significantly improved total output of operations. Lower finance income / expense had an opposite effect; in the previous year, it included income from the spin-off of the operational business activities at KSB Finanz S.A., Luxembourg, and subsequent integration into KSB SE & Co. KGaA. As a result, KSB SE & Co. KGaA generated a net profit for the year of € 49.4 million in the 2023 financial year; this compares with a net profit of € 53.9 million in the previous year.

#### **EARNINGS BEFORE FINANCE INCOME / EXPENSE AND INCOME TAX (EBIT) UNDER IFRS**

The EBIT determined in accordance with IFRS improved significantly to € 4.1 million in the 2023 financial year (previous year: € - 6.0 million). The increase in total output of operations at almost constant cost of materials was higher than the offsetting increases in staff costs and other operating expenses.

#### **Financial Position and Net Assets**

#### **FINANCIAL POSITION**

KSB SE & Co. KGaA is embedded within central financial management at the KSB Group. The latter works within the framework of the guidelines laid down by KSB Management SE as the legal representative and bases the nature and scope of all financial transactions exclusively on the requirements of the business. The objective of financial management is to guarantee liquidity at all times and to ensure the financing of activities on optimum terms. In financing export transactions, KSB SE & Co. KGaA hedges foreign exchange and credit risks. KSB continuously improves its receivables management methods with the goal of settling outstanding amounts by their due dates.

#### **LIABILITIES AND PROVISIONS**

The largest liabilities item, as in the previous year, was pension provisions, which had grown by € 13.0 million to € 517.5 million on the reporting date. Other expenses, at € 128.5 million, were significantly higher than in the previous year (€ 111.0 million). This was due to additions to provisions for warranties.

{93}------------------------------------------------

**33** 

Of liabilities totalling € 239.5 million (previous year: € 208.2 million), € 68.5 million was accounted for by trade payables at year end (previous year: € 71.5 million). Liabilities towards affiliates and equity investments increased significantly from € 128.4 million in the previous year to € 162.4 million. They include € 132.7 million (previous year: € 100.2 million) for intercompany loans and cash investments.

#### **NET ASSETS**

Total assets, at € 1,221.8 million, are up 6.6% on the prioryear level of € 1,146.2 million. The cash and balances with credit institutions item posted an increase. An increase in fixed assets was also recorded. This was offset by almost constant inventories and lower receivables.

In the reporting year, fixed assets made up 45.8 % (previous year: 46.5 %) of total assets. The share accounted for by current assets was 54.2 % after 53.5 % in 2022. Inventories including advance payments received totalled € 215.2 million after € 212.1 million in the previous year.

#### **EQUITY**

The share capital of KSB SE & Co. KGaA remained at € 44.8 million. The capital reserve was unchanged at € 66.7 million. At year end, € 136.2 million (previous year: € 136.2 million) was assigned to other revenue reserves. Out of the 2022 net retained earnings of € 73.6 million, dividends totalling € 34.4 million (dividend of € 19.50 per ordinary share and € 19.76 per preference share) were distributed by resolution of the Annual General Meeting on 4 May 2023. The remaining amount of € 39.3 million was carried forward to new account.

## **Summary of the Performance in the Financial Year**

The forecasts made at the beginning of the year were partly exceeded due to the global economic development. Order intake was comparable to the previous year. The forecast tangible decrease due to fewer large-scale orders has not materialised. The expectations for considerable growth in sales revenue under IFRS were met, with higher revenue achieved in the Standard Markets. EBIT under IFRS was expected to remain stable at the level of the previous year. However, a strong increase in EBIT was recorded, the reasons for which were explained in more detail in the "Earnings before finance income / expense and income tax (EBIT) under IFRS" subsection.

#### **Opportunities and Risks**

The business performance of KSB SE & Co. KGaA depends significantly on the risks and opportunities faced by the KSB Group, which are set out in detail in the Report on Expected Developments and the Opportunities and Risks Report in the Combined Management Report. KSB SE & Co. KGaA generally shares in the risks of its equity investments and subsidiaries in line with its equity interest.

{94}------------------------------------------------

Of liabilities totalling € 239.5 million (previous year: € 208.2 million), € 68.5 million was accounted for by trade payables at year end (previous year: € 71.5 million). Liabilities towards affiliates and equity investments increased significantly from € 128.4 million in the previous year to € 162.4 million. They include € 132.7 million (previous year: € 100.2 million) for

**94** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**Summary of the Performance** 

The forecasts made at the beginning of the year were partly exceeded due to the global economic development. Order intake was comparable to the previous year. The forecast tangible decrease due to fewer large-scale orders has not materialised. The expectations for considerable growth in sales revenue under IFRS were met, with higher revenue achieved in the Standard Markets. EBIT under IFRS was expected to remain stable at the level of the previous year. However, a strong increase in EBIT was recorded, the reasons for which were explained in more detail in the "Earnings before finance income / expense and income tax (EBIT) under IFRS" sub-

The business performance of KSB SE & Co. KGaA depends significantly on the risks and opportunities faced by the KSB Group, which are set out in detail in the Report on Expected Developments and the Opportunities and Risks Report in the Combined Management Report. KSB SE & Co. KGaA generally shares in the risks of its equity investments and

of

**in the Financial Year** 

**Opportunities and Risks** 

subsidiaries in line with its equity interest.

section.

Total assets, at € 1,221.8 million, are up 6.6 % on the prioryear level of € 1,146.2 million. The cash and balances with credit institutions item posted an increase. An increase in fixed assets was also recorded. This was offset by almost constant

In the reporting year, fixed assets made up 45.8 % (previous year: 46.5 %) of total assets. The share accounted for by current assets was 54.2 % after 53.5 % in 2022. Inventories including advance payments received totalled € 215.2 million

The share capital of KSB SE & Co. KGaA remained at € 44.8 million. The capital reserve was unchanged at € 66.7 million. At year end, € 136.2 million (previous year: € 136.2 million) was assigned to other revenue reserves. Out of the 2022 net retained earnings of € 73.6 million, dividends totalling € 34.4 million (dividend of € 19.50 per ordinary share and € 19.76 per preference share) were distributed by resolution of the Annual General Meeting on 4 May 2023. The remaining amount of € 39.3 million was carried forward to new account.

intercompany loans and cash investments.

inventories and lower receivables.

after € 212.1 million in the previous year.

**NET ASSETS** 

**EQUITY** 

KSB Group / Annual Report 2023

**33** 

#### **Report on Expected Developments**

In its current forecast for global economic growth, the International Monetary Fund (IMF) most recently anticipated an increase of 3.1 % in real terms for 2024, which equates to the prior-year growth rate. The slowdown was due to the restrictive monetary policy measures, which resulted in higher interest rates to curb inflation. The medium-term outlook for economic growth remains the lowest seen in decades. Inflation is expected to fall further, which should lead to a reduction in interest rates in the current year.

While the downside risks to this forecast still prevail, they have diminished in view of the resilience of the global economy recently observed. Looking ahead to 2024, inflation risks and the risks of a financial crisis and associated recession risks, in particular, eased over the course of the past year. Geopolitical risks have increased at the same time. Besides current regional conflicts and intensification of the mutual decoupling between the USA and China, the war in Gaza heightened the risk of escalation in the Middle East. Further risks to global economic growth include economic developments in China and its government's approach to addressing the property crisis, as well as possible turbulence on the commodities markets. The latter could be triggered by geopolitical escalation or extreme climatic conditions.

The IMF is projecting an overall growth rate of + 4.1% for the emerging markets and developing countries.

The expected growth in the industrialised nations, at + 1.5% in 2024, is lower than in 2023.

Growth in the euro zone will pick up only slightly to + 0.9%. For Germany, the most recent forecast was for growth of + 0.5%.

Given the weakening of global economic growth, the growth in demand for capital goods is expected to be lower. The VDMA expects global machinery sales revenue to stagnate at 0 % in real terms. An increase is anticipated at the largest production facilities in Asia, which should offset the decline in the other regions. In China, sales revenue is expected to grow by + 2 %. A decline of – 2 % is expected for the USA. The VDMA forecast for Germany is also for – 2%.

For manufacturers of liquid pumps in Germany, VDMA foresees a below-average growth of + 0 % in nominal terms in the current year. It predicts a decline of – 1 % for industrial valves. Sales revenue from building services valves is expected to fall by – 2 % in nominal terms.

Overall, KSB SE & Co. KGaA foresees moderate to tangible growth in sales revenue in the 2024 financial year. Sales revenue growth will be supported especially by growth in the Standard Markets and in large-scale projects. Rising orders in the standard business will result in a moderate increase in the order intake of KSB SE Co. KGaA. EBIT under IFRS will rise significantly to sharply compared with the 2023 financial year.

The forecast horizon for the above-mentioned information and statements is the 2024 financial year.

The forecast may be influenced in particular by the continuing geopolitical tensions.

{95}------------------------------------------------

# <span id="page-95-0"></span>**Acquisition-related Disclosures**

A summary of the acquisition-related disclosures required by Sections 289a and 315a HGB [Handelsgesetzbuch – German Commercial Code] is given below and explanatory information is provided pursuant to Section 176(1) AktG [Aktiengesetz – German Public Companies Act].

The share capital of KSB SE & Co. KGaA (the company) amounts to € 44.8 million, of which € 22.7 million is represented by 886,615 no-par-value ordinary shares and € 22.1 million by 864,712 no-par-value preference shares. Each no-par-value share represents an equal notional amount of the share capital. All shares are bearer shares. They are listed for trading on the regulated market and are traded in the Prime Standard segment of the Frankfurt Stock Exchange.

Each ordinary share entitles the holder to one vote at KSB SE & Co. KGaA's Annual General Meeting. Johannes und Jacob Klein GmbH, Frankenthal, holds approximately 84 % of the ordinary shares; the KSB Stiftung [KSB Foundation], Stuttgart, holds the majority of the shares of Johannes und Jacob Klein GmbH. The preference shares carry separate cumulative preferred dividend rights and progressive additional dividend rights. Detailed information on the share capital and shareholders holding an interest of more than 10 % is provided in the Notes to the consolidated financial statements. Holders of preference shares are entitled to voting rights only in the cases prescribed by law. The issue of additional ordinary shares does not require the consent of the preference shareholders. Similarly, the issue of additional preference shares does not require the consent of the preference shareholders provided that the subscription rights do not exclude newly issued senior or pari passu preference shares.

The company is authorised by a resolution passed at the Annual General Meeting on 13 May 2020 to acquire during the period up to (and including) 12 May 2025, for any permitted purpose, ordinary and/or preference shares of the company up to a total of 10 % of the share capital of KSB SE & Co. KGaA existing at the time the resolution is adopted or – if this value is lower – at the time the authorisation is exercised. The general partner shall be entitled to use treasury shares acquired in such a way for any permitted purpose, including but not limited to the following: (1) The acquired treasury shares may be redeemed without the redemption or its execution requiring any further resolution by the Annual General Meeting. The general partner may also determine that the share capital remains unchanged by the redemption and that, instead, the portion of share capital that the remaining shares represent is increased pursuant to Section 8(3) AktG. (2) The acquired treasury shares may also be sold in ways other than over the stock exchange or by way of an offer to all shareholders if the shares are sold for cash at a price that is not materially lower than the stock exchange price of the company's shares of the same type and with the same features at the time of the sale. However, this authorisation shall only apply subject to the proviso that the shares sold to the exclusion of the pre-emptive right pursuant to Section 186(3), sentence 4 AktG shall not exceed a total pro-rata amount of 10 % of the share capital, either at the time this authorisation enters into effect or at the time it is exercised. Any shares issued from authorised capital during the term of this authorisation to the exclusion of the pre-emptive right pursuant to Sections 203(2), sentence 2, and 186(3), sentence 4 AktG shall be counted towards this limit. In addition, shares to be issued to service bonds and/or participation rights with conversion or option rights or a conversion or option obligation shall also count towards this limit if the bonds and/or participation rights are issued during the term of this authorisation to the exclusion of the pre-emptive right in corresponding application of Section 186(3), sentence 4 AktG. (3) The acquired treasury shares may be sold for a contribution in kind, in particular for the acquisition of companies, parts of companies or interests in companies. (4), Finally, the acquired treasury shares may be used to fulfil conversion or option rights that were granted by the company or a domestic or foreign enterprise in which the company directly or indirectly holds a majority of the votes and capital when issuing bonds and/or participation rights, or to fulfil conversion or option obligations from bonds and/or participation rights issued by the company or a domestic or foreign enterprise in which the company directly or indirectly holds a majority of the votes and capital.

The above-mentioned authorisations (1) to (4) on the use of shares of the Company acquired on the basis of previous authorisation resolutions in accordance with Section 71(1) No. 8 AktG or another legal basis, and of such shares acquired by controlled enterprises or enterprises in which the Company holds a majority ownership interest, or pursuant to Section 71d, sentence 5 AktG. The authorisations may be exercised once or several times, in whole or in part, individually or jointly, and also by controlled enterprises or enterprises in which KSB SE & Co. KGaA holds a majority ownership interest, or by third parties acting for their account or for the account of the company.

{96}------------------------------------------------

**Acquisition-related Disclosures**

Handelsgesetzbuch

– German

**96** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

Aktien-

and capital.

account of the company.

the remaining shares represent is increased pursuant to Section 8(3) AktG. (2) The acquired treasury shares may also be sold in ways other than over the stock exchange or by way of an offer to all shareholders if the shares are sold for cash at a price that is not materially lower than the stock exchange price of the company's shares of the same type and with the same features at the time of the sale. However, this authorisation shall only apply subject to the proviso that the shares sold to the exclusion of the pre-emptive right pursuant to Section 186(3), sentence 4 AktG shall not exceed a total pro-rata amount of 10 % of the share capital, either at the time this authorisation enters into effect or at the time it is exercised. Any shares issued from authorised capital during the term of this authorisation to the exclusion of the pre-emptive right pursuant to Sections 203(2), sentence 2, and 186(3), sentence 4 AktG shall be counted towards this limit. In addition, shares to be issued to service bonds and/or participation rights with conversion or option rights or a conversion or option obligation shall also count towards this limit if the bonds and/or participation rights are issued during the term of this authorisation to the exclusion of the pre-emptive right in corresponding application of Section 186(3), sentence 4 AktG. (3) The acquired treasury shares may be sold for a contribution in kind, in particular for the acquisition of companies, parts of companies or interests in companies. (4), Finally, the acquired treasury shares may be used to fulfil conversion or option rights that were granted by the company or a domestic or foreign enterprise in which the company directly or indirectly holds a majority of the votes and capital when issuing bonds and/or participation rights, or to fulfil conversion or option obligations from bonds and/or participation rights issued by the company or a domestic or foreign enterprise in which the company directly or indirectly holds a majority of the votes

The above-mentioned authorisations (1) to (4) on the use of shares of the Company acquired on the basis of previous authorisation resolutions in accordance with Section 71(1) No. 8 AktG or another legal basis, and of such shares acquired by controlled enterprises or enterprises in which the Company holds a majority ownership interest, or pursuant to Section 71d, sentence 5 AktG. The authorisations may be exercised once or several times, in whole or in part, individually or jointly, and also by controlled enterprises or enterprises in which KSB SE & Co. KGaA holds a majority ownership interest, or by third parties acting for their account or for the

A summary of the acquisition-related disclosures required by

Commercial Code] is given below and explanatory information is provided pursuant to Section 176(1) AktG [

The share capital of KSB SE & Co. KGaA (the company) amounts to € 44.8 million, of which € 22.7 million is represented by 886,615 no-par-value ordinary shares and € 22.1 million by 864,712 no-par-value preference shares. Each no-par-value share represents an equal notional amount of the share capital. All shares are bearer shares. They are listed for trading on the regulated market and are traded in the Prime Standard segment of the Frankfurt Stock Exchange.

Each ordinary share entitles the holder to one vote at KSB SE & Co. KGaA's Annual General Meeting. Johannes und Jacob Klein GmbH, Frankenthal, holds approximately 84 % of the ordinary shares; the KSB Stiftung [KSB Foundation], Stuttgart, holds the majority of the shares of Johannes und Jacob Klein GmbH. The preference shares carry separate cumulative preferred dividend rights and progressive additional dividend rights. Detailed information on the share capital and shareholders holding an interest of more than 10 % is provided in the Notes to the consolidated financial statements. Holders of preference shares are entitled to voting rights only in the cases prescribed by law. The issue of additional ordinary shares does not require the consent of the preference shareholders. Similarly, the issue of additional preference shares does not require the consent of the preference shareholders provided that the subscription rights do not exclude newly issued senior or pari passu preference shares.

The company is authorised by a resolution passed at the Annual General Meeting on 13 May 2020 to acquire during the period up to (and including) 12 May 2025, for any permitted purpose, ordinary and/or preference shares of the company up to a total of 10 % of the share capital of KSB SE & Co. KGaA existing at the time the resolution is adopted or – if this value is lower – at the time the authorisation is exercised. The general partner shall be entitled to use treasury shares acquired in such a way for any permitted purpose, including but not limited to the following: (1) The acquired treasury shares may be redeemed without the redemption or its execution requiring any further resolution by the Annual General Meeting. The general partner may also determine that the share capital remains unchanged by the redemption and that, instead, the portion of share capital that

– German Public Companies Act].

Sections 289a and 315a HGB [

gesetz

**35** 

Where treasury shares are used in accordance with the aforementioned authorisations (2) to (4), the pre-emptive right of the shareholders to these treasury shares is excluded. In addition, the general partner shall, in the event of an offer for treasury shares to the shareholders, be authorised to grant to the creditors of bonds and/or participation rights with conversion or option rights or a conversion or option obligation issued by the company or a domestic or foreign enterprise in which the company directly or indirectly holds a majority of the votes and capital, a pre-emptive right to shares to the extent to which they would be entitled after exercising the conversion or option right or after fulfilling a conversion or option obligation. To this extent, the shareholders' preemptive right to such treasury shares shall also be excluded.

The company has not yet made use of this authorisation to purchase treasury shares.

There are no resolutions by the Annual General Meeting authorising the company's individually liable general partner to increase the share capital (authorised capital).

The company's business is managed by KSB Management SE, which is supervised by the Administrative Board and acts through the Managing Directors.

Amendments to the company's Articles of Association are resolved by the Annual General Meeting. If the amendments only affect the wording of the Articles of Association, they can be made by the Supervisory Board, which operates and is formed in accordance with the regulations of the Mitbestimmungsgesetz [German Co-determination Act].

{97}------------------------------------------------

**37** 

**37** 

# <span id="page-97-0"></span>**Corporate Governance Statement (Section 315d HGB in Conjunction with Section 289f HGB)**

The Corporate Governance Statement pursuant to Section 315d HGB in conjunction with Section 289f HGB [Handelsgesetzbuch – German Commercial Code] dated 11 March 2024 is accessible to the public at www.ksb.com > Investor Relations > Corporate Governance / Statement and Report. The Corporate Governance Statement contains the content specified in Section 298f HGB, including the Statement of Compliance in accordance with Section 161 AktG, as well as the relevant information on corporate governance practices applied at KSB SE & Co. KGaA that go above and beyond statutory requirements. Also described are in particular the working methods of KSB Management SE as the general partner and of the Supervisory Board, and the composition and working methods of the committees of the Supervisory Board.

{98}------------------------------------------------

**Corporate Governance Statement** 

**Corporate Governance Statement** 

**98** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**(Section 315d HGB in Conjunction** 

**(Section 315d HGB in Conjunction** 

– German Commercial Code] dated

– German Commercial Code] dated

**with Section289f HGB)**

**with Section289f HGB)**

[

[

Handelsgesetzbuch

Handelsgesetzbuch

Supervisory Board.

Supervisory Board.

The Corporate Governance Statement pursuant to Section 315d HGB in conjunction with Section 289f HGB

The Corporate Governance Statement pursuant to Section 315d HGB in conjunction with Section 289f HGB

11 March 2024 is accessible to the public at www.ksb.com > Investor Relations > Corporate Governance / Statement and Report. The Corporate Governance Statement contains the content specified in Section 298f HGB, including the Statement of Compliance in accordance with Section 161 AktG, as well as the relevant information on corporate governance practices applied at KSB SE & Co. KGaA that go above and beyond statutory requirements. Also described are in particular the working methods of KSB Management SE as the general partner and of the Supervisory Board, and the composition and working methods of the committees of the

11 March 2024 is accessible to the public at www.ksb.com > Investor Relations > Corporate Governance / Statement and Report. The Corporate Governance Statement contains the content specified in Section 298f HGB, including the Statement of Compliance in accordance with Section 161 AktG, as well as the relevant information on corporate governance practices applied at KSB SE & Co. KGaA that go above and beyond statutory requirements. Also described are in particular the working methods of KSB Management SE as the general partner and of the Supervisory Board, and the composition and working methods of the committees of the

**37** 

**37** 

# <span id="page-98-0"></span>**Statement on the Non-financial Report (Section 315c in Conjunction with Sections 289c to 289e HGB)**

The combined separate non-financial report is prepared in accordance with Section 315c in conjunction with Sections 289b to 289e HGB [Handelsgesetzbuch – German Commercial Code] and disclosed together with the combined management report in accordance with Section 325 HGB. The report can be viewed at: www.ksb.com/non-financial-report. Under the same address the assurance report for the combined separate non-financial report is also disclosed.

{99}------------------------------------------------

#### <span id="page-99-0"></span>**Description of Key Features of the Internal Control System, the Risk Management System and the Compliance Management System in Accordance with the A.5 DCGK 2022\* Recommendation Description of Key Features of the Internal Control System, the Risk Management System and the Compliance Management System in Accordance with the A.5 DCGK 2022\* Recommendation**

KSB has an internal control system, a risk management system and a compliance management system, which are important elements of corporate governance.

The accounting-related internal control system comprises

KSB has an internal control system, a risk management

The accounting-related internal control system comprises principles, processes and measures aimed at ensuring the correctness and reliability of the accounting system. This system ensures, for example, that reliable accountingrelated information is complete and provided in a timely manner.

Further information on characteristics of the accountingrelated internal control system is provided in the Opportunities and Risks Report under Internal Control System and Risk Management System with Regard to the Group Accounting Process.

Controls are also in place in the operative business

Further information on characteristics of the accounting-

Controls are also in place in the operative business processes of the Corporate Functions and KSB's decentralised units for handling the risks involved in the business activities. A comprehensive internal control system is set up at KSB by conceptually integrating the accountingrelated internal control system with the current elements of an internal control system in the operative business processes beyond accounting.

Risk management is the most important instrument the

Risk management is the most important instrument the Managing Directors of KSB have to ensure that all negative and positive developments are reported to them systematically and in a timely manner, and that appropriate measures can be implemented. In addition, risk management is critical for reporting about the risks and developments that could threaten the continued existence of KSB. Group risk management therefore comprises all the organisational rules and methods for recognising and managing risks / opportunities that arise in relation to Corporate Functions and decentralised units, and from markets and business activities. KSB's risk management is oriented on the basic elements of IDW PS 981 published by the German Institute of Public Auditors.

Further information on characteristics of the risk management system is provided in the Opportunities and Risks Report under Risk Management System.

Further information on characteristics of the risk

Compliance in terms of implementing measures to ensure observance of applicable law and internal guidelines by Group units is one of the key management tasks of the general partner, which in this regard also acts through its Managing Directors. The requirement for professional and honest conduct is expressed within the Group-wide Code of Conduct.

Some fundamental statements contained in the Code of

Compliance in terms of implementing measures to ensure

Some fundamental statements contained in the Code of Conduct are addressed in more detail in other, separate directives and guidelines. This particularly applies to the areas of anti-trust or cartel law and anti-corruption measures. The applicable laws and regulations are explained in greater detail and useful information on proper conduct in concrete situations is provided. The latter equally applies to the Insider Directive, which deals with the ban on insider trading and handling of inside information. Further compliance sub-areas that are material to the company (such as data privacy and protection, export control, money laundering prevention) are assigned to the specific specialist departments for processing.

All material structures and processes of the compliance management system, including handling of violations, are compiled in the Compliance Manual which is available to the employees. In the case of proven violations, consistent sanctions are imposed based on a "zero tolerance" policy.

All material structures and processes of the compliance

the general partner, acting through its Managing Responsibility for the compliance organisation lies with Directors, who are monitored by the Supervisory Board the general partner, acting through its Managing (Audit Committee) in this regard. Directors, who are monitored by the Supervisory Board (Audit Committee) in this regard.

Responsibility for the compliance organisation lies with

The compliance organisation is structured as follows: The compliance organisation is structured as follows:

- Group Compliance Office Group Compliance Office
- Local Compliance Offices Local Compliance Offices
- Compliance Committee Compliance Committee
- Ombudsperson Ombudsperson

**39** 

{100}------------------------------------------------

**39** 

**39** 

\* Disclosures unrelated to the management report that are excluded from the factual review of the management report by the auditors

\* Disclosures unrelated to the management report that are excluded from the factual review of the management report by the auditors

**Description of Key Features of the Internal Control** 

**Description of Key Features of the Internal Control** 

Code of Conduct.

Code of Conduct.

Compliance in terms of implementing measures to ensure observance of applicable law and internal guidelines by Group units is one of the key management tasks of the general partner, which in this regard also acts through its Managing Directors. The requirement for professional and honest conduct is expressed within the Group-wide

Compliance in terms of implementing measures to ensure observance of applicable law and internal guidelines by Group units is one of the key management tasks of the general partner, which in this regard also acts through its Managing Directors. The requirement for professional and honest conduct is expressed within the Group-wide

Some fundamental statements contained in the Code of Conduct are addressed in more detail in other, separate directives and guidelines. This particularly applies to the areas of anti-trust or cartel law and anti-corruption measures. The applicable laws and regulations are explained in greater detail and useful information on proper conduct in concrete situations is provided. The latter equally applies to the Insider Directive, which deals with the ban on insider trading and handling of inside information. Further compliance sub-areas that are material to the company (such as data privacy and protection, export control, money laundering prevention) are assigned to the

Some fundamental statements contained in the Code of Conduct are addressed in more detail in other, separate directives and guidelines. This particularly applies to the areas of anti-trust or cartel law and anti-corruption measures. The applicable laws and regulations are explained in greater detail and useful information on proper conduct in concrete situations is provided. The latter equally applies to the Insider Directive, which deals with the ban on insider trading and handling of inside information. Further compliance sub-areas that are material to the company (such as data privacy and protection, export control, money laundering prevention) are assigned to the

specific specialist departments for processing.

specific specialist departments for processing.

(Audit Committee) in this regard.

(Audit Committee) in this regard.

Group Compliance Office

Group Compliance Office

Local Compliance Offices

Compliance Committee

Compliance Committee

Local Compliance Offices

Ombudsperson

Ombudsperson

All material structures and processes of the compliance management system, including handling of violations, are compiled in the Compliance Manual which is available to the employees. In the case of proven violations, consistent sanctions are imposed based on a "zero tolerance" policy.

All material structures and processes of the compliance management system, including handling of violations, are compiled in the Compliance Manual which is available to the employees. In the case of proven violations, consistent sanctions are imposed based on a "zero tolerance" policy.

Responsibility for the compliance organisation lies with the general partner, acting through its Managing Directors, who are monitored by the Supervisory Board

Responsibility for the compliance organisation lies with the general partner, acting through its Managing Directors, who are monitored by the Supervisory Board

The compliance organisation is structured as follows:

The compliance organisation is structured as follows:

**System, the Risk Management System and the** 

**System, the Risk Management System and the** 

**Compliance Management System** 

**Compliance Management System** 

**Recommendation** 

**Recommendation** 

important elements of corporate governance.

important elements of corporate governance.

manner.

manner.

Accounting Process.

Accounting Process.

processes beyond accounting.

processes beyond accounting.

KSB has an internal control system, a risk management system and a compliance management system, which are

KSB has an internal control system, a risk management system and a compliance management system, which are

The accounting-related internal control system comprises principles, processes and measures aimed at ensuring the correctness and reliability of the accounting system. This system ensures, for example, that reliable accountingrelated information is complete and provided in a timely

The accounting-related internal control system comprises principles, processes and measures aimed at ensuring the correctness and reliability of the accounting system. This system ensures, for example, that reliable accountingrelated information is complete and provided in a timely

Further information on characteristics of the accountingrelated internal control system is provided in the Opportunities and Risks Report under Internal Control System and Risk Management System with Regard to the Group

Further information on characteristics of the accountingrelated internal control system is provided in the Opportunities and Risks Report under Internal Control System and Risk Management System with Regard to the Group

Controls are also in place in the operative business processes of the Corporate Functions and KSB's decentralised units for handling the risks involved in the business activities. A comprehensive internal control system is set up at KSB by conceptually integrating the accountingrelated internal control system with the current elements of an internal control system in the operative business

Controls are also in place in the operative business processes of the Corporate Functions and KSB's decentralised units for handling the risks involved in the business activities. A comprehensive internal control system is set up at KSB by conceptually integrating the accountingrelated internal control system with the current elements of an internal control system in the operative business

Risk management is the most important instrument the Managing Directors of KSB have to ensure that all negative and positive developments are reported to them systematically and in a timely manner, and that appropriate measures can be implemented. In addition, risk management is critical for reporting about the risks and developments that could threaten the continued existence of KSB. Group risk management therefore comprises all the organisational rules and methods for recognising and managing risks / opportunities that arise in relation to Corporate Functions and decentralised units, and from markets and business activities. KSB's risk management is oriented on the basic elements of IDW PS 981 published

Risk management is the most important instrument the Managing Directors of KSB have to ensure that all negative and positive developments are reported to them systematically and in a timely manner, and that appropriate measures can be implemented. In addition, risk management is critical for reporting about the risks and developments that could threaten the continued existence of KSB. Group risk management therefore comprises all the organisational rules and methods for recognising and managing risks / opportunities that arise in relation to Corporate Functions and decentralised units, and from markets and business activities. KSB's risk management is oriented on the basic elements of IDW PS 981 published

by the German Institute of Public Auditors.

by the German Institute of Public Auditors.

Risks Report under Risk Management System.

Risks Report under Risk Management System.

KSB Group / Annual Report 2023

Further information on characteristics of the risk management system is provided in the Opportunities and

Further information on characteristics of the risk management system is provided in the Opportunities and

**in Accordance with the A.5 DCGK 2022\*** 

**100** Management and Issues 2023 **Combined Management Report** Consolidated Financial Statements General Information

**in Accordance with the A.5 DCGK 2022\*** 

The Group Compliance Officer (hereinafter also "GCO") heads the Group Compliance Office. In the Group Compliance Office, the GCO is supported by the Regional Compliance Officers. In addition, there are Local Compliance Offices in place throughout the Group in countries in which KSB Group companies have their registered office; they usually consist of the Local Compliance Officer. Where several Local Compliance Officers are appointed in a country, they may be headed by a Country Compliance Officer.

An interdisciplinary Compliance Committee at Group headquarters provides advice on fundamental compliance issues as well as support to the Group Compliance Office in fulfilling its responsibilities.

If employees or third parties become aware of infringements of the KSB Code of Conduct, i.e. in particular violations of laws or company guidelines, they can get in touch with internal contacts or an external ombudsperson with the relevant information, also anonymously if they wish. The ombudsperson will immediately contact the Group Compliance Office with regard to processing such information.

A key focus of compliance activities in 2023 was the renewed analysis of the compliance management system for the areas of anti-corruption and anti-trust / cartel law at central level; such an analysis was last carried out in 2020. The analysis aims to reveal further development potential for existing processes. Support for this was provided by an auditing firm, whose specialists subjected the relevant internal processes to a critical review. Similarly, the specific handling of the aforementioned compliance regulations was analysed at a selected national company, GIW Industries, Inc., USA. The identified potential for improvement and modernisation will be implemented in the current financial year. Another focus was on the implementation of a country-specific risk analysis for specific compliance sub-areas. This served as a preparatory pilot project for a corresponding Groupwide audit, which is planned for the current financial year. In addition, further relevant compliance sub-areas were subject to an annual status control, in some cases also with the help of external support. Compliance training was continued throughout the year for new employees and employees who were transferred internally to relevant functions. The targeted preventive effect of compliance measures is rounded off by the specific review of operative projects for compliance with the regulations.

#### **STATEMENT ON THE APPROPRIATENESS AND EFFECTIVENESS OF THE SYSTEMS IN ACCORDANCE WITH THE A.5 DCGK 2022\* RECOMMENDATION**

The internal control system, the risk management system and the compliance management system are subject to process-integrated and process-independent monitoring. Responsibility for process-integrated monitoring lies with the relevant Corporate Functions and decentralised units. The Internal Audits department is responsible for processindependent monitoring of the systems.

Process-independent monitoring of the internal control system comprises an audit of material controls along selected business processes at the level of Corporate Functions and decentralised units. The basis for this is a risk-oriented audit plan of the Internal Audits department, which is updated annually or as needed in a given situation.

Internal Audits also regularly reviews the risk management system for appropriateness and effectiveness on the basis of relevant standards, such as the DIIR Audit Standard No. 2 – Audit of the Risk Management System by Internal Audits.

Finally, the appropriateness and effectiveness of the compliance management system is also continuously monitored by Internal Audits, mainly in the course of general or special audit measures. For example, the application of compliance regulations in the company is monitored in the form of employee surveys or in-depth analysis of relevant operative projects. In addition, selected parts of the compliance management system occasionally undergo external analyses by auditors, which are based on the requirements of IDW PS 980. The Audit Committee of the Supervisory Board is always involved in these processes and their findings, in particular to facilitate independent monitoring of the compliance management system by the Committee.

The Managing Directors are involved in monitoring the appropriateness and effectiveness of the systems by coordinating the specific key areas for the audit by Internal Audits, commissioning external auditors, managing a Group Compliance Office and maintaining regular dialogue with those responsible for the governance systems, among other things.

Based on the continuous findings from the aforementioned monitoring measures, the Managing Directors have no evidence that would call into question the appropriateness and effectiveness of the compliance management system, the risk management system and the internal control system.

{101}------------------------------------------------

Image /page/101/Picture/3 description: The image shows a large, white number 3 against a solid blue background. The number is stylized with rounded curves and takes up most of the frame.

{102}------------------------------------------------

# <span id="page-102-0"></span>**Consolidated Financial Statements 3**

- 104 [Balance Sheet](#page-103-0)
- 106 [Statement of Comprehensive Income](#page-105-0)
- 108 [Statement of Changes in Equity](#page-107-0)
- [110 Statement of Cash Flows](#page-109-0)
- [111 Notes](#page-110-0)
	- 170 [List of Shareholdings](#page-169-0)
	- 174 [Supervisory Board](#page-173-0)
	- 176 [Legal Representatives](#page-175-0)
	- 178 Proposal on the Appropriation of the
		- [Net Retained Earnings of KSB SE & Co. KGaA](#page-177-0)

**102** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

KSB Group / Annual Report 2023

{103}------------------------------------------------

**1**

# <span id="page-103-0"></span>**Balance Sheet**

**Assets** 

| € thousands                                       | Notes | 31 Dec. 2023 | 31 Dec. 2022 |
|---------------------------------------------------|-------|--------------|--------------|
| Non-current assets                                |       |              |              |
| Intangible assets                                 | 1     | 75,716       | 72,673       |
| Right-of-use assets                               | 2     | 46,939       | 40,220       |
| Property, plant and equipment                     | 3     | 602,166      | 578,512      |
| Non-current financial assets                      | 4     | 1,227        | 1,191        |
| Other non-financial assets                        | 5     | 7,728        | 7,319        |
| Investments accounted for using the equity method | 6     | 24,480       | 20,833       |
| Deferred tax assets                               | 20    | 94,040       | 37,074       |
|                                                   |       | 852,295      | 757,822      |
| Current assets                                    |       |              |              |
| Inventories                                       | 7     | 748,393      | 719,221      |
| Contract assets                                   | 8     | 58,969       | 80,018       |
| Trade receivables                                 | 8     | 554,583      | 579,539      |
| Other financial assets                            | 8     | 70,888       | 71,517       |
| Other non-financial assets                        | 8     | 44,272       | 42,203       |
| Cash and cash equivalents                         | 9     | 340,420      | 228,570      |
|                                                   |       | 1,817,524    | 1,721,069    |
|                                                   |       | 2,669,819    | 2,478,890    |

Further information is provided in the Notes to the consolidated financial statements.

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{104}------------------------------------------------

- -

**Balance Sheet**

**€ thousands Notes 31 Dec. 2023 31 Dec. 2022** 

**104** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

Intangible assets 1 75,716 72,673 Right-of-use assets 2 46,939 40,220 Property, plant and equipment 3 602,166 578,512 Non-current financial assets 4 1,227 1,191 Other non-financial assets 5 7,728 7,319 Investments accounted for using the equity method 6 24,480 20,833 Deferred tax assets 20 94,040 37,074

Inventories 7 748,393 719,221 Contract assets 8 58,969 80,018 Trade receivables 8 554,583 579,539 Other financial assets 8 70,888 71,517 Other non-financial assets 8 44,272 42,203 Cash and cash equivalents 9 340,420 228,570

**Assets** 

**Non-current assets** 

**Current assets** 

KSB Group / Annual Report 2023

Further information is provided in the Notes to the consolidated financial statements.

 Download Excel files of the 2023 tables for the KSB Group

#### **Equity and liabilities**

| € thousands                                              | Notes | 31 Dec. 2023 | 31 Dec. 2022 |
|----------------------------------------------------------|-------|--------------|--------------|
| Equity                                                   | 10    |              |              |
| Subscribed capital                                       |       | 44,772       | 44,772       |
| Capital reserve                                          |       | 66,663       | 66,663       |
| Revenue reserves                                         |       | 888,998      | 804,484      |
| Equity attributable to shareholders of KSB SE & Co. KGaA |       | 1,000,434    | 915,919      |
| Non-controlling interests                                |       | 216,465      | 209,653      |
|                                                          |       | 1,216,899    | 1,125,572    |
| Non-current liabilities                                  |       |              |              |
| Deferred tax liabilities                                 | 20    | 9,857        | 12,010       |
| Provisions for employee benefits *                       | 11    | 496,114      | 451,568      |
| Other provisions *                                       | 12    | 15,703       | 16,715       |
| Financial liabilities                                    | 13    | 28,960       | 24,116       |
|                                                          |       | 550,634      | 504,409      |
| Current liabilities                                      |       |              |              |
| Other provisions *                                       | 12    | 120,781      | 98,999       |
| Financial liabilities                                    | 13    | 26,053       | 26,630       |
| Contract liabilities                                     | 13    | 202,619      | 186,477      |
| Trade payables                                           | 13    | 324,723      | 333,361      |
| Other financial liabilities                              | 13    | 27,659       | 23,921       |
| Other non-financial liabilities                          | 13    | 181,804      | 164,604      |
| Income tax liabilities                                   | 13    | 18,649       | 14,918       |
|                                                          |       | 902,286      | 848,910      |
|                                                          |       | 2,669,819    | 2,478,890    |

\* Compared with the presentation in the 2022 Annual Report the provisions for pensions and similar obligations are now shown as a separate item to increase transparency. Provisions for other employee benefits under IAS 19 are presented in the other provisions item together with provisions under IAS 37. The prior-year values concerned have been restated accordingly.

Further information is provided in the Notes to the consolidated financial statements.

**1**

**852,295 757,822** 

**1,817,524 1,721,069 2,669,819 2,478,890** 

{105}------------------------------------------------

# <span id="page-105-0"></span>**Statement of Comprehensive Income**

#### **Income statement**

| € thousands                                                                | Notes | 2023       | 2022       |
|----------------------------------------------------------------------------|-------|------------|------------|
| Sales revenue                                                              | 14    | 2,818,988  | 2,573,387  |
| Changes in inventories                                                     |       | 24,271     | 99,412     |
| Work performed and capitalised                                             |       | 1,959      | 1,716      |
| Total output of operations                                                 |       | 2,845,217  | 2,674,515  |
| Other income                                                               | 15    | 44,384     | 34,462     |
| Cost of materials                                                          | 16    | −1,153,651 | −1,156,292 |
| Staff costs                                                                | 17    | −960,699   | −901,551   |
| Depreciation and amortisation                                              | 1 – 3 | −88,094    | −90,419    |
| Other expenses                                                             | 18    | −463,257   | −391,612   |
| Earnings before finance income / expense and income tax (EBIT)             |       | 223,902    | 169,103    |
| Finance income                                                             | 19    | 9,382      | 7,461      |
| Finance expense                                                            | 19    | −29,656    | −17,712    |
| Income from / expense to investments accounted for using the equity method | 19    | 5,361      | 1,816      |
| Finance income / expense                                                   |       | −14,913    | −8,435     |
| Earnings before income tax (EBT)                                           |       | 208,989    | 160,668    |
| Taxes on income                                                            | 20    | −32,376    | −33,330    |
| Earnings after income tax                                                  |       | 176,613    | 127,338    |
| Attributable to:                                                           |       |            |            |
| Non-controlling interests                                                  | 21    | 24,318     | 23,689     |
| Shareholders of KSB SE & Co. KGaA                                          |       | 152,295    | 103,649    |
| Diluted and basic earnings per ordinary share (€)                          | 22    | 86,83      | 59,05      |
| Diluted and basic earnings per preference share (€)                        | 22    | 87,09      | 59,31      |

Further information is provided in the Notes to the consolidated financial statements

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{106}------------------------------------------------

# =

**Statement of Comprehensive Income** 

**106** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**€ thousands Notes 2023 2022 Sales revenue 14 2,818,988 2,573,387**  Changes in inventories 24,271 99,412 Work performed and capitalised 1,959 1,716 **Total output of operations 2,845,217 2,674,515**  Other income 15 44,384 34,462 Cost of materials 16 −1,153,651 −1,156,292 Staff costs 17 −960,699 −901,551 Depreciation and amortisation 1 – 3 −88,094 −90,419 Other expenses 18 −463,257 −391,612 **Earnings before finance income / expense and income tax (EBIT) 223,902 169,103**  Finance income 19 9,382 7,461 Finance expense 19 −29,656 −17,712 Income from / expense to investments accounted for using the equity method 19 5,361 1,816 **Finance income / expense −14,913 −8,435 Earnings before income tax (EBT) 208,989 160,668**  Taxes on income 20 −32,376 −33,330 **Earnings after income tax 176,613 127,338** 

Non-controlling interests 21 24,318 23,689 **Shareholders of KSB SE & Co. KGaA 152,295 103,649** 

Diluted and basic earnings per ordinary share (€) 22 86,83 59,05 Diluted and basic earnings per preference share (€) 22 87,09 59,31

**Income statement** 

Attributable to:

KSB Group / Annual Report 2023

Further information is provided in the Notes to the consolidated financial statements

 Download Excel files of the 2023 tables for the KSB Group

**3**

#### **Statement of income and expense recognised in equity**

| € thousands                                                                                                       | Notes | 2023    | 2022    |
|-------------------------------------------------------------------------------------------------------------------|-------|---------|---------|
| Earnings after income tax                                                                                         |       | 176,613 | 127,338 |
| Remeasurement of defined benefit plans                                                                            | 11    | -39,433 | 158,429 |
| Taxes on income                                                                                                   |       | 27,618  | -13,868 |
| Remeasurement of defined benefit plans<br>attributable to investments accounted for using the equity method       |       | 237     | -35     |
| Items not reclassified to profit or loss in subsequent periods                                                    |       | -11,579 | 144,526 |
| Currency translation differences                                                                                  |       | -32,872 | 12,386  |
| Changes in the fair value of financial instruments: Hedging reserve                                               |       | -1,260  | 7,510   |
| Taxes on income: Hedging reserve                                                                                  |       | 415     | -1,925  |
| Changes in the fair value of financial instruments: Hedging cost reserve                                          |       | 802     | -4,225  |
| Taxes on income: Hedging cost reserve                                                                             |       | -119    | 1,168   |
| Expense and income recognised directly in equity<br>relating to investments accounted for using the equity method |       | -498    | 129     |
| Items reclassified to profit or loss in subsequent periods if required                                            |       | -33,532 | 15,043  |
| Other comprehensive income                                                                                        |       | -45,110 | 159,569 |
| Comprehensive income                                                                                              |       | 131,503 | 286,907 |
| Attributable to:                                                                                                  |       |         |         |
| Non-controlling interests                                                                                         |       | 16,146  | 24,072  |
| Shareholders of KSB SE & Co. KGaA                                                                                 |       | 115,357 | 262,835 |

Further information is provided in the Notes to the consolidated financial statements.

{107}------------------------------------------------

# <span id="page-107-0"></span>**Statement of Changes in Equity Eigenkapitalveränderungsrechnung**

| € thousands                 | Subscribed<br>capital of<br>KSB SE & Co.<br>KGaA | Capital reserve<br>of KSB SE & Co.<br>KGaA |
|-----------------------------|--------------------------------------------------|--------------------------------------------|
| 1 Jan. 2022                 | 44,772                                           | 66,663                                     |
| Other comprehensive income  | –                                                | –                                          |
| Earnings after income tax   | –                                                | –                                          |
| Total comprehensive income  | –                                                | –                                          |
| Dividends paid              | –                                                | –                                          |
| Capital increase / decrease | –                                                | –                                          |
| Step acquisitions           | –                                                | –                                          |
| Other                       | –                                                | –                                          |
| 31 Dec. 2022                | 44,772                                           | 66,663                                     |

| € thousands                 | Subscribed<br>capital of<br>KSB SE & Co.<br>KGaA | Capital reserve<br>of KSB SE & Co.<br>KGaA |
|-----------------------------|--------------------------------------------------|--------------------------------------------|
| 1 Jan. 2023                 | 44,772                                           | 66,663                                     |
| Other comprehensive income  | –                                                | –                                          |
| Earnings after income tax   | –                                                | –                                          |
| Total comprehensive income  | –                                                | –                                          |
| Dividends paid              | –                                                | –                                          |
| Capital increase / decrease | –                                                | –                                          |
| Step acquisitions           | –                                                | –                                          |
| Other                       | –                                                | –                                          |
| 31 Dec. 2023                | 44,772                                           | 66,663                                     |

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{108}------------------------------------------------

**Statement of Changes in Equity** 

**Eigenkapitalveränderungsrechnung** 

**Eigenkapitalveränderungsrechnung** 

**108** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**1 Jan. 2022 44,772 66,663** Other comprehensive income – – Earnings after income tax – – **Total comprehensive income – –** Dividends paid – – Capital increase / decrease – – Step acquisitions – – Other – – **31 Dec. 2022 44,772 66,663**

**Stand 01.01.2020 44.772 66.663** Sonstiges Ergebnis – – Ergebnis nach Ertragsteuern – – **Gesamtergebnis – –** Ausschüttungen – – Kapitalerhöhungen / -herabsetzungen – – Sukzessive Erwerbe – – Sonstiges – – **Stand 31.12.2020 44.772 66.663**

**Stand 01.01.2020 44.772 66.663** Sonstiges Ergebnis – – Ergebnis nach Ertragsteuern – – **Gesamtergebnis – –** Ausschüttungen – – Kapitalerhöhungen / -herabsetzungen – – Sukzessive Erwerbe – – Sonstiges – – **Stand 31.12.2020 44.772 66.663**

KSB Konzern / Geschäftsbericht 2021 **Konzernabschluss 5**

KSB Konzern / Geschäftsbericht 2021 **Konzernabschluss 5**

**1 Jan. 2023 44,772 66,663** Other comprehensive income – – Earnings after income tax – – **Total comprehensive income – –** Dividends paid – – Capital increase / decrease – – Step acquisitions – – Other – – **31 Dec. 2023 44,772 66,663**

**Stand 01.01.2021 44.772 66.663** Sonstiges Ergebnis – – Ergebnis nach Ertragsteuern – – **Gesamtergebnis – –** Ausschüttungen – – Kapitalerhöhungen / -herabsetzungen – – Sukzessive Erwerbe – – Sonstiges – – **Stand 31.12.2021 44.772 66.663**

**Stand 01.01.2021 44.772 66.663** Sonstiges Ergebnis – – Ergebnis nach Ertragsteuern – – **Gesamtergebnis – –** Ausschüttungen – – Kapitalerhöhungen / -herabsetzungen – – Sukzessive Erwerbe – – Sonstiges – – **Stand 31.12.2021 44.772 66.663**

**€ thousands** 

**in T€**

**in T€**

**€ thousands** 

KSB Group / Annual Report 2023

 Download Excel files of the 2023 tables for the KSB Group

**in T€**

**in T€**

**5**

**Subscribed capital of KSB SE & Co. KGaA** 

**Gezeichnetes Kapital der KSB SE & Co. KGaA** 

**Subscribed capital of KSB SE & Co. KGaA** 

**Gezeichnetes Kapital der KSB SE & Co. KGaA** 

**Capital reserve of KSB SE & Co. KGaA** 

**Gezeichnetes Kapital der KSB SE & Co. KGaA** 

**Kapitalrücklage der KSB SE & Co.** 

**KGaA** 

**KGaA** 

**Kapitalrücklage der KSB SE & Co.** 

**Capital reserve of KSB SE & Co. KGaA** 

**Gezeichnetes Kapital der KSB SE & Co. KGaA** 

**Kapitalrücklage der KSB SE & Co.** 

**KGaA** 

**KGaA** 

**Kapitalrücklage der KSB SE & Co.** 

|  | Other<br>revenue<br>reserves | Currency<br>translation<br>differences | Changes in<br>the fair value<br>of financial<br>instruments:<br>Hedging reserve | Changes in<br>the fair value<br>of financial<br>instruments:<br>Hedging cost<br>reserve | Remeasurement<br>of defined<br>benefit plans | Equity<br>attributable to<br>shareholders of<br>KSB SE & Co.<br>KGaA | Non-controlling<br>interests | Total<br>Equity |
|--|------------------------------|----------------------------------------|---------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|----------------------------------------------|----------------------------------------------------------------------|------------------------------|-----------------|
|  | 953,330                      | -124,168                               | -4,539                                                                          | 2,227                                                                                   | -263,534                                     | 674,751                                                              | 194,372                      | 869,123         |
|  | –                            | 11,843                                 | 5,585                                                                           | -3,057                                                                                  | 144,815                                      | 159,186                                                              | 383                          | 159,569         |
|  | 103,649                      | –                                      | –                                                                               | –                                                                                       | –                                            | 103,649                                                              | 23,689                       | 127,338         |
|  | 103,649                      | 11,843                                 | 5,585                                                                           | -3,057                                                                                  | 144,815                                      | 262,835                                                              | 24,072                       | 286,907         |
|  | -21,241                      | –                                      | –                                                                               | –                                                                                       | –                                            | -21,241                                                              | -8,791                       | -30,032         |
|  | –                            | –                                      | –                                                                               | –                                                                                       | –                                            | –                                                                    | –                            | –               |
|  | –                            | –                                      | –                                                                               | –                                                                                       | –                                            | –                                                                    | –                            | –               |
|  | –                            | –                                      | –                                                                               | –                                                                                       | –                                            | –                                                                    | –                            | –               |
|  | -426                         | –                                      | 38                                                                              | –                                                                                       | -38                                          | -426                                                                 | –                            | -426            |
|  | 1,035,312                    | -112,325                               | 1,084                                                                           | -830                                                                                    | -118,757                                     | 915,919                                                              | 209,653                      | 1,125,572       |

#### **Other comprehensive income Other comprehensive income**

| Other<br>revenue<br>reserves | Currency<br>translation<br>differences | Changes in<br>the fair value<br>of financial<br>instruments:<br>Hedging reserve | Changes in<br>the fair value<br>of financial<br>instruments:<br>Hedging cost<br>reserve | Remeasurement<br>of defined<br>benefit plans | Equity<br>attributable to<br>shareholders of<br>KSB SE & Co.<br>KGaA | Non-controlling<br>interests | Total<br>Equity |
|------------------------------|----------------------------------------|---------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|----------------------------------------------|----------------------------------------------------------------------|------------------------------|-----------------|
| 1,035,312                    | −112,325                               | 1,084                                                                           | −830                                                                                    | −118,757                                     | 915,919                                                              | 209,653                      | 1,125,572       |
| –                            | −24,938                                | −845                                                                            | 684                                                                                     | −11,839                                      | −36,938                                                              | −8,172                       | −45,110         |
| 152,295                      | –                                      | –                                                                               | –                                                                                       | –                                            | 152,295                                                              | 24,318                       | 176,613         |
| 152,295                      | −24,938                                | −845                                                                            | 684                                                                                     | −11,839                                      | 115,357                                                              | 16,146                       | 131,503         |
| −34,376                      | –                                      | –                                                                               | –                                                                                       | –                                            | −34,376                                                              | −6,311                       | −40,687         |
| –                            | –                                      | –                                                                               | –                                                                                       | –                                            | –                                                                    | –                            | –               |
| –                            | –                                      | –                                                                               | –                                                                                       | –                                            | –                                                                    | –                            | –               |
| –                            | –                                      | –                                                                               | –                                                                                       | –                                            | –                                                                    | –                            | –               |
| 3,534                        | –                                      | –                                                                               | –                                                                                       | –                                            | 3,534                                                                | −3,022                       | 512             |
| 1,156,764                    | −137,263                               | 239                                                                             | −146                                                                                    | −130,596                                     | 1,000,434                                                            | 216,465                      | 1,216,899       |

**Revenue reserves** 

**Revenue reserves** 

**6** 

{109}------------------------------------------------

# <span id="page-109-0"></span>**Statement of Cash Flows**

| € thousands                                                                               | 2023     | 2022     |
|-------------------------------------------------------------------------------------------|----------|----------|
| Earnings after income tax                                                                 | 176,613  | 127,338  |
| Taxes on income                                                                           | 32,376   | 33,330   |
| Finance income                                                                            | -9,382   | -7,461   |
| Financial expense                                                                         | 29,656   | 17,712   |
| Depreciation and amortisation                                                             | 88,094   | 90,419   |
| Gain / loss on disposal of intangible assets and property, plant and equipment            | 153      | -305     |
| Change in inventories                                                                     | -59,122  | -192,562 |
| Change in contract assets                                                                 | 20,694   | -1,071   |
| Change in trade receivables                                                               | 12,617   | -103,366 |
| Change in provisions                                                                      | 9,394    | -13,957  |
| Change in contract liabilities                                                            | 26,510   | 31,688   |
| Change in trade liabilities                                                               | -2,375   | 58,786   |
| Change in other assets and liabilities                                                    | 12,836   | 987      |
| Income tax paid                                                                           | -65,058  | -45,789  |
| Interest received                                                                         | 7,298    | 6,360    |
| <b>Cash flows from operating activities</b>                                               | 280,304  | 2,109    |
| Proceeds from disposal of intangible assets and property, plant and equipment             | 2,098    | 2,457    |
| Payments to acquire intangible assets and property, plant and equipment                   | -106,461 | -102,393 |
| Sale of subsidiaries and other operations less cash and cash equivalents sold             | -908     | –        |
| Proceeds from deposits with an original maturity of more than 3 months                    | 9,674    | 13,763   |
| Payments for deposits with an original maturity of more than 3 months                     | -5,720   | -2,608   |
| Proceeds from investments in Group companies that are not fully consolidated              | 294      | 475      |
| Payments for investments in Group companies that are not fully consolidated               | -2,997   | -992     |
| Proceeds from dividends from Group companies that are not fully consolidated              | 823      | 882      |
| Payments for capitalisation measures with Group companies that are not fully consolidated | -339     | -621     |
| <b>Cash flows from investing activities</b>                                               | -103,536 | -89,037  |
| Dividends paid to shareholders of KSB SE & Co. KGaA                                       | -34,376  | -21,241  |
| Dividends paid to non-controlling interests                                               | -6,311   | -8,791   |
| Proceeds from financial liabilities                                                       | 9,991    | 13,318   |
| Payments for financial liabilities (not including lease liabilities)                      | -11,674  | -38,169  |
| Repayment of lease liabilities                                                            | -17,771  | -17,091  |
| Interest paid                                                                             | -3,347   | -3,866   |
| <b>Cash flows from financing activities</b>                                               | -63,488  | -75,840  |
| Changes in cash and cash equivalents                                                      | 113,280  | -162,768 |
| Effects of exchange rate changes on cash and cash equivalents                             | -3,001   | 4,252    |
| Effects of changes in consolidated Group                                                  | 1,571    | 403      |
| Cash and cash equivalents at beginning of period                                          | 228,570  | 386,683  |
| Cash and cash equivalents at end of period                                                | 340,420  | 228,570  |

Further information is provided in Section VII. Statement of Cash Flows in the Notes to the consolidated financial statements.

Image /page/109/Picture/5 description: The image shows a blue square with rounded corners. Inside the square is a white outline of a paperclip.

 [Download Excel files of the 2023](https://www.ksb.com/online-report/2023/downloads_en.html#excel)  tables for the KSB Group

{110}------------------------------------------------

**Statement of Cash Flows** 

Further information is provided in Section VII. Statement of Cash Flows in the Notes to the consolidated financial statements.

 Download Excel files of the 2023 tables for the KSB Group

KSB Group / Annual Report 2023

**€ thousands 2023 2022**  Earnings after income tax 176,613 127,338 Taxes on income 32,376 33,330 Finance income −9,382 −7,461 Financial expense 29,656 17,712 Depreciation and amortisation 88,094 90,419 Gain / loss on disposal of intangible assets and property, plant and equipment 153 −305 Change in inventories −59,122 −192,562 Change in contract assets 20,694 −1,071 Change in trade receivables 12,617 −103,366 Change in provisions 9,394 −13,957 Change in contract liabilities 26,510 31,688 Change in trade liabilities −2,375 58,786 Change in other assets and liabilities 12,836 987 Income tax paid −65,058 −45,789 Interest received 7,298 6,360 **Cash flows from operating activities 280,304 2,109**  Proceeds from disposal of intangible assets and property, plant and equipment 2,098 2,457 Payments to acquire intangible assets and property, plant and equipment −106,461 −102,393 Sale of subsidiaries and other operations less cash and cash equivalents sold −908 – Proceeds from deposits with an original maturity of more than 3 months 9,674 13,763 Payments for deposits with an original maturity of more than 3 months −5,720 −2,608 Proceeds from investments in Group companies that are not fully consolidated 294 475 Payments for investments in Group companies that are not fully consolidated −2,997 −992 Proceeds from dividends from Group companies that are not fully consolidated 823 882 Payments for capitalisation measures with Group companies that are not fully consolidated −339 −621 **Cash flows from investing activities −103,536 −89,037** Dividends paid to shareholders of KSB SE & Co. KGaA −34,376 −21,241 Dividends paid to non-controlling interests −6,311 −8,791 Proceeds from financial liabilities 9,991 13,318 Payments for financial liabilities (not including lease liabilities) −11,674 −38,169 Repayment of lease liabilities −17,771 −17,091 Interest paid −3,347 −3,866 **Cash flows from financing activities −63,488 −75,840** Changes in cash and cash equivalents 113,280 −162,768 Effects of exchange rate changes on cash and cash equivalents −3,001 4,252 Effects of changes in consolidated Group 1,571 403 Cash and cash equivalents at beginning of period 228,570 386,683 **Cash and cash equivalents at end of period 340,420 228,570** 

**110** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

# <span id="page-110-0"></span>**Notes**

#### **I. GENERAL INFORMATION AND BASIC PRINCIPLES**

#### **General Information on the Group**

KSB SE & Co. KGaA, Frankenthal / Pfalz, Germany, is a capital market-oriented Kommanditgesellschaft auf Aktien [partnership limited by shares] under the law of the Federal Republic of Germany. The company is registered with the Handelsregister [German Commercial Register] of the Amtsgericht [Local Court] Ludwigshafen am Rhein, registration No. HRB 65657, and has its registered office at Johann-Klein-Straße 9, 67227 Frankenthal / Pfalz, Germany. KSB SE & Co. KGaA was formed from KSB Aktiengesellschaft by entry in the German Commercial Register on 17 January 2018. The general partner is KSB Management SE, a European public limited company. The shares in this company are wholly owned by Klein, Schanzlin & Becker GmbH, Frankenthal / Pfalz. Klein, Schanzlin & Becker GmbH is jointly managed by its two shareholders, the non-profit KSB Stiftung [KSB Foundation], Stuttgart, and the non-profit Kühborth-Stiftung GmbH [Kühborth Foundation], Stuttgart. KSB SE & Co. KGaA and thus the KSB Group are managed via KSB Management SE, which has four Managing Directors and a five-member Administrative Board.

KSB SE & Co. KGaA is the ultimate and immediate parent company whose consolidated financial statements include the single-entity financial statements of KSB SE & Co. KGaA. The consolidated financial statements of KSB SE & Co. KGaA prepared in accordance with International Financial Reporting Standards as adopted by the EU are published in the Bundesanzeiger [German Federal Gazette].

The KSB Group (hereinafter also called "KSB" or the "Group") is a global supplier of high-quality pumps, valves and related systems and also provides a wide range of support services to users of these products. The breakdown of the Group's business activities is based on three Segments: Pumps, Valves and KSB SupremeServ.

**7**

#### **Basis of preparation of the consolidated financial statements**

The accompanying consolidated financial statements of KSB SE & Co. KGaA were prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and the additional requirements of German commercial law under Section 315e(1) HGB [Handelsgesetzbuch – German Commercial Code]. To do so, the Conceptual Framework and all Standards applicable at the reporting date and adopted by the European Commission for use in the EU that are of relevance to the KSB Group as well as the interpretations of the IFRS Interpretations Committee were applied. For the purposes of this document, the term IFRSs includes applicable International Accounting Standards (IASs). The consolidated financial statements of KSB SE & Co. KGaA therefore meet the requirements of the IFRSs as adopted by the EU. The consolidated financial statements were prepared on a going concern basis in accordance with IAS 1.25. On principle, the historical cost is the measurement basis used for the consolidated financial statements, unless Section III. Accounting Policies provides otherwise.

Amounts in this report are generally presented in thousands of euros (€ thousands) using standard commercial rounding rules. Due to rounding, there may be minor differences in the totals and percentages presented in this report.

The financial year of the companies consolidated is the calendar year.

The income statement as part of the statement of comprehensive income has been prepared using the nature of expense method.

All material items of the balance sheet and the income statement are presented separately and explained in these Notes.

{111}------------------------------------------------

**9**

The main accounting policies used to prepare the consolidated financial statements are presented below. The policies described were applied consistently for the reporting periods presented unless stated otherwise.

The consolidated financial statements, the annual financial statements of the parent company and the combined management report are submitted to and published in the Bundesanzeiger.

These consolidated financial statements are released by the Managing Directors of KSB Management SE on 12 March 2024 for approval at the meeting of the Supervisory Board on 20 March 2024.

#### **New accounting principles**

#### **a) Accounting principles applied for the first time in the 2023 financial year**

The new or revised accounting Standards and Interpretations listed below which were adopted for the first time in the reporting year had no or no material impact on the Group's net assets, financial position and results of operations.

#### **b) Accounting principles that have been published but that are not yet mandatory**

The new or revised Accounting Standards and Interpretations listed below were not yet mandatory and were not applied in the 2023 financial year.

As a matter of principle, the new or revised Standards or Interpretations shown in the table have not been adopted early. No or no material effects on our net assets, financial position or results of operations are expected to arise from these amendments.

#### **Accounting principles applied for the first time in the 2023 financial year**

|                                                                                                                                             | First-time<br>adoption<br>in the EU |
|---------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
| Amendments to IAS 1 Presentation of Financial Statements including amendments to<br>IFRS Practice Statement 2 Making Materiality Judgements | 1 Jan. 2023                         |
| Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors                                                         | 1 Jan. 2023                         |
| Amendments to IAS 12 Income Taxes                                                                                                           | 1 Jan. 2023                         |

**Accounting principles that have been published but that are not yet mandatory** 

|                                                          | First-time<br>adoption<br>in the EU |
|----------------------------------------------------------|-------------------------------------|
| Amendments to IFRS 16 Leases                             | 1 Jan. 2024                         |
| Amendments to IAS 1 Presentation of Financial Statements | 1 Jan. 2024                         |

{112}------------------------------------------------

**b) Accounting principles that have been published but that** 

The new or revised Accounting Standards and Interpretations listed below were not yet mandatory and were not applied in

As a matter of principle, the new or revised Standards or Interpretations shown in the table have not been adopted early. No or no material effects on our net assets, financial position or results of operations are expected to arise from

**are not yet mandatory** 

the 2023 financial year.

these amendments.

IFRS Practice Statement 2 Making Materiality Judgements 1 Jan. 2023 Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 1 Jan. 2023 Amendments to IAS 12 Income Taxes 1 Jan. 2023

Amendments to IFRS 16 Leases 1 Jan. 2024 Amendments to IAS 1 Presentation of Financial Statements 1 Jan. 2024

The main accounting policies used to prepare the consolidated financial statements are presented below. The policies described were applied consistently for the reporting periods

**112** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

The consolidated financial statements, the annual financial statements of the parent company and the combined management report are submitted to and published in the

These consolidated financial statements are released by the Managing Directors of KSB Management SE on 12 March 2024 for approval at the meeting of the Supervisory Board on

**a) Accounting principles applied for the first time in the** 

The new or revised accounting Standards and Interpretations listed below which were adopted for the first time in the reporting year had no or no material impact on the Group's net assets, financial position and results of operations.

**Accounting principles applied for the first time in the 2023 financial year** 

Amendments to IAS 1 Presentation of Financial Statements including amendments to

**Accounting principles that have been published but that are not yet mandatory** 

presented unless stated otherwise.

.

Bundesanzeiger

20 March 2024.

**2023 financial year** 

KSB Group / Annual Report 2023

**New accounting principles**

**9**

**First-time adoption in the EU** 

**First-time adoption in the EU** 

#### **II. CONSOLIDATION PRINCIPLES**

#### **Consolidated Group**

As at 31 December 2023, in addition to KSB SE & Co. KGaA, 10 German and 78 foreign companies (previous year: 9 German and 79 foreign companies) were fully consolidated in the consolidated financial statements. A majority interest is held, either directly or indirectly, in the voting power of these subsidiaries which the KSB Group has the option to control under IFRS 10.

Subsidiaries are companies controlled by the Group. The Group controls a company if it is exposed, or has rights, to variable returns from its involvement with the company and has the ability to affect those returns through its power of disposition over the company. The financial statements of subsidiaries are included in the Group's financial statements from the date on which control begins until the date on which control ends. Changes in the investment ratio that do not result in a loss of control are treated as a transaction between shareholders and recognised directly in equity. Such transactions do not result in the recognition of goodwill or the realisation of disposal profits.

The consolidation principles apply accordingly to the five joint ventures and associated companies accounted for using the equity method as at 31 December 2023. Upon the loss of joint control or significant influence any retained interest in the investee is remeasured at fair value through profit or loss.

Associates are companies in which the Group has significant influence but does not have control or joint control over financial and business policy. A joint venture is an agreement through which the Group exercises joint control, in that it has rights to the net assets of the agreement rather than rights to its assets and obligations for its liabilities.

The shares in companies included at-equity are measured at cost of acquisition plus or minus cumulative changes in net assets, with recognised goodwill reported in the carrying amount of the investment.

The Thai company KSB Pumps Co. Ltd., Bangkok, and the Indian company KSB Limited, Pimpri (Pune), are included in the group of fully consolidated affiliates despite the fact that KSB holds a group share of capital of less than 50 %. KSB does, however, have the power to determine their business and financial policies and thus the level of variable returns.

KSB gained control over KSB Limited, Pimpri (Pune), in which KSB owns 40.54 % of the shares, through contractual agreements with other shareholders. These agreements ensure that KSB has the majority of voting rights in management committees and also exercises control over the budget.

Likewise, KSB exercises control over KSB Pumps Co. Ltd., Bangkok, in which it owns 40 % of the shares, through additional agreements which give KSB the majority of voting rights in management committees and control over the budget.

Companies that were not consolidated due to there being no material impact are reported as other investments under noncurrent other financial assets.

{113}------------------------------------------------

#### **Changes in the consolidated Group**

In the 2023 financial year, there were the following changes in the consolidated Group, none of which had a material impact on the Group's assets, financial position and results of operations. Against this background, no further information is provided in this context.

With regard to the subsidiaries of D.P. Industries B.V. based in Alphen aan den Rijn, the Netherlands, there have been changes under company law. On the one hand, former DP Pompen B.V. now trades under the name KSB Manufacturing Netherlands B.V. On the other hand, DP Pumps B.V. initially was renamed Duijvelaar Pompen B.V. and subsequently the previously separate entities KSB B.V., Duijvelaar Installatiebouw B.V. and DP Service B.V. were merged with it.

The acquisition by KSB of all shares in DAG - Dieselanlagen Service GmbH, Oberwaltersdorf, Austria, in the 2023 financial year expands the group of fully consolidated companies.

In addition, KSB Čerpadlá a Armatúry, s.r.o., Bratislava, Slovakia, and TOO "KSB Kazakhstan", Almaty, Kazakhstan, which were previously not consolidated due to immateriality, are now included in the Group financial statements as fully consolidated companies.

The company Vari.Co. GmbH, Karlsruhe, Germany, which was acquired in the reporting year, is not consolidated due to immateriality.

In addition, former KSB FINANZ S.A. based in Echternach, Luxembourg, now trades as KSB FINANZ GmbH based in Frankenthal / Pfalz, Germany, as at the balance sheet date of the reporting year.

A full list of the shareholdings held by the KSB Group is provided at the end of these Notes to the consolidated financial statements.

#### **Consolidation methods**

For the purposes of consolidation, the effects of any intercompany transactions are eliminated in full. Any receivables and liabilities between the consolidated companies are offset against each other, and any unrealised gains and losses recognised in fixed assets and inventories are eliminated. Any revenues from intercompany sales are offset against the corresponding expenses.

Capital consolidation is based on the purchase method of accounting pursuant to IFRS 3. This means that the amortised cost of the parent's shares in the subsidiary is eliminated against the remeasured equity attributable to the parent at the date of acquisition.

Any goodwill created from the application of the purchase method denominated in a currency other than the functional currency of the KSB Group is measured at the relevant current closing rate. Goodwill is reported under intangible assets and tested for impairment at least once a year. If an impairment is identified, an impairment loss is recognised. Any excess of our interest in the fair values of net assets acquired over cost is recognised in profit or loss in the year it occurred.

Those shares of subsidiaries' equity not attributable to KSB SE & Co. KGaA are reported as non-controlling interests. Further explanations on non-controlling interests of other shareholders are included under Notes No. 10. Equity.

#### **Currency translation**

The consolidated financial statements have been prepared in euro (€). Unless otherwise stated, amounts in this report are presented in thousands of euros (€ thousands) using standard commercial rounding rules.

Currency translation is effected on the basis of the functional currency of the consolidated companies. As in the previous year, the functional currency is exclusively the local currency of the company consolidated, as it operates as a financially, economically and organisationally independent entity.

Transactions denominated in foreign currencies are translated at the individual companies at the rate prevailing when the transaction is initially recognised. Monetary assets and liabilities are subsequently measured at the closing rate. Measurement effects are recognised in the income statement.

{114}------------------------------------------------

**Changes in the consolidated Group** 

provided in this context.

consolidated companies.

immateriality.

the reporting year.

statements.

KSB Group / Annual Report 2023

In the 2023 financial year, there were the following changes in the consolidated Group, none of which had a material impact on the Group's assets, financial position and results of operations. Against this background, no further information is

**114** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Consolidation methods** 

corresponding expenses.

date of acquisition.

**Currency translation** 

commercial rounding rules.

For the purposes of consolidation, the effects of any intercompany transactions are eliminated in full. Any receivables and liabilities between the consolidated companies are offset against each other, and any unrealised gains and losses recognised in fixed assets and inventories are eliminated. Any revenues from intercompany sales are offset against the

Capital consolidation is based on the purchase method of accounting pursuant to IFRS 3. This means that the amortised cost of the parent's shares in the subsidiary is eliminated against the remeasured equity attributable to the parent at the

Any goodwill created from the application of the purchase method denominated in a currency other than the functional currency of the KSB Group is measured at the relevant current closing rate. Goodwill is reported under intangible assets and tested for impairment at least once a year. If an impairment is identified, an impairment loss is recognised. Any excess of our interest in the fair values of net assets acquired over cost is

Those shares of subsidiaries' equity not attributable to KSB SE & Co. KGaA are reported as non-controlling interests. Further explanations on non-controlling interests of other share-

The consolidated financial statements have been prepared in euro (€). Unless otherwise stated, amounts in this report are presented in thousands of euros (€ thousands) using standard

Currency translation is effected on the basis of the functional currency of the consolidated companies. As in the previous year, the functional currency is exclusively the local currency of the company consolidated, as it operates as a financially,

Transactions denominated in foreign currencies are translated at the individual companies at the rate prevailing when the transaction is initially recognised. Monetary assets and liabilities are subsequently measured at the closing rate. Measurement effects are recognised in the income statement.

economically and organisationally independent entity.

recognised in profit or loss in the year it occurred.

holders are included under Notes No. 10. Equity.

With regard to the subsidiaries of D.P. Industries B.V. based in Alphen aan den Rijn, the Netherlands, there have been changes under company law. On the one hand, former DP Pompen B.V. now trades under the name KSB Manufacturing Netherlands B.V. On the other hand, DP Pumps B.V. initially was renamed Duijvelaar Pompen B.V. and subsequently the previously separate entities KSB B.V., Duijvelaar Installatiebouw B.V. and DP Service B.V. were merged with it.

The acquisition by KSB of all shares in DAG - Dieselanlagen Service GmbH, Oberwaltersdorf, Austria, in the 2023 financial year expands the group of fully consolidated companies.

In addition, KSB Čerpadlá a Armatúry, s.r.o., Bratislava, Slovakia, and TOO "KSB Kazakhstan", Almaty, Kazakhstan, which were previously not consolidated due to immateriality, are now included in the Group financial statements as fully

The company Vari.Co. GmbH, Karlsruhe, Germany, which was acquired in the reporting year, is not consolidated due to

In addition, former KSB FINANZ S.A. based in Echternach, Luxembourg, now trades as KSB FINANZ GmbH based in Frankenthal / Pfalz, Germany, as at the balance sheet date of

A full list of the shareholdings held by the KSB Group is provided at the end of these Notes to the consolidated financial When translating financial statements of consolidated companies that are not prepared in euro, assets and liabilities are translated at the closing rate; the income statement accounts are translated at average exchange rates (modified closing rate method). An exception to this, with a translation of the income statement items at the closing rate, results from the application of IAS 29 Financial Reporting in Hyperinflationary Countries, as explained in greater detail below. Gains and losses from the translation of items of assets and liabilities compared with their translation in the previous year are taken directly to equity in other comprehensive income and reported under currency translation differences.

The exchange rates of the most important currencies for the KSB Group at the reporting date and on an annual average are presented in the table below.

#### **Hyperinflation**

**11**

Argentina and Turkey have been classified as hyperinflationary economies for accounting purposes since 2018 and 2022 respectively. Accordingly, IAS 29 Financial Reporting in Hyperinflationary Economies has since been applied to the translation of the financial statements of KSB Compañía Sudamericana de Bombas S.A., Carapachay (Buenos Aires), Argentina, and KSB-Pompa, Armatür Sanayi ve Ticaret A.S., Ankara, Turkey.

As a result, the activities of the two said subsidiaries are not accounted for on the basis of historical acquisition and production costs, but are adjusted for the effects of inflation by using country-specific price indices. The inflation adjustment to the financial statements of the Argentine subsidiary is based on the consumer price index IPC (Índice de precios al consumidor), which was at 3,520.10 on 31 December 2023 (31 December 2022: 1,134.59; 1 January 2022: 582.02). The con-sumer price index TÜFE (Tüketici fiyat endeksi) is used to adjust for inflation in the financial statements of the Turkish subsidiary; the value applied at the reporting date was 1,859.38 (31 December 2022: 1,128.45; 1 January 2022: 686.95).

The net loss from monetary depreciation to be taken into account under IAS 29 on the affected monetary assets and liabilities, amounting to € 6,872 thousand (previous year: € 4,628 thousand), is included in the income statement under other financial expenses within finance income / expense.

After applying the inflation adjustment, the balance sheet and income statement items are translated into the reporting currency (euro) at the closing rate for inclusion in the consolidated financial statements.

#### **Exchange rates of the most important currencies**

|                | Closing rate |              | Average rate |         |
|----------------|--------------|--------------|--------------|---------|
|                | 31 Dec. 2023 | 31 Dec. 2022 | 2023         | 2022    |
| US dollar      | 1.1050       | 1.0666       | 1.0813       | 1.0531  |
| Brazilian real | 5.3618       | 5.6386       | 5.4010       | 5.4399  |
| Indian rupee   | 91.9045      | 88.1710      | 89.3001      | 82.6864 |
| Chinese yuan   | 7.8509       | 7.3582       | 7.6600       | 7.0788  |

{115}------------------------------------------------

#### KSB Group / Annual Report 2023

#### **III. ACCOUNTING POLICIES**

#### **1. General accounting policies**

#### **Acquisition and production costs**

In addition to the purchase price, acquisition cost includes attributable incidental costs (except for costs associated with the acquisition of a company) and subsequent expenditure. Purchase price reductions are deducted.

As well as directly allocated costs, production costs also include reasonable proportions of material and production overheads based on standard capacity utilisation of the relevant production facilities, if and to the extent these were incurred as part of the production process. This also includes production-related administrative expenses. General administrative expenses, research costs and selling expenses are not capitalised.

Borrowing costs as defined in IAS 23 that can be directly allocated to the acquisition or production of qualifying assets are capitalised. As in the previous year no such borrowing costs were incurred.

#### **Fair value**

Fair value is the price that independent market participants would, under standard market conditions, receive when selling an asset or pay when transferring a liability at the measurement date. This applies irrespectively of whether the price is directly observable or has been estimated using a measurement method.

The KSB Group defined a monitoring framework concept for determining fair value. This includes the monitoring of all material measurements at fair value and the direct communication of material facts to Management and, if necessary, to the audit committee. For the purposes of calculating fair value, KSB makes use wherever possible of estimates from market participants or estimates derived from these. As an initial step, regular checks are made to ascertain if there are current prices on active markets for an identical transaction. If no quoted market prices are available, the preference is to use the marketbased approach (deriving the fair value from the market or transaction prices of comparable assets, for example multipliers) or the income-based approach (calculation of fair value as a future value by discounting future cash surpluses).

Based upon the input factors used in the measurement methods, fair values are assigned to different levels of the fair value hierarchy.

- Level 1: Quoted prices (unadjusted) on active markets for identical assets and liabilities
- Level 2: Measurement parameters that are not the quoted prices taken into account for level 1, but that are observable for the asset or the liability either directly as a price or indirectly derived from prices
- Level 3: Measurement parameters for assets or liabilities that are not based on observable market data

If input factors categorised into different levels are included in the fair value measurement, the measurement must be categorised in its entirety in the level of the lowest level input factor that is material for the entire measurement.

Reclassifications between different levels in the fair value hierarchy are recognised at the end of the reporting period during which the change has occurred.

#### **Maturities**

Maturities of up to one year are classified as current.

Assets that can only be realised after more than twelve months, as well as liabilities that only become due after more than twelve months, are also classified as current if they are attributable to the operating cycle defined in IAS 1. An operating cycle of more than 12 months typically applies to madeto-order production (construction contracts).

Assets and liabilities not classified as current are non-current.

#### **Financial assets and financial liabilities**

A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets and financial liabilities are recognised in the consolidated balance sheet at the time when KSB becomes a contractual party. When the contractual right to payments from financial assets expires, these are derecognised. Financial liabilities are derecognised at the time when the contractual obligations are settled or cancelled or have expired. The acquisition and sale of financial instruments on an arm's length basis are recognised at the value at the date of settlement. This applies to primary financial instruments, such as trade receivables and financial receivables. Only derivative financial instruments are recognised at the value at the trade date.

{116}------------------------------------------------

Level 1: Quoted prices (unadjusted) on active markets for

 Level 2: Measurement parameters that are not the quoted prices taken into account for level 1, but that are observable for the asset or the liability either directly as a

 Level 3: Measurement parameters for assets or liabilities that are not based on observable market data

If input factors categorised into different levels are included in the fair value measurement, the measurement must be categorised in its entirety in the level of the lowest level input factor

Reclassifications between different levels in the fair value hierarchy are recognised at the end of the reporting period during

Assets that can only be realised after more than twelve months, as well as liabilities that only become due after more than twelve months, are also classified as current if they are attributable to the operating cycle defined in IAS 1. An operating cycle of more than 12 months typically applies to made-

Assets and liabilities not classified as current are non-current.

A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity

Financial assets and financial liabilities are recognised in the consolidated balance sheet at the time when KSB becomes a contractual party. When the contractual right to payments from financial assets expires, these are derecognised. Financial liabilities are derecognised at the time when the contractual obligations are settled or cancelled or have expired. The acquisition and sale of financial instruments on an arm's length basis are recognised at the value at the date of settlement. This applies to primary financial instruments, such as trade receivables and financial receivables. Only derivative financial instruments are recognised at the value at the trade

Maturities of up to one year are classified as current.

to-order production (construction contracts).

**Financial assets and financial liabilities** 

instrument of another entity.

date.

identical assets and liabilities

price or indirectly derived from prices

that is material for the entire measurement.

which the change has occurred.

**Maturities** 

**III. ACCOUNTING POLICIES** 

**1. General accounting policies** 

**Acquisition and production costs** 

capitalised.

**Fair value** 

costs were incurred.

measurement method.

value hierarchy.

KSB Group / Annual Report 2023

Purchase price reductions are deducted.

In addition to the purchase price, acquisition cost includes attributable incidental costs (except for costs associated with the acquisition of a company) and subsequent expenditure.

**116** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

As well as directly allocated costs, production costs also include reasonable proportions of material and production overheads based on standard capacity utilisation of the relevant production facilities, if and to the extent these were incurred as part of the production process. This also includes production-related administrative expenses. General administrative expenses, research costs and selling expenses are not

Borrowing costs as defined in IAS 23 that can be directly allocated to the acquisition or production of qualifying assets are capitalised. As in the previous year no such borrowing

Fair value is the price that independent market participants would, under standard market conditions, receive when selling an asset or pay when transferring a liability at the measurement date. This applies irrespectively of whether the price is directly observable or has been estimated using a

The KSB Group defined a monitoring framework concept for determining fair value. This includes the monitoring of all material measurements at fair value and the direct communication of material facts to Management and, if necessary, to the audit committee. For the purposes of calculating fair value, KSB makes use wherever possible of estimates from market participants or estimates derived from these. As an initial step, regular checks are made to ascertain if there are current prices on active markets for an identical transaction. If no quoted market prices are available, the preference is to use the marketbased approach (deriving the fair value from the market or transaction prices of comparable assets, for example multipliers) or the income-based approach (calculation of fair value as a future value by discounting future cash surpluses).

Based upon the input factors used in the measurement methods, fair values are assigned to different levels of the fair

#### **a) Primary financial instruments**

In the KSB Group, primary financial instruments are allocated to the following measurement categories as financial assets and financial liabilities based on the requirements of IFRS 9:

- Financial assets at amortised cost Receivables, credits, cash and cash equivalents, loans and other financial assets
- Financial assets at fair value through profit or loss (FVPL) – Financial instruments
- Financial liabilities at amortised cost Loans, trade payables and other financial liabilities

Financial assets and liabilities are reported at fair value on initial recognition. Financial assets and liabilities that are not measured at fair value are recognised after adjustment for transaction costs. Subsequent measurement is in line with the measurement category allocated to the financial asset or financial liability.

The fair value option is not being used at the moment.

#### **b) Derivatives**

**13**

Derivatives are exclusively used for hedging purposes. Future cash flows and existing recognised underlyings are hedged against foreign currency and interest rate risks. The hedging instruments used are exclusively currency forwards and interest rate derivatives entered into with prime-rated banks. Interest rate risks are minimised for long-term borrowings at floating rates of interest. Group guidelines govern the use of these instruments. These transactions are also subject to continuous risk monitoring.

Derivative financial instruments are categorised as at fair value through profit or loss unless they are part of hedge accounting. In the case of designated cash flow hedges, changes in the fair value of the effective portions of the currency derivatives are recognised under other comprehensive income and reported under "Changes in the fair value of financial instruments" in equity for as long as the underlying transaction is not recognised in the income statement. Only the spot element of the derivative hedging instrument is designated, while the forward element and currency basis spreads are excluded from the hedge and reported separately in the hedging cost reserve in other comprehensive income. Any ineffectiveness and changes in the market value of currency forwards not designated as hedges are recognised in the income statement.

Changes in the fair value of interest rate derivatives used to hedge against interest rate risks in liabilities are recognised under other comprehensive income and presented under "Changes in the fair value of financial instruments" in equity.

The carrying amounts equal fair value and are determined on the basis of input factors observable either directly (as a price) or indirectly (derived from prices). Fair values may be positive or negative. Fair value is the amount that KSB would receive or have to pay at the reporting date to settle the financial instrument. This amount is determined using the relevant exchange rates, interest rates and counterparty credit ratings at the reporting date. Information is obtained solely from recognised external sources.

Currency forwards are reported under other financial assets and under other financial liabilities. This also applies in principle to interest rate swaps, where applicable.

#### **2. Specific accounting policies**

#### **Intangible assets**

Intangible assets are recognised at (acquisition or production) cost and reduced by straight-line amortisation. Depreciation / amortisation is reported under "Depreciation / amortisation" in the income statement. The underlying useful life of intangible assets – excluding goodwill (indefinite useful life) – is between 2 and 15 years. If an intangible asset's recoverable amount is lower than its carrying amount, an impairment loss is recognised. Impairment testing is carried out at least once a year for goodwill, other intangible assets with indefinite useful lives and intangible assets under development at the reporting date. In addition, all types of intangible assets are subject to impairment testing if there are indications as defined in IAS 36 of a possible impairment. If the reasons for an impairment loss in a previous period no longer apply, it is reversed up to a maximum of amortised cost (write-up), with the exception of goodwill.

Goodwill is scheduled to be tested for impairment once a year. The test relates to cash-generating units (CGUs). The cashgenerating units are generally represented by the respective share in a legal entity that is allocated to an operating segment. The Group's total of five operating segments encompass Energy, Mining and Standard Markets for new business with Pumps, new business with Valves and KSB SupremeServ. A legal entity contains several cash-generating units if the main business activities are spread over several operating segments. Further details on KSB's segmentation are provided in Section VIII. Segment Reporting in these Notes to the consolidated financial statements.

{117}------------------------------------------------

Combined Management

The goodwill is reduced by the difference in value or down to zero at maximum if the value in use is lower than the carrying amount of the CGU. If the difference exceeds the carrying amount of goodwill, further impairment testing is required at the level of intangible assets, rights to use leased assets and property, plant and equipment. Reversal of an impairment loss from an earlier period is not possible for goodwill.

The discounted cash flow model is used to determine the recoverable amount (value in use). The future earnings (EBIT in accordance with IFRS) applied are taken from a multi-year financial plan (five years), based on the 30 September reporting date taking into account the medium-term strategy approved by Management for the respective cash-generating unit. This planning is carried out based on certain assumptions which are drawn from both forecasts from external sources, e.g. current German Mechanical Engineering Industry Association (VDMA) publications, and own experience-based knowledge of markets and competitors. The earnings of the last plan year are consistently extrapolated as a constant, if that level is considered to be achievable in the long term. Growth rates are derived taking account of the estimates with regard to economic circumstances. The Group regularly tests goodwill for impairment in the fourth quarter of every year based on the figures as per 30 September of the year in question. In addition, a review of impairment is always carried out when events or circumstances ("trigger events") suggest that the value could be impaired.

In order to assess the risk of impairment of material goodwill, the Group also performs sensitivity analyses as part of its impairment testing. To this end, changes deemed possible in material assumptions underlying the calculation of the value in use are taken into account.

When companies are acquired, purchase price allocations are made and the fair value of the assets and liabilities acquired is determined. In addition to the assets and liabilities already recognised by the selling party, account is also taken of marketing-related aspects (primarily brands or trademarks and competitive restrictions), customer-related aspects (primarily customer lists, customer relations and orders on hand), contract-related aspects (mainly particularly advantageous service, work, purchasing and employment contracts) as well as technology-related aspects (primarily patents, know-how and databases). The residual value method, the excess earnings method and cost-oriented procedures are primarily applied to determine values.

Development costs are capitalised as internally generated intangible assets at cost where the criteria described in IAS 38 are met and reduced by straight-line amortisation as from the time the asset becomes operational. Research costs are expensed as incurred. Where research and development costs cannot be reliably distinguished within a project, no costs are capitalised.

#### **Leases**

According to IFRS 16, a contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

For leases where KSB is the lessee, lease liabilities and right-ofuse assets (rights to use leased assets) must be recognised on the balance sheet. Leases of low value assets and short-term leases with a term of up to 12 months are exempt from this provision as KSB has elected to make use of the practical expedient of accounting for lease payments as an expense. In this context, leased assets with a fair value of up to € 5,000 are defined as low-value assets.

Lease liabilities and right-of-use assets are generally recognised at the time at which the leased asset is made available to KSB by the lessor for use. The carrying amount of the two items is essentially based on the present value of the future minimum lease payments. It is discounted using the incremental borrowing rate of KSB if no interest rate implicitly underlying the lease is available. Extension and termination options are included in the term and the carrying amounts of a lease if it is deemed reasonably certain that they will be exercised by KSB. Only lease components and in particular no separate service components are taken into account in the measurement of lease payments. The right-of-use assets are depreciated over the economic useful life of the leased asset or over the term of the lease, whichever is shorter. Lease liabilities are subsequently measured at amortised cost using the effective interest rate method in the form of a redemption and interest portion. Changes in lease payments are taken into account through remeasurements of lease liabilities. The interest expense for the lease liability and depreciation / amortisation expense for the right-of-use asset are recognised separately.

#### **Property, plant and equipment**

In accordance with IAS 16, property, plant and equipment is measured at cost and reduced by straight-line depreciation over its useful life. If an asset's recoverable amount is lower than its carrying amount, an impairment loss is recognised. Impairment testing of property, plant and equipment is always carried out if there are indications as defined in IAS 36 of a

{118}------------------------------------------------

Development costs are capitalised as internally generated intangible assets at cost where the criteria described in IAS 38 are met and reduced by straight-line amortisation as from the time the asset becomes operational. Research costs are expensed as incurred. Where research and development costs cannot be reliably distinguished within a project, no costs are

According to IFRS 16, a contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a

For leases where KSB is the lessee, lease liabilities and right-ofuse assets (rights to use leased assets) must be recognised on the balance sheet. Leases of low value assets and short-term leases with a term of up to 12 months are exempt from this provision as KSB has elected to make use of the practical expedient of accounting for lease payments as an expense. In this context, leased assets with a fair value of up to € 5,000 are

Lease liabilities and right-of-use assets are generally recognised at the time at which the leased asset is made available to KSB by the lessor for use. The carrying amount of the two items is essentially based on the present value of the future minimum lease payments. It is discounted using the incremental borrowing rate of KSB if no interest rate implicitly underlying the lease is available. Extension and termination options are included in the term and the carrying amounts of a lease if it is deemed reasonably certain that they will be exercised by KSB. Only lease components and in particular no separate service components are taken into account in the measurement of lease payments. The right-of-use assets are depreciated over the economic useful life of the leased asset or over the term of the lease, whichever is shorter. Lease liabilities are subsequently measured at amortised cost using the effective interest rate method in the form of a redemption and interest portion. Changes in lease payments are taken into account through remeasurements of lease liabilities. The interest expense for the lease liability and depreciation / amortisation expense for the right-of-use asset are recognised

In accordance with IAS 16, property, plant and equipment is measured at cost and reduced by straight-line depreciation over its useful life. If an asset's recoverable amount is lower than its carrying amount, an impairment loss is recognised. Impairment testing of property, plant and equipment is always carried out if there are indications as defined in IAS 36 of a

period of time in exchange for consideration.

defined as low-value assets.

separately.

**Property, plant and equipment** 

capitalised.

**Leases** 

The goodwill is reduced by the difference in value or down to zero at maximum if the value in use is lower than the carrying amount of the CGU. If the difference exceeds the carrying amount of goodwill, further impairment testing is required at the level of intangible assets, rights to use leased assets and property, plant and equipment. Reversal of an impairment loss

**118** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

The discounted cash flow model is used to determine the recoverable amount (value in use). The future earnings (EBIT in accordance with IFRS) applied are taken from a multi-year financial plan (five years), based on the 30 September reporting date taking into account the medium-term strategy approved by Management for the respective cash-generating unit. This planning is carried out based on certain assumptions which are drawn from both forecasts from external sources, e.g. current German Mechanical Engineering Industry Association (VDMA) publications, and own experience-based knowledge of markets and competitors. The earnings of the last plan year are consistently extrapolated as a constant, if that level is considered to be achievable in the long term. Growth rates are derived taking account of the estimates with regard to economic circumstances. The Group regularly tests goodwill for impairment in the fourth quarter of every year based on the figures as per 30 September of the year in question. In addition, a review of impairment is always carried out when events or circumstances ("trigger events") suggest

In order to assess the risk of impairment of material goodwill, the Group also performs sensitivity analyses as part of its impairment testing. To this end, changes deemed possible in material assumptions underlying the calculation of the value

When companies are acquired, purchase price allocations are made and the fair value of the assets and liabilities acquired is determined. In addition to the assets and liabilities already recognised by the selling party, account is also taken of marketing-related aspects (primarily brands or trademarks and competitive restrictions), customer-related aspects (primarily customer lists, customer relations and orders on hand), contract-related aspects (mainly particularly advantageous service, work, purchasing and employment contracts) as well as technology-related aspects (primarily patents, know-how and databases). The residual value method, the excess earnings method and cost-oriented procedures are primarily

from an earlier period is not possible for goodwill.

that the value could be impaired.

in use are taken into account.

applied to determine values.

KSB Group / Annual Report 2023

possible impairment. If the reasons for an impairment loss recognised in a previous period no longer apply, the impairment loss is reversed (write-up) up to a maximum of amortised cost.

Government grants relating to property, plant and equipment are transferred to an adjustment item on the liabilities side. This item is reversed pro rata over the useful life of the subsidised assets and recognised as other income.

Maintenance expenses are recognised as an expense in the period in which they are incurred, unless they lead to the expansion or material improvement of the asset concerned.

As in the previous year, the following useful lives are applied:

#### **Useful life of property, plant and equipment**

| Buildings                                       | 10 to 50 years |
|-------------------------------------------------|----------------|
| Plant and machinery                             | 5 to 25 years  |
| Other equipment, operating and office equipment | 3 to 25 years  |

#### **Non-current financial assets**

Interest-bearing loans are recognised at amortised cost, whereas non-current financial instruments are recognised in the income statement at fair value as at the reporting date. Financial assets such other cash deposits are subject to an expected default risk. The impairment loss is calculated based on the loan amount on the closing or reporting date, the loss ratio of the loan amount and the term-weighted credit default spreads as a benchmark for probability of failure. Furthermore, partial or complete impairment is recognised as soon as there are signs of an increase in default risk.

#### **Non-current other non-financial assets**

**15**

Investments in non-consolidated subsidiaries are measured at amortised cost.

Defined benefit assets are recognised at the amount by which the fair value of the plan assets exceeds the related defined benefit obligation, less the effects of the asset ceiling in accordance with IAS 19.

#### **Investments accounted for using the equity method**

Investments accounted for using the equity method are companies in which the parties exercise joint control (joint venture) or have the power to exercise significant influence over the companies' operating and financial policies (associate); this is usually the case where an entity holds between 20 % and 50 % of the voting power. These assets are recognised at cost at the time of acquisition. If the costs of acquisition exceed the share of the net assets, adjustments are made on the basis of the fair value (pro rata hidden reserves and liabilities). The remaining amount is recognised as goodwill. It forms part of the carrying amount of the joint venture or associate and is not amortised. For subsequent measurement, the carrying amounts are increased / reduced annually by the pro-rata earnings, distributed dividends or other changes in equity of the joint venture or the associate. If local accounting principles differ from the Group's standard accounting policies, adjustments are made accordingly. The share of earnings is reported in the consolidated income statement in a separate line (earnings from investments accounted for using the equity method), and changes such as currency translation effects are taken directly to Group equity. If the losses attributable to the KSB Group correspond to the carrying amount of the company or exceed this, they are not recognised unless KSB has entered into obligations or has made payments for the company. Intercompany gains and losses from transactions between Group companies and investments accounted for using the equity method are offset against the carrying amount in profit or loss. At each reporting date, a review is carried out to determine whether there are any objective indications of impairment, and the amount of such impairment is calculated if required. If the carrying amount exceeds the recoverable amount of an investment, it is written down to the recoverable amount. Any impairments or reversals of impairments are reported in the consolidated income statement under finance income / expense.

#### **Inventories**

Pursuant to IAS 2, inventories are recognised at the lower of cost and net realisable value as at the reporting date. Cost is measured using the weighted average method. KSB takes account of the inventory risks resulting from slow-moving goods or impaired marketability through write-downs to the net realisable value. This also applies if the selling price is lower than production cost plus costs still to be incurred. If the reasons for an impairment loss charged in a previous period no longer apply, the impairment loss is reversed (write-up).

Advance payments made on inventories are also presented under inventories because of the correlation and expected realisation of these advances (through conversion into inventories) within the normal business cycle.

#### **Contract assets and contract liabilities**

A contract asset shows KSB's claim to consideration in exchange for goods or services transferred to customers, with the right to payment being not only conditional on the passage of time but also on the satisfaction of an overall contractual performance obligation by KSB. By contrast, receivables 

{119}------------------------------------------------

reflect KSB's unqualified claim to consideration. A contract liability also represents KSB's obligation to transfer goods or services to a customer. However, in these cases KSB has already received consideration from a customer that exceeds the amount of the goods or services provided. Contract assets relate to ongoing projects that have not yet been invoiced and are subject to similar credit risks as trade receivables for the same types of contract. Against this background, the expected loss ratios of trade receivables are also used for the risk provision for expected credit loss (ECL) of contract assets determined using the simplified impairment model. If it becomes apparent to KSB at the respective project stage that it is sufficiently likely that customers will default on payments, these risks are taken into account by appropriate individual impairment allowances for the contract assets concerned.

#### **Trade receivables**

Trade receivables and other current assets are subsequently recognised at amortised cost. Low-interest or non-interestbearing receivables are discounted. In addition, identifiable risks are taken into account by charging individual impairment losses. Individual impairment allowances are regularly made if insolvency or collection proceedings have been instigated, on the default or failure to meet agreed repayment plans and on overdue payments. Receivables are derecognised if it is reasonably certain that payment cannot be expected. A risk provision for expected credit losses (ECL) is set aside under the simplified impairment model according to IFRS 9 for receivables that are not individually impaired. To measure expected credit losses, trade receivables are summarised on the basis of common credit risk features (risk classes) and number of days overdue. The expected default rates stem from the historical payment profiles of sales revenues over the last three financial years before the reporting date. The historical and forward-looking information forms the basis for the expected probability of failure, adjusted for future-oriented macroeconomic factors.

Part of the default risk exposure of trade receivables is hedged. For more information, please refer to Section VI. Additional Information on Financial Instruments" – sub-section "Financial risks – Credit risk".

For trade receivables for which collateral, such as credit insurance, has been provided or letters of credit have been opened, a risk provision is set aside, taking account of default risks of the provider of the security and the company's macroeconomic factors.

If the reasons for an impairment loss charged in a previous period no longer apply, the impairment loss is reversed (writeup).

#### **Other non-financial assets**

The prepayments made that are presented in this item relate to accrued expenditure prior to the reporting date that will only be classified as an expense after the reporting date.

#### **Cash and cash equivalents**

Cash (cash and sight deposits) and cash equivalents (shortterm, highly liquid financial investments that are readily convertible to defined amounts of cash, and that are subject to only immaterial fluctuations in terms of their value) are recognised at amortised cost. Cash and cash equivalents are subject to an expected credit default risk. The impairment allowance under IFRS 9 is calculated based on the loan amount on the closing date, the loss ratio of the loan amount and the term-weighted credit default spreads as a benchmark for probability of failure. Furthermore, partial or complete impairment allowances are recognised as soon as there are signs of an increase in default risk.

#### **Taxes on income**

Current taxes on income are recognised in income tax liabilities to the extent that they have not yet been paid. If the amount already paid exceeds the amount owed, an income tax receivable is recognised and reported in other tax assets under other non-financial assets.

Deferred taxes are accounted for in accordance with IAS 12 using the balance sheet liability method on the basis of the enacted or substantively enacted local tax rates. This means that deferred tax assets and liabilities generally arise when the tax base of assets and liabilities differs from their carrying amount in the IFRS financial statements, and this leads to future tax expense or income. KSB recognises deferred tax assets from tax loss carryforwards in those cases where it is more likely than not that there will be sufficient taxable profit available in the near future against which these tax loss carryforwards can be utilised. Deferred taxes are also recognised for consolidation adjustments. Deferred taxes are not discounted. Deferred tax assets and liabilities are always offset where they relate to the same tax authority. Changes to deferred taxes in the consolidated balance sheet generally result in deferred tax expense or income. If, however, a direct entry is made in other comprehensive income in equity, the change in deferred taxes is also taken directly to equity.

{120}------------------------------------------------

#### **Provisions**

If the reasons for an impairment loss charged in a previous period no longer apply, the impairment loss is reversed (write-

The prepayments made that are presented in this item relate to accrued expenditure prior to the reporting date that will only

Cash (cash and sight deposits) and cash equivalents (shortterm, highly liquid financial investments that are readily convertible to defined amounts of cash, and that are subject to only immaterial fluctuations in terms of their value) are recognised at amortised cost. Cash and cash equivalents are subject to an expected credit default risk. The impairment allowance under IFRS 9 is calculated based on the loan amount on the closing date, the loss ratio of the loan amount and the term-weighted credit default spreads as a benchmark for probability of failure. Furthermore, partial or complete impairment allowances are recognised as soon as there are

Current taxes on income are recognised in income tax liabilities to the extent that they have not yet been paid. If the amount already paid exceeds the amount owed, an income tax receivable is recognised and reported in other tax assets under

Deferred taxes are accounted for in accordance with IAS 12 using the balance sheet liability method on the basis of the enacted or substantively enacted local tax rates. This means that deferred tax assets and liabilities generally arise when the tax base of assets and liabilities differs from their carrying amount in the IFRS financial statements, and this leads to future tax expense or income. KSB recognises deferred tax assets from tax loss carryforwards in those cases where it is more likely than not that there will be sufficient taxable profit available in the near future against which these tax loss carryforwards can be utilised. Deferred taxes are also recognised for consolidation adjustments. Deferred taxes are not discounted. Deferred tax assets and liabilities are always offset where they relate to the same tax authority. Changes to deferred taxes in the consolidated balance sheet generally result in deferred tax expense or income. If, however, a direct entry is made in other comprehensive income in equity, the change

in deferred taxes is also taken directly to equity.

be classified as an expense after the reporting date.

up).

**120** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Other non-financial assets** 

**Cash and cash equivalents** 

signs of an increase in default risk.

**Taxes on income** 

other non-financial assets.

reflect KSB's unqualified claim to consideration. A contract liability also represents KSB's obligation to transfer goods or services to a customer. However, in these cases KSB has already received consideration from a customer that exceeds the amount of the goods or services provided. Contract assets relate to ongoing projects that have not yet been invoiced and are subject to similar credit risks as trade receivables for the same types of contract. Against this background, the expected loss ratios of trade receivables are also used for the risk provision for expected credit loss (ECL) of contract assets determined using the simplified impairment model. If it becomes apparent to KSB at the respective project stage that it is sufficiently likely that customers will default on payments, these risks are taken into account by appropriate individual impairment allowances for the contract assets concerned.

Trade receivables and other current assets are subsequently recognised at amortised cost. Low-interest or non-interestbearing receivables are discounted. In addition, identifiable risks are taken into account by charging individual impairment losses. Individual impairment allowances are regularly made if insolvency or collection proceedings have been instigated, on the default or failure to meet agreed repayment plans and on overdue payments. Receivables are derecognised if it is reasonably certain that payment cannot be expected. A risk provision for expected credit losses (ECL) is set aside under the simplified impairment model according to IFRS 9 for receivables that are not individually impaired. To measure expected credit losses, trade receivables are summarised on the basis of common credit risk features (risk classes) and number of days overdue. The expected default rates stem from the historical payment profiles of sales revenues over the last three financial years before the reporting date. The historical and forward-looking information forms the basis for the expected probability of failure, adjusted for future-oriented macro-

Part of the default risk exposure of trade receivables is hedged. For more information, please refer to Section VI. Additional Information on Financial Instruments" – sub-section "Finan-

For trade receivables for which collateral, such as credit insurance, has been provided or letters of credit have been opened, a risk provision is set aside, taking account of default risks of the provider of the security and the company's macro-

**Trade receivables** 

economic factors.

cial risks – Credit risk".

economic factors.

KSB Group / Annual Report 2023

#### **a) Provisions for pensions and similar obligations**

Provisions for pensions and similar obligations pursuant to IAS 19 are calculated on the basis of actuarial reports. They are based on defined benefit pension plans. They are measured using the projected unit credit method.

Actuarial gains and losses are taken directly to other comprehensive income and reported in equity under "Remeasurement of defined benefit plans". The actuarial demographic assumptions and the setting of the discount rate (based on senior, fixed-income corporate bonds) and other measurement parameters (for example income and pension trends) are based on best estimates.

Net interest is calculated by multiplying the discount rate with the net liability (pension obligation minus plan assets) or the net asset value that results if the plan assets exceed the pension obligation.

The defined benefit costs include the service cost, which is included in staff costs under pension costs, and the net interest income or expense on the net liability or net asset value, which is recognised in finance income / expense under interest and similar expenses or under interest and similar income.

Defined benefit assets are reported under non-current other non-financial assets.

No provisions are set aside for defined contribution pension plans. In these cases, the premium payments are recognised directly in staff costs in the income statement. Other than an obligation to pay premiums, KSB has no further obligations. Consequently, the insurance risk remains with the insured parties.

#### **b) Other provisions**

**17**

Provisions are recognised if an event that occurred by the reporting date of the respective financial year results in a present legal or constructive external obligation that the company has no realistic alternative to settling, where settlement of this obligation is expected to result in an outflow of resources embodying economic benefits, and the amount of the obligation can be estimated reliably. The amount of the provision corresponds to the best estimate of the settlement amount of the current obligation on the reporting date. Any more or less secure recourse or reimbursement claims are recognised as separate assets.

Obligations in the form of expected losses from onerous contracts are recognised if the unavoidable costs to KSB of fulfilling a contract exceed the expected economic benefits. In the case of customer contracts that are expected to be lossmaking, first an impairment of contract-related inventories is recognised before additional provisions are recognised. In contrast, contract assets are reported gross on the one hand and provisions for expected losses from onerous customer contracts are recognised on the other hand.

Provisions for restructurings are recognised only if the criteria set out in IAS 37 are met.

Non-current provisions are discounted if the effects are material.

#### **Contingent liabilities**

Contingent liabilities, which are not recognised, are potential obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events. Contingent liabilities may also be present obligations that arise from past events where it is possible but not probable that there will be an outflow of resources embodying economic benefits.

Contingent liabilities correspond to the extent of liability at the reporting date.

#### **Sales revenue**

KSB generates sales revenue from the sale of goods and goods purchased and held for resale from the production, sale and trade of machinery, systems and other industrial products, particularly pumps and valves and related support services. The breadth of orders with pumps ranges from the supply of an individual pump to customised pump sets, including drive and control systems. These goods and services are sold to engineering contractors, OEMs and end users or, in some cases, distributed via dealers. Some customer contracts contain several service components, such as manufacture of a pump and the related installation and commissioning. These installation services cover integration services and can only be carried out by specifically trained and qualified staff. They are not accounted for as independent performance obligations and the transaction price is not split.

Sales revenue is recognised in the amount of the consideration expected by KSB based on the transfer of goods or provision of services to the customer. Depending on the type of performance and contractual structure, sales revenue is recognised either over time or at a point in time in line with satisfaction of the performance obligation by KSB.

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Combined Management

If a performance obligation meets the criteria for recognising sales revenue over time under IFRS 15 and the progress towards completion and expected consideration can be reliably estimated, the sales revenue is recognised based on progress towards complete satisfaction of the performance obligation. KSB specifically recognises sales revenue over time for contracts covering the production of customised pumps and valves as well as contracts for the provision of services. By contrast, standard products in the pumps and valves areas are typically subject to sales revenue recognition at a point in time. KSB applies the input-oriented method to determine progress that is measured by the factors used. The percentage of completion of contracts is determined on the basis of the proportion that contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs at the reporting date and thus follows the cost-to-cost method. Contract revenue consists of all contractually agreed revenues, as well as additional claims and incentive payments that are likely to result in revenue and are capable of being reliably measured. Contract revenue may vary, for instance because of renegotiations or penalties. Sales revenue is accounted for based on the amount fixed in the contract less expected consideration. Variable considerations (penalties, bonuses) are estimated at the most likely value. Restrictions on estimate options are taken into account. Estimates on costs and contract progress are corrected if circumstances change. Any resultant increases or reductions in the estimated proceeds or costs are reflected in the profit and loss account for the period in which the circumstances giving rise to the correction occurred. If the earnings from a service or production order with sales revenue recognition over time cannot be reliably estimated, revenue will only be recognised in the amount of the contract costs incurred that are likely to be covered and the contract costs recognised as an expense for the period in which they are incurred.

Sales revenue is recognised at a point in time for performance obligations that do not meet the criteria for recognising sales revenue over time under IFRS 15. At KSB, this typically applies in particular to standard products without any significant customer-specific characteristic in the Pumps and Valves segments. At the time of revenue recognition, receipt of the consideration must be probable and the amount of sales revenue must be reliably measurable. A reliable estimation of the associated costs and potential return of the goods must also be possible. The point in time at which KSB satisfies the performance obligations from contracts with customers subject to sales revenue recognition at a point in time is generally based on the agreed delivery terms and conditions (INCOTERMS). For certain deliveries and services, a declaration of acceptance by the customer is required for the recognition of sales revenue. The Group generally aims to agree on delivery terms and conditions with the earliest possible transfer of risk. For customer contracts based on sales revenue recognised at a point in time, sales reductions also reduce sales revenue.

KSB agrees payment terms and conditions for customer contracts that allow for payment in a reasonable period after the invoice has been issued. Extended payment terms are not usually granted to customers. There are usually no long-term financing components.

In individual cases and in compliance with the statutory requirements of IFRS 15, a customer may ask to obtain control of a product prior to delivery of the goods (bill-and-hold arrangements). This can result in earlier sales revenue recognition.

For regular fixed-price contracts, the customer pays a fixed amount using a payment plan. Depending on the ratio of the customer payments received to the claim to consideration acquired by KSB based on the transfer of goods and services to the customer, there is an advance or subsequent type of payment on the reporting date for the respective customer contract. Contract assets are reported reduced by advances received, if the amount of the goods and services provided by KSB exceed the payment amount. Payments received from the customer that exceed the amount of the goods and services provided by KSB for the respective customer contract result in the reporting of a contract liability.

#### **Other income statement items**

Interest income and expense are recognised in the period in which they occur. Dividend income from investments is collected when the legal entitlement to payment is created. Operating expenses are recognised when they are incurred or when the services are utilised. Income tax is calculated in accordance with the statutory tax rules in the countries in which the Group operates. Deferred taxes are accounted for on the basis of the enacted or substantively enacted income tax rates.

#### **3. Significant judgements, estimates and assumptions**

The preparation of consolidated financial statements in accordance with the IFRSs as adopted by the EU requires management to make estimates and assumptions that affect the accounting policies to be applied. When implementing such accounting policies, estimates and assumptions affect the assets, liabilities, income and expenses recognised in the consolidated financial statements, and their presentation.

{122}------------------------------------------------

recognition of sales revenue. The Group generally aims to agree on delivery terms and conditions with the earliest possible transfer of risk. For customer contracts based on sales revenue recognised at a point in time, sales reductions also

KSB agrees payment terms and conditions for customer contracts that allow for payment in a reasonable period after the invoice has been issued. Extended payment terms are not usually granted to customers. There are usually no long-term

In individual cases and in compliance with the statutory requirements of IFRS 15, a customer may ask to obtain control of a product prior to delivery of the goods (bill-and-hold arrangements). This can result in earlier sales revenue

For regular fixed-price contracts, the customer pays a fixed amount using a payment plan. Depending on the ratio of the customer payments received to the claim to consideration acquired by KSB based on the transfer of goods and services to the customer, there is an advance or subsequent type of payment on the reporting date for the respective customer contract. Contract assets are reported reduced by advances received, if the amount of the goods and services provided by KSB exceed the payment amount. Payments received from the customer that exceed the amount of the goods and services provided by KSB for the respective customer contract result in

Interest income and expense are recognised in the period in which they occur. Dividend income from investments is collected when the legal entitlement to payment is created. Operating expenses are recognised when they are incurred or when the services are utilised. Income tax is calculated in accordance with the statutory tax rules in the countries in which the Group operates. Deferred taxes are accounted for on the basis of the enacted or substantively enacted income tax

**3. Significant judgements, estimates and assumptions** 

The preparation of consolidated financial statements in accordance with the IFRSs as adopted by the EU requires management to make estimates and assumptions that affect the accounting policies to be applied. When implementing such accounting policies, estimates and assumptions affect the assets, liabilities, income and expenses recognised in the consolidated financial statements, and their presentation.

reduce sales revenue.

financing components.

the reporting of a contract liability.

**Other income statement items** 

rates.

recognition.

If a performance obligation meets the criteria for recognising sales revenue over time under IFRS 15 and the progress towards completion and expected consideration can be reliably estimated, the sales revenue is recognised based on progress towards complete satisfaction of the performance obligation. KSB specifically recognises sales revenue over time for contracts covering the production of customised pumps and valves as well as contracts for the provision of services. By contrast, standard products in the pumps and valves areas are typically subject to sales revenue recognition at a point in time. KSB applies the input-oriented method to determine progress that is measured by the factors used. The percentage of completion of contracts is determined on the basis of the proportion that contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs at the reporting date and thus follows the cost-to-cost method. Contract revenue consists of all contractually agreed revenues, as well as additional claims and incentive payments that are likely to result in revenue and are capable of being reliably measured. Contract revenue may vary, for instance because of renegotiations or penalties. Sales revenue is accounted for based on the amount fixed in the contract less expected consideration. Variable considerations (penalties, bonuses) are estimated at the most likely value. Restrictions on estimate options are taken into account. Estimates on costs and contract progress are corrected if circumstances change. Any resultant increases or reductions in the estimated proceeds or costs are reflected in the profit and loss account for the period in which the circumstances giving rise to the correction occurred. If the earnings from a service or production order with sales revenue recognition over time cannot be reliably estimated, revenue will only be recognised in the amount of the contract costs incurred that are likely to be covered and the contract costs recognised as an expense for the period in

**122** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

which they are incurred.

KSB Group / Annual Report 2023

Sales revenue is recognised at a point in time for performance obligations that do not meet the criteria for recognising sales revenue over time under IFRS 15. At KSB, this typically applies in particular to standard products without any significant customer-specific characteristic in the Pumps and Valves segments. At the time of revenue recognition, receipt of the consideration must be probable and the amount of sales revenue must be reliably measurable. A reliable estimation of the associated costs and potential return of the goods must also be possible. The point in time at which KSB satisfies the performance obligations from contracts with customers subject to sales revenue recognition at a point in time is generally based on the agreed delivery terms and conditions (INCOTERMS). For certain deliveries and services, a declaration of acceptance by the customer is required for the These estimates and assumptions are based on past experience and a variety of other factors deemed appropriate under the circumstances. Actual amounts may differ from these estimates and assumptions. The estimates and assumptions made are constantly reviewed. If more recent information and additional knowledge are available, recognised amounts are adjusted to reflect the new circumstances. Any changes in estimates and assumptions that result in material differences are explained separately.

#### **Recoverability of intangible assets, right-of-use assets and property, plant and equipment**

Impairment tests for goodwill, which are conducted at least once per year, require an estimate of the recoverable amounts for each cash-generating unit (CGU). These correspond to the higher amount from the fair value less costs to sell and value in use. The earnings forecast on the basis of these estimates are affected by various factors, which may include exchange rate fluctuations, progress in Group integration or the expectations for the economic development of these units. Although management believes that the assumptions used to calculate the recoverable amount are appropriate, any unforeseen changes in these assumptions could lead to an impairment loss.

Estimates and assumptions must also be made when testing the impairment of other intangible assets, the rights to use leased assets and property, plant and equipment. For each asset it must be verified to what extent there are indications of an impairment. When determining the recoverable amount of property, plant and equipment, the estimation of the relevant useful life is subject to uncertainty.

#### **Net realisable value of inventories**

**19**

Determining the net realisable value of inventories requires, in particular, estimates of the further marketability of the inventory items and the future development of market prices on the sales markets of KSB in relation to the needed production costs. If the actual development in a later period differs from the original estimates, this may result in an additional impairment requirement for the inventory items or in the reversal of impairments.

#### **Impairments on contract assets and trade receivables**

Contract assets and trade receivables are subject to the impairment rules of IFRS 9. The assessments that KSB makes regarding customers' solvency are of central importance here. Depending on the actual payment behaviour of customers, actual defaults on receivables may exceed the impairment losses recognised in previous periods, or impairments may be reversed.

#### **Actuarial assumptions for the measurement of provisions for employee benefits**

Provisions for employee benefits, in particular provisions for pensions and similar obligations, are determined according to actuarial principles. These are based on statistical and other factors so as to anticipate future events. Material factors are the reported market discount rates and life expectancy. The actuarial assumptions made may differ from actual developments as a result of changing market and economic conditions, and this can have material effects on the amount of provisions and thus on the company's overall net assets, financial position and results of operations. For the material pension plans of the German companies, every employee is entitled to apply at any time during the ongoing employment contract for payment in annual instalments, as a one-time payment or as a pension for life. KSB's estimate as to how the specific workforce is likely to decide on exercising the lumpsum option is reviewed on a regular basis and is reflected accordingly in the measurement of pension provisions.

#### **Recognition and measurement of other provisions**

Provisions are recognised for uncertain liabilities with a probability of occurrence of more than 50 %. The provision corresponds to the best estimate of the expenditure to fulfil the current obligation on the reporting date. The later, actual outflow can, however, differ from the estimate as a result of changed economic, political or legal conditions. This will be reflected in additional expenses or income from reversals.

#### **Estimates in connection with the accounting treatment of income taxes**

The Group's global scope of activities must be taken into account in relation to taxes on income. Based on operative activities in numerous countries with varying tax laws and administrative interpretation, differentiated assessment is required for determining tax liabilities. Uncertainty may arise due to different interpretations by taxable entities on the one hand and local finance authorities on the other. Uncertain tax assets and liabilities are recognised if their probability of occurrence exceeds 50 %. The best estimate of the expected tax payment is used for reporting purposes; depending on the case in question this will take the form of the most probable result or of the expected value. Although KSB believes it has made a reasonable estimate regarding any tax uncertainties, it is possible that the actual tax obligation will differ from the original estimate.

With regard to future tax benefits, KSB assesses their realisability as at every reporting date. For this reason, deferred tax assets are only recognised if sufficient taxable income is available in future. In assessing this future taxable income within the planning horizon of three to five years it must be

{123}------------------------------------------------

**21**

taken into account that expected future business developments are subject to uncertainties and are in some cases excluded from control by company management (for example changes to applicable tax legislation). If KSB comes to the conclusion that previously reported deferred tax assets cannot be realised because of changed assumptions, then the assets will be written down by the appropriate amount.

#### **Sales revenue recognition over time**

If performance obligations meet the relevant criteria of IFRS 15, KSB recognises revenue from customer contracts over time in line with progress towards completion. The progress towards completion is determined according to the percentage of completion. This requires estimates regarding the total contract costs and revenue including the variable considerations of contract risks as well as other relevant factors. These estimates take into account the empirical values of KSB and are reviewed regularly by those with operative responsibility and adjusted where necessary.

#### **Consideration of sustainability issues (ESG)**

In connection with the ESG sustainability issues – Environmental (E), Social (S) and corporate Governance (G) – estimates are required in the preparation of the consolidated financial statements with regard to the effects on the financial statements. ESG-related aspects did not have a material impact on KSB's net assets, financial position and results of operations in the reporting year. For further information in this context, please refer to the Group's opportunities and risks report as part of the combined management report.

#### **Geopolitical and macroeconomic developments**

The business activities of the KSB Group take place in an increasingly complex and uncertain macroeconomic and geopolitical environment. In particular, the war in Ukraine, the conflicts in the Middle East and especially in the Gaza region, and the China-Taiwan conflict are global flashpoints of key importance for the global economy. The overall picture of the Group's economic environment is characterised by ongoing inflation, increased interest rates as well as volatile share prices and exchange rates. All of these uncertainties are fuelling concerns about a medium-term slowdown in global economic growth in key markets.

The geopolitical and macroeconomic uncertainties accompanying the above-mentioned aspects require a high degree of discretionary assessments and assumptions with regard to their future development and impact on the consolidated financial statements of KSB. The duration and possible escalation of conflicts are decisive with regard to future repercussions for the Group.

{124}------------------------------------------------

taken into account that expected future business developments are subject to uncertainties and are in some cases excluded from control by company management (for example changes to applicable tax legislation). If KSB comes to the conclusion that previously reported deferred tax assets cannot be realised because of changed assumptions, then the assets

**124** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Geopolitical and macroeconomic developments** 

growth in key markets.

cussions for the Group.

The business activities of the KSB Group take place in an increasingly complex and uncertain macroeconomic and geopolitical environment. In particular, the war in Ukraine, the conflicts in the Middle East and especially in the Gaza region, and the China-Taiwan conflict are global flashpoints of key importance for the global economy. The overall picture of the Group's economic environment is characterised by ongoing inflation, increased interest rates as well as volatile share prices and exchange rates. All of these uncertainties are fuelling concerns about a medium-term slowdown in global economic

The geopolitical and macroeconomic uncertainties accompanying the above-mentioned aspects require a high degree of discretionary assessments and assumptions with regard to their future development and impact on the consolidated financial statements of KSB. The duration and possible escalation of conflicts are decisive with regard to future reper-

If performance obligations meet the relevant criteria of IFRS 15, KSB recognises revenue from customer contracts over time in line with progress towards completion. The progress towards completion is determined according to the percentage of completion. This requires estimates regarding the total contract costs and revenue including the variable considerations of contract risks as well as other relevant factors. These estimates take into account the empirical values of KSB and are reviewed regularly by those with operative responsibility

In connection with the ESG sustainability issues – Environmental (E), Social (S) and corporate Governance (G) – estimates are required in the preparation of the consolidated financial statements with regard to the effects on the financial statements. ESG-related aspects did not have a material impact on KSB's net assets, financial position and results of operations in the reporting year. For further information in this context, please refer to the Group's opportunities and risks report as

will be written down by the appropriate amount.

**Sales revenue recognition over time** 

and adjusted where necessary.

**Consideration of sustainability issues (ESG)** 

part of the combined management report.

KSB Group / Annual Report 2023

#### **IV. BALANCE SHEET DISCLOSURES**

#### **1. Intangible assets**

| Statement of changes in intangible assets |        |                                                                                                               |        |          |        |                                        |       |                  |         |                         |  |
|-------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------------------------------------|-------|------------------|---------|-------------------------|--|
| € thousands                               |        | Concessions, industrial property and similar rights and assets, as well as licences in such rights and assets |        | Goodwill |        | Internally generated intangible assets |       | Advance payments |         | Intangible assets Total |  |
| Historical cost                           | 2023   | 2022                                                                                                          | 2023   | 2022     | 2023   | 2022                                   | 2023  | 2022             | 2023    | 2022                    |  |
| Balance at 1 January                      | 79,772 | 74,671                                                                                                        | 32,204 | 31,411   | 43,319 | 40,383                                 | 1,984 | 5,649            | 157,279 | 152,114                 |  |
| Currency translation adjustments          | -759   | 602                                                                                                           | -121   | 793      | –      | –                                      | -3    | 4                | -883    | 1,399                   |  |
| Other                                     | 667    | 10                                                                                                            | 1,405  | –        | –      | –                                      | –     | –                | 2,073   | 10                      |  |
| Additions                                 | 5,181  | 2,633                                                                                                         | –      | –        | 2,696  | 1,552                                  | 1,921 | 1,028            | 9,799   | 5,213                   |  |
| Disposals                                 | -704   | -781                                                                                                          | –      | –        | –      | -13                                    | -83   | -663             | -787    | -1,457                  |  |
| Reclassifications                         | 263    | 2,637                                                                                                         | –      | –        | 393    | 1,397                                  | -656  | -4,034           | –       | –                       |  |
| Balance at 31 December                    | 84,421 | 79,772                                                                                                        | 33,489 | 32,204   | 46,408 | 43,319                                 | 3,163 | 1,984            | 167,481 | 157,279                 |  |
| Accumulated depreciation and amortisation |        |                                                                                                               |        |          |        |                                        |       |                  |         |                         |  |
|                                           | 2023   | 2022                                                                                                          | 2023   | 2022     | 2023   | 2022                                   | 2023  | 2022             | 2023    | 2022                    |  |
| Balance at 1 January                      | 71,398 | 67,363                                                                                                        | 2,403  | 700      | 10,805 | 8,124                                  | –     | –                | 84,606  | 76,187                  |  |
| Currency translation adjustments          | -547   | 576                                                                                                           | -31    | -12      | –      | –                                      | –     | –                | -578    | 564                     |  |
| Other                                     | 194    | 3                                                                                                             | –      | –        | –      | –                                      | –     | –                | 194     | 3                       |  |
| Additions                                 | 4,119  | 4,220                                                                                                         | 678    | 1,715    | 2,815  | 2,694                                  | –     | –                | 7,611   | 8,629                   |  |
| Disposals                                 | -69    | -764                                                                                                          | –      | –        | –      | -13                                    | –     | –                | -69     | -777                    |  |
| Reclassifications                         | –      | –                                                                                                             | –      | –        | –      | –                                      | –     | –                | –       | –                       |  |
| Balance at 31 December                    | 75,095 | 71,398                                                                                                        | 3,050  | 2,403    | 13,620 | 10,805                                 | –     | –                | 91,765  | 84,606                  |  |
| Carrying amount at 31 December            | 9,326  | 8,374                                                                                                         | 30,439 | 29,801   | 32,788 | 32,514                                 | 3,163 | 1,984            | 75,716  | 72,673                  |  |

The additions to intangible assets amounting to € 9.8 million (previous year: € 5.2 million) are distributed among various software applications.

The "Concessions, industrial property and similar rights and assets, as well as licences in such rights and assets" item includes € 6.5 million (previous year: € 7.7 million) of software including software licences valid for a limited period. As in the previous year, there are no restrictions on ownership or use.

The increase of € 1,405 thousand in the acquisition costs for goodwill in the "Other" line results from the acquired goodwill as part of the acquisition of DAG - Dieselanlagen Service GmbH, Oberwaltersdorf (Austria).

**21**

KSB reported internally generated intangible assets of € 32,788 thousand (previous year: € 32,514 thousand). These are primarily attributable to the KSBase sales software.

In the reporting year, impairment losses on intangible assets amounting to € 786 thousand (previous year: € 1,715 thousand) were recognised, of which € 678 thousand related to goodwill (previous year: € 1,715 thousand). The impairment losses were recognised in the income statement under depreciation and amortisation expense. Further details on the goodwill impairments are provided in the following explanations on impairment testing under IAS 36.

{125}------------------------------------------------

**23**

As in the previous year, no product-related development costs were capitalised in the reporting year because not all of the comprehensive recognition criteria defined in IAS 38 were met.

#### **IMPAIRMENT TESTING UNDER IAS 36**

The date defined by KSB for the mandatory annual impairment testing for goodwill is 30 September of each year. The impairment testing methodology is explained in more detail in Section III. Accounting Policies in the "Intangible assets" subsection.

In the previous year, impairment testing was also carried out for goodwill as at 31 December 2022 to take account of identified indications for a possible impairment of assets as defined in IAS 36. The following information on the basic assumptions and parameters, the goodwill impairments and the sensitivity analyses therefore relates to the reporting year as at 30 September 2023 and to the previous year as at 31 December 2022.

#### **Basic assumptions and parameters**

The carrying amounts of the cash-generating units in connection with the impairment testing of goodwill do not contain any items relating to income tax or financing activities.

To determine the discount factor, the weighted average cost of capital (WACC) method is applied in conjunction with the capital asset pricing model (CAPM), taking into account a peer group. Under this method, first the cost of equity is determined using CAPM and the borrowing costs are defined, and then the individual capital components are weighted in accordance with the capital structure taking account of the peer group. The peer group information includes aspects like beta factors, capital structure data and borrowing costs. The peer group includes companies that are similar to the Group in terms of industry, size and activity. To account for changes in market parameters, the composition of the peer group is reviewed at regular intervals and adjusted if necessary (e.g. due to changes in the business model of either the cash-generating unit or the comparable company being looked at).

The interest rate for risk-free 30-year Bunds was used as a base rate. This rate was 2.7 % in the reporting year (previous year: 2.0 %). The market risk premium was set at 6.7 % (previous year: 7.2 %), with a beta factor of 1.25 (previous year: 1.22). In addition, country-specific tax rates and country risk premiums are taken into account individually for each cashgenerating unit (CGU). The growth rate for the cashgenerating units in the reporting year was generally set at 1.5 % (previous year: 0.5 %). The regular review of the peer group did not generate any new findings in relation to the business models of comparative companies. The peer group for examining the weighted capital cost factor therefore remained the same as in the previous year.

{126}------------------------------------------------

group. Under this method, first the cost of equity is determined using CAPM and the borrowing costs are defined, and then the individual capital components are weighted in accordance with the capital structure taking account of the peer group. The peer group information includes aspects like beta factors, capital structure data and borrowing costs. The peer group includes companies that are similar to the Group in terms of industry, size and activity. To account for changes in market parameters, the composition of the peer group is reviewed at regular intervals and adjusted if necessary (e.g. due to changes in the business model of either the cash-generating

unit or the comparable company being looked at).

the same as in the previous year.

The interest rate for risk-free 30-year Bunds was used as a base rate. This rate was 2.7 % in the reporting year (previous year: 2.0 %). The market risk premium was set at 6.7 % (previous year: 7.2 %), with a beta factor of 1.25 (previous year: 1.22). In addition, country-specific tax rates and country risk premiums are taken into account individually for each cashgenerating unit (CGU). The growth rate for the cashgenerating units in the reporting year was generally set at 1.5 % (previous year: 0.5 %). The regular review of the peer group did not generate any new findings in relation to the business models of comparative companies. The peer group for examining the weighted capital cost factor therefore remained

As in the previous year, no product-related development costs were capitalised in the reporting year because not all of the comprehensive recognition criteria defined in IAS 38 were

**126** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

The date defined by KSB for the mandatory annual impairment testing for goodwill is 30 September of each year. The impairment testing methodology is explained in more detail in Section III. Accounting Policies in the "Intangible assets" sub-

In the previous year, impairment testing was also carried out for goodwill as at 31 December 2022 to take account of identified indications for a possible impairment of assets as defined in IAS 36. The following information on the basic assumptions and parameters, the goodwill impairments and the sensitivity analyses therefore relates to the reporting year as at 30 September 2023 and to the previous year as at 31 December

The carrying amounts of the cash-generating units in connection with the impairment testing of goodwill do not contain any items relating to income tax or financing activities.

To determine the discount factor, the weighted average cost of capital (WACC) method is applied in conjunction with the capital asset pricing model (CAPM), taking into account a peer

**IMPAIRMENT TESTING UNDER IAS 36** 

**Basic assumptions and parameters** 

met.

section.

2022.

KSB Group / Annual Report 2023

#### **Basic parameters for the impairment testing of goodwill considered material (30 September 2023)**

|                                                                                     | Carrying<br>amount of<br>goodwill | Percentage of<br>total carrying<br>amount of<br>goodwill |              | Planning<br> |                                            |             |
|-------------------------------------------------------------------------------------|-----------------------------------|----------------------------------------------------------|--------------|--------------|--------------------------------------------|-------------|
| Name of CGU                                                                         | € thousands                       | goodwill                                                 | Method       | time horizon | Discount rate                              | Growth rate |
| KSB SupremeServ operating segment of<br>D.P. Industries B.V., Netherlands           | 10,146                            | 33 %                                                     | Value in use | 5 years      | 14.1 % before<br>tax /<br>10.9 % after tax | 1.5 %       |
| Standard Markets Pumps operating<br>segment of D.P. Industries B.V.,<br>Netherlands | 8,139                             | 27 %                                                     | Value in use | 5 years      | 14.3 % before<br>tax /<br>10.9 % after tax | 1.5 %       |

#### **Basic parameters for the impairment testing of goodwill considered material (31 December 2022)**

| Name of CGU                                                                         | Carrying amount of<br>€ thousands | Percentage of total carrying<br>amount of goodwill | Method       | Planning time horizon | Discount rate                              | Growth rate |
|-------------------------------------------------------------------------------------|-----------------------------------|----------------------------------------------------|--------------|-----------------------|--------------------------------------------|-------------|
| KSB SupremeServ operating segment of<br>D.P. Industries B.V., Netherlands           | 10,146                            | 34 %                                               | Value in use | 5 years               | 14.1 % before<br>tax /<br>10.6 % after tax | 0.5 %       |
| Standard Markets Pumps operating<br>segment of D.P. Industries B.V.,<br>Netherlands | 8,139                             | 27 %                                               | Value in use | 5 years               | 14.1 % before<br>tax /<br>10.6 % after tax | 0.5 %       |

#### **Impairment of goodwill in the 2023 financial year**

| Name of CGU                                                                               | Segment         | Discount rate (before taxes) | Discount rate (after taxes) | Recoverable amount (€ thousands) | Impairment loss (€ thousands) |
|-------------------------------------------------------------------------------------------|-----------------|------------------------------|-----------------------------|----------------------------------|-------------------------------|
| KSB SupremeServ operating segment of<br>Dynamik-Pumpen GmbH, Germany                      | KSB SupremeServ | 15.0 %                       | 10.9 %                      | 3,226                            | 249                           |
| Standard Markets Pumps operating segment of<br>KAGEMA Industrieausrüstungen GmbH, Germany | Pumps           | 15.7 %                       | 10.9 %                      | 2,404                            | 429                           |
| Total                                                                                     |                 |                              |                             |                                  | 678                           |

The goodwill from the Standard Markets Pumps operating segment of KAGEMA Industrieausrüstungen GmbH, Germany, was fully amortised in the reporting year.

#### **Disclosures on material goodwill items**

**23**

D.P. Industries B.V., Alphen aan den Rijn, Netherlands, represents the only goodwill considered material from the Group's perspective, both in the reporting year and in the previous year, totalling € 18,285 thousand.

In addition, the carrying amount of the other goodwill of € 12,154 thousand is spread over a large number of the Group's cash-generating units. There are no other significant carrying amounts of individual goodwill in relation to the total carrying amount of the Group's goodwill.

The basic parameters for the impairment testing of material goodwill are summarised in the tables above.

The Group's material assumptions impacting cash flows from the multi-year financial plan on which the impairment test as at 30 September 2023 is based relate to the performance of order intake, sales revenue and earnings before finance income / expense and taxes (EBIT). For all three of the abovementioned key indicators, tangible growth was projected in all five years of the detailed planning period, both for the KSB SupremeServ operating segment and for the Standard Markets operating segment for new business with pumps of D.P. Industries B.V. The assessments take into account the company's own experience-based knowledge of competitors and markets as well as published economic data collected externally.

#### **Impairment loss on goodwill**

The impairment losses on goodwill recognised in the reporting year are shown in the "Impairment loss on goodwill in the 2023 financial year" table. Impairment testing for goodwill in the previous year resulted in an impairment requirement of € 1,715 thousand.

**Impairment of goodwill in the 2023 financial year** 

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Combined Management Re

**25**

#### **Sensitivity analyses**

For the cash-generating units in the form of the operating segments Standard Markets for new pump business and KSB SupremeServ of D.P. Industries B.V., with goodwill considered material from the Group's perspective, additional sensitivity analyses were performed based on the parameters as at 30 September 2023. As in the previous year, the following assumptions were made: a 15 % increase in the cost of capital (Sensitivity 1), a reduction in the growth rate to 0.0 % (Sensitivity 2) and a reduction in sales revenue of 10 % with the corresponding impact on expense items and performance indicators (Sensitivity 3).

As in the previous year, the sensitivity analyses did not reveal any impairment requirement in the reporting year.

#### **2. Right-of-use assets**

| € thousands                                                 | 31 Dec. 2023 | 31 Dec. 2022 |
|-------------------------------------------------------------|--------------|--------------|
| Right-of-use assets                                         | 46,939       | 40,220       |
| of which land and buildings                                 | 30,576       | 28,456       |
| of which technical equipment<br>and machinery               | 783          | 979          |
| of which other equipment,<br>operating and office equipment | 15,579       | 10,785       |

Additions to right-of-use assets in the reporting year amounted to € 25,891 thousand (previous year: € 15,340 thousand).

as follows:

| € thousands                                                 | 2023   | 2022   |
|-------------------------------------------------------------|--------|--------|
| Depreciation on<br>right-of-use assets                      | 18,445 | 16,917 |
| of which land and buildings                                 | 11,065 | 9,734  |
| of which technical equipment<br>and machinery               | 379    | 418    |
| of which other equipment,<br>operating and office equipment | 7,001  | 6,765  |

Write-downs for the reporting year include impairment losses on rights to use land and buildings in the KSB SupremeServ Segment amounting to € 201 thousand. There were no impairments on right-of-use assets in the previous year.

{128}------------------------------------------------

**Sensitivity analyses** 

indicators (Sensitivity 3).

KSB Group / Annual Report 2023

For the cash-generating units in the form of the operating segments Standard Markets for new pump business and KSB SupremeServ of D.P. Industries B.V., with goodwill considered material from the Group's perspective, additional sensitivity analyses were performed based on the parameters as at 30 September 2023. As in the previous year, the following assumptions were made: a 15 % increase in the cost of capital (Sensitivity 1), a reduction in the growth rate to 0.0 % (Sensitivity 2) and a reduction in sales revenue of 10 % with the corresponding impact on expense items and performance

**128** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**2. Right-of-use assets** 

of which technical equipment

of which other equipment,

as follows:

**Depreciation on** 

of which technical equipment

of which other equipment,

**€ thousands 31 Dec. 2023 31 Dec. 2022 Right-of-use assets 46,939 40,220**  of which land and buildings 30,576 28,456

and machinery 783 979

operating and office equipment 15,579 10,785

Additions to right-of-use assets in the reporting year amounted to € 25,891 thousand (previous year: € 15,340 thousand).

Depreciation on right-of-use assets in the reporting year was

**€ thousands 2023 2022** 

**right-of-use assets 18,445 16,917**  of which land and buildings 11,065 9,734

and machinery 379 418

operating and office equipment 7,001 6,765

Write-downs for the reporting year include impairment losses on rights to use land and buildings in the KSB SupremeServ Segment amounting to € 201 thousand. There were no impair-

ments on right-of-use assets in the previous year.

As in the previous year, the sensitivity analyses did not reveal

any impairment requirement in the reporting year.

#### **3. Property, plant and equipment**

| € thousands          |         | Land and buildings |         | Plant and machinery |         | Other equipment,<br>operating and<br>office equipment |         | Advance payments<br>and assets under<br>construction* |           | Property, plant<br>and equipment |
|----------------------|---------|--------------------|---------|---------------------|---------|-------------------------------------------------------|---------|-------------------------------------------------------|-----------|----------------------------------|
| Historical cost      | 2023    | 2022               | 2023    | 2022                | 2023    | 2022                                                  | 2023    | 2022                                                  | 2023      | 2022                             |
| Balance at 1 January | 509,342 | 461,545            | 680,423 | 629,990             | 259,540 | 244,123                                               | 50,463  | 67,599                                                | 1,499,768 | 1,403,257                        |
| Currency translation |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| adjustments          | -9,156  | 4,190              | -12,572 | 7,342               | -4,845  | 1,586                                                 | -1,072  | 2,403                                                 | -27,644   | 15,520                           |
| Other                | –       | –                  | 53      | 49                  | 565     | 88                                                    | –       | –                                                     | 618       | 136                              |
| Additions            | 19,753  | 19,597             | 22,404  | 22,737              | 22,952  | 20,525                                                | 34,761  | 38,138                                                | 99,871    | 100,997                          |
| Disposals            | -3,254  | -1,288             | -12,621 | -9,423              | -13,040 | -9,339                                                | -203    | -93                                                   | -29,118   | -20,142                          |
| Reclassifications    | 14,335  | 25,299             | 17,346  | 29,728              | 6,438   | 2,557                                                 | -38,119 | -57,584                                               | –         | –                                |
| Balance at           |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| 31 December          | 531,021 | 509,342            | 695,033 | 680,423             | 271,611 | 259,540                                               | 45,829  | 50,463                                                | 1,543,494 | 1,499,768                        |
|                      |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| Accumulated          |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| depreciation and     |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| amortisation         | 2023    | 2022               | 2023    | 2022                | 2023    | 2022                                                  | 2023    | 2022                                                  | 2023      | 2022                             |
| Balance at 1 January | 236,082 | 218,176            | 497,936 | 471,946             | 187,239 | 175,349                                               | –       | –                                                     | 921,256   | 865,471                          |
| Currency translation |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| adjustments          | -3,400  | 1,602              | -8,098  | 6,287               | -3,248  | 1,597                                                 | –       | –                                                     | -14,746   | 9,486                            |
| Other                | –       | –                  | 47      | 38                  | 319     | 58                                                    | –       | –                                                     | 366       | 97                               |
| Additions            | 12,466  | 16,476             | 29,458  | 28,664              | 20,113  | 19,733                                                | –       | –                                                     | 62,038    | 64,872                           |
| Disposals            | -2,725  | -744               | -12,440 | -9,168              | -12,421 | -8,758                                                | –       | –                                                     | -27,585   | -18,670                          |
| Reclassifications    | –       | 571                | 106     | 169                 | -106    | -740                                                  | –       | –                                                     | –         | –                                |
| Balance at           |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| 31 December          | 242,423 | 236,082            | 507,010 | 497,936             | 191,896 | 187,239                                               | –       | –                                                     | 941,328   | 921,256                          |
| Carrying amount at   |         |                    |         |                     |         |                                                       |         |                                                       |           |                                  |
| 31 December          | 288,598 | 273,261            | 188,023 | 182,488             | 79,715  | 72,302                                                | 45,829  | 50,463                                                | 602,166   | 578,512                          |

#### **Statement of changes in property, plant and equipment**

\* The carrying amount of advance payments on property, plant and equipment as at the reporting date is € 13,913 thousand (previous year: € 11,051 thousand).

Impairment losses on property, plant and equipment of € 1,490 thousand (previous year: € 3,879 thousand) were recognised in the reporting year. Of this amount, € 398 thousand (previous year: € 3,549 thousand) was attributable to land and buildings, € 900 thousand (previous year: € 222 thousand) to technical equipment and machinery, and € 192 thousand (previous year: € 108 thousand) to other equipment and operating and office equipment. The Pumps Segment was affected by the impairments in the amount of € 935 thousand (previous year: € 1,912 thousand), the KSB SupremeServ Segment in the amount of € 555 thousand (previous year: € 1,532 thousand) and the Valves Segment in the previous year in the amount of € 435 thousand. The impairment losses are reported in the income statement under depreciation and amortisation.

The reversals of impairment losses on property, plant and equipment in the reporting year amounted to € 2,194

**25**

thousand. Of this amount, € 1,676 thousand was attributable to land and buildings, € 444 thousand to technical equipment and machinery, and € 73 thousand to other equipment and operating and office equipment. The reversals of impairment losses on property, plant and equipment were recognised for the Pumps Segment in the amount of € 1,811 thousand, the Depreciation on right-of-use assets in the reporting year was Valves Segment in the amount of € 300 thousand and the KSB

There were no material reversals of impairment losses on property, plant and equipment in the previous year.

Disposals of intangible assets and items of property, plant and equipment resulted in book gains of € 867 thousand (previous year: € 1,057 thousand) and book losses of € 1,021 thousand (previous year: € 752 thousand). The book gains and losses are reported in the income statement under other income and other expenses.

{129}------------------------------------------------

**27**

#### **4. Non-current financial assets**

The non-current financial assets in the amount of € 1,227 thousand (previous year: € 1,191 thousand) were mainly accounted for by loans to equity investments with € 1,018 thousand (previous year: € 1,105 thousand).

In the reporting year, as in the previous year, no material impairment losses on loans were recognised, because no significant default risks were identified.

#### **5. Other non-financial assets**

| € thousands            | 31 Dec. 2023 | 31 Dec. 2022 |
|------------------------|--------------|--------------|
| Other investments      | 3,699        | 3,801        |
| Defined benefit assets | 4,029        | 3,518        |
|                        | 7,728        | 7,319        |

Other investments are investments in affiliates that were not consolidated due to there being no material impact. As in the previous year, there was no depreciation and amortisation applied in the reporting year.

#### **6. Investments accounted for using the equity method**

The following table lists the KSB Group's material joint ventures. "Seat" refers to the country in which the main activity is performed. All joint ventures and associates are accounted for using the equity method and can also be found in the list of shareholdings in these Notes to the Consolidated Financial Statements. The share of capital corresponds to the share of voting rights.

**Material joint ventures** 

Neither of the two material joint ventures is listed on a stock market, which is why there is no active market.

Summarised financial information on these material joint ventures of the KSB Group and a combined summary for all the individually immaterial joint ventures and associated companies are provided in the following tables:

- **Summarised balance sheet**
- **Summarised statement of comprehensive income**
- **Reconciliation to carrying amount of Group share in joint ventures**
- **Summarised information on joint ventures and associates that are immaterial individually**

As in the previous year, there are no pro rata losses that have not been recognised from the consolidation at equity.

{130}------------------------------------------------

**4. Non-current financial assets** 

thousand (previous year: € 1,105 thousand).

significant default risks were identified.

**5. Other non-financial assets** 

applied in the reporting year.

KSB Group / Annual Report 2023

The non-current financial assets in the amount of € 1,227 thousand (previous year: € 1,191 thousand) were mainly accounted for by loans to equity investments with € 1,018

In the reporting year, as in the previous year, no material impairment losses on loans were recognised, because no

**€ thousands 31 Dec. 2023 31 Dec. 2022**  Other investments 3,699 3,801 Defined benefit assets 4,029 3,518

Other investments are investments in affiliates that were not consolidated due to there being no material impact. As in the previous year, there was no depreciation and amortisation

**7,728 7,319** 

**130** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**6. Investments accounted for using the equity method**  The following table lists the KSB Group's material joint ventures. "Seat" refers to the country in which the main activity is performed. All joint ventures and associates are accounted for using the equity method and can also be found in the list of shareholdings in these Notes to the Consolidated Financial Statements. The share of capital corresponds to the

Neither of the two material joint ventures is listed on a stock

Summarised financial information on these material joint ventures of the KSB Group and a combined summary for all the individually immaterial joint ventures and associated

market, which is why there is no active market.

companies are provided in the following tables:

**Summarised statement of comprehensive income** 

**Reconciliation to carrying amount of Group share in joint** 

**Summarised information on joint ventures and associates that** 

As in the previous year, there are no pro rata losses that have

not been recognised from the consolidation at equity.

share of voting rights. **Material joint ventures** 

**Summarised balance sheet** 

**are immaterial individually** 

**ventures** 

#### **Material joint ventures**

| Name and seat                                                         | Capital share | Nature of the entity's relationship                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------------------------------|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| KSB Pumps Arabia Ltd.,<br>Saudi Arabia                                | 50.00 %       | KSB Pumps Arabia Ltd. in Riyadh, Saudi Arabia, offers a wide range of services and activities for the energy market<br>as well as in water, waste water and building services applications. The portfolio includes business development<br>and marketing, supply chain management, production of pressure booster systems and pump sets, sale of pumps,<br>valves and systems and technical service activities. KSB Pumps Arabia Ltd. is important for the growth of the Group<br>in the Saudi Arabian market. |
| Shanghai Electric-KSB<br>Nuclear Pumps and Valves<br>Co., Ltd., China | 45.00 %       | Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd. in Shanghai, China, produces suitable auxiliary pumps<br>for the secondary coolant circuits and modern reactor coolant pumps for the primary cooling circuits of nuclear<br>power stations. Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd. is a strategic partnership on the part of<br>the Group, through which KSB is participating in the expansion of energy capacity in China and other Asian markets.                                 |

#### **Summarised balance sheet**

**27**

|                                                                                         | KSB Pumps Arabia Ltd. |         | Shanghai Electric-KSB Nuclear<br>Pumps and Valves Co., Ltd. |          |
|-----------------------------------------------------------------------------------------|-----------------------|---------|-------------------------------------------------------------|----------|
| € thousands                                                                             | 2023                  | 2022    | 2023                                                        | 2022     |
| Non-current assets                                                                      | 9,864                 | 10,208  | 76,663                                                      | 75,689   |
| Current assets                                                                          | 45,294                | 35,671  | 196,481                                                     | 189,834  |
| of which cash and cash equivalents                                                      | 2,728                 | 1,700   | 42,144                                                      | 23,471   |
| Non-current liabilities                                                                 | -7,539                | -1,557  | -6,369                                                      | -6,795   |
| of which non-current financial liabilities<br>(excluding trade payables and provisions) | -6,109                | -87     | -6,369                                                      | -6,795   |
| Current liabilities                                                                     | -33,987               | -33,067 | -223,564                                                    | -218,280 |
| of which current financial liabilities<br>(excluding trade payables and provisions)     | -10,354               | -9,916  | -12,737                                                     | -13,590  |
| Net assets                                                                              | 13,632                | 11,255  | 43,212                                                      | 40,448   |

#### **Summarised statement of comprehensive income**

|                                                   | KSB Pumps Arabia Ltd. |        | Shanghai Electric-KSB Nuclear<br>Pumps and Valves Co., Ltd. |        |
|---------------------------------------------------|-----------------------|--------|-------------------------------------------------------------|--------|
| € thousands                                       | 2023                  | 2022   | 2023                                                        | 2022   |
| Sales revenue                                     | 40,060                | 32,316 | 86,284                                                      | 91,895 |
| Depreciation / amortisation                       | 1,023                 | 1,023  | 4,855                                                       | 4,859  |
| Interest income                                   | –                     | –      | 208                                                         | 134    |
| Interest expense                                  | -934                  | -514   | -650                                                        | -993   |
| Earnings from continuing operations               | 2,674                 | 2,633  | 2,015                                                       | 5,112  |
| Taxes on income                                   | -407                  | -519   | 3,420                                                       | -998   |
| Earnings after taxes from continuing operations   | 2,268                 | 2,115  | 5,435                                                       | 4,114  |
| Earnings after taxes from discontinued operations | –                     | –      | –                                                           | –      |
| Other comprehensive income                        | 110                   | 427    | -2,671                                                      | -985   |
| Comprehensive income                              | 2,378                 | 2,542  | 2,764                                                       | 3,129  |
| Dividends received from joint ventures            | –                     | –      | –                                                           | –      |

{131}------------------------------------------------

#### **Reconciliation to carrying amount of Group share in joint ventures**

|                                               |  | KSB Pumps Arabia Ltd, |        | Shanghai Electric-KSB Nuclear<br>Pumps and Valves Co,, Ltd, |        |
|-----------------------------------------------|--|-----------------------|--------|-------------------------------------------------------------|--------|
| € thousands                                   |  | 2023                  | 2022   | 2023                                                        | 2022   |
| Net carrying amount at 1 January              |  | 11,255                | 8,713  | 40,448                                                      | 37,319 |
| Earnings after income tax                     |  | 2,268                 | 2,115  | 5,435                                                       | 4,114  |
| Distribution of dividends                     |  | –                     | –      | –                                                           | –      |
| Other comprehensive income                    |  | 110                   | 427    | -2,671                                                      | -985   |
| Net carrying amount at 31 December            |  | 13,633                | 11,255 | 43,212                                                      | 40,448 |
| Investment in joint venture (50 % / 45 %)     |  | 6,817                 | 5,628  | 19,445                                                      | 18,202 |
| Elimination of intercompany profit and loss * |  | -1,123                | -870   | -6,880                                                      | -7,694 |
| Goodwill                                      |  | –                     | –      | –                                                           | –      |
| Carrying amount at 31 December                |  | 5,693                 | 4,757  | 12,565                                                      | 10,508 |

\* The cumulative effects shown as elimination of intercompany profits and loss in the reconciliation to the carrying amount of KSB's investment in Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd., Shanghai, China, result from eliminations in connection with the oncharging of product licences from KSB SE & Co. KGaA, Frankenthal/Pfalz, to this joint venture.

#### **Summarised information on joint ventures and associates that are immaterial individually**

|                                                              | Joint ventures | Associates |            | Joint ventures | Associates |            |
|--------------------------------------------------------------|----------------|------------|------------|----------------|------------|------------|
| € thousands                                                  | 2023           | 2023       | Total 2023 | 2022           | 2022       | Total 2022 |
| Group share of earnings from<br>continuing operations        | 597            | 1,033      | 1,630      | 126            | 794        | 920        |
| Group share of other<br>comprehensive income                 | -192           | –          | -192       | 214            | –          | 214        |
| Group share of comprehensive income                          | 405            | 1,033      | 1,438      | 340            | 794        | 1,134      |
| Elimination of intercompany<br>profit and loss               | 39             | –          | 39         | -263           | –          | -263       |
| Dividend distributed to the Group                            | -49            | -774       | -823       | –              | -625       | -625       |
| Total carrying amounts of Group<br>shares in these companies | 4,429          | 1,793      | 6,222      | 4,033          | 1,535      | 5,568      |

#### **7. Inventories**

| € thousands                                               | 31 Dec. 2023 | 31 Dec. 2022 |
|-----------------------------------------------------------|--------------|--------------|
| Raw materials and<br>production supplies                  | 268,175      | 257,070      |
| Work in progress                                          | 261,167      | 222,631      |
| Finished goods and goods<br>purchased and held for resale | 196,200      | 216,254      |
| Advance payments                                          | 22,851       | 23,266       |
|                                                           | 748,393      | 719,221      |

As at the reporting date, inventories amounting to € 57,263 thousand (previous year: € 51,018 thousand) are carried at net realisable value.

The impairment losses on inventories recognised as an expense in the reporting period amount to € 21,847 thousand (previous year: € 21,792 thousand).

Reversals of impairments on inventories in the amount of € 7,946 thousand (previous year: € 3,979 thousand) resulted from increased net realisable values compared with the previous year. Impairment losses and reversals of impairment losses on inventories are recognised in the income statement under cost of materials and changes in inventories.

Inventories amounting to € 1,129,380 thousand (previous year: € 1,056,880 thousand) were recognised as an expense in the reporting period.

Of the inventories as at the reporting date, work in progress and finished goods amounting to a total of € 88,664 thousand SupremeServ Segment in the amount of € 83 thousand. than one year.

{132}------------------------------------------------

**Reconciliation to carrying amount of Group share in joint ventures** 

**KSB Pumps Arabia Ltd,** 

**Joint ventures 2022** 

Reversals of impairments on inventories in the amount of € 7,946 thousand (previous year: € 3,979 thousand) resulted from increased net realisable values compared with the previous year. Impairment losses and reversals of impairment losses on inventories are recognised in the income statement

Inventories amounting to € 1,129,380 thousand (previous year: € 1,056,880 thousand) were recognised as an expense in

Of the inventories as at the reporting date, work in progress and finished goods amounting to a total of € 88,664 thousand (previous year: € 87,023 thousand) have a maturity of more

under cost of materials and changes in inventories.

the reporting period.

than one year.

**€ thousands 2023 2022 2023 2022**  Net carrying amount at 1 January 11,255 8,713 40,448 37,319 Earnings after income tax 2,268 2,115 5,435 4,114 Distribution of dividends – – – – Other comprehensive income 110 427 −2,671 −985 **Net carrying amount at 31 December 13,633 11,255 43,212 40,448**  Investment in joint venture (50 % / 45 %) 6,817 5,628 19,445 18,202 Elimination of intercompany profit and loss \* −1,123 −870 −6,880 −7,694 Goodwill – – – – **Carrying amount at 31 December 5,693 4,757 12,565 10,508**  \* The cumulative effects shown as elimination of intercompany profits and loss in the reconciliation to the carrying amount of KSB's investment in Shanghai Electric-KSB Nuclear Pumps and Valves

Co., Ltd., Shanghai, China, result from eliminations in connection with the oncharging of product licences from KSB SE & Co. KGaA, Frankenthal/Pfalz, to this joint venture.

**132** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Associates** 

**2023 Total 2023** 

continuing operations 597 1,033 **1,630** 126 794 **920** 

comprehensive income −192 – **−192** 214 – **214**  Group share of comprehensive income 405 1,033 **1,438** 340 794 **1,134** 

profit and loss 39 – **39** −263 – **−263** Dividend distributed to the Group −49 −774 **−823** – −625 **−625**

**shares in these companies 4,429 1,793 6,222 4,033 1,535 5,568** 

**Summarised information on joint ventures and associates that are immaterial individually** 

**Joint ventures 2023** 

**€ thousands 31 Dec. 2023 31 Dec. 2022** 

production supplies 268,175 257,070 Work in progress 261,167 222,631

purchased and held for resale 196,200 216,254 Advance payments 22,851 23,266

As at the reporting date, inventories amounting to € 57,263 thousand (previous year: € 51,018 thousand) are carried at net

The impairment losses on inventories recognised as an expense in the reporting period amount to € 21,847 thousand

**748,393 719,221** 

**€ thousands** 

Group share of earnings from

Elimination of intercompany

**Total carrying amounts of Group** 

Group share of other

**7. Inventories** 

Raw materials and

realisable value.

KSB Group / Annual Report 2023

(previous year: € 21,792 thousand).

Finished goods and goods

**Shanghai Electric-KSB Nuclear Pumps and Valves Co,, Ltd,** 

**Associates** 

**2022 Total 2022** 

**29**

#### **8. Contract assets, trade receivables and other financial and non-financial assets**

| € thousands                                | 31 Dec. 2023 | 31 Dec. 2022 |
|--------------------------------------------|--------------|--------------|
| Contract assets                            | 58,969       | 80,018       |
| Trade receivables                          | 554,583      | 579,539      |
| Trade receivables from third parties *     | 505,795      | 530,156      |
| Trade receivables from related parties *   | 48,787       | 49,383       |
| Other financial assets                     | 70,888       | 71,517       |
| Receivables from loans to related parties  | 4,652        | 2,498        |
| Currency forwards                          | 2,325        | 2,970        |
| Other receivables and other current assets | 63,912       | 66,050       |
| Other non-financial assets                 | 44,272       | 42,203       |
| Other tax assets                           | 33,577       | 31,470       |
| Deferred income                            | 10,694       | 10,733       |

\* In the presentation in the 2022 Annual Report, trade receivables from third parties as at 31 December 2022 included items amounting to € 104 thousand from related parties. By introducing a separate item for all trade receivables from related parties, a clear distinction is now made from balances with third parties to increase transparency. The previous year's figure for trade receivables from third parties has been adjusted accordingly in this and the other relevant tables in this section. The change in presentation has no impact on the total value of trade receivables from related parties itemised for the previous year in Section IX. Other Disclosures.

Contract assets at the end of the reporting year totalled € 58,969 thousand (previous year: € 80,018 thousand). This decline is due to the fact that KSB's contract progress fell more sharply than the related advance payments received as at the reporting date. Impairment losses on contract assets amounted to € 1,599 thousand (previous year: € 1,609 thousand). Of the contract assets as at the reporting date, € 12,361 thousand (previous year: € 17,482 thousand) relate to project orders with customers whose completion is not expected until more than one year after the reporting date.

Impairment losses of € 33,781 thousand (previous year: € 32,833 thousand) were recognised on trade receivables from third parties as at the reporting date.

Impairment losses on trade receivables and contract assets include the individual impairment allowance (EWB) and risk provisions for expected credit losses (ECL).

**Impairment losses on trade receivables from third parties** 

| € thousands                                                      | 31 Dec. 2023 | 31 Dec. 2022 |
|------------------------------------------------------------------|--------------|--------------|
| Gross carrying amount of trade<br>receivables from third parties | 539,576      | 562,989      |
| of which unhedged receivables                                    | 373,723      | 404,621      |
| of which hedged receivables                                      | 165,853      | 158,368      |
| Individual impairment<br>allowance (EWB)                         | -29,713      | -29,380      |
| Risk provisions for expected<br>credit losses (ECL)              | -4,068       | -3,453       |
| of which ECL for<br>unhedged receivables                         | -3,347       | -2,855       |
| of which ECL for<br>hedged receivables                           | -721         | -598         |
| Net carrying amount of trade<br>receivables from third parties   | 505,795      | 530,156      |

{133}------------------------------------------------

**31**

#### **Impairment losses on contract assets**

|                              |         | 31 Dec. 2023 | 31 Dec. 2022 |
|------------------------------|---------|--------------|--------------|
| Gross carrying amount        | € thou- |              |              |
| of contract assets           | sands   | 60,568       | 81,627       |
| Individual impairment        | € thou- |              |              |
| allowance (EWB)              | sands   | -1,150       | -1,258       |
| Risk provisions for expected | € thou- |              |              |
| credit losses (ECL)          | sands   | -449         | -351         |
| Net carrying amount          | € thou- |              |              |
| of contract assets           | sands   | 58,969       | 80,018       |
|                              |         |              |              |
| Expected default risk        |         |              |              |
| in relation to ECL           | in %    | 0.7          | 0.4          |

Impairment losses of € 151 thousand (previous year: € 87 thousand) were recognised on trade receivables from related parties as at the reporting date. The impairment losses relate entirely to receivables from other investments. There were no impairment losses on receivables from loans to related parties as at the reporting date (previous year: € 320 thousand).

For further information on relationships with related parties, please refer to the relevant details in Section IX. Other Disclosures.

The reconciliation of impairment losses on trade receivables from third parties and contract assets between the opening and closing balance sheets is shown in the following tables.

#### **Reconciliation of impairment losses 2023**

|                                | Trade receivables from third parties |        |         | Contract assets |      |        |
|--------------------------------|--------------------------------------|--------|---------|-----------------|------|--------|
| € thousands                    | EWB                                  | ECL    | Total   | EWB             | ECL  | Total  |
| Opening balance at 1 January   | −29,380                              | −3,453 | −32,833 | −1,258          | −351 | −1,609 |
| Additions                      | −12,216                              | −2,221 | −14,437 | −168            | −226 | −393   |
| Utilised                       | 2,239                                | –      | 2,239   | –               | –    | –      |
| Reversal                       | 8,281                                | 1,292  | 9,572   | –               | 75   | 75     |
| Currency translation / Other   | 1,363                                | 315    | 1,678   | 276             | 52   | 328    |
| Closing balance at 31 December | −29,713                              | −4,068 | −33,781 | −1,150          | −449 | −1,599 |

#### **Reconciliation of impairment losses 2022**

|                                | Trade receivables from third parties |        |         | Contract assets |      |        |
|--------------------------------|--------------------------------------|--------|---------|-----------------|------|--------|
| € thousands                    | EWB                                  | ECL    | Total   | EWB             | ECL  | Total  |
| Opening balance at 1 January   | −32,165                              | −3,016 | −35,181 | −1,211          | −419 | −1,630 |
| Additions                      | −8,210                               | −1,239 | −9,449  | −298            | −96  | −394   |
| Utilised                       | 944                                  | –      | 944     | –               | –    | –      |
| Reversal                       | 9,577                                | 615    | 10,192  | 8               | 111  | 119    |
| Currency translation / Other   | 474                                  | 187    | 661     | 243             | 54   | 296    |
| Closing balance at 31 December | −29,380                              | −3,453 | −32,833 | −1,258          | −351 | −1,609 |

{134}------------------------------------------------

**Impairment losses on contract assets** 

**€ thou-**

**€ thou-**

**€ thou-**

**€ thou-**

in relation to ECL **in %** 0.7 0.4

**Reconciliation of impairment losses 2023** 

**Reconciliation of impairment losses 2022** 

KSB Group / Annual Report 2023

Gross carrying amount of contract assets

Individual impairment allowance (EWB)

**Net carrying amount of contract assets** 

Expected default risk

Risk provisions for expected credit losses (ECL)

**31 Dec. 2023 31 Dec. 2022** 

**134** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

Impairment losses of € 151 thousand (previous year: € 87 thousand) were recognised on trade receivables from related parties as at the reporting date. The impairment losses relate entirely to receivables from other investments. There were no impairment losses on receivables from loans to related parties as at the reporting date (previous year: € 320 thousand).

For further information on relationships with related parties, please refer to the relevant details in Section IX. Other

The reconciliation of impairment losses on trade receivables from third parties and contract assets between the opening and closing balance sheets is shown in the following tables.

Disclosures.

**Trade receivables from third parties Contract assets** 

**Trade receivables from third parties Contract assets** 

**€ thousands EWB ECL Total EWB ECL Total Opening balance at 1 January −29,380 −3,453 −32,833 −1,258 −351 −1,609** Additions −12,216 −2,221 −14,437 −168 −226 **−393** Utilised 2,239 – 2,239 – – **–**  Reversal 8,281 1,292 9,572 – 75 **75**  Currency translation / Other 1,363 315 1,678 276 52 **328 Closing balance at 31 December −29,713 −4,068 −33,781 −1,150 −449 −1,599**

**€ thousands EWB ECL Total EWB ECL Total Opening balance at 1 January −32,165 −3,016 −35,181 −1,211 −419 −1,630** Additions −8,210 −1,239 −9,449 −298 −96 **−394** Utilised 944 – 944 – – **–**  Reversal 9,577 615 10,192 8 111 **119**  Currency translation / Other 474 187 661 243 54 **296 Closing balance at 31 December −29,380 −3,453 −32,833 −1,258 −351 −1,609**

**sands** 60,568 81,627

**sands** −1,150 −1,258

**sands** −449 −351

**sands 58,969 80,018** 

**31**

|                                      |             | Not<br>overdue | Up to<br>30 days | Up to<br>90 days | Up to<br>180 days | Up to<br>360 days | Over<br>360 days | Total   |
|--------------------------------------|-------------|----------------|------------------|------------------|-------------------|-------------------|------------------|---------|
| 31 Dec. 2023                         |             |                |                  |                  |                   |                   |                  |         |
| Gross carrying amount of unhedged    |             |                |                  |                  |                   |                   |                  |         |
| trade receivables from third parties | € thousands | 242,964        | 46,945           | 27,924           | 19,752            | 10,316            | 25,822           | 373,723 |
| ECL                                  | € thousands | -1,558         | -415             | -459             | -397              | -344              | -174             | -3,347  |
| Expected default risk                |             |                |                  |                  |                   |                   |                  |         |
| in relation to ECL                   | in %        | 0,6            | 0,9              | 1,6              | 2,0               | 3,3               | 0,7              | –       |
| 31 Dec. 2022                         |             |                |                  |                  |                   |                   |                  |         |
| Gross carrying amount of unhedged    |             |                |                  |                  |                   |                   |                  |         |
| trade receivables from third parties | € thousands | 275,133        | 48,141           | 29,928           | 18,250            | 9,156             | 24,012           | 404,621 |
| ECL                                  | € thousands | -1,296         | -275             | -386             | -365              | -200              | -333             | -2,855  |
| Expected default risk                |             |                |                  |                  |                   |                   |                  |         |
| in relation to ECL                   | in %        | 0.5            | 0.6              | 1.3              | 2.0               | 2.2               | 1.4              | –       |

#### **Risk provision for expected credit losses by maturity of trade receivables**

The expected default risk of unhedged trade receivables from third parties determined based on the simplified impairment model is distributed over the age structure of the receivables portfolio at gross carrying amount as shown in the table above.

In the case of unhedged trade receivables from third parties with high overdue amounts, the risk provision for expected credit losses (ECL) in the reporting year partly results in a lower expected default risk compared with time bands with lower overdue amounts. This is the result of the relatively high recognition of individual impairments for the entirety of the far overdue open receivables items.

Other receivables and other current assets include hedges of credit balances prescribed by law for partial retirement arrangements and long-term working time accounts of the German Group companies in the amount of € 15,810 thousand (previous year: € 13,103 thousand).

€ 37,567 thousand (previous year: € 48,907 thousand) of total receivables and other assets are due after more than one year.

#### **9. Cash and cash equivalents**

Cash and cash equivalents are term deposits with short maturities and call deposits, and also current account balances. Cash equivalents include short-term deposits with an original maturity of less than three months.

In the reporting year, as in the previous year, no material impairment losses were recognised on cash and cash equivalents as no significant default risks were identified.

{135}------------------------------------------------

Combined Management Repo

**33**

#### **10. Equity**

There was no change in the share capital of KSB SE & Co. KGaA as against the previous year. In accordance with the Articles of Association, it totals € 44,771,963.82 and, as in the previous year, is composed of 886,615 ordinary shares and 864,712 preference shares. Each no-par-value share represents an equal notional amount of the share capital. The preference shares carry separate cumulative preferred dividend rights and progressive additional dividend rights. All shares are no-parvalue bearer shares. The individual shares have no par value.

The capital reserve results from the appropriation of premiums from capital increases in previous years.

In addition to revenue reserves from previous years, the revenue reserves include currency translation adjustments, consolidation effects, remeasurements of defined benefit plans under IAS 19 and changes in the fair value of interest rate derivatives taken directly to equity. These issues resulted in deferred tax assets in the amount of € 57,712 thousand (previous year: € 29,732 thousand) and deferred tax liabilities in the amount of € 793 thousand (previous year: € 856 thousand).

Intercompany results from the transfer of assets within the Group are now eliminated on a pro rata basis in the noncontrolling interests, and no longer in full with an effect on the equity attributable to the shareholders of KSB SE & Co. KGaA. The adjustment resulted in a reclassification of € 3,022 thousand, taken directly to equity, from non-controlling interests to revenue reserves in the reporting year.

#### **Development of currency translation differences in equity**

The development of the currency translation differences in equity is shown in the table of the same name below.

A total of € 34,376 thousand (dividend of € 19.50 per ordinary share and € 19.76 per preference share) was paid from equity by resolution of the Annual General Meeting of the Group's parent company KSB SE & Co. KGaA, Frankenthal, on 4 May 2023.

The proposal on the appropriation of the net retained earnings of KSB SE & Co. KGaA for the reporting year calculated in (previous year: € 87,023 thousand) have a maturity of more mercial Code] is shown at the end of these Notes.

The development of the equity items, including the noncontrolling interests explained in more detail below, is shown in the statement of changes in equity.

#### **Non-controlling interests**

The table below shows the subsidiaries with material noncontrolling interests from the Group's perspective. "Seat" refers to the country in which the main activity is performed.

 **Subsidiaries with material non-controlling interests** 

Non-controlling interest thus relates primarily to PAB Pumpen- und Armaturen-Beteiligungsges. mbH, Frankenthal / Pfalz, and the interests it holds, as well as to companies in India and China. KSB SE & Co. KGaA, Frankenthal / Pfalz, holds a 51 % interest in PAB Pumpen- und Armaturen-Beteiligungsges. mbH, while Johannes und Jacob Klein GmbH, Frankenthal / Pfalz, holds a 49 % interest.

| € thousands    | Currency translation<br>differences in equity<br>attributable to<br>shareholders of<br>KSB SE & Co. KGaA | Currency translation<br>differences in non<br>controlling interests | Total amount of<br>currency translation<br>differences in equity |
|----------------|----------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|------------------------------------------------------------------|
| 1 Jan. 2022    | −124,168                                                                                                 | −21,868                                                             | −146,036                                                         |
| Change in 2022 | 11,843                                                                                                   | 672                                                                 | 12,515                                                           |
| 31 Dec. 2022   | −112,325                                                                                                 | −21,196                                                             | −133,521                                                         |
| 1 Jan. 2023    | −112,325                                                                                                 | −21,196                                                             | −133,521                                                         |
| Change in 2023 | −24,938                                                                                                  | −8,433                                                              | −33,370                                                          |
| 31 Dec. 2023   | −137,263                                                                                                 | −29,629                                                             | −166,891                                                         |

{136}------------------------------------------------

The development of the currency translation differences in

A total of € 34,376 thousand (dividend of € 19.50 per ordinary share and € 19.76 per preference share) was paid from equity by resolution of the Annual General Meeting of the Group's parent company KSB SE & Co. KGaA, Franken-

The proposal on the appropriation of the net retained earnings of KSB SE & Co. KGaA for the reporting year calculated in

The development of the equity items, including the noncontrolling interests explained in more detail below, is shown

The table below shows the subsidiaries with material noncontrolling interests from the Group's perspective. "Seat" refers to the country in which the main activity is performed.

Non-controlling interest thus relates primarily to PAB Pumpen- und Armaturen-Beteiligungsges. mbH, Frankenthal / Pfalz, and the interests it holds, as well as to companies in India and China. KSB SE & Co. KGaA, Frankenthal / Pfalz, holds a 51 % interest in PAB Pumpen- und Armaturen-Beteiligungsges. mbH, while Johannes und Jacob Klein GmbH,

> **Currency translation differences in noncontrolling interests**

mercial Code] is shown at the end of these Notes.

 **Subsidiaries with material non-controlling interests** 

Frankenthal / Pfalz, holds a 49 % interest.

in the statement of changes in equity.

Handelsgesetzbuch

– German Com-

**Total amount of currency translation differences in equity** 

equity is shown in the table of the same name below.

thal, on 4 May 2023.

accordance with HGB [

**Non-controlling interests**

**Currency translation differences in equity attributable to shareholders of KSB SE & Co. KGaA** 

1 Jan. 2022 −124,168 −21,868 **−146,036** Change in 2022 11,843 672 **12,515 31 Dec. 2022 −112,325 −21,196 −133,521** 1 Jan. 2023 −112,325 −21,196 **−133,521** Change in 2023 −24,938 −8,433 **−33,370 31 Dec. 2023 −137,263 −29,629 −166,891**

**10. Equity** 

thousand).

**€ thousands** 

KSB Group / Annual Report 2023

There was no change in the share capital of KSB SE & Co. KGaA as against the previous year. In accordance with the Articles of Association, it totals € 44,771,963.82 and, as in the previous year, is composed of 886,615 ordinary shares and 864,712 preference shares. Each no-par-value share represents an equal notional amount of the share capital. The preference shares carry separate cumulative preferred dividend rights and progressive additional dividend rights. All shares are no-parvalue bearer shares. The individual shares have no par value.

**136** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

The capital reserve results from the appropriation of premi-

In addition to revenue reserves from previous years, the revenue reserves include currency translation adjustments, consolidation effects, remeasurements of defined benefit plans under IAS 19 and changes in the fair value of interest rate derivatives taken directly to equity. These issues resulted in deferred tax assets in the amount of € 57,712 thousand (previous year: € 29,732 thousand) and deferred tax liabilities in the amount of € 793 thousand (previous year: € 856

Intercompany results from the transfer of assets within the Group are now eliminated on a pro rata basis in the noncontrolling interests, and no longer in full with an effect on the equity attributable to the shareholders of KSB SE & Co. KGaA. The adjustment resulted in a reclassification of € 3,022 thousand, taken directly to equity, from non-controlling

interests to revenue reserves in the reporting year.

**Development of currency translation differences in equity** 

ums from capital increases in previous years.

**33**

#### **Subsidiaries with material non-controlling interests**

| Name and seat                             | Non-controlling<br>interest<br>in capital | Earnings after income tax<br>attributable to<br>non-controlling interests |              | Accumulated<br>non-controlling interests<br>in equity |              |
|-------------------------------------------|-------------------------------------------|---------------------------------------------------------------------------|--------------|-------------------------------------------------------|--------------|
| € thousands                               | 2023 / 2022                               | 31 Dec. 2023                                                              | 31 Dec. 2022 | 31 Dec. 2023                                          | 31 Dec. 2022 |
| PAB, Germany / USA (subgroup)             | 49.00 %                                   | 7,964                                                                     | 5,998        | 103,690                                               | 101,598      |
| KSB Limited, India                        | 59.46 %                                   | 13,268                                                                    | 13,218       | 83,155                                                | 76,591       |
| KSB Shanghai Pump Co., Ltd., China        | 20.00 %                                   | 1,755                                                                     | 2,056        | 8,639                                                 | 9,359        |
| Subsidiaries with individually immaterial |                                           |                                                                           |              |                                                       |              |
| non-controlling interests                 |                                           | 1,330                                                                     | 2,418        | 20,982                                                | 22,106       |
| Total amount of non-controlling interests |                                           | 24,318                                                                    | 23,689       | 216,465                                               | 209,653      |

#### **Composition of the PAB subgroup as at 31 December 2023**

| Cons. No. | Name and seat                                               | Country | Capital share<br>in % | Held by No. |
|-----------|-------------------------------------------------------------|---------|-----------------------|-------------|
| 1         | PAB Pumpen- und Armaturen-Beteiligungsges. mbH, Frankenthal | Germany | 51.00                 | –           |
| 2         | KSB America Corporation, Richmond / Virginia                | USA     | 100.00                | 1           |
| 3         | GIW Industries, Inc., Grovetown / Georgia                   | USA     | 100.00                | 2           |
| 4         | KSB Dubric, Inc., Comstock Park / Michigan                  | USA     | 100.00                | 2           |
| 5         | KSB, Inc., Richmond / Virginia                              | USA     | 100.00                | 2           |
| 6         | KSB, Inc. – Western Division, Bakersfield / California      | USA     | 100.00                | 2           |
| 7         | Standard Alloys Incorporated, Port Arthur / Texas           | USA     | 100.00                | 2           |

Information on the subgroup that comprised the subsidiaries of the KSB Group listed in the following table as at 31 December 2023 is summarised under the name "PAB".

**Composition of the PAB subgroup as at 31 December 2023** 

The summarised financial information regarding the KSB Group's subsidiaries with significant non-controlling interests and the PAB subgroup considered here is provided below. Except for the details on the PAB subgroup, this information corresponds to the amounts shown in the subsidiaries' financial statements prepared in accordance with IFRS prior to intercompany eliminations. The required intercompany eliminations were taken into consideration for the PAB subgroup.

- **Summarised balance sheet**
- **Summarised statement of comprehensive income**
- **Condensed statement of cash flows**

{137}------------------------------------------------

#### **Summarised balance sheet**

|                         | PAB     |         | KSB Limited |         | KSB Shanghai Pump Co., Ltd. |          |
|-------------------------|---------|---------|-------------|---------|-----------------------------|----------|
| € thousands / 31 Dec.   | 2023    | 2022    | 2023        | 2022    | 2023                        | 2022     |
| Non-current assets      | 103,858 | 110,567 | 58,289      | 54,401  | 29,156                      | 29,064   |
| Current assets          | 182,599 | 163,954 | 166,034     | 152,376 | 149,750                     | 137,293  |
| Non-current liabilities | −13,068 | −14,669 | −2,279      | −2,171  | −391                        | −463     |
| Current liabilities     | −56,864 | −52,511 | −81,157     | −75,795 | −134,232                    | −119,101 |
| Net assets              | 216,526 | 207,342 | 140,886     | 128,811 | 44,283                      | 46,793   |

#### **Summarised statement of comprehensive income**

|                                                                         | PAB     |         | KSB Limited |         | KSB Shanghai Pump Co,, Ltd, |         |
|-------------------------------------------------------------------------|---------|---------|-------------|---------|-----------------------------|---------|
| € thousands                                                             | 2023    | 2022    | 2023        | 2022    | 2023                        | 2022    |
| Sales revenue                                                           | 292,917 | 274,891 | 250,825     | 219,339 | 186,347                     | 179,474 |
| Earnings after income tax                                               | 16,050  | 12,240  | 23,327      | 22,621  | 9,129                       | 10,278  |
| Other comprehensive income                                              | -6,867  | 11,437  | -5,404      | -7,075  | -2,947                      | -863    |
| Comprehensive income                                                    | 9,184   | 23,678  | 17,923      | 15,545  | 6,182                       | 9,415   |
| Other comprehensive income<br>attributable to non-controlling interests | -3,365  | 5,604   | -3,213      | -4,207  | -589                        | -173    |
| Comprehensive income<br>attributable to non-controlling interests       | 4,500   | 11,602  | 10,055      | 9,011   | 1,236                       | 1,883   |
| Dividends paid to<br>non-controlling interests                          | -       | -       | -3,477      | -3,129  | -1,738                      | -4,545  |

#### **Summarised cash flow statement**

|                                                     | PAB     |        | KSB Limited |        | KSB Shanghai Pump Co,, Ltd, |         |
|-----------------------------------------------------|---------|--------|-------------|--------|-----------------------------|---------|
| € thousands                                         | 2023    | 2022   | 2023        | 2022   | 2023                        | 2022    |
| Cash flows from operating activities                | 32,422  | -9,399 | 16,580      | 4,686  | 21,338                      | 9,175   |
| Cash flows from investing activities                | -10,432 | 7,167  | -201        | -1,540 | -2,442                      | -782    |
| Cash flows from financing activities                | -3,996  | -2,648 | -6,553      | -6,115 | -9,257                      | -14,481 |
| Changes in cash and<br>cash equivalents             |         |        |             |        |                             |         |
|                                                     | 17,994  | -4,880 | 9,826       | -2,969 | 9,639                       | -6,088  |
| Cash and cash equivalents<br>at beginning of period | 11,886  | 14,419 | 3,701       | 6,788  | 40,702                      | 47,612  |
| Effects of exchange rate changes                    | 164     | 2,347  | -429        | -118   | -2,781                      | -822    |
| Cash and cash equivalents<br>at end of period       | 30,044  | 11,886 | 13,098      | 3,701  | 47,560                      | 40,702  |

{138}------------------------------------------------

**PAB KSB Limited KSB Shanghai Pump Co., Ltd.** 

**PAB KSB Limited KSB Shanghai Pump Co,, Ltd,** 

**PAB KSB Limited KSB Shanghai Pump Co,, Ltd,** 

**€ thousands / 31 Dec. 2023 2022 2023 2022 2023 2022**  Non-current assets 103,858 110,567 58,289 54,401 29,156 29,064 Current assets 182,599 163,954 166,034 152,376 149,750 137,293 Non-current liabilities −13,068 −14,669 −2,279 −2,171 −391 −463 Current liabilities −56,864 −52,511 −81,157 −75,795 −134,232 −119,101 **Net assets 216,526 207,342 140,886 128,811 44,283 46,793** 

**138** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**€ thousands 2023 2022 2023 2022 2023 2022**  Sales revenue 292,917 274,891 250,825 219,339 186,347 179,474 Earnings after income tax 16,050 12,240 23,327 22,621 9,129 10,278 Other comprehensive income −6,867 11,437 −5,404 −7,075 −2,947 −863 Comprehensive income 9,184 23,678 17,923 15,545 6,182 9,415

attributable to non-controlling interests −3,365 5,604 −3,213 −4,207 −589 −173

attributable to non-controlling interests 4,500 11,602 10,055 9,011 1,236 1,883

non-controlling interests – – −3,477 −3,129 −1,738 −4,545

**€ thousands 2023 2022 2023 2022 2023 2022**  Cash flows from operating activities 32,422 −9,399 16,580 4,686 21,338 9,175 Cash flows from investing activities −10,432 7,167 −201 −1,540 −2,442 −782 Cash flows from financing activities −3,996 −2,648 −6,553 −6,115 −9,257 −14,481

**cash equivalents 17,994 −4,880 9,826 −2,969 9,639 −6,088**

at beginning of period 11,886 14,419 3,701 6,788 40,702 47,612 Effects of exchange rate changes 164 2,347 −429 −118 −2,781 −822

**at end of period 30,044 11,886 13,098 3,701 47,560 40,702** 

**Summarised balance sheet** 

Other comprehensive income

**Summarised cash flow statement** 

Comprehensive income

**Changes in cash and** 

Cash and cash equivalents

**Cash and cash equivalents** 

KSB Group / Annual Report 2023

Dividends paid to

**Summarised statement of comprehensive income** 

#### **11. Provisions for pensions and similar obligations**

The pension obligations in the KSB Group include defined contribution and defined benefit plans and contain both obligations from current pensions and future pension benefit entitlements.

#### **Defined contribution pension plans**

Total expenses for defined contribution pension plans in the reporting year amounted to € 62,327 thousand (previous year: € 52,816 thousand). Of this figure, € 27,884 thousand (previous year: € 27,714 thousand) resulted from contributions into the statutory pension insurance scheme in Germany.

#### **Description of the defined benefit pension plans**

The obligations for defined benefit pension plans for employees of the Group are mainly due to pension obligations in Germany, as well as in France, the United States and Switzerland.

accordance with HGB [Handelsgesetzbuch – German Comto the German Group companies. These relate to direct commitments by the companies to their employees. The commitments are based on salary and length of service. Contributions from employees themselves are also considered. This pension provision can be broken down into purely company-financed basic provision and the top-up provision from the employer. The latter is based on the amount of own contributions and the generated return on sales before taxes on income. Both components take account of the general pension contribution (the amount of which partially depends on company performance), personal income (the relationship between pensionable income and maximum income threshold) and the annuity conversion factor (based on age). Within the scope of the material pension plans of the German companies, every employee is entitled to apply at any time during the ongoing employment contract for payment in annual instalments, as a one-time payment or as a pension for life.

Pension schemes in France are governed by the provisions of the respective collective agreements. The obligations are basically covered by assets that have been paid in to an external fund. Upon retirement, the employees concerned receive a oneoff payment from the fund.

**35**

The defined benefit pension plans in the United States are closed to new entrants. The pension benefit amount is derived from the average salary and years of service before closure of the plan. The retirement age is 65 years; from this point a monthly payment is made to the beneficiaries. The pension benefits are financed by external funds.

The obligations for defined benefit pension plans in Switzerland are based on occupational pensions in accordance More than 90 % of the defined benefit plans are attributable with the Bundesgesetz über die berufliche Alters-,
Hinterlassenen- und Invalidenvorsorge (BVG) [Swiss Federal Act on Occupational Retirement, Surviving Dependants', and Disability Pension Plans]. Every employee of a company with a total annual income above a certain minimum amount is insured in the employer's pension fund as a mandatory requirement. The occupational pension plan, as the second pillar of the Swiss pension system supplementing the state pension plan as the first pillar which is classified as a defined contribution plan, includes defined additional benefits in old age, in the event of disability or in the event of death with the aim of safeguarding the accustomed standard of living. Both employer and employee contributions are paid to finance this. If the pension fund has a shortfall, the employer is obliged to make up for it. The pension benefits after retirement are paid out as a monthly pension, as a one-off lump-sum payment or in the form of a combination of these, according to the choice of the employee.

In addition, employees in other countries are also entitled to a limited extent to retirement and partly to medical care benefits, depending mainly on the length of service and salary.

These defined benefit plans harbour actuarial risks, such as the longevity risk and interest rate risk. The payments associated with the pension obligations are mostly serviced through liquidity. Plan assets are also partially available for financing these obligations. Most of the plan assets are man-aged by insurers who set their own appropriate investment policies.

{139}------------------------------------------------

**37**

The actuarial valuations of the present value of the defined benefit obligation (and the related current service cost and the past service cost) are measured and calculated annually on the basis of actuarial reports using the projected unit credit method (IAS 19). Plan assets are measured at fair value.

#### **Explanation of the effects of the defined benefit pension plans on the balance sheet and income statement**

The regional allocation of the total defined benefit pension plans from the Group's point of view, as well as the change in the present value of the defined benefit obligation, the fair value of plan assets and the net liability from defined benefit obligations, as consolidated for the Group, is presented in the following tables.

- **Regional allocation of the defined benefit pension plans**
- **Change in present value of defined benefit obligations**
- **Changes in the fair value of the plan assets**
- **Changes to the net liability of the defined benefit obligations**

#### **Regional allocation of the defined benefit pension plans**

|                 | Defined<br>benefit<br>obligation<br>s (DBOs) | Fair value<br>of plan<br>assets | Effect of<br>the asset<br>upper<br>limit | Net<br>balance<br>approach | Defined<br>benefit<br>obligation<br>s (DBOs) | Fair value<br>of plan<br>assets | Effect of<br>the asset<br>upper<br>limit | Net<br>balance<br>approach |
|-----------------|----------------------------------------------|---------------------------------|------------------------------------------|----------------------------|----------------------------------------------|---------------------------------|------------------------------------------|----------------------------|
| € thousands     |                                              | 31 Dec. 2023                    |                                          |                            |                                              | 31 Dec. 2022                    |                                          |                            |
| Germany         | 476,577                                      | –                               | –                                        | 476,577                    | 432,985                                      | –                               | –                                        | 432,985                    |
| France          | 9,699                                        | -2,209                          | –                                        | 7,490                      | 8,755                                        | -2,798                          | –                                        | 5,957                      |
| USA             | 10,094                                       | -13,303                         | –                                        | -3,209                     | 11,168                                       | -13,845                         | –                                        | -2,677                     |
| Switzerland     | 12,911                                       | -12,439                         | –                                        | 472                        | 12,474                                       | -11,885                         | –                                        | 589                        |
| Other countries | 40,552                                       | -33,314                         | 3,520                                    | 10,758                     | 44,002                                       | -36,522                         | 3,717                                    | 11,197                     |
|                 | 549,833                                      | -61,265                         | 3,520                                    | 492,088                    | 509,384                                      | -65,050                         | 3,717                                    | 448,051                    |

#### **Change in present value of defined benefit obligations**

| € thousands                                                          | 2023    | 2022     |
|----------------------------------------------------------------------|---------|----------|
| Opening balance of the defined benefit obligation (DBO) – 1 Jan.     | 509,384 | 678,323  |
| Current service cost                                                 | 10,008  | 13,264   |
| Interest cost                                                        | 18,977  | 8,835    |
| Employee contributions                                               | 352     | 301      |
| Remeasurements                                                       |         |          |
| – / + Gain / loss from the change in demographic assumptions         | -339    | -333     |
| – / + Gain / loss from the change in financial assumptions           | 40,729  | -188,897 |
| – / + Experience-based gain / loss                                   | 41      | 20,139   |
| Benefit payments                                                     | -28,750 | -23,831  |
| Past service cost<br>(incl. effects of settlements and curtailments) | 150     | 851      |
| Currency translation differences                                     | -719    | -131     |
| Changes in consolidated Group / Other                                | –       | 863      |
| Closing balance of the defined benefit obligation (DBO) – 31 Dec.    | 549,833 | 509,384  |

{140}------------------------------------------------

**Regional allocation of the defined benefit pension plans** 

**Change in present value of defined benefit obligations** 

**Changes in the fair value of the plan assets** 

**obligations** 

**Net balance approach** 

**549,833 −61,265 3,520 492,088 509,384 −65,050 3,717 448,051** 

**Defined benefit obligation s (DBOs)** 

**Changes to the net liability of the defined benefit** 

**Fair value of plan assets** 

**Effect of the asset upper limit** 

**Net balance approach** 

The actuarial valuations of the present value of the defined benefit obligation (and the related current service cost and the past service cost) are measured and calculated annually on the basis of actuarial reports using the projected unit credit method (IAS 19). Plan assets are measured at fair value.

**Explanation of the effects of the defined benefit pension plans on the balance sheet and income statement** 

**Regional allocation of the defined benefit pension plans** 

**Change in present value of defined benefit obligations** 

**Defined benefit obligation s (DBOs)** 

**Fair value of plan assets** 

**140** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Effect of the asset upper limit** 

Germany 476,577 – – **476,577** 432,985 – – **432,985**  France 9,699 −2,209 – **7,490** 8,755 −2,798 – **5,957**  USA 10,094 −13,303 – **−3,209** 11,168 −13,845 – **−2,677** Switzerland 12,911 −12,439 – **472** 12,474 −11,885 – **589**  Other countries 40,552 −33,314 3,520 **10,758** 44,002 −36,522 3,717 **11,197** 

**€ thousands 2023 2022 Opening balance of the defined benefit obligation (DBO) – 1 Jan. 509,384 678,323**  Current service cost 10,008 13,264 Interest cost 18,977 8,835 Employee contributions 352 301

– / + Gain / loss from the change in demographic assumptions −339 −333 – / + Gain / loss from the change in financial assumptions 40,729 −188,897 – / + Experience-based gain / loss 41 20,139 Benefit payments −28,750 −23,831

(incl. effects of settlements and curtailments) 150 851 Currency translation differences −719 −131 Changes in consolidated Group / Other – 863 **Closing balance of the defined benefit obligation (DBO) – 31 Dec. 549,833 509,384** 

**€ thousands 31 Dec. 2023 31 Dec. 2022** 

following tables.

Remeasurements

Past service cost

The regional allocation of the total defined benefit pension plans from the Group's point of view, as well as the change in the present value of the defined benefit obligation, the fair value of plan assets and the net liability from defined benefit obligations, as consolidated for the Group, is presented in the

#### **Changes in the fair value of the plan assets**

| € thousands                                                                                | 2023   | 2022   |
|--------------------------------------------------------------------------------------------|--------|--------|
| Opening balance of the plan assets measured at fair value – 1 Jan.                         | 65,050 | 68,701 |
| Interest income                                                                            | 2,977  | 1,781  |
| Remeasurements                                                                             |        |        |
| + / - Gain / loss from plan assets excluding amounts already recognised in interest income | 541    | -6,796 |
| Contributions by the employer                                                              | 1,060  | 4,737  |
| Contributions by the beneficiary employees                                                 | 352    | 301    |
| Currency translation differences                                                           | -419   | -63    |
| Paid benefits                                                                              | -8,150 | -4,086 |
| Changes in consolidated Group / Other                                                      | -146   | 475    |
| Closing balance of the plan assets measured at fair value – 31 Dec.                        | 61,265 | 65,050 |

#### **Changes to the net balance sheet approach of the defined benefit obligations**

| € thousands                                                                                  | 2023    | 2022     |
|----------------------------------------------------------------------------------------------|---------|----------|
| Opening balance of the net balance sheet approach from defined benefit obligations – 1 Jan.  | 448,051 | 609,622  |
| Current service cost                                                                         | 10,008  | 13,264   |
| Net interest expense                                                                         | 16,182  | 7,054    |
| Employee contributions                                                                       | –       | –        |
| Contributions by the employer                                                                | −1,060  | −4,737   |
| Remeasurements                                                                               |         |          |
| – / + Gain / loss from plan assets excluding amounts already recognised in interest income   | −541    | 6,796    |
| – / + Gain / loss from the change in demographic assumptions                                 | −339    | −333     |
| – / + Gain / loss from the change in financial assumptions                                   | 40,729  | −188,897 |
| – / + Experience-based gain / loss                                                           | 41      | 20,139   |
| Change in the asset ceiling                                                                  | −456    | 3,866    |
| Benefit payments                                                                             | −20,600 | −19,745  |
| Past service cost                                                                            |         |          |
| (incl. effects of settlements and curtailments)                                              | 150     | 851      |
| Currency translation differences                                                             | −223    | −217     |
| Changes in consolidated Group / Other                                                        | 146     | 388      |
| Closing balance of the net balance sheet approach from defined benefit obligations – 31 Dec. | 492,088 | 448,051  |
| of which assets from defined benefit assets                                                  | 4,028   | 3,518    |
| of which provisions for pensions and similar obligations                                     | 496,116 | 451,569  |

Current and past service costs are recognised in staff costs under pension costs.

The interest rate effect from accounting for the defined benefit pension plans, in the form of interest expenses from the DBO and interest income from the plan assets, is recognised in the income statement as a net amount under the interest and similar expenses item and thus in the finance income / expense.

The remeasurement of defined benefit obligations and plan assets as well as the change in the asset ceiling is included in other comprehensive income and thus directly in the Group's equity.

**37**

Overall, because of the asset ceiling stipulated in IAS 19, a surplus of plan assets over the present value of the related defined benefit obligations in the amount of € 3,520 thousand (previous year: € 3,717 thousand) is not recognised as an asset as at the reporting date. KSB does not derive any future economic benefit from this surplus in the form of reduced contributions or a refund.

{141}------------------------------------------------

**39**

#### **Explanation of the plan assets**

The composition of the plan assets is explained in the table of the same name.

In principle, the pension funds are endowed with the amount needed to meet the respective statutory minimum requirements.

The actual income from plan assets amounted to € 3,518 thousand (previous year: expense of € 5,015 thousand).

In the following year, employer contributions to plan assets are expected to be at the level seen in the 2023 financial year. The amounts in 2023 came to € 1,060 thousand.

#### **Composition of plan assets**

|                             | Quoted market<br>price in an<br>active market | No quoted<br>market price<br>in an active<br>market | Total        | Quoted market<br>price in an<br>active market | No quoted<br>market price<br>in an active<br>market | Total        |
|-----------------------------|-----------------------------------------------|-----------------------------------------------------|--------------|-----------------------------------------------|-----------------------------------------------------|--------------|
| € thousands                 | 31 Dec. 2023                                  | 31 Dec. 2023                                        | 31 Dec. 2023 | 31 Dec. 2022                                  | 31 Dec. 2022                                        | 31 Dec. 2022 |
| Equity instruments (shares) | 17,537                                        | –                                                   | 17,537       | 28,154                                        | –                                                   | 28,154       |
| Debt instruments (loans)    | 21,409                                        | –                                                   | 21,409       | 12,179                                        | 477                                                 | 12,656       |
| of which government bonds   | 16,429                                        | –                                                   | 16,429       | 7,169                                         | 477                                                 | 7,646        |
| of which corporate bonds    | 4,980                                         | –                                                   | 4,980        | 5,010                                         | –                                                   | 5,010        |
| Currency forwards           | –                                             | –                                                   | –            | 137                                           | –                                                   | 137          |
| Money market investments    | 1,470                                         | 359                                                 | 1,829        | 2,159                                         | 96                                                  | 2,255        |
| Real estate                 | 2,953                                         | 84                                                  | 3,037        | 3,516                                         | 124                                                 | 3,640        |
| Insurance contracts         | 48                                            | 9,259                                               | 9,307        | 280                                           | 9,653                                               | 9,933        |
| Bank credit balances        | 500                                           | 5,089                                               | 5,589        | 634                                           | 5,300                                               | 5,934        |
| Other investments           | 1,920                                         | 637                                                 | 2,557        | 2,341                                         | –                                                   | 2,341        |
|                             | 45,837                                        | 15,428                                              | 61,265       | 49,400                                        | 15,650                                              | 65,050       |

{142}------------------------------------------------

**Explanation of the plan assets**

the same name.

requirements.

**Composition of plan assets** 

KSB Group / Annual Report 2023

The composition of the plan assets is explained in the table of

In principle, the pension funds are endowed with the amount needed to meet the respective statutory minimum

The actual income from plan assets amounted to € 3,518 thousand (previous year: expense of € 5,015 thousand).

In the following year, employer contributions to plan assets are expected to be at the level seen in the 2023 financial year.

> **Quoted market price in an active market**

**No quoted market price in an active** 

**142** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**market Total** 

**€ thousands 31 Dec. 2023 31 Dec. 2023 31 Dec. 2023 31 Dec. 2022 31 Dec. 2022 31 Dec. 2022**  Equity instruments (shares) 17,537 – **17,537** 28,154 – **28,154**  Debt instruments (loans) 21,409 – **21,409** 12,179 477 **12,656**  of which government bonds 16,429 – **16,429** 7,169 477 **7,646**  of which corporate bonds 4,980 – **4,980** 5,010 – **5,010**  Currency forwards – – **–** 137 – **137**  Money market investments 1,470 359 **1,829** 2,159 96 **2,255**  Real estate 2,953 84 **3,037** 3,516 124 **3,640**  Insurance contracts 48 9,259 **9,307** 280 9,653 **9,933**  Bank credit balances 500 5,089 **5,589** 634 5,300 **5,934**  Other investments 1,920 637 **2,557** 2,341 – **2,341** 

**Quoted market price in an active market** 

**45,837 15,428 61,265 49,400 15,650 65,050** 

**No quoted market price in an active** 

**market Total** 

The amounts in 2023 came to € 1,060 thousand.

#### **Actuarial assumptions, sensitivities and other disclosures on defined benefit pension plans**

As in the previous year, measurement of the German pension plans is based on a mean fluctuation rate of 2.0 %. The biometric assumptions continue to be based on the 2018G mortality tables published by Prof. Dr. Klaus Heubeck. The retirement age used for the calculations is based on the Rentenversicherungs-Altersgrenzanpassungsgesetz 2007 [RVAGAnpG – German Act Adapting the Standard Retirement Age for the Statutory Pension Insurance System]. Other measurement parameters (e.g. cost trends in the medical care area) are not material.

For the material pension plans of the German companies, the regular assessment made by KSB regarding the exercising of the lump-sum option by employees led to an adjustment of the measurement assumptions compared with the previous year. Therefore, as at 31 December 2023, a payment in the form of a lifelong pension was assumed for 65 % (previous year: 45 %) of the specific workforce, a one-off payment for 30 % (previous year: 35 %) and payment in instalments over 10 years after termination of employment for 5 % (previous year: 20 %). The resulting actuarial losses had a negative effect of € 7,068 thousand on other comprehensive income in the reporting year.

The discount rate and future mortality were identified as key actuarial assumptions.

#### **Discount rate**

| %           | 31 Dec. 2023 | 31 Dec. 2022 |
|-------------|--------------|--------------|
| Germany     | 3.2          | 3.7          |
| France      | 3.2          | 3.8          |
| USA         | 5.3          | 4.9          |
| Switzerland | 2.0          | 1.8          |

As in the previous year the basis for the calculation of the sensitivities is the same method which was used for the calculation of the provisions for pensions and similar obligations. Were the discount factor to increase by 100 basis points, the DBO would fall by € 62,170 thousand (previous year: € 53,175 thousand). A 100 basis point reduction in the discount factor would increase the DBO by € 78,164 thousand (previous year: € 65,355 thousand). It should be noted that a change in the discount factor due to particular financial effects (such as compound interest) does not affect the development of the DBO on a straight-line basis. Were life expectancy to increase by 1 year, the DBO would increase by € 18,028 thousand (previous year: € 14,932 thousand). Additionally, the individual actuarial assumptions are mutually dependent, but these interdependencies are not taken into account in the sensitivity analysis.

On 31 December 2023 the weighted average term of the DBO was 14 years (previous year: 13 years).

KSB's expected benefit payments from defined benefit pension plans over the next five years are shown in the table below.

| € thousands at 31 Dec. 2023 | 2024   | 2025   | 2026   | 2027   | 2028   |
|-----------------------------|--------|--------|--------|--------|--------|
| Expected payments           | 23,894 | 26,901 | 28,235 | 28,625 | 30,626 |
| € thousands at 31 Dec. 2022 | 2023   | 2024   | 2025   | 2026   | 2027   |
| Expected payments           | 23,475 | 24,810 | 26,109 | 29,136 | 29,934 |

#### **Expected pension benefit payments**

{143}------------------------------------------------

**41**

#### **12. Other provisions**

The provisions for warranty obligations and contractual penalties cover the statutory and contractual obligations to customers and are based on estimates prepared using historical data for similar products and services. They amount to € 71,945 thousand (previous year: € 53,129 thousand) in the reporting year.

Provisions for employee benefits relate primarily to anniversary and partial retirement obligations.

The provisions for onerous contracts amounting to € 13,672 thousand (previous year: € 13,667 thousand) result in particular from project orders with customers.

Miscellaneous other provisions include provisions for litigation risks in the amount of € 5,768 thousand (previous year: € 4,52 thousand).

€ 44,419 thousand (previous year: € 40,743 thousand) of the other provisions are expected to become cash-effective after more than one year.

#### **Composition of other provisions \***

|  | € thousands                                    | Total   | Non-current | Current | Total   | Non-current | Current |
|--|------------------------------------------------|---------|-------------|---------|---------|-------------|---------|
|  | Warranty obligations and contractual penalties | 71,945  | –           | 71,945  | 53,129  | –           | 53,129  |
|  | Employee benefits                              | 22,585  | 13,855      | 8,730   | 22,725  | 14,832      | 7,893   |
|  | Onerous contracts                              | 13,672  | –           | 13,672  | 13,667  | –           | 13,667  |
|  | Miscellaneous other provisions                 | 28,281  | 1,848       | 26,433  | 26,193  | 1,883       | 24,310  |
|  |                                                | 136,483 | 15,703      | 120,781 | 115,714 | 16,715      | 98,999  |

\* Compared with the presentation in the 2022 Annual Report, provisions for employee benefits in accordance with IAS 19 that do not relate to pensions and similar obligations are now included in the other provisions item to increase transparency. The previous year's figures have been restated accordingly. Provisions for pensions and similar obligations are shown in a separate balance sheet item and explained in Section 11 above.

#### **Development of other provisions \***

| € thousands                                    | 1 Jan. 2023 | CTA ** / Other | Utilisation | Reversal | Additions | 31 Dec. 2023 |
|------------------------------------------------|-------------|----------------|-------------|----------|-----------|--------------|
| Warranty obligations and contractual penalties | 53,129      | -470           | -18,943     | -6,839   | 45,068    | 71,945       |
| Employee benefits                              | 22,725      | -47            | -8,752      | -493     | 9,152     | 22,585       |
| Onerous contracts                              | 13,667      | -8             | -8,056      | -170     | 8,238     | 13,672       |
| Miscellaneous other provisions                 | 26,193      | -235           | -6,516      | -2,333   | 11,172    | 28,281       |
|                                                | 115,714     | -760           | -42,266     | -9,835   | 73,631    | 136,483      |

\* Restated compared with the presentation in the 2022 Annual Report; cf. the explanation below the "Composition of other provisions" table.

\*\* Currency translation adjustments

{144}------------------------------------------------

The provisions for onerous contracts amounting to € 13,672 thousand (previous year: € 13,667 thousand) result in

Miscellaneous other provisions include provisions for litigation risks in the amount of € 5,768 thousand (previous

€ 44,419 thousand (previous year: € 40,743 thousand) of the other provisions are expected to become cash-effective after

particular from project orders with customers.

year: € 4,52 thousand).

more than one year.

**31 Dec. 2023 31 Dec. 2022** 

**136,483 15,703 120,781 115,714 16,715 98,999** 

**115,714 −760 −42,266 −9,835 73,631 136,483** 

**€ thousands Total Non-current Current Total Non-current Current** 

contractual penalties 71,945 – 71,945 **53,129** – 53,129 Employee benefits 22,585 13,855 8,730 **22,725** 14,832 7,893 Onerous contracts 13,672 – 13,672 **13,667** – 13,667 Miscellaneous other provisions 28,281 1,848 26,433 **26,193** 1,883 24,310

\* Compared with the presentation in the 2022 Annual Report, provisions for employee benefits in accordance with IAS 19 that do not relate to pensions and similar obligations are now included in the other provisions item to increase transparency. The previous year's figures have been restated accordingly. Provisions for pensions and similar obligations are shown in a separate balance

**€ thousands 1 Jan. 2023 CTA \*\* / Other Utilisation Reversal Additions 31 Dec. 2023** 

contractual penalties 53,129 −470 −18,943 −6,839 45,068 **71,945**  Employee benefits 22,725 −47 −8,752 −493 9,152 **22,585**  Onerous contracts 13,667 −8 −8,056 −170 8,238 **13,672**  Miscellaneous other provisions 26,193 −235 −6,516 −2,333 11,172 **28,281** 

\* Restated compared with the presentation in the 2022 Annual Report; cf. the explanation below the "Composition of other provisions" table.

**12. Other provisions** 

reporting year.

The provisions for warranty obligations and contractual penalties cover the statutory and contractual obligations to customers and are based on estimates prepared using historical data for similar products and services. They amount to € 71,945 thousand (previous year: € 53,129 thousand) in the

**144** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

Provisions for employee benefits relate primarily to

anniversary and partial retirement obligations.

**Composition of other provisions \*** 

sheet item and explained in Section 11 above.

**Development of other provisions \*** 

Warranty obligations and

\*\* Currency translation adjustments

KSB Group / Annual Report 2023

Warranty obligations and

#### **13. Liabilities**

#### **Non-current liabilities**

| € thousands               | 31 Dec. 2023 | 31 Dec. 2022 |
|---------------------------|--------------|--------------|
| Financial liabilities     | 28,960       | 24,117       |
| Bank loans and overdrafts | 312          | 940          |
| Finance lease liabilities | 28,170       | 22,904       |
| Other                     | 477          | 272          |

#### **Current liabilities**

**41**

| € thousands                                  | 31 Dec. 2023 | 31 Dec. 2022 |
|----------------------------------------------|--------------|--------------|
| Financial liabilities                        | 26,053       | 26,630       |
| Bank loans and overdrafts                    | 10,189       | 13,094       |
| Finance lease liabilities                    | 15,853       | 13,526       |
| Other                                        | 10           | 10           |
| Contract liabilities                         | 202,619      | 186,477      |
| Trade payables                               | 324,723      | 333,361      |
| Trade payables to third parties *            | 318,930      | 328,373      |
| Trade payables to related parties *          | 5,793        | 4,988        |
| Other financial liabilities                  | 27,659       | 23,921       |
| Currency forwards                            | 2,304        | 2,322        |
| Miscellaneous other financial liabilities    | 25,355       | 21,599       |
| Other non-financial liabilities              | 181,804      | 164,604      |
| Social security and liabilities to employees | 152,410      | 132,989      |
| Tax liabilities (excluding income tax)       | 23,782       | 24,147       |
| Prepaid expenses                             | 630          | 2,393        |
| Investment grants and subsidies              | 4,982        | 5,075        |

**Income tax liabilities 18,649 14,918**  \* In the presentation in the 2022 Annual Report, trade payables to third parties as at 31 December 2022 included trade payables to related parties amounting to € 4,007 thousand. By introducing a separate item for all trade payables to related parties, a clear distinction is now made with respect to balances with third parties in order to increase transparency. The previous year's figure for trade payables to third parties was restated accordingly. The change in presentation has no impact on the total value of trade payables to related parties itemised for the previous year in Section IX. Other Disclosures.

{145}------------------------------------------------

**43**

The weighted average interest rate on bank loans and overdrafts was 9.06 % (previous year: 8.19 %). The interest rate is in particular influenced by the terms and conditions for borrowing by subsidiaries based abroad, which finance themselves in the local market due to a greater currency devaluation.

The maturity analysis of lease obligations at the reporting date is as follows:

|  |  |  |  |  |  | Maturity analysis of liabilities from lease obligations |
|--|--|--|--|--|--|---------------------------------------------------------|
|--|--|--|--|--|--|---------------------------------------------------------|

| € thousands                 | 31 Dec. 2023 | 31 Dec. 2022 |
|-----------------------------|--------------|--------------|
| Due within 1 year           | 15,853       | 13,526       |
| Due between 1 and 5 years   | 25,094       | 19,195       |
| Due after more than 5 years | 3,076        | 3,709        |
|                             | 44,023       | 36,430       |

The amount of contract liabilities at the end of the reporting year is € 202,619 thousand and is thus above the comparative prior-year value of € 186,477 thousand. This increase is due to the higher advance payments received from customers in the 2023 financial year compared with the prior-year reporting date, coupled with a lower associated contract progress on the part of KSB. In the reporting year, KSB recognised sales revenue of € 95,453 thousand (previous year: € 86,757 thousand) which was included in the balance of contract liabilities at the beginning of the reporting year.

The reported investment grants and subsidies largely comprise funding from the European Union and German entities for new buildings and development aid projects. There are no material unfulfilled conditions or other contingencies related to these grants.

Overall, assets of the Group amounting to € 22,883 thousand (previous year: € 21,503 thousand) are used to secure liabilities and are subject to corresponding restrictions on disposal by KSB or pledges. The majority of the assets used as security for liabilities, at € 17,444 thousand (previous year: € 14,921 thousand), is attributable to other receivables and other current assets, and includes in particular hedges of credit balances for partial retirement arrangements and long-term working accounts of the German Group companies.

There were no covenant agreements for loans in the reporting year, as was the case in the previous year.

{146}------------------------------------------------

The weighted average interest rate on bank loans and overdrafts was 9.06 % (previous year: 8.19 %). The interest rate is in particular influenced by the terms and conditions for borrowing by subsidiaries based abroad, which finance themselves in the local market due to a greater currency

The maturity analysis of lease obligations at the reporting date

**€ thousands 31 Dec. 2023 31 Dec. 2022**  Due within 1 year 15,853 13,526 Due between 1 and 5 years 25,094 19,195 Due after more than 5 years 3,076 3,709

The amount of contract liabilities at the end of the reporting year is € 202,619 thousand and is thus above the comparative prior-year value of € 186,477 thousand. This increase is due to the higher advance payments received from customers in the 2023 financial year compared with the prior-year reporting date, coupled with a lower associated contract progress on the part of KSB. In the reporting year, KSB recognised sales revenue of € 95,453 thousand (previous year: € 86,757 thousand) which was included in the balance of contract

**44,023 36,430** 

**146** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

The reported investment grants and subsidies largely comprise funding from the European Union and German entities for new buildings and development aid projects. There are no material unfulfilled conditions or other contingencies related

Overall, assets of the Group amounting to € 22,883 thousand (previous year: € 21,503 thousand) are used to secure liabilities and are subject to corresponding restrictions on disposal by KSB or pledges. The majority of the assets used as security for liabilities, at € 17,444 thousand (previous year: € 14,921 thousand), is attributable to other receivables and other current assets, and includes in particular hedges of credit balances for partial retirement arrangements and long-term

working accounts of the German Group companies.

year, as was the case in the previous year.

There were no covenant agreements for loans in the reporting

to these grants.

**Maturity analysis of liabilities from lease obligations** 

liabilities at the beginning of the reporting year.

devaluation.

is as follows:

KSB Group / Annual Report 2023

**43**

#### **V. INCOME STATEMENT DISCLOSURES**

#### **14. Sales revenue**

#### **Breakdown of sales revenue for the 2023 financial year**

| € thousands                                                   | Pumps Segment | Valves Segment | KSB<br>SupremeServ<br>Segment | Total     |
|---------------------------------------------------------------|---------------|----------------|-------------------------------|-----------|
| Sales revenue                                                 | 1,513,653     | 361,435        | 943,900                       | 2,818,988 |
| of which sales revenue from the sale of goods                 | 1,513,653     | 361,435        | 647,903                       | 2,522,991 |
| of which sales revenue from the provision of services         | –             | –              | 295,997                       | 295,997   |
| of which goods and services transferred at a specific time    | 1,255,058     | 342,177        | 545,246                       | 2,142,481 |
| of which goods and services transferred over a period of time | 258,595       | 19,258         | 398,654                       | 676,507   |

#### **Breakdown of sales revenue for the 2022 financial year**

|                                                               |               |                | KSB<br>SupremeServ<br>Segment |           |
|---------------------------------------------------------------|---------------|----------------|-------------------------------|-----------|
| € thousands                                                   | Pumps Segment | Valves Segment |                               | Total     |
| Sales revenue                                                 | 1,390,192     | 333,072        | 850,123                       | 2,573,387 |
| of which sales revenue from the sale of goods                 | 1,390,192     | 333,072        | 554,976                       | 2,278,240 |
| of which sales revenue from the provision of services         | –             | –              | 295,147                       | 295,147   |
| of which goods and services transferred at a specific time    | 1,147,952     | 302,740        | 460,136                       | 1,910,828 |
| of which goods and services transferred over a period of time | 242,240       | 30,332         | 389,987                       | 662,559   |

The tables above show the breakdown of the Group's sales **Performance obligations unsatisfied or partially unsatisfied as at** revenue by product category, timing of revenue recognition **the reporting date (orders on hand)** and Segment. Detailed information on KSB's Segments is provided in Section VIII. Segment Reporting of the Notes to the consolidated financial statements.

The Group's orders on hand, in the form of the total transaction price of performance obligations unsatisfied or partially unsatisfied as at the reporting date, are as follows:

Performance obligations unsatisfied or partially unsatisfied as at
the reporting date (orders on hand)

| € thousands                     | 31 Dec. 2023 | 31 Dec. 2022 |
|---------------------------------|--------------|--------------|
| Total transaction price of      |              |              |
| performance obligations         |              |              |
| unsatisfied or partially        |              |              |
| unsatisfied as at the reporting |              |              |
| date (orders on hand)           | 1,548,138    | 1,497,754    |
| of which expected sales revenue |              |              |
| within the next 12 months       | 1,223,626    | 1,170,521    |
| of which expected sales revenue |              |              |
| after more than 12 months       | 324,512      | 327,233      |

{147}------------------------------------------------

**45**

#### **15. Other income**

| € thousands                                                    | 2023    | 2022    |
|----------------------------------------------------------------|---------|---------|
| Income from the reversal of<br>impairment losses               | 9,648   | 10,313  |
| Government grants                                              | 6,140   | 4,520   |
| Currency translation gains                                     | 2,138   | 3,050   |
| Insurance compensation                                         | 12,862  | 2,981   |
| Income from disposal of assets                                 | 867     | 1,057   |
| Miscellaneous other income                                     | 12,728  | 12,540  |
|                                                                | 44,384  | 34,462  |
| € thousands                                                    | 2023    | 2022    |
| Wages and salaries                                             | 781,483 | 730,170 |
| Social security contributions and<br>employee assistance costs | 161,990 | 150,420 |
| Pension costs                                                  | 17,226  | 20,961  |
|                                                                | 960,699 | 901,551 |

In the reporting year, KSB received insurance compensation of € 10.4 million in relation to the hail damage at the French factory in La Roche-Chalais in 2022.

Other income relates to a large number of individual items and includes, among other things, remuneration for various other services provided by the Group outside its primary business activities.

#### **16. Cost of materials**

The cost of materials amounted to € 1,153,651 thousand (previous year: € 1,156,292 thousand) in the reporting year. This item includes expenses for raw materials, consumables and supplies and for goods and services purchased. Due in part to the sales growth in the KSB SupremeServ Segment, the cost of materials was at the same level as in the previous year, while sales revenue increased year on year. In addition, a slight fall in procurement prices had an impact in some cases.

#### **17. Staff costs**

Pension costs are reduced by the interest component included in the allocation of provisions that is reported in finance income / expense.

The average number of employees in the Group during the year and as at the reporting date is shown in the table below.

**Employees**

The increase in staff costs compared with the previous year reflects the higher number of employees, general wage and salary increases and increased profit bonuses for employees.

#### **Employees**

| Average for the year |        | At reporting date |              |        |
|----------------------|--------|-------------------|--------------|--------|
| 2023                 | 2022   | 31 Dec. 2023      | 31 Dec. 2022 |        |
| Wage earners         | 6,787  | 6,827             | 6,758        | 6,804  |
| Salaried employees   | 9,151  | 8,816             | 9,280        | 8,889  |
|                      | 15,938 | 15,643            | 16,038       | 15,693 |

{148}------------------------------------------------

**15. Other income** 

Income from the reversal of

**€ thousands 2023 2022** 

impairment losses 9,648 10,313 Government grants 6,140 4,520 Currency translation gains 2,138 3,050 Insurance compensation 12,862 2,981 Income from disposal of assets 867 1,057 Miscellaneous other income 12,728 12,540

In the reporting year, KSB received insurance compensation of € 10.4 million in relation to the hail damage at the French

Other income relates to a large number of individual items and includes, among other things, remuneration for various other services provided by the Group outside its primary business

The cost of materials amounted to € 1,153,651 thousand (previous year: € 1,156,292 thousand) in the reporting year. This item includes expenses for raw materials, consumables and supplies and for goods and services purchased. Due in part to the sales growth in the KSB SupremeServ Segment, the cost of materials was at the same level as in the previous year, while sales revenue increased year on year. In addition, a slight fall

in procurement prices had an impact in some cases.

factory in La Roche-Chalais in 2022.

activities.

**Employees** 

KSB Group / Annual Report 2023

**16. Cost of materials** 

**44,384 34,462** 

**148** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**17. Staff costs** 

income / expense.

**Employees**

Wage earners 6,787 6,827 6,758 6,804 Salaried employees 9,151 8,816 9,280 8,889

Social security contributions and

**€ thousands 2023 2022**  Wages and salaries 781,483 730,170

employee assistance costs 161,990 150,420 Pension costs 17,226 20,961

Pension costs are reduced by the interest component included in the allocation of provisions that is reported in finance

The average number of employees in the Group during the year and as at the reporting date is shown in the table below.

The increase in staff costs compared with the previous year reflects the higher number of employees, general wage and salary increases and increased profit bonuses for employees.

**Average for the year At reporting date** 

**2023 2022 31 Dec. 2023 31 Dec. 2022** 

**15,938 15,643 16,038 15,693** 

**960,699 901,551** 

#### **18. Other expenses**

| € thousands                                                   | 2023    | 2022    |
|---------------------------------------------------------------|---------|---------|
| Repairs, maintenance,<br>third-party services                 | 159,651 | 139,693 |
| Administrative expenses                                       | 110,890 | 93,936  |
| Selling expenses                                              | 80,219  | 67,193  |
| Other staff costs                                             | 31,689  | 27,271  |
| Other taxes                                                   | 13,557  | 13,108  |
| Rents and leases                                              | 12,585  | 12,835  |
| Impairment losses on<br>trade receivables and contract assets | 14,906  | 9,935   |
| Currency translation losses                                   | 158     | 2,719   |
| Losses from current assets                                    | 1,442   | 569     |
| Losses from asset disposals                                   | 1,021   | 752     |
| Miscellaneous other expenses                                  | 37,137  | 23,602  |
|                                                               | 463,257 | 391,612 |

The increase in administrative costs was due in particular to higher consulting costs and travel expenses.

The expenses for rents and leases consist of expenses for leases with low-value underlying assets of € 3,498 thousand (previous year: € 2,629 thousand), expenses for short-term leases in the amount of € 6,511 thousand (previous year: € 5,916 thousand), expenses from variable lease payments of € 1,280 thousand (previous year: € 1,061 thousand) and expenses for rents and other leases in the amount of € 1,297 thousand (previous year: € 3,229 thousand).

Other expenses are primarily made up of expenses from the additions to provisions for warranties and expected losses associated with customer contracts. Income from the reversal of such provisions is also included in this item.

#### **19. Finance income / expense**

Interest and similar expenses include the net interest expense for pension provisions amounting to € 16,182 thousand (previous year: € 7,054 thousand). In addition, the item also includes interest expense from the subsequent measurement of lease liabilities in the amount of € 1,329 thousand (previous year: € 673 thousand).

Other finance expense includes in particular the effects from the application of IAS 29 Financial Reporting in Hyperinflationary Economies described in Section II. Consolidation Principles under Hyperinflation.

#### **Finance income / expense**

**45**

| € thousands                                                                | 2023    | 2022    |
|----------------------------------------------------------------------------|---------|---------|
| Finance income                                                             | 9,382   | 7,461   |
| Income from equity investments                                             | –       | 257     |
| thereof from other investments                                             | –       | 257     |
| Interest and similar income                                                | 9,301   | 7,132   |
| thereof from other investments                                             | 65      | 59      |
| thereof from investments accounted for using the equity method             | 81      | 350     |
| Other finance income                                                       | 81      | 72      |
| Finance expense                                                            | -29,656 | -17,712 |
| Interest and similar expenses                                              | -22,620 | -12,985 |
| Other finance expense                                                      | -7,036  | -4,727  |
| Income from / expense to investments accounted for using the equity method | 5,361   | 1,816   |
| Finance income / expense                                                   | -14,913 | -8,435  |

{149}------------------------------------------------

Combined Management Rep

**47**

#### **20. Taxes on income**

This item shows the effective and deferred taxes on income of the companies included in the consolidated financial statements. The applicable tax rate of 30.5 % in the 2023 financial year (previous year: 30.7 %) is a composite rate resulting from the current German corporation tax, solidarity surcharge and trade tax rates. This tax rate forms the base for deriving the actual tax rate for the Group.

**Taxes on income in the income statement Taxes on income** 

| € thousands                                          | 2023    | 2022    |
|------------------------------------------------------|---------|---------|
| Effective taxes                                      | 64,971  | 48,606  |
| Deferred taxes                                       | −32,595 | −15,276 |
|                                                      | 32,376  | 33,330  |
| € thousands                                          | 2023    | 2022    |
| Change in deferred tax assets                        | -56,966 | -2,455  |
| Change in deferred tax liabilities                   | -2,153  | 2,833   |
| Change in deferred taxes recognised in balance sheet | -59,119 | 378     |
| Change in deferred taxes taken directly to equity    | 27,915  | -14,625 |
| Changes in consolidated Group / CTA * / Other        | -1,391  | -1,029  |
| Deferred taxes recognised in income statement        | -32,595 | -15,276 |

Effective taxes include prior-period tax refunds in the amount of € 1,369 thousand (previous year: € 2,090 thousand) and tax arrears in the amount of € 933 thousand (previous year: € 386 thousand). As in the previous year, the introduction of new local taxes had no effects in the reporting year. Changes in foreign tax rates led to an increase in the total tax expense of € 198 thousand (previous year: reduction of € 205 thousand).

#### Deferred tax assets according to the income statement are derived as follows:

#### **Reconciliation of deferred taxes**

\* Currency translation adjustments

The reconciliation for the derivation of the taxes on income reported in the income statement, based on the earnings before income tax (EBT), is shown in the following table.

| Reconciliation of income tax                                          |         |         |
|-----------------------------------------------------------------------|---------|---------|
| € thousands                                                           | 2023    | 2022    |
| Earnings before income tax (EBT)                                      | 208,989 | 160,668 |
| Calculated income taxes on the basis of the applicable Group tax rate | 63,742  | 49,281  |
| Differences in tax rates                                              | -10,405 | -8,607  |
| Tax losses from the current year that are not recognised              | 2,193   | 1,646   |
| Changes in the value of deferred taxes on tax loss carryforwards      | -24,364 | -7,193  |
| Impairment loss on goodwill                                           | 207     | 219     |
| Changes in the value of deferred taxes on temporary differences       | -15,415 | -13,975 |
| Tax-exempt income                                                     | -6,022  | -5,315  |
| Non-deductible expenses                                               | 13,042  | 13,096  |
| Prior-period taxes                                                    | 5,379   | -1,511  |
| Non-deductible foreign income tax                                     | 5,416   | 5,243   |
| Investments accounted for using the equity method                     | -1,406  | -352    |
| Other                                                                 | 9       | 797     |
| Current taxes on income                                               | 32,376  | 33,330  |
| Current tax rate                                                      | 16 %    | 21 %    |

{150}------------------------------------------------

**20. Taxes on income** 

**Taxes on income** 

thousand).

KSB Group / Annual Report 2023

**Reconciliation of income tax** 

This item shows the effective and deferred taxes on income of the companies included in the consolidated financial statements. The applicable tax rate of 30.5 % in the 2023 financial year (previous year: 30.7 %) is a composite rate resulting from the current German corporation tax, solidarity surcharge and trade tax rates. This tax rate forms the base for

**€ thousands 2023 2022**  Effective taxes 64,971 48,606 Deferred taxes −32,595 −15,276

Effective taxes include prior-period tax refunds in the amount of € 1,369 thousand (previous year: € 2,090 thousand) and tax arrears in the amount of € 933 thousand (previous year: € 386 thousand). As in the previous year, the introduction of new local taxes had no effects in the reporting year. Changes in foreign tax rates led to an increase in the total tax expense of € 198 thousand (previous year: reduction of € 205

**32,376 33,330** 

**150** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

Deferred tax assets according to the income statement are

**€ thousands 2023 2022**  Change in deferred tax assets −56,966 −2,455 Change in deferred tax liabilities −2,153 2,833

**recognised in balance sheet −59,119 378** 

taken directly to equity 27,915 −14,625

CTA \* / Other −1,391 −1,029

**income statement −32,595 −15,276**

The reconciliation for the derivation of the taxes on income reported in the income statement, based on the earnings before

income tax (EBT), is shown in the following table.

derived as follows:

**Reconciliation of deferred taxes** 

**Change in deferred taxes** 

Change in deferred taxes

Changes in consolidated Group /

**Deferred taxes recognised in** 

\* Currency translation adjustments

**€ thousands 2023 2022**  Earnings before income tax (EBT) 208,989 160,668 Calculated income taxes on the basis of the applicable Group tax rate 63,742 49,281 Differences in tax rates −10,405 −8,607 Tax losses from the current year that are not recognised 2,193 1,646 Changes in the value of deferred taxes on tax loss carryforwards −24,364 −7,193 Impairment loss on goodwill 207 219 Changes in the value of deferred taxes on temporary differences −15,415 −13,975 Tax-exempt income −6,022 −5,315 Non-deductible expenses 13,042 13,096 Prior-period taxes 5,379 −1,511 Non-deductible foreign income tax 5,416 5,243 Investments accounted for using the equity method −1,406 −352 Other 9 797 **Current taxes on income 32,376 33,330**  Current tax rate 16 % 21 %

deriving the actual tax rate for the Group.

**Taxes on income in the income statement** 

#### **Taxes on income in the balance sheet**

The allocation of deferred tax assets and deferred tax liabilities to the items in the Group's balance sheet is shown in the table below.

#### **Allocation of deferred taxes**

As at the reporting date, deferred tax assets (after offsetting) of € 5,903 thousand (previous year: € 9,713 thousand) were recognised in the balance sheet, which arose from companies posting a loss in the reporting year or in the previous year and whose realisation depends exclusively on the creation of future profit. Based on the planning figures available, KSB expects realisation to take place.

As shown in the reconciliation to the comprehensive earnings in the Group's statement of comprehensive income, taxes on income are reflected in the Group's equity as follows:

#### **Income tax included under equity**

| € thousands                        | 2023    | 2022    |
|------------------------------------|---------|---------|
| Remeasurement of                   |         |         |
| defined benefit plans *            | -39,196 | 158,394 |
| Taxes on income                    | 27,618  | -13,868 |
| Currency translation differences * | -33,370 | 12,515  |
| Taxes on income                    | –       | –       |
| Changes in the fair value of       |         |         |
| financial instruments              | -458    | 3,285   |
| Taxes on income                    | 297     | -757    |
| Other comprehensive income         | -45,110 | 159,569 |

\* These items include the changes taken directly to equity relating to investments accounted for using the equity method. Further details are provided in the statement of comprehensive income.

#### **Allocation of deferred taxes**

**47**

|                                                 | Deferred tax assets |         | Deferred tax liabilities |         |
|-------------------------------------------------|---------------------|---------|--------------------------|---------|
| € thousands                                     | 2023                | 2022    | 2023                     | 2022    |
| Non-current assets                              | 5,268               | 6,228   | 42,122                   | 40,630  |
| Intangible assets                               | 407                 | 442     | 1,861                    | 1,334   |
| Right-of-use assets                             | 17                  | 19      | 9,522                    | 8,536   |
| Property, plant and equipment                   | 4,202               | 4,952   | 28,944                   | 29,150  |
| Financial and non-financial assets              | 642                 | 815     | 1,795                    | 1,610   |
| Current assets                                  | 45,006              | 40,999  | 16,818                   | 19,889  |
| Inventories                                     | 38,152              | 33,552  | 1,538                    | 297     |
| Receivables and other current assets            | 6,854               | 7,447   | 15,280                   | 19,592  |
| Non-current liabilities                         | 66,538              | 37,212  | 4,854                    | 3,447   |
| Provisions for pensions and similar obligations | 59,502              | 31,702  | 4,854                    | 3,447   |
| Other provisions                                | 932                 | 641     | –                        | –       |
| Other liabilities *                             | 6,104               | 4,869   | –                        | –       |
| Current liabilities                             | 36,467              | 25,134  | 22,028                   | 22,610  |
| Other provisions                                | 18,400              | 11,482  | 264                      | 145     |
| Other liabilities *                             | 18,067              | 13,652  | 21,764                   | 22,465  |
| Tax loss carryforwards                          | 16,729              | 2,067   | –                        | –       |
| Gross deferred taxes – before offsetting        | 170,006             | 111,640 | 85,822                   | 86,576  |
| Offset under IAS 12.74                          | −75,966             | −74,566 | −75,966                  | −74,566 |
| Net deferred taxes – after offsetting           | 94,040              | 37,074  | 9,857                    | 12,010  |

\* Deferred tax assets from non-current lease liabilities amount to € 6,104 thousand (previous year: € 4,869 thousand) and those from current lease liabilities to € 3,460 thousand (previous year: € 2,719 thousand). They are reported under deferred taxes for other liabilities (non-current and current).

{151}------------------------------------------------

**49**

**Further information and explanations on taxes on income**  Contingent liabilities from income tax issues amount to € 1,068 thousand (previous year: € 215 thousand). There are currently no indications that the utilisation of these obligations is likely.

As far as net income from affiliates and other equity investments is concerned, withholding taxes incurred in connection with distributions and German taxes incurred are recognised as deferred taxes if these gains are expected to be subject to corresponding taxation, or there is no intention of reinvesting them in the long term. No deferred tax liabilities were recognised for taxable temporary differences of € 6,139 thousand (previous year: € 6,297 thousand) in relation to affiliates and associates as it is unlikely that these temporary differences will be reversed in the foreseeable future.

No deferred tax assets were recognised for corporate tax loss carryforwards amounting to € 17,219 thousand (previous year: € 104,619 thousand) and for trade tax loss carryforwards amounting to € 2,942 thousand (previous year: € 64,917 thousand), due to the recognition criteria of IAS 12, especially in the case where there is a history of losses. The loss carryforwards are largely available for an indefinite period. The income resulting from the use of loss carryforwards for which no deferred tax assets had been recognised so far was € 4,714 thousand (previous year: € 6,033 thousand).

Deductible temporary differences for which no deferred tax assets had to be set up amounted to € 4,663 thousand (previous year: € 107,236 thousand).

KSB considers the existing deferred tax assets in the tax group of KSB SE & Co. KGaA from loss carryforwards and from taxable temporary differences to be fully recoverable. The basis for this assessment is, firstly, the elimination of the loss history for KSB SE & Co. KGaA's tax group. Secondly, KSB expects positive taxable income for KSB SE & Co. KGaA's tax group in the coming years. The reversal of impairment losses recognised in the previous year results in deferred tax income of € 32,532 thousand in the income statement and € 15,261 thousand in other comprehensive income.

The Group falls within the scope of the OECD Pillar Two model rules. The Pillar Two legislation was adopted in Germany and has been applicable since 1 January 2024. As the Pillar Two legislation had not yet been finalised as at the reporting date, the Group is not subject to any taxation in this respect for the 2023 financial year. The Group makes use of the exemption from recognising deferred taxes in connection with Pillar Two income taxes, which was the subject of the amendments to IAS 12 published in May 2023. Overall, the Group does not expect the first-time application of the Pillar Two rules in 2024 to have any material impact on its net assets, financial position and results of operations. The Group is currently working with external tax specialists to support the application and implementation of the Pillar Two legislation.

#### **21. Earnings after income tax – Non-controlling interests**

The net profit attributable to non-controlling interests amounts to € 25,940 thousand (previous year: € 25,244 thousand) and the net loss attributable to non-controlling interests amounts to € 1,622 thousand (previous year: € 1,555 thousand). Further details on the non-controlling interests are provided in Notes No. 10 "Equity".

#### **22. Earnings per share**

Earnings per share are calculated using the weighted average number of shares as the denominator.

#### **Earnings per share**

|                                                                                                                                           |             | 2023      | 2022      |
|-------------------------------------------------------------------------------------------------------------------------------------------|-------------|-----------|-----------|
| Earnings after income tax – Attributable to KSB SE & Co. KGaA shareholders                                                                | € thousands | 152,295   | 103,649   |
| Additional dividend attributable to preference shareholders (€ 0.26 per preference share)<br>(previous year: € 0.26 per preference share) | € thousands | -225      | -225      |
|                                                                                                                                           | € thousands | 152,070   | 103,425   |
| Number of ordinary shares                                                                                                                 |             | 886,615   | 886,615   |
| Number of preference shares                                                                                                               |             | 864,712   | 864,712   |
| Total number of shares                                                                                                                    |             | 1,751,327 | 1,751,327 |
| Diluted and basic earnings per ordinary share                                                                                             | €           | 86.83     | 59.05     |
| Diluted and basic earnings per preference share                                                                                           | €           | 87.09     | 59.31     |

{152}------------------------------------------------

KSB considers the existing deferred tax assets in the tax group of KSB SE & Co. KGaA from loss carryforwards and from taxable temporary differences to be fully recoverable. The basis for this assessment is, firstly, the elimination of the loss history for KSB SE & Co. KGaA's tax group. Secondly, KSB expects positive taxable income for KSB SE & Co. KGaA's tax group in the coming years. The reversal of impairment losses recognised in the previous year results in deferred tax income of € 32,532 thousand in the income statement and € 15,261

The Group falls within the scope of the OECD Pillar Two model rules. The Pillar Two legislation was adopted in Germany and has been applicable since 1 January 2024. As the Pillar Two legislation had not yet been finalised as at the reporting date, the Group is not subject to any taxation in this respect for the 2023 financial year. The Group makes use of the exemption from recognising deferred taxes in connection with Pillar Two income taxes, which was the subject of the amendments to IAS 12 published in May 2023. Overall, the Group does not expect the first-time application of the Pillar Two rules in 2024 to have any material impact on its net assets, financial position and results of operations. The Group is currently working with external tax specialists to support the application and implementation of the Pillar Two

**21. Earnings after income tax – Non-controlling interests**  The net profit attributable to non-controlling interests amounts to € 25,940 thousand (previous year: € 25,244 thousand) and the net loss attributable to non-controlling interests amounts to € 1,622 thousand (previous year: € 1,555 thousand). Further details on the non-controlling interests are

Earnings per share are calculated using the weighted average

provided in Notes No. 10 "Equity".

number of shares as the denominator.

**22. Earnings per share** 

thousand in other comprehensive income.

legislation.

Earnings after income tax − Attributable to KSB SE & Co. KGaA shareholders € thousands 152,295 103,649

(previous year: € 0.26 per preference share) € thousands −225 −225

Number of ordinary shares 886,615 886,615 Number of preference shares 864,712 864,712 **Total number of shares 1,751,327 1,751,327 Diluted and basic earnings per ordinary share € 86.83 59.05 Diluted and basic earnings per preference share € 87.09 59.31** 

**Further information and explanations on taxes on income**  Contingent liabilities from income tax issues amount to € 1,068 thousand (previous year: € 215 thousand). There are currently no indications that the utilisation of these obli-

**152** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

As far as net income from affiliates and other equity investments is concerned, withholding taxes incurred in connection with distributions and German taxes incurred are recognised as deferred taxes if these gains are expected to be subject to corresponding taxation, or there is no intention of reinvesting them in the long term. No deferred tax liabilities were recognised for taxable temporary differences of € 6,139 thousand (previous year: € 6,297 thousand) in relation to affiliates and associates as it is unlikely that these temporary

differences will be reversed in the foreseeable future.

€ 4,714 thousand (previous year: € 6,033 thousand).

(previous year: € 107,236 thousand).

**Earnings per share** 

KSB Group / Annual Report 2023

Deductible temporary differences for which no deferred tax assets had to be set up amounted to € 4,663 thousand

Additional dividend attributable to preference shareholders (€ 0.26 per preference share)

No deferred tax assets were recognised for corporate tax loss carryforwards amounting to € 17,219 thousand (previous year: € 104,619 thousand) and for trade tax loss carryforwards amounting to € 2,942 thousand (previous year: € 64,917 thousand), due to the recognition criteria of IAS 12, especially in the case where there is a history of losses. The loss carryforwards are largely available for an indefinite period. The income resulting from the use of loss carryforwards for which no deferred tax assets had been recognised so far was

gations is likely.

#### **VI. ADDITIONAL DISCLOSURES ON FINANCIAL INSTRUMENTS**

#### **1. Financial instruments – Carrying amounts, fair values and other disclosures by measurement category**

| Balance sheet item / Class                           | Measurement<br>category * | Carrying<br>amount | Fair value | Fair value<br>Level 1 ** | Fair value<br>Level 2 *** | Fair value<br>Level 3 **** |
|------------------------------------------------------|---------------------------|--------------------|------------|--------------------------|---------------------------|----------------------------|
| € thousands                                          |                           |                    |            |                          |                           |                            |
| Assets                                               |                           |                    |            |                          |                           |                            |
| Non-current assets                                   |                           |                    |            |                          |                           |                            |
| Loans and other assets                               | AC                        | 1,227              | 1,227      | –                        | 1,227                     | –                          |
| Current assets                                       |                           |                    |            |                          |                           |                            |
| Trade receivables from third parties                 | AC                        | 505,795            | 505,795    | –                        | –                         | –                          |
| Trade receivables from related parties               | AC                        | 48,787             | 48,787     | –                        | –                         | –                          |
| Receivables from loans to<br>related parties         | AC                        | 4,652              | 4,652      | –                        | –                         | –                          |
| Currency forwards<br>designated as hedges            | n.a.                      | 1,724              | 1,724      | –                        | 1,724                     | –                          |
| Currency forwards<br>not designated as hedges        | FVPL                      | 601                | 601        | –                        | 601                       | –                          |
| Other receivables and other<br>current assets        | AC                        | 63,912             | 63,912     | –                        | –                         | –                          |
| Cash and cash equivalents                            | AC                        | 340,420            | 340,420    | –                        | –                         | –                          |
| Equity and Liabilities                               |                           |                    |            |                          |                           |                            |
| Non-current liabilities                              |                           |                    |            |                          |                           |                            |
| Financial liabilities excluding<br>lease obligations | AC                        | 789                | 742        | –                        | 742                       | –                          |
| Lease obligations                                    | n.a.                      | 28,170             | –          | –                        | –                         | –                          |
| Current liabilities                                  |                           |                    |            |                          |                           |                            |
| Financial liabilities excluding<br>lease obligations | AC                        | 10,199             | 10,199     | –                        | –                         | –                          |
| Lease obligations                                    | n.a.                      | 15,853             | –          | –                        | –                         | –                          |
| Trade payables                                       | AC                        | 324,723            | 324,723    | –                        | –                         | –                          |
| Currency forwards<br>designated as hedges            | n.a.                      | 2,165              | 2,165      | –                        | 2,165                     | –                          |
| Currency forwards<br>not designated as hedges        | FVPL                      | 139                | 139        | –                        | 139                       | –                          |
| Miscellaneous other financial liabilities            | AC                        | 25,355             | 25,355     | –                        | –                         | –                          |

#### **Financial instruments by measurement category – 31 Dec. 2023**

#### **Measurement categories aggregated under IFRS 9 – 31 Dec. 2023**

| Assets                 | AC   | 964,793 |
|------------------------|------|---------|
| Equity and Liabilities | AC   | 361,066 |
| Assets                 | FVPL | 601     |
| Equity and Liabilities | FVPL | 139     |

\* AC = Amortised cost, FVPL = Fair value through profit or loss

**49**

**2023 2022** 

**€ thousands 152,070 103,425** 

\*\* Level 1: Fair value is determined on the basis of quoted prices (unadjusted) on active markets for identical assets and liabilities.

\*\*\* Level 2: The fair value is determined on the basis of measurement parameters that are not the quoted prices taken into account for level 1, but are observable for the asset or the liability either directly as a price or indirectly derived from prices.

\*\*\*\* Level 3: The fair value is determined on the basis of measurement parameters for assets or liabilities that are not based on observable market data.

{153}------------------------------------------------

#### **Financial instruments by measurement category – 31 Dec. 2022**

| Balance sheet item / Class                        | € thousands | Measurement category * | Carrying amount | Fair value | Fair value Level 1 ** | Fair value Level 2 *** | Fair value Level 3 **** |
|---------------------------------------------------|-------------|------------------------|-----------------|------------|-----------------------|------------------------|-------------------------|
| Assets                                            |             |                        |                 |            |                       |                        |                         |
| Non-current assets                                |             |                        |                 |            |                       |                        |                         |
| Non-current financial instruments                 |             | FVPL                   | 53              | 53         | 53                    | –                      | –                       |
| Loans                                             |             | AC                     | 1,137           | 1,137      | –                     | 1,137                  | –                       |
| Current assets                                    |             |                        |                 |            |                       |                        |                         |
| Trade receivables from third parties              |             | AC                     | 530,156         | 530,156    | –                     | –                      | –                       |
| Trade receivables from related parties            |             | AC                     | 49,383          | 49,383     | –                     | –                      | –                       |
| Receivables from loans to related parties         |             | AC                     | 2,498           | 2,498      | –                     | –                      | –                       |
| Currency forwards designated as hedges            |             | n.a.                   | 2,522           | 2,522      | –                     | 2,522                  | –                       |
| Currency forwards not designated as hedges        |             | FVPL                   | 448             | 448        | –                     | 448                    | –                       |
| Other receivables and other current assets        |             | AC                     | 66,050          | 66,050     | –                     | –                      | –                       |
| Cash and cash equivalents                         |             | AC                     | 228,570         | 228,570    | –                     | –                      | –                       |
| Equity and Liabilities                            |             |                        |                 |            |                       |                        |                         |
| Non-current liabilities                           |             |                        |                 |            |                       |                        |                         |
| Financial liabilities excluding lease obligations |             | AC                     | 1,212           | 891        | –                     | 891                    | –                       |
| Lease obligations                                 |             | n.a.                   | 22,904          | –          | –                     | –                      | –                       |
| Current liabilities                               |             |                        |                 |            |                       |                        |                         |
| Financial liabilities excluding lease obligations |             | AC                     | 13,104          | 13,104     | –                     | –                      | –                       |
| Lease obligations                                 |             | n.a.                   | 13,526          | –          | –                     | –                      | –                       |
| Trade payables                                    |             | AC                     | 333,361         | 333,361    | –                     | –                      | –                       |
| Currency forwards designated as hedges            |             | n.a.                   | 1,791           | 1,791      | –                     | 1,791                  | –                       |
| Currency forwards not designated as hedges        |             | FVPL                   | 531             | 531        | –                     | 531                    | –                       |
| Miscellaneous other financial liabilities         |             | AC                     | 21,599          | 21,599     | –                     | –                      | –                       |

#### **Measurement categories aggregated under IFRS 9 – 31 Dec. 2022**

| Assets                 | AC   | 877,794 |
|------------------------|------|---------|
| Equity and Liabilities | AC   | 369,276 |
| Assets                 | FVPL | 501     |
| Equity and Liabilities | FVPL | 531     |

\* AC = Amortised cost, FVPL = Fair value through profit or loss

\*\* Level 1: Fair value is determined on the basis of quoted prices (unadjusted) on active markets for identical assets and liabilities.

\*\*\* Level 2: The fair value is determined on the basis of measurement parameters that are not the quoted prices taken into account for level 1, but are observable for the asset or the liability either directly as a price or indirectly derived from prices.

\*\*\*\* Level 3: The fair value is determined on the basis of measurement parameters for assets or liabilities that are not based on observable market data.

For the financial assets measured at amortised cost, it is assumed that the fair values correspond to the carrying amounts, given the predominantly short maturities of these financial instruments. This is also the case for all financial liabilities measured at amortised cost, with the exception of

The fair values of the current and non-current financial instruments are based on prices quoted in active markets (level

Fair values within level 2 are determined using a discounted cash flow method. This relates to loans, non-current financial liabilities and currency forwards. KSB applies an appropriate yield curve for discounting. Future cash flows from currency forwards are calculated on the basis of forward exchange rates (observable rates on the reporting date) and the contracted

Level 3 includes financial instruments whose fair value is based on measurement parameters that are not based on observable

**From interest** 

**From interest** 

**and dividends At fair value** 

**and dividends At fair value** 

non-current financial liabilities.

forward exchange rates.

**Net results by measurement category in 2023** 

**Net results by measurement category in 2022** 

market data.

**€ thousands** 

**€ thousands** 

1).

**51**

**52** 

KSB Group / Annual Report 2023

In the reporting year, as in the previous year, there were no significant reclassifications of financial assets or liabilities

The net gains and losses from financial instruments, after taking into account the relevant tax effect, are presented in the

The interest shown is a component of finance income / expense. The other gains and losses are partly reported in other

Differences between the gross and net carrying amounts of financial assets, which are reflected in the table on net results under the column "Impairments", mainly concern trade receivables. For further details, please refer to Notes No. 8 "Contract assets, trade receivables and other financial and

The amount of financial assets and liabilities subject to

**losses From disposal Net results** 

**losses From disposal Net results** 

between the hierarchy levels described above.

**Net results by measurement category** 

income and other expenses.

non-financial assets".

**From subsequent measurement** 

**From subsequent measurement** 

**Currency translation** 

Amortised cost (assets) 9,301 – −848 −4,809 – **3,644**  Amortised cost (equity and liabilities) −4,389 – −136 – – **−4,525** FVPL (assets and equity and liabilities) – 544 – – – **544** 

Amortised cost (assets) 7,132 – 315 815 – **8,262**  Amortised cost (equity and liabilities) −4,984 – −199 – – **−5,183** FVPL (assets and equity and liabilities) – 1,049 – – – **1,049** 

**Currency translation** 

offsetting agreements is not material.

**4,912 544 −984 −4,809 – −337**

**2,148 1,049 116 815 – 4,128** 

**Impairment** 

**Impairment** 

following table:

Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information **155**

{154}------------------------------------------------

For the financial assets measured at amortised cost, it is assumed that the fair values correspond to the carrying amounts, given the predominantly short maturities of these financial instruments. This is also the case for all financial liabilities measured at amortised cost, with the exception of non-current financial liabilities.

The fair values of the current and non-current financial instruments are based on prices quoted in active markets (level 1).

Fair values within level 2 are determined using a discounted cash flow method. This relates to loans, non-current financial liabilities and currency forwards. KSB applies an appropriate yield curve for discounting. Future cash flows from currency forwards are calculated on the basis of forward exchange rates (observable rates on the reporting date) and the contracted forward exchange rates.

Level 3 includes financial instruments whose fair value is based on measurement parameters that are not based on observable market data.

In the reporting year, as in the previous year, there were no significant reclassifications of financial assets or liabilities between the hierarchy levels described above.

The net gains and losses from financial instruments, after taking into account the relevant tax effect, are presented in the following table:

#### **Net results by measurement category**

The interest shown is a component of finance income / expense. The other gains and losses are partly reported in other income and other expenses.

Differences between the gross and net carrying amounts of financial assets, which are reflected in the table on net results under the column "Impairments", mainly concern trade receivables. For further details, please refer to Notes No. 8 "Contract assets, trade receivables and other financial and non-financial assets".

The amount of financial assets and liabilities subject to offsetting agreements is not material.

#### **Net results by measurement category in 2023**

|                                          |                                | From subsequent measurement |                         |                      |               |             |
|------------------------------------------|--------------------------------|-----------------------------|-------------------------|----------------------|---------------|-------------|
| € thousands                              | From interest<br>and dividends | At fair value               | Currency<br>translation | Impairment<br>losses | From disposal | Net results |
| Amortised cost (assets)                  | 9,301                          | −                           | −848                    | −4,809               | −             | 3,644       |
| Amortised cost (equity and liabilities)  | −4,389                         | −                           | −136                    | −                    | −             | −4,525      |
| FVPL (assets and equity and liabilities) | −                              | 544                         | −                       | −                    | −             | 544         |
|                                          | 4,912                          | 544                         | −984                    | −4,809               | −             | −337        |

#### **Net results by measurement category in 2022**

|                                          | From subsequent measurement    |               |                         |                      |               |             |
|------------------------------------------|--------------------------------|---------------|-------------------------|----------------------|---------------|-------------|
| € thousands                              | From interest<br>and dividends | At fair value | Currency<br>translation | Impairment<br>losses | From disposal | Net results |
| Amortised cost (assets)                  | 7,132                          | –             | 315                     | 815                  | –             | 8,262       |
| Amortised cost (equity and liabilities)  | −4,984                         | –             | −199                    | –                    | –             | −5,183      |
| FVPL (assets and equity and liabilities) | –                              | 1,049         | –                       | –                    | –             | 1,049       |
|                                          | 2,148                          | 1,049         | 116                     | 815                  | –             | 4,128       |

{155}------------------------------------------------

#### **2. Financial risks**

KSB is exposed to certain financial risks as a consequence of its business activities. These risks can be classified into three areas:

KSB is firstly exposed to credit risk. Credit risk is defined as the potential default or delays in the receipt of contractually agreed payments. KSB is also exposed to liquidity risk which is the risk that an entity will be unable to meet its financial obligations, or will be unable to meet them in full. In addition, KSB is exposed to market price risk. The risk of exchange rate or interest rate changes may adversely affect the economic position of the Group. Risks from fluctuations in the prices of financial instruments are not material for KSB.

KSB limits all these risks through an appropriate risk management system, defining how these risks are addressed through guidelines and work instructions. Furthermore, KSB continuously monitors the current risk characteristics and regularly provides the information obtained to the Managing Directors and the Supervisory Board in the form of standardised reports and individual analyses.

The three risk areas are described in detail in the following. Additional information is also provided in the group management report, in particular in the Economic Review, Report on Expected Developments, Opportunities and Risks Report sections.

#### **Credit risk**

The primary credit risk is that there is a delay in settling a receivable, or that it is not settled either in full or in part. KSB minimises this risk using a variety of measures. As a matter of principle, KSB runs credit checks on potential and existing counterparties. KSB only enters into business relationships if the results of these checks are positive. Additionally, European companies in particular take out trade credit insurance policies. In exceptional cases KSB accepts other securities (collateral) such as guarantees. The insurance policies primarily cover the risk of loss of receivables. Moreover, cover is also taken out against political and commercial risks in the case of specific customers in selected countries. For both types of insurance, KSB has agreed deductibles, which represent significantly less than 50 % of the insured volume. The total amount of unhedged trade receivables as at the reporting date is shown under Notes No. 8 "Contract assets, trade receivables and other financial and non-financial assets". As part of receivables management, KSB continuously monitors out-standing items, performs maturity analyses and establishes contact with customers at an early stage if delays in payment occur. In the case of major projects, the terms and conditions provide for prepayments, guarantees and – for export transactions – letters of credit. These also mitigate risk. KSB recognises impairment losses for the residual risk remaining in trade receivables. It regularly examines the extent to which individual receivables need to be written down for impairment. Indications of this are significant financial difficulties of the debtor, such as insolvency or bankruptcy. Receivables are derecognised when it is reasonably certain that payment cannot be expected.

The maximum default risk, excluding collateral received, corresponds to the carrying amount of the financial assets.

There is no concentration of risk because the diversity of KSB's business means that it supplies a considerable number of customers in different sectors.

#### **Liquidity risk**

Liquidity management ensures that the liquidity risk is minimised in the Group and that solvency is ensured at all times. There are no concentrations of risk because KSB works with a number of credit institutions, on which strict creditworthiness requirements are imposed.

KSB generates its financial resources primarily from its operating business. These are used to finance investments in non-current assets. The Group also uses them to cover working capital requirements. KSB monitors changes in inventories, contract assets, trade receivables, trade payables and contract liabilities regularly using a standardised Group reporting system.

The reporting system additionally ensures, with the help of monthly rolling cash flow planning, that the Group's central financial management is continuously informed about liquidity surpluses and requirements. This enables KSB to optimally meet the needs of the Group as a whole and of the individual companies. In order to be able to provide the necessary collateral in the project business, KSB makes corresponding guarantee volumes available.

In addition, it is always ensured that free credit facilities are sufficient; KSB identifies the need for these on the basis of regular liquidity planning. This way, it can respond at any time to fluctuating liquidity requirements. The available cash loans and credit lines total € 1,077.9 million (previous year: € 1,086.4 million). The utilisation of cash loans and credit lines by the Group was as follows at the end of the reporting year:

| € thousands / Type of line | Maximum<br>amount of line | Utilisation as at<br>31 Dec.2023 |
|----------------------------|---------------------------|----------------------------------|
| Loans                      | 420.1                     | 10.5                             |
| Sureties                   | 657.8                     | 212.6                            |

{156}------------------------------------------------

recognises impairment losses for the residual risk remaining in trade receivables. It regularly examines the extent to which individual receivables need to be written down for impairment. Indications of this are significant financial difficulties of the debtor, such as insolvency or bankruptcy. Receivables are derecognised when it is reasonably certain that payment

The maximum default risk, excluding collateral received, corresponds to the carrying amount of the financial assets.

There is no concentration of risk because the diversity of KSB's business means that it supplies a considerable number of

Liquidity management ensures that the liquidity risk is minimised in the Group and that solvency is ensured at all times. There are no concentrations of risk because KSB works with a number of credit institutions, on which strict

KSB generates its financial resources primarily from its operating business. These are used to finance investments in non-current assets. The Group also uses them to cover working capital requirements. KSB monitors changes in inventories, contract assets, trade receivables, trade payables and contract liabilities regularly using a standardised Group

The reporting system additionally ensures, with the help of monthly rolling cash flow planning, that the Group's central financial management is continuously informed about liquidity surpluses and requirements. This enables KSB to optimally meet the needs of the Group as a whole and of the individual companies. In order to be able to provide the necessary collateral in the project business, KSB makes

In addition, it is always ensured that free credit facilities are sufficient; KSB identifies the need for these on the basis of regular liquidity planning. This way, it can respond at any time to fluctuating liquidity requirements. The available cash loans and credit lines total € 1,077.9 million (previous year: € 1,086.4 million). The utilisation of cash loans and credit lines by the Group was as follows at the end of the reporting

Loans 420.1 10.5 Sureties 657.8 212.6

**Maximum amount of line**

cannot be expected.

**Liquidity risk** 

reporting system.

year:

**€ thousands / Type of line** 

customers in different sectors.

creditworthiness requirements are imposed.

corresponding guarantee volumes available.

**2. Financial risks** 

areas:

KSB is exposed to certain financial risks as a consequence of its business activities. These risks can be classified into three

**156** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

KSB is firstly exposed to credit risk. Credit risk is defined as the potential default or delays in the receipt of contractually agreed payments. KSB is also exposed to liquidity risk which is the risk that an entity will be unable to meet its financial obligations, or will be unable to meet them in full. In addition, KSB is exposed to market price risk. The risk of exchange rate or interest rate changes may adversely affect the economic position of the Group. Risks from fluctuations in the prices of

KSB limits all these risks through an appropriate risk management system, defining how these risks are addressed through guidelines and work instructions. Furthermore, KSB continuously monitors the current risk characteristics and regularly provides the information obtained to the Managing Directors and the Supervisory Board in the form of

The three risk areas are described in detail in the following. Additional information is also provided in the group management report, in particular in the Economic Review, Report on Expected Developments, Opportunities and Risks

The primary credit risk is that there is a delay in settling a receivable, or that it is not settled either in full or in part. KSB minimises this risk using a variety of measures. As a matter of principle, KSB runs credit checks on potential and existing counterparties. KSB only enters into business relationships if the results of these checks are positive. Additionally, European companies in particular take out trade credit insurance policies. In exceptional cases KSB accepts other securities (collateral) such as guarantees. The insurance policies primarily cover the risk of loss of receivables. Moreover, cover is also taken out against political and commercial risks in the case of specific customers in selected countries. For both types of insurance, KSB has agreed deductibles, which represent significantly less than 50 % of the insured volume. The total amount of unhedged trade receivables as at the reporting date is shown under Notes No. 8 "Contract assets, trade receivables and other financial and non-financial assets". As part of receivables management, KSB continuously monitors out-standing items, performs maturity analyses and establishes contact with customers at an early stage if delays in payment occur. In the case of major projects, the terms and conditions provide for prepayments, guarantees and – for export transactions – letters of credit. These also mitigate risk. KSB

financial instruments are not material for KSB.

standardised reports and individual analyses.

Report sections.

**Credit risk** 

KSB Group / Annual Report 2023

Cash loans and credit lines included amounts from a syndicated loan agreement signed in December 2018, whose credit line in the amount of € 300.0 million can be used at any time. The credit line from the syndicated loan agreement comes to € 350.0 million. Following the utilisation of renewal options by KSB in previous years, the cash loan and credit line now has a fixed term until the end of 2025.

The following tables show the contractually agreed nondiscounted future cash flows of the financial liabilities (primary financial instruments) and derivative financial instruments. Interest payments on fixed-rate liabilities are determined on the basis of the fixed rate. Floating-rate interest payments are based on the last floating interest rates fixed before 31 December. Projections for future new liabilities are not included in the presentation. Based on the current state of knowledge, it is neither expected that the cash flows will take place significantly earlier, nor that the amounts will differ significantly.

#### **Cash flows of financial liabilities 2023**

| € thousands                               | Total   | Up to 1 year | 1 − 5 years | > 5 years |
|-------------------------------------------|---------|--------------|-------------|-----------|
| Financial liabilities                     | 57,097  | 27,581       | 26,151      | 3,365     |
| of which from lease obligations           | 46,094  | 16,971       | 25,830      | 3,293     |
| Trade payables                            | 324,723 | 324,723      | –           | –         |
| Miscellaneous other financial liabilities | 25,355  | 25,230       | 125         | –         |
| Derivative financial instruments (net)    | 2,304   | 2,202        | 102         | –         |
|                                           | 409,479 | 379,736      | 26,378      | 3,365     |

#### **Cash flows of financial liabilities 2022**

**53**

**Utilisation as at 31 Dec.2023** 

| € thousands                               | Total   | Up to 1 year | 1 - 5 years | > 5 years |
|-------------------------------------------|---------|--------------|-------------|-----------|
| Financial liabilities                     | 54,703  | 28,628       | 21,883      | 4,192     |
| of which from lease obligations           | 40,453  | 15,300       | 21,034      | 4,119     |
| Trade payables                            | 333,361 | 333,361      | -           | -         |
| Miscellaneous other financial liabilities | 21,599  | 21,407       | 192         | -         |
| Derivative financial instruments (net)    | 2,322   | 2,067        | 255         | -         |
|                                           | 411,985 | 385,463      | 22,330      | 4,192     |

{157}------------------------------------------------

**55**

#### **Market price risk**

Global business activities expose KSB primarily to currency and interest rate risk. Any changes in market prices can affect fair values and future cash flows. Sensitivity analyses are used to determine the hypothetical impact of such market price fluctuations on earnings and equity. In doing so, KSB assumes that the portfolio at the reporting date is representative of the full year.

#### **Currency risk**

Currency risk mainly affects cash flows from operating activities. It arises when Group companies settle transactions in currencies that are not their functional currency. The main currencies in the KSB Group are the US dollar (USD), the Chinese yuan (CNY), the Indian rupee (INR) and the Brazilian real (BRL).

**Currency volumes** 

#### KSB minimises currency risk by using currency forwards. Further information is provided in Section III. Accounting Policies under "Financial assets and financial liabilities – b) Derivatives" and in the following sub-section 3. "Hedge accounting".

For the currency sensitivity analysis shown in the tables below, KSB simulates the effects for the main currencies used in the Group based on the notional volume of existing foreign currency derivatives and foreign currency receivables and liabilities at the reporting date. For the analysis, a 10 % increase (decrease) in the value of the euro versus the other currencies is assumed.

**Currency sensitivity** 

#### **Currency volumes**

|                   | CNY             | CNY             | USD             | USD             | INR             | INR             | BRL             | BRL             |
|-------------------|-----------------|-----------------|-----------------|-----------------|-----------------|-----------------|-----------------|-----------------|
|                   | 31 Dec.<br>2023 | 31 Dec.<br>2022 | 31 Dec.<br>2023 | 31 Dec.<br>2022 | 31 Dec.<br>2023 | 31 Dec.<br>2022 | 31 Dec.<br>2023 | 31 Dec.<br>2022 |
| € thousands       |                 |                 |                 |                 |                 |                 |                 |                 |
| Trade receivables | 44,590          | 47,261          | 30,235          | 36,586          | 53,110          | 46,549          | 20,550          | 18,834          |
| Trade payables    | 49,093          | 47,863          | 22,322          | 24,460          | 41,235          | 36,910          | 16,190          | 24,210          |
| Balance           | -4,502          | -602            | 7,912           | 12,126          | 11,875          | 9,639           | 4,360           | -5,376          |

#### **Currency sensitivity as at 31 December 2023**

|            |                              | Effect on consolidated earnings for |                              | Effect on other comprehensive income for |  |
|------------|------------------------------|-------------------------------------|------------------------------|------------------------------------------|--|
|            | Increase in the value of the | Decrease in the value of the        | Increase in the value of the | Decrease in the value of the             |  |
| € millions | euro by + 10 %               | euro by - 10 %                      | euro by + 10 %               | euro by - 10 %                           |  |
| CNY        | 0.8                          | -0.8                                | 0.5                          | -0.5                                     |  |
| USD        | 1.8                          | -1.8                                | 4.5                          | -4.5                                     |  |
| INR        | -1.2                         | 1.2                                 | –                            | –                                        |  |
| BRL        | -0.4                         | 0.4                                 | –                            | –                                        |  |

#### **Currency sensitivity as at 31 December 2022**

| € millions | Effect on consolidated earnings for            |                                                | Effect on other comprehensive income for       |                                                |
|------------|------------------------------------------------|------------------------------------------------|------------------------------------------------|------------------------------------------------|
|            | Increase in the value of the<br>euro by + 10 % | Decrease in the value of the<br>euro by – 10 % | Increase in the value of the<br>euro by + 10 % | Decrease in the value of the<br>euro by – 10 % |
| CNY        | 0.3                                            | -0.3                                           | 1.0                                            | -1.0                                           |
| USD        | 0.0                                            | 0.0                                            | 6.4                                            | -6.4                                           |
| INR        | -1.0                                           | 1.0                                            | –                                              | –                                              |
| BRL        | 0.5                                            | -0.5                                           | –                                              | –                                              |

{158}------------------------------------------------

KSB minimises currency risk by using currency forwards. Further information is provided in Section III. Accounting Policies under "Financial assets and financial liabilities – b) Derivatives" and in the following sub-section 3. "Hedge

For the currency sensitivity analysis shown in the tables below, KSB simulates the effects for the main currencies used in the Group based on the notional volume of existing foreign currency derivatives and foreign currency receivables and liabilities at the reporting date. For the analysis, a 10 % increase (decrease) in the value of the euro versus the other

accounting".

currencies is assumed. **Currency sensitivity** 

> **USD 31 Dec. 2022**

**Effect on consolidated earnings for Effect on other comprehensive income for** 

**Effect on consolidated earnings for Effect on other comprehensive income for** 

**INR 31 Dec. 2023** 

**Increase in the value of the euro by + 10 %** 

**Increase in the value of the euro by + 10 %** 

**INR 31 Dec. 2022** 

**BRL 31 Dec. 2023** 

**Decrease in the value of the euro by − 10 %**

**Decrease in the value of the euro by − 10 %**

**BRL 31 Dec. 2022** 

**Market price risk** 

full year.

**Currency risk** 

real (BRL).

**Currency volumes** 

**Currency volumes** 

**Currency sensitivity as at 31 December 2023** 

**Currency sensitivity as at 31 December 2022** 

**€ thousands** 

**€ millions** 

**€ millions** 

KSB Group / Annual Report 2023

Global business activities expose KSB primarily to currency and interest rate risk. Any changes in market prices can affect fair values and future cash flows. Sensitivity analyses are used to determine the hypothetical impact of such market price fluctuations on earnings and equity. In doing so, KSB assumes that the portfolio at the reporting date is representative of the

Currency risk mainly affects cash flows from operating activities. It arises when Group companies settle transactions in currencies that are not their functional currency. The main currencies in the KSB Group are the US dollar (USD), the Chinese yuan (CNY), the Indian rupee (INR) and the Brazilian

> **CNY 31 Dec. 2023**

**Increase in the value of the euro by + 10 %** 

**Increase in the value of the euro by + 10 %** 

**CNY 31 Dec. 2022** 

**158** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**USD 31 Dec. 2023** 

Trade receivables 44,590 47,261 30,235 36,586 53,110 46,549 20,550 18,834 Trade payables 49,093 47,863 22,322 24,460 41,235 36,910 16,190 24,210 **Balance** −4,502 −602 7,912 12,126 11,875 **9,639** 4,360 −5,376

> **Decrease in the value of the euro by − 10 %**

> **Decrease in the value of the euro by − 10 %**

CNY 0.3 −0.3 1.0 −1.0 USD 0.0 0.0 6.4 −6.4 INR −1.0 1.0 – – BRL 0.5 −0.5 – –

CNY 0.8 −0.8 0.5 −0.5 USD 1.8 −1.8 4.5 −4.5 INR −1.2 1.2 – – BRL −0.4 0.4 – –

#### **Interest rate risks**

KSB regularly monitors the interest rate risks associated with its financing activities. To avoid the negative effects of interest rate fluctuations on the international capital markets, KSB concludes interest rate hedges (interest rate swaps) where necessary, generally for long-term loans. These are used exclusively to hedge floating rate loans against rising interest rates. In the reporting year, as in the previous year, there were no such transactions or other interest rate derivatives in the portfolio.

As part of the interest rate sensitivity analysis shown in the table below, KSB simulates a 100 basis point increase (decrease) in market interest rates and analyses the impact on the floating rate financial instruments.

#### **Interest rate sensitivity**

**55**

|                       | 31 Dec. 2023       |                    | 31 Dec. 2022       |                    |
|-----------------------|--------------------|--------------------|--------------------|--------------------|
| € millions            | + 100 basis points | - 100 basis points | + 100 basis points | - 100 basis points |
| Consolidated earnings | 3.7                | -3.7               | 2.6                | -2.6               |

{159}------------------------------------------------

**57**

#### **3. Hedge accounting**

KSB uses micro hedges (hedging individual transactions) and macro hedges (hedging an overall risk portfolio) to hedge currency risk from transactions already recognised in the balance sheet as well as transactions that are expected in the future with a high degree of probability. The hedging instruments used share the essential terms and conditions with the underlying transactions, i.e. with regard to amount, term and quality. The maturities of the currency derivatives used are, as in the previous year, mostly between one and two years. Internal guidelines govern the use of financial instruments. Such transactions are also subject to ongoing risk control measures.

The effectiveness of hedges is determined at the beginning of the hedge and through regular prospective assessment. The aim is to ensure that there is a financial relationship between the hedge underlying and hedging instrument. The hedging instruments used are exclusively currency forwards entered into with prime-rated banks. To hedge forward exchange transactions, the Group takes out hedges where the contractual modalities of the hedging instrument essentially match those of the hedged underlying. The hedge ratio for hedges is 1:1, i.e. the volume of hedge transactions matches the designated underlyings.

In order to measure the effectiveness or ineffectiveness of hedges, KSB compares the fair value of the underlying and the hedge transactions. Changes in the fair value of the derivatives are almost completely offset by changes in the fair value of the cash flows from the underlyings (dollar offset method). The changes in the fair value of the underlyings and hedges in the financial year therefore match the unrealised profits and losses recorded under equity. As a rule, KSB does not hedge currency risks from the translation of foreign operations into the Group currency (€). Ineffectiveness can arise from hedging currency risk if the material measurement parameters of the underlying and hedge no longer match. There was no material ineffectiveness in the KSB Group in respect of currency hedges in the 2023 and 2022 financial years.

At the reporting date, the notional volume of the currency forwards designated as hedges was € 215,935 thousand (previous year: € 188,568 thousand). In addition to the US dollar, the hedged currency risk relates to a number of other currencies to a lesser extent. The weighted average EUR / USD exchange rate for hedging instruments denominated in US dollars was 1.11 (previous year: 1.07) as at the balance sheet date. The contractual maturities of payments for these currency forwards are as follows:

#### **Notional volumes in 2023**

| € thousands                            | Total   | Up to 1 year | 1 – 5 years | > 5 years |
|----------------------------------------|---------|--------------|-------------|-----------|
| Currency forwards designated as hedges | 215,935 | 204,144      | 11,791      | –         |
| Notional volumes in 2022               |         |              |             |           |
| € thousands                            | Total   | Up to 1 year | 1 – 5 years | > 5 years |
| Currency forwards designated as hedges | 188,568 | 155,225      | 32,962      | 381       |

{160}------------------------------------------------

In order to measure the effectiveness or ineffectiveness of hedges, KSB compares the fair value of the underlying and the hedge transactions. Changes in the fair value of the derivatives are almost completely offset by changes in the fair value of the cash flows from the underlyings (dollar offset method). The changes in the fair value of the underlyings and hedges in the financial year therefore match the unrealised profits and losses recorded under equity. As a rule, KSB does not hedge currency risks from the translation of foreign operations into the Group currency (€). Ineffectiveness can arise from hedging currency risk if the material measurement parameters of the underlying and hedge no longer match. There was no material ineffectiveness in the KSB Group in respect of currency hedges

At the reporting date, the notional volume of the currency forwards designated as hedges was € 215,935 thousand (previous year: € 188,568 thousand). In addition to the US dollar, the hedged currency risk relates to a number of other currencies to a lesser extent. The weighted average EUR / USD exchange rate for hedging instruments denominated in US dollars was 1.11 (previous year: 1.07) as at the balance sheet date. The contractual maturities of payments for these

in the 2023 and 2022 financial years.

currency forwards are as follows:

**€ thousands Total Up to 1 year 1 − 5 years > 5 years**  Currency forwards designated as hedges 215,935 204,144 11,791 –

**€ thousands Total Up to 1 year 1 − 5 years > 5 years**  Currency forwards designated as hedges 188,568 155,225 32,962 381

**3. Hedge accounting** 

measures.

designated underlyings.

**Notional volumes in 2023** 

**Notional volumes in 2022** 

KSB Group / Annual Report 2023

KSB uses micro hedges (hedging individual transactions) and macro hedges (hedging an overall risk portfolio) to hedge currency risk from transactions already recognised in the balance sheet as well as transactions that are expected in the future with a high degree of probability. The hedging instruments used share the essential terms and conditions with the underlying transactions, i.e. with regard to amount, term and quality. The maturities of the currency derivatives used are, as in the previous year, mostly between one and two years. Internal guidelines govern the use of financial instruments. Such transactions are also subject to ongoing risk control

**160** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

The effectiveness of hedges is determined at the beginning of the hedge and through regular prospective assessment. The aim is to ensure that there is a financial relationship between the hedge underlying and hedging instrument. The hedging instruments used are exclusively currency forwards entered into with prime-rated banks. To hedge forward exchange transactions, the Group takes out hedges where the contractual modalities of the hedging instrument essentially match those of the hedged underlying. The hedge ratio for hedges is 1:1, i.e. the volume of hedge transactions matches the The "Changes in the fair value of derivatives" table shows the change in the hedging reserve and in the cost of the hedging reserve for currency hedges before tax. In the reporting year,

the realisation of the underlying recognised in income includes amounts of € 62 thousand (previous year: € 29 thousand) resulting from hedging transactions in which the hedged future cash flows are no longer expected to occur.

#### **Fair value changes in derivatives in 2023**

|                                                | OCI                                      |                                                  |
|------------------------------------------------|------------------------------------------|--------------------------------------------------|
| € thousands                                    | Cash flow<br>hedges –<br>Hedging reserve | Cash flow<br>hedges –<br>Hedging cost<br>reserve |
| Currency risk                                  |                                          |                                                  |
| Opening balance at 1 January                   | 1,560                                    | −1,012                                           |
| Effective portion of changes in fair value     | −832                                     | 2,191                                            |
| Realisation of underlying recognised in income | −429                                     | −1,389                                           |
| Closing balance at 31 December                 | 299                                      | −210                                             |

#### **Fair value changes in derivatives in 2022**

**57**

|                                                | OCI                                |                                         |
|------------------------------------------------|------------------------------------|-----------------------------------------|
| € thousands                                    | Cash flow hedges – Hedging reserve | Cash flow hedges – Hedging cost reserve |
| Currency risk                                  |                                    |                                         |
| Opening balance at 1 January                   | −5,988                             | 3,213                                   |
| Effective portion of changes in fair value     | 36,961                             | −22,542                                 |
| Realisation of underlying recognised in income | −29,413                            | 18,317                                  |
| Closing balance at 31 December                 | 1,560                              | −1,012                                  |

{161}------------------------------------------------

**59**

#### **VII. STATEMENT OF CASH FLOWS**

The cash flow statement shows how the Group's cash and cash equivalents reported in the balance sheet changed during the reporting year as a result of cash inflows and outflows. In accordance with the requirements of IAS 7, a distinction is made between cash flows from operating activities and from investing and financing activities. The exact composition of these individual components can be seen in the individual items listed in the cash flow statement.

Non-cash effects from currency translation and from changes in the consolidated Group are eliminated in the respective items. Consequently, the cash flows from changes in balance sheet items shown in the cash flow statement cannot be reconciled with the corresponding movements in the Group's balance sheet.

Cash flows reported by Group companies in foreign currencies are translated into euros at average exchange rates for the year, while cash and cash equivalents are translated at the closing rate.

The effect of exchange rate changes on cash and cash equivalents, as well as the effect of changes in the consolidated Group, are shown in a separate item in the cash flow statement.

The cash flow from investing activities includes the cash effects from additions and disposals of intangible assets and property, plant and equipment. The total additions and disposals in the reporting year are provided in the explanatory notes to the balance sheet items in these Notes to the Consolidated Financial Statements.

The change in financial liabilities over the year, including the cash-effective portion of this change, which is included in the cash flows from financing activities, is presented in the tables below.

As in the previous year, the cash and cash equivalents reported as at the reporting date are not subject to any significant restrictions on disposal by KSB.

#### **Change in financial liabilities in 2023**

| € thousands                                                     | 1 Jan. 2023 | Cash-effective in cash flows from financing activities | Additions / Disposals / Acquisitions / Other | Exchange-rate-related changes | 31 Dec. 2023 |
|-----------------------------------------------------------------|-------------|--------------------------------------------------------|----------------------------------------------|-------------------------------|--------------|
| Non-current financial liabilities (excluding lease liabilities) | 1,213       | -865                                                   | 612                                          | -170                          | 790          |
| Current financial liabilities (excluding lease liabilities)     | 13,103      | -2,835                                                 | 1,933                                        | -2,001                        | 10,200       |
| Lease liabilities                                               | 36,430      | -19,100                                                | 27,237                                       | -545                          | 44,022       |
| Total financial liabilities                                     | 50,746      | -22,801                                                | 29,782                                       | -2,717                        | 55,011       |

#### **Change in financial liabilities in 2022**

|                                                                 |             | Non-cash changes                                                |                                                       |                                   |              |
|-----------------------------------------------------------------|-------------|-----------------------------------------------------------------|-------------------------------------------------------|-----------------------------------|--------------|
| € thousands                                                     | 1 Jan. 2022 | Cash-effective<br>in cash flows<br>from financing<br>activities | Additions /<br>Disposals /<br>Acquisitions /<br>Other | Exchange-rate-<br>related changes | 31 Dec. 2022 |
| Non-current financial liabilities (excluding lease liabilities) | 2,574       | −1,996                                                          | 226                                                   | 410                               | 1,213        |
| Current financial liabilities (excluding lease liabilities)     | 37,386      | −26,048                                                         | 2,996                                                 | −1,231                            | 13,103       |
| Lease liabilities                                               | 39,006      | −17,764                                                         | 15,080                                                | 108                               | 36,430       |
| Total financial liabilities                                     | 78,966      | −45,808                                                         | 18,302                                                | −713                              | 50,746       |

{162}------------------------------------------------

The effect of exchange rate changes on cash and cash equivalents, as well as the effect of changes in the consolidated Group, are shown in a separate item in the cash flow

The cash flow from investing activities includes the cash effects from additions and disposals of intangible assets and property, plant and equipment. The total additions and disposals in the reporting year are provided in the explanatory notes to the balance sheet items in these Notes to the Consolidated

The change in financial liabilities over the year, including the cash-effective portion of this change, which is included in the cash flows from financing activities, is presented in the tables

As in the previous year, the cash and cash equivalents reported as at the reporting date are not subject to any significant

> **Additions / Disposals / Acquisitions / Other**

> **Additions / Disposals / Acquisitions / Other**

**Non-cash changes** 

**Exchange-rate-**

**Non-cash changes** 

**Exchange-rate-**

**related changes 31 Dec. 2023** 

**related changes 31 Dec. 2022** 

statement.

below.

**Cash-effective in cash flows from financing activities** 

**Cash-effective in cash flows from financing activities** 

Non-current financial liabilities (excluding lease liabilities) 1,213 −865 612 −170 790 Current financial liabilities (excluding lease liabilities) 13,103 −2,835 1,933 −2,001 10,200 Lease liabilities 36,430 −19,100 27,237 −545 44,022 **Total financial liabilities 50,746 −22,801 29,782 −2,717 55,011** 

Non-current financial liabilities (excluding lease liabilities) 2,574 −1,996 226 410 1,213 Current financial liabilities (excluding lease liabilities) 37,386 −26,048 2,996 −1,231 13,103 Lease liabilities 39,006 −17,764 15,080 108 36,430 **Total financial liabilities 78,966 −45,808 18,302 −713 50,746** 

Financial Statements.

restrictions on disposal by KSB.

**VII. STATEMENT OF CASH FLOWS** 

items listed in the cash flow statement.

**Change in financial liabilities in 2023** 

**Change in financial liabilities in 2022** 

KSB Group / Annual Report 2023

balance sheet.

rate.

The cash flow statement shows how the Group's cash and cash equivalents reported in the balance sheet changed during the reporting year as a result of cash inflows and outflows. In accordance with the requirements of IAS 7, a distinction is made between cash flows from operating activities and from investing and financing activities. The exact composition of these individual components can be seen in the individual

**162** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

Non-cash effects from currency translation and from changes in the consolidated Group are eliminated in the respective items. Consequently, the cash flows from changes in balance sheet items shown in the cash flow statement cannot be reconciled with the corresponding movements in the Group's

Cash flows reported by Group companies in foreign currencies are translated into euros at average exchange rates for the year, while cash and cash equivalents are translated at the closing

**€ thousands 1 Jan. 2023** 

**€ thousands 1 Jan. 2022** 

#### **VIII. SEGMENT REPORTING**

Segment reporting is prepared in accordance with IFRS 8 based on the management approach and corresponds to the internal organisational and management structure as well as the reporting lines to the Managing Directors as the chief operating decision-makers.

KSB takes management decisions on the basis of the key performance indicators – order intake, external sales revenue and earnings before finance income / expense and taxes (EBIT) – determined for the Pumps, Valves and KSB SupremeServ reporting segments (hereinafter also referred to as "Segments"). Reporting the relevant assets, number of employees and inter-segment sales revenue of the Segments is not part of internal reporting.

Based on comprehensive consideration, the reporting segments were aligned with the Group's products and services. For the derivation of the Pumps Segment, the underlying differentiation of individual Market Areas must also be taken into account, as described below.

The Pumps Segment comprises new business with single-stage and multistage pumps, submersible pumps and the associated control and drive systems. The applications are assigned to the Market Areas of Energy and Mining and to the Market Areas of Water, Building Services, Petrochemicals / Chemicals and General Industry, which are grouped together in the organisational and reporting structure of the Group as Standard Markets. Each customer is assigned by the Group to a specific Market Area according to their main business activity. The allocation of transactions with customers to the Market Areas follows this clear assignment of customers by KSB, irrespective of the specific product underlying the transaction.

For the new business with pumps, the Energy, Mining and Standard Markets are derived from the organisational and reporting structure of the Group as operating segments as defined by IFRS 8. These segments share the characteristic that they are based on a common product group, i.e. pumps. Furthermore, it follows from the customer-related delineation of the Market Areas described above that these operating segments are not based on a classification according to specific products and services, taking into account technological and economic characteristics, such as production processes or sales methods. According to KSB's estimates and expectations, the three pumps operating segments have similar long-term earnings trends and may also involve fundamentally comparable risks. As a result, the operating segments considered here are aggregated into the Pumps reporting segment pursuant to IFRS 8 in view of the close technological

**59**

and economic interrelationships from the Group's point of view.

The Valves Segment combines the Group's business activities with regard to new business in butterfly valves, globe valves, gate valves, control valves, diaphragm valves and ball valves. as well as associated actuators and control systems. The basic applications for these products are identical to those for pumps. However, in contrast to the Pumps Segment, the Valves Segment is not divided into individual Market Areas for the central management of the Group.

The KSB SupremeServ Segment on the one hand comprises the spare parts business for pumps and valves. On the other hand, KSB's service activities are allocated to this Segment. These include the installation, commissioning, start-up, inspection, servicing, maintenance and repair of pumps, related systems and valves, as well as modular service concepts and system analyses for complete plants.

The amounts disclosed for the individual segments have been established in compliance with the accounting policies of the present consolidated financial statements.

The order intake by segment presents order intake generated with third parties.

The sales revenue by segment presents sales revenue generated with third parties.

The "Segment reporting" table shows earnings before finance income / expense and income tax (EBIT) including noncontrolling interests.

EBIT includes depreciation and amortisation of € 40,994 thousand (previous year: € 42,705 thousand) for the Pumps Segment, € 11,353 thousand (previous year: € 11,592 thousand) for the Valves Segment and € 35,747 thousand (previous year: € 36,122 thousand) for the KSB SupremeServ Segment.

The total depreciation and amortisation included impairment losses on intangible assets, property, plant and equipment, and rights of use to leased assets in the amount of € 2,476 thousand (previous year: € 5,594 thousand). Of these impairments, € 1,472 thousand (previous year: € 2,712 thousand) relate to the Pumps Segment, € 1,004 thousand (previous year: € 2,447 thousand) to the KSB SupremeServ Segment and € 435 thousand in the previous year to the Valves Segment. In addition, the write-downs for the reporting year include reversals of impairments on property, plant and

{163}------------------------------------------------

**61**

equipment in the amount of € 2,194 thousand. These were attributable to the Pumps Segment in the amount of € 1,811 thousand, the Valves Segment in the amount of € 300 thousand and the KSB SupremeServ Segment in the amount of € 83 thousand.

€ 641,992 thousand (previous year: € 560,517 thousand) of the sales revenue presented were generated by the companies based in Germany, € 215,770 thousand (previous year: € 215,103 thousand) by companies in China, € 200,211 thousand (previous year: € 180,404 thousand) by companies in France, € 238,773 thousand (previous year: € 238,973 thousand) by companies in the USA, € 249.847 thousand (previous year: € 218,850 thousand) by companies in India and € 1,272,395 thousand (previous year: € 1,159,540 thousand) by the other Group companies.

There were no relationships with individual customers that accounted for a material proportion of Group sales revenue.

At the reporting date, the total non-current assets of the KSB Group under review for the purposes of segment reporting amounted to € 749,300 thousand (year-end figure in previous year: € 712,238 thousand), with € 285,090 thousand (yearend figure in previous year: € 256,585 thousand) being attributable to the companies based in Germany and € 464,210 thousand (year-end figure in previous year: € 455,653 thousand) being attributable to the other Group companies. The values presented include intangible assets, rights of use to leased assets, property, plant and equipment and investments accounted for using the equity method.

#### **Segment reporting**

|                         | Order intake |           | Sales revenue |           | EBIT    |         |
|-------------------------|--------------|-----------|---------------|-----------|---------|---------|
| € thousands             | 2023         | 2022      | 2023          | 2022      | 2023    | 2022    |
| Pumps Segment           | 1,576,483    | 1,585,727 | 1,513,653     | 1,390,192 | 52,301  | 27,718  |
| Valves Segment          | 392,573      | 359,676   | 361,435       | 333,072   | -7,522  | -4,635  |
| KSB SupremeServ Segment | 990,418      | 916,684   | 943,900       | 850,123   | 179,123 | 146,020 |
| Total                   | 2,959,474    | 2,862,087 | 2,818,988     | 2,573,387 | 223,902 | 169,103 |

{164}------------------------------------------------

There were no relationships with individual customers that accounted for a material proportion of Group sales revenue.

At the reporting date, the total non-current assets of the KSB Group under review for the purposes of segment reporting amounted to € 749,300 thousand (year-end figure in previous year: € 712,238 thousand), with € 285,090 thousand (yearend figure in previous year: € 256,585 thousand) being attributable to the companies based in Germany and € 464,210 thousand (year-end figure in previous year: € 455,653 thousand) being attributable to the other Group companies. The values presented include intangible assets, rights of use to leased assets, property, plant and equipment and investments accounted for using the equity method.

**Order intake Sales revenue EBIT** 

**€ thousands 2023 2022 2023 2022 2023 2022**  Pumps Segment 1,576,483 1,585,727 1,513,653 1,390,192 52,301 27,718 Valves Segment 392,573 359,676 361,435 333,072 −7,522 −4,635 KSB SupremeServ Segment 990,418 916,684 943,900 850,123 179,123 146,020 **Total 2,959,474 2,862,087 2,818,988 2,573,387 223,902 169,103** 

equipment in the amount of € 2,194 thousand. These were attributable to the Pumps Segment in the amount of € 1,811 thousand, the Valves Segment in the amount of € 300 thousand and the KSB SupremeServ Segment in the amount of

**164** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

€ 641,992 thousand (previous year: € 560,517 thousand) of the sales revenue presented were generated by the companies based in Germany, € 215,770 thousand (previous year: € 215,103 thousand) by companies in China, € 200,211 thousand (previous year: € 180,404 thousand) by companies in France, € 238,773 thousand (previous year: € 238,973 thousand) by companies in the USA, € 249.847 thousand (previous year: € 218,850 thousand) by companies in India and € 1,272,395 thousand (previous year: € 1,159,540

thousand) by the other Group companies.

€ 83 thousand.

**Segment reporting** 

KSB Group / Annual Report 2023

#### **IX. OTHER DISCLOSURES**

#### **Capital disclosures**

Sufficient financial independence is a key requirement for safeguarding KSB's continued existence in the long term. Obtaining the necessary funds for ongoing business operations is also extremely important for KSB. KSB regularly monitors the development of the net financial position that is derived from the balance of interest-bearing financial liabilities and financial assets (mainly cash and cash equivalents as well as receivables from deposits). One objective is to avoid net debt. The net financial position at the end of the reporting year was € 324.9 million (previous year: € 225.6 million). This rise is essentially due to the marked increase in cash flows from operating activities.

#### **Contingent liabilities**

Contingent liabilities to third parties and other investments are as follows at the reporting date:

#### **Contingent liabilities**

| € thousands                       | 31 Dec. 2023 | 31 Dec. 2022 |
|-----------------------------------|--------------|--------------|
| From legal disputes               | 2,264        | 3,090        |
| from guarantees                   | 2,055        | 2,000        |
| From warranty agreements          | 1,755        | 5,109        |
| From other tax matters            | 13,432       | 13,207       |
| From other contingent liabilities | 503          | 3,177        |
|                                   | 20,009       | 26,583       |

In the context of establishing the contingent liabilities, estimates are required in particular with regard to the existence of any obligations and in relation to the probability and amount of an outflow of resources.

At present, KSB does not expect a payment obligation for the total of contingent liabilities listed in the table of that name.

In addition, the KSB Group has contingent liabilities towards associates and joint ventures of € 7,163 thousand (previous year: € 7,311 thousand). The extent to which these will result in a cash outflow depends on the future business performance of the respective company.

As at the reporting date of the reporting year, there are no material contingent receivables of the Group, as in the previous year.

#### **Other financial obligations**

**61**

As in the previous year, there are no purchase price obligations from acquisitions of companies and no payment obligations from capitalisation measures at Group companies.

The aggregate purchase obligation for investments amounts to € 27,852 thousand (previous year: € 27,273 thousand). Of this amount, € 1,052 thousand (previous year: € 2,717 thousand) is attributable to intangible assets and € 26,800 thousand (previous year: € 24,556 thousand) to property, plant and equipment. Most of the corresponding payments are due in 2024.

#### **Leases**

#### **KSB as lessee**

Lease agreements in which KSB is the lessee mainly relate to real estate and motor vehicles. The terms of leases and additional cancellation and renewal options for one or both contracting parties are agreed individually and at different conditions.

The total cash outflow from leases, in the form of the repayment of lease liabilities, payments for leases relating to low-value assets and for short-term leases as well as variable lease payments, totalled € 29,060 thousand in the reporting year (previous year: € 26,697 thousand).

The Group expects future payments of € 5,328 thousand (previous year: € 5,967 thousand) from leases already concluded where the leased asset had not yet been made available to KSB by the lessor for use at the reporting date.

#### **KSB as lessor**

KSB acts as a lessor to a small extent, including in the context of real estate leasing. These activities have no material impact on the consolidated financial statements, so no further disclosures are made in this context.

#### **Research and development costs**

Research and development costs in the reporting year amounted to € 60,577 thousand (previous year: € 56,307 thousand).

#### **Related party disclosures**

Related parties are legal entities or natural persons that have influence over the KSB Group or are subject to control, joint control or significant influence by the KSB Group.

In order to determine the entirety of related parties of the Group, the organisational and shareholding structure of KSB SE & Co. KGaA must be taken into account. Johannes und Jacob Klein GmbH, Frankenthal / Pfalz, holds an unchanged voting interest of 83.94 % in KSB SE & Co. KGaA. The voting rights in this company are held, again unchanged, by KSB Stiftung, Stuttgart, with 74.93 %, and by Kühborth-Stiftung GmbH, Stuttgart, with 25.07 %.

{165}------------------------------------------------

**63**

Transactions with related parties are performed at arm's length and are described in more detail below.

#### **Related parties (entities)**

In view of the above explanations, related parties of the KSB Group are, on the one hand, KSB Stiftung, Stuttgart, and Kühborth Stiftung GmbH, Stuttgart, each with their direct and indirect interests, joint ventures and associates. This includes Klein, Schanzlin & Becker GmbH, Frankenthal / Pfalz, which in turn holds 100 % of the voting rights in KSB Management SE, Frankenthal / Pfalz. KSB Management SE, as general partner, is also a related party. Similarly, Johannes und Jacob Klein GmbH, Frankenthal / Pfalz, and its direct and indirect interests, joint ventures and associates are to be classified as related parties of the Group. This includes in particular Palatina Versicherungsservice GmbH, Frankenthal / Pfalz, and the companies of Abacus alpha GmbH, Frankenthal / Pfalz.

Furthermore, related parties also include entities controlled or jointly controlled by the Managing Directors of Johannes und Jacob Klein GmbH, the Managing Directors or members of the Administrative Board of KSB Management SE or the Managing Directors or members of the Advisory Board of Klein, Schanzlin & Becker GmbH.

The group of related parties (entities) also includes the companies fully consolidated in the consolidated financial statements, the joint ventures and associates of the Group as well as the companies not consolidated due to immateriality. Balances and transactions between fully consolidated companies of the KSB Group have been eliminated for the purposes of these consolidated financial statements and are therefore not explained in detail below.

As part of normal business activities, KSB maintains business relationships with related parties in the following areas:

- Buying / selling assets
- Sourcing / providing services
- Usage / transferring usage of assets
- Granting of loans

The following table shows the services provided and used in relation to the purchase and sale of assets and services, as well as the associated pending receivables and liabilities owed from and to related parties.

**Services, receivables and liabilities in dealings with related parties** 

#### **Services, receivables and liabilities in dealings with related parties**

|                                                                 | Sale of<br>assets and services |        | Purchases of<br>assets and services |       | Trade receivables |                 | Trade payables  |                 |
|-----------------------------------------------------------------|--------------------------------|--------|-------------------------------------|-------|-------------------|-----------------|-----------------|-----------------|
| € thousands                                                     | 2023                           | 2022   | 2023                                | 2022  | 31 Dec.<br>2023   | 31 Dec.<br>2022 | 31 Dec.<br>2023 | 31 Dec.<br>2022 |
| KSB Management SE                                               | 5                              | 4      | 6,711                               | 6,179 | –                 | –               | 4,148           | 3,652           |
| Klein, Schanzlin & Becker GmbH                                  | –                              | –      | –                                   | –     | –                 | –               | –               | –               |
| KSB Stiftung and<br>Kühborth-Stiftung GmbH                      | –                              | –      | –                                   | –     | –                 | –               | –               | –               |
| Johannes und Jacob Klein GmbH                                   | –                              | 1      | 9                                   | 21    | –                 | –               | –               | 16              |
| Subsidiaries of<br>Johannes und Jacob Klein GmbH                | 647                            | 572    | 3,999                               | 3,936 | 136               | 104             | 268             | 339             |
| Associates / joint ventures of<br>Johannes und Jakob Klein GmbH | –                              | –      | –                                   | –     | –                 | –               | –               | –               |
| Joint ventures                                                  | 44,289                         | 43,078 | 1,506                               | 2,182 | 41,811            | 40,867          | 434             | 439             |
| Associates                                                      | 3                              | 5      | 6,422                               | 6,595 | 1,483             | 610             | 544             | 415             |
| Companies not consolidated<br>due to immateriality              | 8,953                          | 13,124 | 411                                 | 274   | 5,357             | 7,802           | 398             | 127             |

{166}------------------------------------------------

The group of related parties (entities) also includes the companies fully consolidated in the consolidated financial statements, the joint ventures and associates of the Group as well as the companies not consolidated due to immateriality. Balances and transactions between fully consolidated companies of the KSB Group have been eliminated for the purposes of these consolidated financial statements and are

As part of normal business activities, KSB maintains business relationships with related parties in the following areas:

The following table shows the services provided and used in relation to the purchase and sale of assets and services, as well as the associated pending receivables and liabilities owed from

**Services, receivables and liabilities in dealings with related parties** 

**31 Dec. 2022**  **31 Dec. 2023**  **31 Dec. 2022** 

**assets and services Trade receivables Trade payables** 

**31 Dec. 2023** 

therefore not explained in detail below.

 Buying / selling assets Sourcing / providing services Usage / transferring usage of assets

Granting of loans

and to related parties.

**Purchases of** 

KSB Management SE 5 4 6,711 6,179 – – 4,148 3,652 Klein, Schanzlin & Becker GmbH – – – – – – – –

Kühborth-Stiftung GmbH – – – – – – – – Johannes und Jacob Klein GmbH – 1 9 21 – – – 16

Johannes und Jacob Klein GmbH 647 572 3,999 3,936 136 104 268 339

Johannes und Jakob Klein GmbH – – – – – – – – Joint ventures 44,289 43,078 1,506 2,182 41,811 40,867 434 439 Associates 3 5 6,422 6,595 1,483 610 544 415

due to immateriality 8,953 13,124 411 274 5,357 7,802 398 127

Transactions with related parties are performed at arm's

**166** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

In view of the above explanations, related parties of the KSB Group are, on the one hand, KSB Stiftung, Stuttgart, and Kühborth Stiftung GmbH, Stuttgart, each with their direct and indirect interests, joint ventures and associates. This includes Klein, Schanzlin & Becker GmbH, Frankenthal / Pfalz, which in turn holds 100 % of the voting rights in KSB Management SE, Frankenthal / Pfalz. KSB Management SE, as general partner, is also a related party. Similarly, Johannes und Jacob Klein GmbH, Frankenthal / Pfalz, and its direct and indirect interests, joint ventures and associates are to be classified as related parties of the Group. This includes in particular Palatina Versicherungsservice GmbH, Frankenthal / Pfalz, and the companies of Abacus alpha GmbH, Frankenthal / Pfalz.

Furthermore, related parties also include entities controlled or jointly controlled by the Managing Directors of Johannes und Jacob Klein GmbH, the Managing Directors or members of the Administrative Board of KSB Management SE or the Managing Directors or members of the Advisory Board of

**Services, receivables and liabilities in dealings with related parties** 

**Sale of assets and services** 

**€ thousands 2023 2022 2023 2022** 

Klein, Schanzlin & Becker GmbH.

KSB Stiftung and

Subsidiaries of

Associates / joint ventures of

Companies not consolidated

KSB Group / Annual Report 2023

length and are described in more detail below.

**Related parties (entities)** 

Pending balances at the year end are unsecured, do not accrue interest and are settled by means of payments. No guarantees were given or received. At the reporting date, impairments of € 151 thousand (previous year: € 87 thousand) were recognised on the presented receivables from companies not consolidated due to immateriality.

As the legal representative, KSB Management SE provides management services for KSB. The management fee is charged on to KSB SE & Co. KGaA. In addition, KSB Management SE as general partner assumes liability for KSB and receives annual remuneration for this amounting to 4 % of its share capital. Accordingly, € 6,554 thousand (previous year: € 5,964 thousand) of the purchases of assets and services from KSB Management SE relate firstly to the remuneration of the members of the governing bodies of KSB Management SE, which is explained in more detail under the "Related parties (persons)" sub-section below. Secondly, they include the liability remuneration in the amount of € 20 thousand (previous year: € 20 thousand) and a further reimbursement of expenses in connection with the management of the Group's business in the amount of € 137 thousand (previous year: € 194 thousand). The liabilities to KSB Management SE are due in the short term.

Relations covering the supply of products and services in relation with Johannes und Jacob Klein GmbH were of minor scope in the reporting year as in the previous year. In addition, Johannes und Jacob Klein GmbH received dividend payments.

Transactions with subsidiaries of Johannes und Jacob Klein GmbH comprise transactions with Palatina Versicherungsservice GmbH, Abacus alpha GmbH, Abacus Resale GmbH, Abacus Experten GmbH, Salinnova GmbH and airinotec GmbH). A services agreement for insurances is in place between Palatina Versicherungsservice GmbH and KSB SE & Co. KGaA. Abacus Experten GmbH concluded a number of service agreements with KSB SE & Co. KGaA. In particular, there is a framework delivery and service agreement with Abacus Resale GmbH for the purchase of returns and the provision of additional related services. In addition, products were delivered to Abacus Resale GmbH and to airinotec GmbH as part of the normal business activities. Services were provided by Abacus alpha GmbH to a minor extent. In the previous year, there was also a two-way supply of products with Salinnova GmbH.

Further information on joint ventures, associates and companies not consolidated due to immateriality is provided in Section IV. Balance Sheet Disclosures – Notes No. 4 "Other financial assets", Notes No. 6 "Investments accounted for using the equity method", Notes No. 8 "Contract assets, trade receivables and other financial and non-financial assets",

**63**

Notes No. 13 "Liabilities" and in Section IX. Other Disclosures – Contingent Liabilities. In addition, the cash flows from the granting of loans and from capital measures with the aforementioned companies are shown in the statement of cash flows under cash flows from investing activities.

#### **Related parties (persons)**

The members of the Supervisory Board, the Managing Directors of KSB Management SE and the members of the Administrative Board of KSB Management SE, as well as their close family members, are deemed to be related parties of the KSB Group. Further information is provided below, in these consolidated financial statements, before the comments concerning the proposal on the appropriation of the net retained earnings of KSB SE & Co. KGaA.

In the reporting year, two members of the Administrative Board and one member of the Supervisory Board held an immaterial share of interests in KSB SE & Co. KGaA.

The remuneration paid to key management personnel of the Group, i.e. the Managing Directors and the members of the Administrative Board of KSB Management SE, is listed in the following table. The amounts are paid by KSB under an expense reimbursement agreement.

#### **Management remuneration**

| € thousands              | 2023  | 2022  |
|--------------------------|-------|-------|
| Short-term benefits      | 4,594 | 3,729 |
| Post-employment benefits | 1,439 | 1,602 |
| Other long-term benefits | 521   | 633   |
| Total                    | 6,554 | 5,964 |

The remuneration system for the Managing Directors of KSB Management SE consists of components that are not performance-related, in the form of fixed sum plus benefits and pension commitments, as well as short-term and long-term variable remuneration components. In this context, 60 % of the regular annual salary, i.e. the sum of fixed and variable remuneration, is accounted for by the fixed component. The variable remuneration accounts for 40 % of the regular annual salary, with about two thirds of this being allocated to the long-term variable remuneration. The majority of the variable remuneration is thus linked to the long-term performance of the company.

The short-term variable remuneration with an assessment period of one year is designed as a target bonus model and is awarded annually. The target amount, i.e. the amount paid out if 100 % of the target is achieved, corresponds to 15 % of the respective regular annual salary. The Administrative Board of KSB Management SE has set the performance targets of EBIT

{167}------------------------------------------------

margin, sales revenue and the overall assessment of the personal performance of the Managing Directors in equal parts as the basis for assessment.

The long-term variable remuneration is structured as an annually granted plan with a three-year, forward-looking assessment period. The target amount corresponds to 25 % of the respective regular annual salary. The Administrative Board has defined the performance target as the equally weighted average of the earnings per share (EPS) over three years with a weighting of 80 % and the achievement of the Environmental, Social and Governance (ESG) sustainability goals with a weighting of 20 %. By considering earnings per share, a focus is placed on the long-term successful performance of the company as well as linking the interests of the Managing Directors with the interests of the shareholders.

The final payment of the long-term variable remuneration is made after the end of the assessment period. For the 2021 and 2022 financial years, a one-time payment on account amounting to 40 % of the target value in the event of 100 % target achievement was agreed and paid. At the end of the assessment period, it will be offset against any amount paid out in excess of this; no repayment has been agreed in the event that the sum falls short of this amount.

As at the reporting date, the Group recognised provisions for pension obligations to current Managing Directors of KSB Management SE amounting to € 644 thousand (previous year: € 578 thousand), and to former members of the Board of Management of KSB AG (excluding the Managing Directors of KSB Management SE) and their surviving dependants amounting to € 32,084 thousand (previous year: € 33,070 thousand). The total remuneration of the latter persons amounted to € 2,761 thousand in the past financial year (previous year: € 2,380 thousand).

The members of the Supervisory Board receive a fixed remuneration, attendance fees and reimbursement of expenses. In addition, they receive remuneration for activities that require them to devote special time to the tasks of the Supervisory Board that go beyond preparing and holding meetings of the Supervisory Board and its committees. The short-term benefits paid to members of the Supervisory Board amount to € 851 thousand for the 2023 financial year (previous year: € 894 thousand). At the end of the financial year, liabilities of € 472 thousand (previous year: € 513 thousand) were recognised towards the members of the Supervisory Board.

In addition, assets and services amounting to € 20 thousand (previous year: € 21 thousand) were sold to other related parties (corporate bodies) in the reporting year.

#### **Auditors**

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, based in Frankfurt am Main with an office in Mannheim, were appointed as auditors and group auditors for the 2023 financial year at the Annual General Meeting of KSB SE & Co. KGaA on 4 May 2023.

The following table shows the total fees for all services that KSB utilised in the reporting year from the global PwC network, to which the group auditors belong. It also shows the specific share of the total amount attributable to the Group auditors based in Germany.

| Total fees PricewaterhouseCoopers / Group auditors in 2023 |                       |                                                                                                   |
|------------------------------------------------------------|-----------------------|---------------------------------------------------------------------------------------------------|
| € thousands                                                | Global<br>PwC network | Attributable to:<br>Pricewaterhouse<br>-Coopers GmbH<br>Wirtschafts-<br>prüfungs-<br>gesellschaft |
| Audit fees                                                 | 2,361                 | 886                                                                                               |
| Tax advisory services                                      | 40                    | –                                                                                                 |
| Other certification services                               | 98                    | 76                                                                                                |
| Other services                                             | 139                   | 104                                                                                               |
|                                                            | 2,638                 | 1,066                                                                                             |

The audit fees include costs for the audit of the consolidated financial statements and of the statutory annual financial statements of KSB SE & Co. KGaA and the subsidiaries included in the consolidated financial statements. The fees for other certification services primarily include attestation services outside of the audit of the consolidated financial statements. The fees for other services primarily relate to fees for consultancy services in Compliance.

#### **Use of exemption option**

KSB Service GmbH, Frankenthal, KSB Service GmbH, Schwedt, Uder Elektromechanik GmbH, Friedrichsthal, Dynamik-Pumpen GmbH, Stuhr, PMS-BERCHEM GmbH, Neuss, Pumpen-Service Bentz GmbH, Reinbek, and KAGEMA Industrieausrüstungen GmbH, Pattensen, have made partial use of the exemption provision pursuant to Section 264(3) HGB [German Commercial Code].

#### **Events after the Reporting Period**

There were no events after the end of the financial year that are of particular significance for the Group's net assets, financial position and result of operations.

{168}------------------------------------------------

margin, sales revenue and the overall assessment of the personal performance of the Managing Directors in equal **Auditors** 

**168** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, based in Frankfurt am Main with an office in Mannheim, were appointed as auditors and group auditors for the 2023 financial year at the Annual General Meeting of

The following table shows the total fees for all services that KSB utilised in the reporting year from the global PwC network, to which the group auditors belong. It also shows the specific share of the total amount attributable to the Group

**Total fees PricewaterhouseCoopers / Group auditors in 2023** 

Audit fees 2,361 886 Tax advisory services 40 – Other certification services 98 76 Other services 139 104

The audit fees include costs for the audit of the consolidated financial statements and of the statutory annual financial statements of KSB SE & Co. KGaA and the subsidiaries included in the consolidated financial statements. The fees for other certification services primarily include attestation services outside of the audit of the consolidated financial statements. The fees for other services primarily relate to fees

KSB Service GmbH, Frankenthal, KSB Service GmbH, Schwedt, Uder Elektromechanik GmbH, Friedrichsthal, Dynamik-Pumpen GmbH, Stuhr, PMS-BERCHEM GmbH, Neuss, Pumpen-Service Bentz GmbH, Reinbek, and KAGEMA Industrieausrüstungen GmbH, Pattensen, have made partial use of the exemption provision pursuant to Section 264(3)

There were no events after the end of the financial year that are of particular significance for the Group's net assets,

for consultancy services in Compliance.

HGB [German Commercial Code].

**Events after the Reporting Period** 

financial position and result of operations.

**Use of exemption option** 

**Global PwC network** 

**Attributable to: Pricewaterhouse -Coopers GmbH Wirtschaftsprüfungsgesellschaft** 

**2,638 1,066** 

KSB SE & Co. KGaA on 4 May 2023.

auditors based in Germany.

**€ thousands** 

The long-term variable remuneration is structured as an annually granted plan with a three-year, forward-looking assessment period. The target amount corresponds to 25 % of the respective regular annual salary. The Administrative Board has defined the performance target as the equally weighted average of the earnings per share (EPS) over three years with a weighting of 80 % and the achievement of the Environmental, Social and Governance (ESG) sustainability goals with a weighting of 20 %. By considering earnings per share, a focus is placed on the long-term successful performance of the company as well as linking the interests of the Managing

Directors with the interests of the shareholders.

that the sum falls short of this amount.

(previous year: € 2,380 thousand).

Supervisory Board.

KSB Group / Annual Report 2023

The final payment of the long-term variable remuneration is made after the end of the assessment period. For the 2021 and 2022 financial years, a one-time payment on account amounting to 40 % of the target value in the event of 100 % target achievement was agreed and paid. At the end of the assessment period, it will be offset against any amount paid out in excess of this; no repayment has been agreed in the event

As at the reporting date, the Group recognised provisions for pension obligations to current Managing Directors of KSB Management SE amounting to € 644 thousand (previous year: € 578 thousand), and to former members of the Board of Management of KSB AG (excluding the Managing Directors of KSB Management SE) and their surviving dependants amounting to € 32,084 thousand (previous year: € 33,070 thousand). The total remuneration of the latter persons amounted to € 2,761 thousand in the past financial year

The members of the Supervisory Board receive a fixed remuneration, attendance fees and reimbursement of expenses. In addition, they receive remuneration for activities that require them to devote special time to the tasks of the Supervisory Board that go beyond preparing and holding meetings of the Supervisory Board and its committees. The short-term benefits paid to members of the Supervisory Board amount to € 851 thousand for the 2023 financial year (previous year: € 894 thousand). At the end of the financial year, liabilities of € 472 thousand (previous year: € 513 thousand) were recognised towards the members of the

In addition, assets and services amounting to € 20 thousand (previous year: € 21 thousand) were sold to other related

parties (corporate bodies) in the reporting year.

parts as the basis for assessment.

**65**

#### **German Corporate Governance Code**

The Managing Directors and the Supervisory Board of KSB SE & Co. KGaA issued the current Statement of Compliance with the recommendations of the Government Commission on the German Corporate Governance Code in accordance with Section 161 AktG [Aktiengesetz ">– German Public Companies Act] on 13 December 2023. The Statement is accessible to the public at KSB's web site: www.ksb.com > Investor Relations > Corporate Governance > Statement and Report.

{169}------------------------------------------------

# <span id="page-169-0"></span>**List of Shareholdings**

#### **Affiliates (national and international)**

| Cons.<br>No. | Name and seat                                                       | Country           | Activity¹⁾       | Capital<br>share in % | Group<br>share of<br>capital<br>in % | Held by<br>No. |
|--------------|---------------------------------------------------------------------|-------------------|------------------|-----------------------|--------------------------------------|----------------|
| 1            | Aplicaciones Mecánicas Válvulas Industriales, S.A. (AMVI), Burgos   | Spain             | P                | 100.00                | 100.00                               |                |
| 2            | Canadian Kay Pump Limited, Mississauga / Ontario                    | Canada            | H                | 100.00                | 100.00                               |                |
| 3            | KSB Limited, Pimpri (Pune)                                          | India             | P                | 40.54                 | 40.54                                | 2              |
| 4            | KSB MIL Controls Limited, Annamanada                                | India             | P                | 49.00                 | 19.86                                | 3              |
|              |                                                                     |                   |                  | 51.00                 | 51.00                                |                |
| 5            | Pofran Sales & Agency Limited, Pimpri (Pune)                        | India             | S                | 100.00                | 40.54                                | 3              |
| 6            | DAG - Dieselanlagen Service GmbH, Oberwaltersdorf                   | Austria           | S                | 100.00                | 100.00                               |                |
| 7            | Dynamik-Pumpen GmbH, Stuhr                                          | Germany           | SVC              | 100.00                | 100.00                               |                |
| 8            | Hydroskepi GmbH, Amaroussion (Athens)                               | Greece            | H                | 100.00                | 100.00                               |                |
| 9            | KAGEMA Industrieausrüstungen GmbH, Pattensen                        | Germany           | P                | 100.00                | 100.00                               |                |
| 10           | KSB Armaturen Verwaltungs- und Beteiligungs-GmbH, Frankenthal       | Germany           | H                | 100.00                | 100.00                               |                |
| 11           | OOO "KSB", Moscow                                                   | Russia            | P                | 100.00                | 100.00                               | 10             |
|              |                                                                     |                   |                  | 99.52                 | 99.52                                | 11             |
| 12           | IOOO "KSB BEL", Minsk                                               | Belarus           | S                | 0.48                  | 0.48                                 | 10             |
| 13           | TOO "KSB Kazakhstan", Almaty                                        | Kazakhstan        | S                | 100.00                | 100.00                               | 11             |
| 14           | TOV "KSB Ukraine", Kyiv                                             | Ukraine           | S                | 100.00                | 100.00                               | 11             |
| 15           | TOB "KSB Ukraine" LLC, Kyiv                                         | Ukraine           | S                | 100.00                | 100.00                               | 10             |
| 16           | KSB Belgium S.A., Bierges-lez-Wavre                                 | Belgium           | S                | 100.00                | 100.00                               |                |
| 17           | KSB Service Belgium S.A./N.V., Bierges-lez-Wavre                    | Belgium           | SVC              | 100.00                | 100.00                               | 16             |
|              |                                                                     |                   |                  | 92.00                 | 92.00                                |                |
|              |                                                                     |                   | S                | 1.00                  | 1.00                                 | 27             |
| 18           | KSB, Bombas e Válvulas, SA, Albarraque                              | Portugal          |                  | 1.00                  | 1.00                                 | 61             |
|              |                                                                     |                   |                  | 1.00                  | 1.00                                 | 28             |
| 19           | KSB Čerpadlá a Armatúry, s.r.o., Bratislava                         | Slovakia          | S                | 100.00                | 100.00                               |                |
| 20           | KSB Chile S.A., Santiago                                            | Chile             | P                | 100.00                | 100.00                               |                |
| 21           | KSB Colombia S.A.S., Funza (Cundinamarca)                           | Colombia          | S                | 100.00                | 100.00                               |                |
| 22           | KSB de Mexico, S.A. de C.V., Querétaro                              | Mexico            | P                | 100.00                | 100.00                               |                |
| 23           | KSB Finance Nederland B.V., Zwanenburg                              | Netherlands       | H                | 100.00                | 100.00                               |                |
| 24           | D.P. Industries B.V., Alphen aan den Rijn                           | Netherlands       | H                | 100.00                | 100.00                               | 23             |
| 25           | Duijvelaar Pompen B.V., Alphen aan den Rijn                         | Netherlands       | SVC              | 100.00                | 100.00                               | 24             |
| 26           | KSB Manufacturing Netherlands B.V., Alphen aan den Rijn             | Netherlands       | P                | 100.00                | 100.00                               | 24             |
| 27           | KSB Nederland B.V., Zwanenburg                                      | Netherlands       | S                | 100.00                | 100.00                               | 23             |
| 28           | KSB FINANZ GmbH, Frankenthal                                        | Germany           | H                | 100.00                | 100.00                               |                |
| 29           | Dalian KSB AMRI Valves Co., Ltd., Dalian                            | China             | P                | 100.00                | 100.00                               | 28             |
| 30           | KSB Algérie Eurl, Bordj el Kifane (Alger)                           | Algeria           | S                | 100.00                | 100.00                               | 28             |
| 31           | KSB Australia Pty Ltd, Bundamba QLD                                 | Australia         | P                | 100.00                | 100.00                               | 28             |
| 32           | KSB New Zealand Limited, Albany / Auckland                          | New Zealand       | S                | 100.00                | 100.00                               | 31             |
| Cons.<br>No. | Name and seat                                                       | Country           | Activ-<br>ity 1) | Capital<br>share in % | Group<br>share of<br>capital<br>in % | Held by<br>No. |
| 33           | KSB BRASIL LTDA., Várzea Paulista                                   | Brazil            | P                | 100.00                | 100.00                               | 28             |
| 34           | KSB Compañía Sudamericana de Bombas S.A., Carapachay (Buenos Aires) | Argentina         | P                | 95.00                 | 95.00                                | 28             |
| 35           | KSB Middle East FZE, Dubai                                          | U.A.E.            | S                | 100.00                | 100.00                               | 28             |
| 36           | KSB Pumps (S.A.) (Pty) Ltd., Germiston (Johannesburg)               | South Africa      | H                | 100.00                | 100.00                               | 28             |
| 37           | KSB Pumps and Valves (Pty) Ltd., Germiston (Johannesburg)           | South Africa      | P                | 70.00                 | 70.00                                | 36             |
| 38           | KSB PUMPS AND VALVES LIMITED, Nairobi                               | Kenya             | S                | 100.00                | 100.00                               | 36             |
| 39           | KSB Shanghai Pump Co., Ltd., Shanghai                               | China             | P                | 80.00                 | 80.00                                | 28             |
| 40           | KSB Finland Oy, Kerava                                              | Finland           | S                | 100.00                | 100.00                               |                |
| 41           | KSB Hungary Kft., Budapest                                          | Hungary           | S                | 100.00                | 100.00                               |                |
| 42           | KSB Italia S.p.A., Milan                                            | Italy             | P                | 100.00                | 100.00                               |                |
| 43           | KSB ITUR Spain S.A., Zarautz                                        | Spain             | P                | 100.00                | 100.00                               |                |
| 44           | KSB Korea Ltd., Seoul                                               | South Korea       | P                | 100.00                | 100.00                               |                |
| 45           | KSB Limited, Hong Kong                                              | China             | S                | 100.00                | 100.00                               |                |
| 46           | KSB Pump & Valve Technology Service (Tianjin) Co., Ltd, Tianjin     | China             | SVC              | 100.00                | 100.00                               | 45             |
| 47           | KSB Limited, Loughborough                                           | United<br>Kingdom | S                | 100.00                | 100.00                               |                |
| 48           | KSB Ltd., Tokyo                                                     | Japan             | S                | 100.00                | 100.00                               |                |
| 49           | KSB Norge AS, Ski                                                   | Norway            | P                | 100.00                | 100.00                               |                |
| 50           | KSB Österreich Gesellschaft mbH, Vienna                             | Austria           | S                | 100.00                | 100.00                               |                |
| 51           | KSB Perú S.A., Lurin                                                | Peru              | S                | 100.00                | 100.00                               |                |
| 52           | KSB Polska Sp. z o.o., Ozarow-Mazowiecki                            | Poland            | S                | 100.00                | 100.00                               |                |
| 53           | KSB-Pompa, Armatür Sanayi ve Ticaret A.S., Ankara                   | Turkey            | P                | 100.00                | 100.00                               |                |
| 54           | KSB Pumps and valves L.t.d., Domžale                                | Slovenia          | S                | 100.00                | 100.00                               |                |
| 55           | KSB Pumps Co. Ltd., Bangkok                                         | Thailand          | P                | 40.00                 | 40.00                                |                |
| 56           | KSB Pumps Company Limited, Lahore                                   | Pakistan          | P                | 58.89                 | 58.89                                |                |
| 57           | KSB Pumps Inc., Mississauga / Ontario                               | Canada            | S                | 100.00                | 100.00                               |                |
| 58           | KSB-Pumpy+Armatury s.r.o., koncern, Prague                          | Czech Republic    | S                | 100.00                | 100.00                               |                |
| 59           | KSB S.A.S., Gennevilliers (Paris)                                   | France            | P                | 100.00                | 100.00                               |                |
| 60           | KSB POMPES ET ROBINETTERIES S.à.r.l. d'Associé unique, Casablanca   | Morocco           | S                | 100.00                | 100.00                               | 59             |
| 61           | KSB (Schweiz) AG, Oftringen                                         | Switzerland       | S                | 100.00                | 100.00                               |                |
| 62           | KSB Seil Co., Ltd., Busan                                           | South Korea       | P                | 100.00                | 100.00                               |                |
| 63           | KSB Service GmbH, Frankenthal                                       | Germany           | SVC              | 100.00                | 100.00                               |                |
| 64           | KSB Service GmbH, Schwedt                                           | Germany           | SVC              | 100.00                | 100.00                               |                |
| 65           | KSB Singapore (Asia Pacific) Pte Ltd, Singapore                     | Singapore         | P                | 100.00                | 100.00                               |                |
| 66           | KSB Malaysia Pumps & Valves Sdn. Bhd., Shah Alam                    | Malaysia          | P                | 100.00                | 100.00                               | 65             |
| 67           | KSB PHILIPPINES, INC., Makati City                                  | Philippines       | S                | 100.00                | 100.00                               | 65             |
| 68           | KSB Vietnam Co., Ltd, Long Thanh District                           | Vietnam           | S                | 100.00                | 100.00                               | 65             |
| 69           | KSB Sverige Aktiebolag, Gothenburg                                  | Sweden            | S                | 100.00                | 100.00                               |                |
| 70           | KSB Sverige Fastighets AB, Gothenburg                               | Sweden            | S                | 100.00                | 100.00                               | 69             |
| 71           | PUMPHUSET Sverige AB, Sollentuna                                    | Sweden            | SVC              | 100.00                | 100.00                               | 69             |
| 72           | KSB Taiwan Co., Ltd., New Taipei City                               | Taiwan            | S                | 100.00                | 100.00                               |                |
| 73           | KSB Tech Pvt. Ltd., Pimpri (Pune)                                   | India             | T                | 100.00                | 100.00                               |                |
| Cons.<br>No. | Name and seat                                                       | Country           | Activity1)       | Capital<br>share in % | Group<br>share of<br>capital<br>in % | Held by<br>No. |
| 75           | PAB Pumpen- und Armaturen-Beteiligungsges. mbH, Frankenthal         | Germany           | H                | 51.00                 | 51.00                                |                |
| 76           | KSB America Corporation, Richmond / Virginia                        | USA               | H                | 100.00                | 51.00                                | 75             |
| 77           | GIW Industries, Inc., Grovetown / Georgia                           | USA               | P                | 100.00                | 51.00                                | 76             |
| 78           | KSB Dubric, Inc., Comstock Park / Michigan                          | USA               | SVC              | 100.00                | 51.00                                | 76             |
| 79           | KSB, Inc., Richmond / Virginia                                      | USA               | P                | 100.00                | 51.00                                | 76             |
| 80           | KSB, Inc. – Western Division, Bakersfield / California              | USA               | SVC              | 100.00                | 51.00                                | 76             |
| 81           | Standard Alloys Incorporated, Port Arthur / Texas                   | USA               | SVC              | 100.00                | 51.00                                | 76             |
| 82           | PMS-BERCHEM GmbH, Neuss                                             | Germany           | SVC              | 100.00                | 100.00                               |                |
| 83           | PT. KSB Indonesia, Cibitung                                         | Indonesia         | P                | 94.06<br>5.94         | 94.06<br>5.94                        | 28             |
| 84           | PT. KSB Sales Indonesia, Cibitung                                   | Indonesia         | S                | 99.00<br>1.00         | 99.00<br>1.00                        | 83             |
| 85           | Pumpen-Service Bentz GmbH, Reinbek                                  | Germany           | SVC              | 100.00                | 100.00                               |                |
| 86           | REEL s.r.l., Ponte di Nanto                                         | Italy             | P                | 100.00                | 100.00                               |                |
| 87           | SISTO Armaturen S.A., Echternach                                    | Luxembourg        | P                | 52.85                 | 52.85                                |                |
| 88           | Uder Elektromechanik GmbH, Friedrichsthal                           | Germany           | SVC              | 100.00                | 100.00                               |                |

1) P = Production / assembly, S = Sales, SVC = Service, H = Holding, T = Technical service provider

{170}------------------------------------------------

**List of Shareholdings** 

**No. Name and seat Country** 

4 KSB MIL Controls Limited, Annamanada India P

12 IOOO "KSB BEL", Minsk Belarus S

18 KSB, Bombas e Válvulas, SA, Albarraque Portugal S

1) P = Production / assembly, S = Sales, SVC = Service, H = Holding, T = Technical service provider

KSB Group / Annual Report 2023

1 Aplicaciones Mecánicas Válvulas Industriales, S.A. (AMVI), Burgos Spain P 100.00 100.00 2 Canadian Kay Pump Limited, Mississauga / Ontario Canada H 100.00 100.00

**170** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

6 DAG - Dieselanlagen Service GmbH, Oberwaltersdorf Austria S 100.00 100.00 7 Dynamik-Pumpen GmbH, Stuhr Germany SVC 100.00 100.00 8 Hydroskepi GmbH, Amaroussion (Athens) Greece H 100.00 100.00 9 KAGEMA Industrieausrüstungen GmbH, Pattensen Germany P 100.00 100.00 10 KSB Armaturen Verwaltungs- und Beteiligungs-GmbH, Frankenthal Germany H 100.00 100.00

16 KSB Belgium S.A., Bierges-lez-Wavre Belgium S 100.00 100.00

19 KSB Čerpadlá a Armatúry, s.r.o., Bratislava Slovakia S 100.00 100.00 20 KSB Chile S.A., Santiago Chile P 100.00 100.00 21 KSB Colombia S.A.S., Funza (Cundinamarca) Colombia S 100.00 100.00 22 KSB de Mexico, S.A. de C.V., Querétaro Mexico P 100.00 100.00 23 KSB Finance Nederland B.V., Zwanenburg Netherlands H 100.00 100.00

28 KSB FINANZ GmbH, Frankenthal Germany H 100.00 100.00

3 KSB Limited, Pimpri (Pune) India P 40.54 40.54 2

5 Pofran Sales & Agency Limited, Pimpri (Pune) India S 100.00 40.54 3

11 OOO "KSB", Moscow Russia P 100.00 100.00 10

13 TOO "KSB Kazakhstan", Almaty Kazakhstan S 100.00 100.00 11 14 TOV "KSB Ukraine", Kyiv Ukraine S 100.00 100.00 11 15 TOB "KSB Ukraine" LLC, Kyiv Ukraine S 100.00 100.00 10

17 KSB Service Belgium S.A./N.V., Bierges-lez-Wavre Belgium SVC 100.00 100.00 16

24 D.P. Industries B.V., Alphen aan den Rijn Netherlands H 100.00 100.00 23 25 Duijvelaar Pompen B.V., Alphen aan den Rijn Netherlands SVC 100.00 100.00 24 26 KSB Manufacturing Netherlands B.V., Alphen aan den Rijn Netherlands P 100.00 100.00 24 27 KSB Nederland B.V., Zwanenburg Netherlands S 100.00 100.00 23

29 Dalian KSB AMRI Valves Co., Ltd., Dalian China P 100.00 100.00 28 30 KSB Algérie Eurl, Bordj el Kifane (Alger) Algeria S 100.00 100.00 28 31 KSB Australia Pty Ltd, Bundamba QLD Australia P 100.00 100.00 28 32 KSB New Zealand Limited, Albany / Auckland New Zealand S 100.00 100.00 31

**Activity1)**

**Capital share in %** 

**Group share of capital in %** 

49.00 19.86 3

99.52 99.52 11 0.48 0.48 10

1.00 1.00 27 1.00 1.00 61 1.00 1.00 28

51.00 51.00

92.00 92.00

**Held by No.** 

**Affiliates (national and international)** 

**Cons.** 

<sup>1)</sup> P = Production / assembly, S = Sales, SVC = Service, H = Holding, T = Technical service provider

{171}------------------------------------------------

#### **Joint ventures (international)**

| Cons.<br>No. | Name and seat                                                         | Country      | Activ-<br>ity1) | Capital<br>share in % | Group<br>share of<br>capital<br>in % | Held by<br>No. | Equity 2)<br>€ thousand<br>s | Net profit /<br>loss for the<br>year2)<br>€ thousand<br>s |
|--------------|-----------------------------------------------------------------------|--------------|-----------------|-----------------------|--------------------------------------|----------------|------------------------------|-----------------------------------------------------------|
| 89           | KSB MOTOR TEKNOLOJİLERİ SANAYİ<br>VE TİCARET ANONİM ŞİRKETİ, Ankara   | Turkey       | P               | 55.00                 | 55.00                                | 53             | 194                          | 171                                                       |
| 90           | KSB Pumps Arabia Ltd., Riyadh                                         | Saudi Arabia | P               | 50.00                 | 50.00                                | 28             | 13,632                       | 2,268                                                     |
| 91           | KSB Service LLC, Abu Dhabi                                            | U.A.E.       | SVC             | 49.00                 | 49.00                                |                | 9,278                        | 1,026                                                     |
| 92           | Shanghai Electric-KSB Nuclear<br>Pumps and Valves Co., Ltd., Shanghai | China        | P               | 45.00                 | 45.00                                |                | 43,212                       | 5,435                                                     |

#### **Associates (international)**

| Cons.<br>No. | Name and seat                                  | Country | Activity1) | Capital<br>share in % | Group<br>share of<br>capital<br>in % | Held by<br>No. | Equity 2)<br>€ thousand<br>s | Net profit /<br>loss for the<br>year2)<br>€ thousand<br>s |
|--------------|------------------------------------------------|---------|------------|-----------------------|--------------------------------------|----------------|------------------------------|-----------------------------------------------------------|
| 93           | Motori Sommersi Riavvolgibili S.r.l., Cedegolo | Italy   |            | 25.00                 | 25.00                                |                | 7,171                        | 4,132                                                     |

<sup>1)</sup> P = Production / assembly, S = Sales, SVC = Service, H = Holding, T = Technical service provider

2) Data according to latest annual financial statements under IFRS

{172}------------------------------------------------

**Cons.**

**Joint ventures (international)** 

**No. Name and seat Country** 

**No. Name and seat Country** 

2) Data according to latest annual financial statements under IFRS

1) P = Production / assembly, S = Sales, SVC = Service, H = Holding, T = Technical service provider

KSB MOTOR TEKNOLOJİLERİ SANAYİ

Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd., Shanghai

**Associates (international)** 

**Cons.** 

89

92

**Cons.** 

KSB Group / Annual Report 2023

**No. Name and seat Country** 

83 PT. KSB Indonesia, Cibitung Indonesia P

84 PT. KSB Sales Indonesia, Cibitung Indonesia S

75 PAB Pumpen- und Armaturen-Beteiligungsges. mbH, Frankenthal Germany H 51.00 51.00

**172** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

82 PMS-BERCHEM GmbH, Neuss Germany SVC 100.00 100.00

85 Pumpen-Service Bentz GmbH, Reinbek Germany SVC 100.00 100.00 86 REEL s.r.l., Ponte di Nanto Italy P 100.00 100.00 87 SISTO Armaturen S.A., Echternach Luxembourg P 52.85 52.85 88 Uder Elektromechanik GmbH, Friedrichsthal Germany SVC 100.00 100.00

> **Activity1)**

VE TİCARET ANONİM ŞİRKETİ, Ankara Turkey P 55.00 55.00 53 194 171

90 KSB Pumps Arabia Ltd., Riyadh Saudi Arabia P 50.00 50.00 28 13,632 2,268 91 KSB Service LLC, Abu Dhabi U.A.E. SVC 49.00 49.00 9,278 1,026

> **Activity1)**

93 Motori Sommersi Riavvolgibili S.r.l., Cedegolo Italy 25.00 25.00 7,171 4,132

**Capital share in %** 

**Capital share in %** 

**Group share of capital in %** 

China P 45.00 45.00 43,212 5,435

**Group share of capital in %**  **Held by No.** 

**Held by No.** 

76 KSB America Corporation, Richmond / Virginia USA H 100.00 51.00 75 77 GIW Industries, Inc., Grovetown / Georgia USA P 100.00 51.00 76 78 KSB Dubric, Inc., Comstock Park / Michigan USA SVC 100.00 51.00 76 79 KSB, Inc., Richmond / Virginia USA P 100.00 51.00 76 80 KSB, Inc. – Western Division, Bakersfield / California USA SVC 100.00 51.00 76 81 Standard Alloys Incorporated, Port Arthur / Texas USA SVC 100.00 51.00 76

**Activity1)**

**Capital share in %** 

**Group share of capital in %** 

94.06 94.06

1.00 1.00

5.94 5.94 28

99.00 99.00 83

**Equity 2) € thousand s** 

**Equity 2) € thousand s** 

**Net profit / loss for the year2) € thousand s** 

**Net profit / loss for the year2) € thousand s** 

**Held by No.** 

**69**

#### **Companies not consolidated because of immateriality – Affiliates (national and international)**

| Cons.<br>No. | Name and seat                                                           | Country | Activity 1) | Capital<br>share<br>in % | Group<br>share of<br>capital<br>in % | Held by<br>No. | Equity 2)<br>€ thousand<br>s | Net profit /<br>loss for the<br>year 2)<br>€ thousand<br>s |
|--------------|-------------------------------------------------------------------------|---------|-------------|--------------------------|--------------------------------------|----------------|------------------------------|------------------------------------------------------------|
| 94           | Geheimrat Dr. Jacob Klein-<br>Unterstützungseinrichtung e.V.            | Germany |             | 100.00                   | 100.00                               |                | 110                          | -15                                                        |
| 95           | KSB BOMBAS E VÁLVULAS (Angola), LDA, Belas                              | Angola  | S           | 65.00                    | 65.00                                |                | 237                          | -42                                                        |
| 96           | KSB Ecuador S.A., Samborondón                                           | Ecuador | S           | 100.00                   | 100.00                               | 33             | 1,239                        | 74                                                         |
| 97           | KSB Egypt SOC, Cairo                                                    | Egypt   | H           | 100.00                   | 100.00                               |                | 91                           | -7                                                         |
| 98           | KSB Panama S.A., Panamá                                                 | Panama  | S           | 100.00                   | 100.00                               | 33             | 692                          | 54                                                         |
| 99           | KSB Pumpe i Armature d.o.o. Belgrade                                    | Serbia  | S           | 100.00                   | 100.00                               | 54             | 354                          | 116                                                        |
| 100          | KSB pumpe i armature d.o.o., Rakov Potok                                | Croatia | S           | 100.00                   | 100.00                               | 54             | 206                          | -2                                                         |
| 101          | KSB PUMPS AND VALVES (NAMIBIA)<br>(PROPRIETARY) LIMITED, KLEIN WINDHOEK | Namibia | S           | 100.00                   | 100.00                               | 36             | -86                          | 24                                                         |
| 102          | KSB Pumps and Valves Nigeria Ltd, Lagos                                 | Nigeria | S           | 60.00                    | 60.00                                |                | 143                          | 22                                                         |
|              |                                                                         |         |             | 48.00                    | 48.00                                |                |                              |                                                            |
| 103          | KSB Service Egypt LLC, Cairo                                            | Egypt   | SVC         | 11.00                    | 11.00                                | 97             | 988                          | 339                                                        |
|              |                                                                         |         |             | 1.00                     | 1.00                                 | 28             |                              |                                                            |
| 104          | KSB ZAMBIA LIMITED, Kitwe                                               | Zambia  | S           | 100.00                   | 100.00                               | 36             | 479                          | 49                                                         |
| 105          | Techni Pompe Service Maroc (TPSM), Casablanca                           | Morocco | SVC         | 100.00                   | 100.00                               | 60             | -553                         | 34                                                         |
| 106          | Vari.Co. GmbH, Karlsruhe                                                | Germany | T           | 51.00                    | 51.00                                |                | 205                          | 69                                                         |

<sup>1)</sup> P = Production / assembly, S = Sales, SVC = Service, H = Holding, T = Technical service provider

2) Data according to latest annual financial statements under IFRS

{173}------------------------------------------------

# <span id="page-173-0"></span>**Supervisory Board**

**Dr. Bernd Flohr,** Dipl.-Kfm., Dipl.-Soz., Geislingen (Chair) Former Executive Board Member of WMF AG

**René Klotz,** NC Programmer, Heßheim (Deputy Chair and Member until 4 May 2023) Chair of the General Works Council of KSB SE & Co. KGaA and KSB Service GmbH

**Claudia Augustin,** Office Management Assistant, Pegnitz (Deputy Chair since 4 May 2023) Chair of the Pegnitz Works Council of KSB SE & Co. KGaA

**Klaus Burchards,** Dipl.-Kfm., Stuttgart Independent Auditor

**Arturo Esquinca,** Dipl.-Chemieing., MBA, Forch, Switzerland Head of Business Development, Glas Trösch Holding AG

**Klaus Kühborth,** Dipl.-Wirtsch.-Ing., Frankenthal Managing Director of Johannes und Jacob Klein GmbH

**Birgit Mohme,** Industrial Business Management Assistant, Frankenthal 1st Delegate and Managing Director of IG Metall Ludwigshafen / Frankenthal

#### **Mandates of KSB Supervisory Board members on the Supervisory Board / Board of Directors of other companies**

1) Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd., Shanghai, China

2) TÜV SÜD Industrie Service GmbH, Munich TÜV SÜD Auto Service GmbH, Stuttgart

Image /page/173/Picture/14 description: The image shows a blue icon of a chain link on the left and the text "CVs of Board" on the right. The text is also in blue.

 [CVs of the Supervisory](https://www.ksb.com/en-global/investor-relations/corporate-governance/structures-and-management)  Board members

**Thomas Pabst,** Dipl.-Ing., Freinsheim **1)** Head of the Energy Market Area of KSB SE & Co. KGaA

**Prof. Dr.-Ing. Corinna Salander,** Dipl.-Physikerin, Berlin Head of the Railways Department at the Federal Ministry for Digital Infrastructure and Transport (BMDV)

**Harald Schöberl,** Industrial Business Management Assistant, Plech

Full-time Member of the Pegnitz Works Council / Chair of the Group Works Council of KSB SE & Co. KGaA

**Volker Seidel,** Electrical and Electronics Installer, Münchberg 1st Delegate and Treasurer of IG Metall Ostoberfranken

**Gabriele Sommer,** Dipl.-Geol., Wörthsee 2) Head of Business Development Management Systems & Certification, TÜV SÜD AG

**Jürgen Walther,** IT Coordinator, Offstein (Member since 4 May 2023) Deputy Chair of the Frankenthal Works Council of KSB SE & Co. KGaA

{174}------------------------------------------------

===

**Supervisory Board**

**174** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Dr. Bernd Flohr,** Dipl.-Kfm., Dipl.-Soz., Geislingen

**Thomas Pabst,** Dipl.-Ing., Freinsheim **1)**

Digital Infrastructure and Transport (BMDV)

Full-time Member of the Pegnitz Works Council / Chair of the Group Works Council of KSB SE & Co. KGaA

**Volker Seidel,** Electrical and Electronics Installer,

**Gabriele Sommer,** Dipl.-Geol., Wörthsee 2)

**Jürgen Walther,** IT Coordinator, Offstein

Deputy Chair of the Frankenthal Works Council of

Certification, TÜV SÜD AG

(Member since 4 May 2023)

KSB SE & Co. KGaA

1st Delegate and Treasurer of IG Metall Ostoberfranken

Head of Business Development Management Systems &

Plech

Münchberg

Head of the Energy Market Area of KSB SE & Co. KGaA

**Prof. Dr.-Ing. Corinna Salander,** Dipl.-Physikerin, Berlin Head of the Railways Department at the Federal Ministry for

**Harald Schöberl,** Industrial Business Management Assistant,

Chair of the General Works Council of KSB SE & Co. KGaA

**Claudia Augustin,** Office Management Assistant, Pegnitz

Chair of the Pegnitz Works Council of KSB SE & Co. KGaA

Former Executive Board Member of WMF AG

**René Klotz,** NC Programmer, Heßheim (Deputy Chair and Member until 4 May 2023)

and KSB Service GmbH

Independent Auditor

Switzerland

Frankenthal

**companies** 

KSB Group / Annual Report 2023

Shanghai, China

(Deputy Chair since 4 May 2023)

**Klaus Burchards,** Dipl.-Kfm., Stuttgart

**Arturo Esquinca,** Dipl.-Chemieing., MBA, Forch,

**Klaus Kühborth,** Dipl.-Wirtsch.-Ing., Frankenthal Managing Director of Johannes und Jacob Klein GmbH

1st Delegate and Managing Director of IG Metall Ludwigshafen / Frankenthal

Head of Business Development, Glas Trösch Holding AG

**Birgit Mohme,** Industrial Business Management Assistant,

**Mandates of KSB Supervisory Board members on the Supervisory Board / Board of Directors of other** 

1) Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd.,

 CVs of the Supervisory Board members

2) TÜV SÜD Industrie Service GmbH, Munich TÜV SÜD Auto Service GmbH, Stuttgart

(Chair)

{175}------------------------------------------------

# **Legal Representatives**

<span id="page-175-0"></span>**Legal Representatives** 

#### **Managing Directors of KSB Management SEDr. Stephan Jörg Timmermann,**

**Managing Directors of KSB Management SE** 

#### **CEO**, Augsburg <sup>1)</sup>Strategy, Human Resources, Communications,

**CEO**, Augsburg 1)

Patents & Trademarks, Service (since 1 April 2023) Strategy, Human Resources, Communications,
Patents & Trademarks, Service (since 1 April 2023) Internal Audits, Legal & Compliance, **Dr. Stephan Bross,** Weinheim <sup>2)</sup>

#### **Dr. Stephan Bross,** Weinheim [2\)](#page-3-2)

Global Operations, Research and Development, Innovation and Complexity Management, Digital Transformation, Committees and Associations

Global Operations, Research and Development, Innovation and

#### **Ralf Kannefass,** Regensburg 3) Sales, Service (until 31 March 2023) and Marketing

Taxes, Controlling KSB Group, Finance, Accounting,

Sales, Service (until 31 March 2023) and Marketing

**Dr. Matthias Schmitz,** Frankenthal [4\)](#page-3-4) Taxes, Controlling KSB Group, Finance, Accounting, Information Technology and Procurement

#### **Mandates of the Managing Directors on the Board of Directors of KSB companies**

**Mandates of the Managing Directors on the** 

- **Board of Directors of KSB companies** GIW Industries, Inc., Grovetown / Georgia, USA
	- [1\)](#page-3-1) KSB America Corporation, Richmond / Virginia, USA, KSB MOTOR TEKNOLOJİLERİ SANAYİ VE TİCARET ANONİM ŞİKETİ, KSB MIL Controls Limited, Annamanada, India Ankara, Turkey

KSB MOTOR TEKNOLOJİLERİ SANAYİ VE TİCARET ANONİM ŞİKETİ,

- [3\)](#page-3-3) KSB Shanghai Pump Co., Ltd., Shanghai, China Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd., KSB Pumps (S.A.) (Pty) Ltd., Germiston (Johannesburg), Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd., KSB Pumps and Valves (Pty) Ltd., Germiston (Johannesburg), KSB Pumps (S.A.) (Pty) Ltd., Germiston (Johannesburg), South Africa Shanghai, China South Africa South Africa
- 4) KSB Valves S.A., Echternach, Luxembourg (until 18 Dec. 2023) KSB Finance Nederland B.V., Zwanenburg, the Netherlands KSB Limited, Pimpri (Pune), India KSB Shanghai Pump Co., Ltd., Shanghai, China KSB BRASIL LTDA., Várzea Paulista, Brazil KSB Pumps Arabia Ltd., Riyadh, Saudi Arabia KSB Österreich Gesellschaft mbH, Vienna, Austria Canadian Kay Pump Limited, Mississauga / Ontario, Canada

KSB BRASIL LTDA., Várzea Paulista, Brazil KSB Pumps Arabia Ltd., Riyadh, Saudi Arabia KSB Österreich Gesellschaft mbH, Vienna, Austria

- - -

**72** 

{176}------------------------------------------------

**Legal Representatives** 

**176** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Legal Representatives** 

**Managing Directors of KSB Management SE** 

**Managing Directors of KSB Management SE** 

Strategy, Human Resources, Communications,

Patents & Trademarks, Service (since 1 April 2023)

Strategy, Human Resources, Communications,

Patents & Trademarks, Service (since 1 April 2023)

Sales, Service (until 31 March 2023) and Marketing

Taxes, Controlling KSB Group, Finance, Accounting,

Sales, Service (until 31 March 2023) and Marketing

Taxes, Controlling KSB Group, Finance, Accounting,

Global Operations, Research and Development, Innovation and Complexity Management, Digital Transformation, Committees

Global Operations, Research and Development, Innovation and Complexity Management, Digital Transformation, Committees

**Mandates of the Managing Directors on the Board of Directors of KSB companies** 

1) KSB America Corporation, Richmond / Virginia, USA, GIW Industries, Inc., Grovetown / Georgia, USA

**Mandates of the Managing Directors on the Board of Directors of KSB companies** 

2) KSB Limited, Pimpri (Pune), India

2) KSB Limited, Pimpri (Pune), India

Ankara, Turkey

Shanghai, China

South Africa

South Africa

Ankara, Turkey

Shanghai, China

South Africa

South Africa

1) KSB America Corporation, Richmond / Virginia, USA, GIW Industries, Inc., Grovetown / Georgia, USA

KSB MIL Controls Limited, Annamanada, India 3) KSB Shanghai Pump Co., Ltd., Shanghai, China

KSB MIL Controls Limited, Annamanada, India 3) KSB Shanghai Pump Co., Ltd., Shanghai, China

KSB MOTOR TEKNOLOJİLERİ SANAYİ VE TİCARET ANONİM ŞİKETİ,

KSB MOTOR TEKNOLOJİLERİ SANAYİ VE TİCARET ANONİM ŞİKETİ,

Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd.,

KSB Pumps and Valves (Pty) Ltd., Germiston (Johannesburg),

KSB Pumps (S.A.) (Pty) Ltd., Germiston (Johannesburg),

4) KSB Valves S.A., Echternach, Luxembourg (until 18 Dec. 2023) KSB Finance Nederland B.V., Zwanenburg, the Netherlands Canadian Kay Pump Limited, Mississauga / Ontario, Canada

KSB Pumps and Valves (Pty) Ltd., Germiston (Johannesburg),

Shanghai Electric-KSB Nuclear Pumps and Valves Co., Ltd.,

KSB Pumps (S.A.) (Pty) Ltd., Germiston (Johannesburg),

4) KSB Valves S.A., Echternach, Luxembourg (until 18 Dec. 2023) KSB Finance Nederland B.V., Zwanenburg, the Netherlands Canadian Kay Pump Limited, Mississauga / Ontario, Canada

KSB Shanghai Pump Co., Ltd., Shanghai, China KSB BRASIL LTDA., Várzea Paulista, Brazil KSB Pumps Arabia Ltd., Riyadh, Saudi Arabia KSB Österreich Gesellschaft mbH, Vienna, Austria

KSB Shanghai Pump Co., Ltd., Shanghai, China KSB BRASIL LTDA., Várzea Paulista, Brazil KSB Pumps Arabia Ltd., Riyadh, Saudi Arabia KSB Österreich Gesellschaft mbH, Vienna, Austria

KSB Limited, Pimpri (Pune), India

KSB Limited, Pimpri (Pune), India

**Dr. Stephan Jörg Timmermann,**

Internal Audits, Legal & Compliance,

**Dr. Stephan Jörg Timmermann,**

Internal Audits, Legal & Compliance,

**Dr. Stephan Bross,** Weinheim 2)

**Dr. Stephan Bross,** Weinheim 2)

**Ralf Kannefass,** Regensburg 3)

**Dr. Matthias Schmitz,** Frankenthal 4)

**Ralf Kannefass,** Regensburg 3)

**Dr. Matthias Schmitz,** Frankenthal 4)

Information Technology and Procurement

Information Technology and Procurement

**CEO**, Augsburg 1)

**CEO**, Augsburg 1)

and Associations

KSB Group / Annual Report 2023

and Associations

#### **Members of the Administrative Board of KSB Management SE**

**Oswald Bubel,** Chair, Saarbrücken

**Monika Kühborth,** Deputy Chair, Homburg Managing Director of Klein, Schanzlin & Becker GmbH

**Günther Koch,** Ludwigshafen

**Dr. Harald Schwager,** Speyer 1) Deputy Chairman of the Executive Board of Evonik Industries AG

**Andrea Teutenberg,** Kaarst 2)

#### **Mandates on statutory Supervisory Boards**

- 1) Evonik Operations GmbH, Essen, Germany (Chair of the Supervisory Board) Currenta GmbH & Co. OHG, Leverkusen, Germany
- 2) Bauer AG, Schrobenhausen, Germany (until 2 Nov. 2023)

#### **Mandates in comparable supervisory bodies**

**72** 

**72** 

- 1) Member of the Presidential Board of DEKRA e.V., Stuttgart, Germany
- 2) Member of the Advisory Board, EJOT Holding GmbH & Co. KG, Bad Berleburg, Germany Member of the Advisory Board, Talbot Holding GmbH, Aachen, Germany

{177}------------------------------------------------

**74** 

# <span id="page-177-0"></span>**Proposal on the Appropriation of the Net Retained Earnings of KSB SE & Co. KGaA**

The following proposal on the appropriation of the net retained earnings of € 88,641,634.78 of KSB SE & Co. KGaA will be submitted to the Annual General Meeting on 8 May 2024:

**Proposal for the appropriation of net retained earnings** 

| €                                                     |               |
|-------------------------------------------------------|---------------|
| Dividend of € 26.00 per ordinary no-par-value share   | 23,051,990.00 |
| Dividend of € 26.26 per preference no-par-value share | 22,707,337.12 |
| Total                                                 | 45,759,327.12 |
| Carried forward to new account                        | 42,882,307.66 |
|                                                       | 88,641,634.78 |

Frankenthal, 12 March 2024

KSB Management SE

The Managing Directors

The annual financial statements of KSB SE & Co. KGaA were prepared in accordance with German accounting principles. They are published in the Bundesanzeiger [German Federal Gazette]. These annual financial statements are also available online: ksb.com/financialstatements

{178}------------------------------------------------

===

**74** 

88,641,634.78

**Proposal on the Appropriation of the Net** 

**178** Management and Issues 2023 Combined Management Report **Consolidated Financial Statements** General Information

**Retained Earnings of KSB SE & Co. KGaA**

The following proposal on the appropriation of the net retained earnings of € 88,641,634.78 of KSB SE & Co. KGaA will be submitted to the Annual General Meeting on 8 May 2024:

Dividend of € 26.00 per ordinary no-par-value share 23,051,990.00 Dividend of € 26.26 per preference no-par-value share 22,707,337.12 **Total 45,759,327.12 Carried forward to new account 42,882,307.66** 

The annual financial statements of KSB SE & Co. KGaA were prepared in accordance with

Gazette]. These annual financial statements are also available online:

Bundesanzeiger

[German Federal

German accounting principles. They are published in the

**Proposal for the appropriation of net retained earnings** 

Frankenthal, 12 March 2024

KSB Management SE

The Managing Directors

ksb.com/financialstatements

KSB Group / Annual Report 2023

**€**

{179}------------------------------------------------

Image /page/179/Picture/4 description: The image shows a large, white number 4 against a solid blue background. The number is bold and fills most of the frame.

#### KSB Group / Annual Report 2023

{180}------------------------------------------------

# **General Information**

182 [Responsibility Statement](#page-181-0)

<span id="page-180-0"></span>**Bestätigungsvermerk des** 

**unabhängigen Abschlussprüfers**

- 183 [Independent Auditor's Report](#page-182-0)
- 194 [Glossary](#page-193-0)
- 196 [Contacts](#page-195-0)
- [197 Financial Calendar](#page-196-0)

**180** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

**4**

KSB Group / Annual Report 2023

{181}------------------------------------------------

# <span id="page-181-0"></span>**Responsibility Statement**

To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the combined management report for the Group and KSB SE & Co. KGaA includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.

Frankenthal, 12 March 2024

KSB Management SE

The Managing Directors

{182}------------------------------------------------

**182** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

nities and risks associated with the expected development of the Group.

Frankenthal, 12 March 2024

KSB Management SE

The Managing Directors

To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the combined management report for the Group and KSB SE & Co. KGaA includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportu-

**Responsibility Statement** 

**Responsibility Statement**

KSB Group / Annual Report 2023

# <span id="page-182-0"></span>**Independent Auditor's Report**

To KSB SE & Co. KGaA, Frankenthal

# **Report on the Audit of the Consolidated Financial Statements and of the Group Management Report**

#### **AUDIT OPINIONS**

We have audited the consolidated financial statements of KSB SE & Co. KGaA, Frankenthal, and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2023, and the consolidated statement of comprehensive income, consolidated statement of profit or loss, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year from 1 January to 31 December 2023, and notes to the consolidated financial statements, including material accounting policy information. In addition, we have audited the group management report of KSB SE & Co. KGaA, which is combined with the Company's management report, for the financial year from 1 January to 31 December 2023. In accordance with the German legal requirements, we have not audited the content of the section "Description of Key Features of the Internal Control System, the Risk Management System and the Compliance Management System in Accordance with the A.5 DCGK 2022 Recommendation" of the group management report.

In our opinion, on the basis of the knowledge obtained in the audit,

- the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in compliance with these requirements, give a true and fair view of the assets, liabilities, and financial position of the Group as at 31 December 2023, and of its financial performance for the financial year from 1 January to 31 December 2023, and
- the accompanying group management report as a whole provides an appropriate view of the Group's position. In all material respects, this group management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our audit opinion on the group management report does not cover the content of the section referred to above.

Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report.

#### **BASIS FOR THE AUDIT OPINIONS**

We conducted our audit of the consolidated financial statements and of the group management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as "EU Audit Regulation") in compliance with German Generally Accepted 

{183}------------------------------------------------

Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report" section of our auditor's report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated financial statements and on the group management report.

#### **KEY AUDIT MATTERS IN THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS**

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2023. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters.

In our view, the matters of most significance in our audit were as follows:

- <sup>1</sup> Recoverability of goodwill
- **<sup>2</sup>** Accounting treatment of project orders recognized over time

Our presentation of these key audit matters has been structured in each case as follows:

- **<sup>1</sup>** Matter and issue
- <sup>2</sup> Audit approach and findings
- **<sup>3</sup>** Reference to further information

Hereinafter we present the key audit matters:

#### **<sup>1</sup> Recoverability of goodwill**

**<sup>1</sup>** In the Company's consolidated financial statements goodwill amounting in total to EUR 30.4 million is reported under the "Intangible assets" balance sheet item. Goodwill is tested for im-pairment by the Company once a year or when there are indications of impairment to 

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**184** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

**KEY AUDIT MATTERS IN THE AUDIT OF THE CONSOLIDATED** 

In our view, the matters of most significance in our audit were as follows:

Our presentation of these key audit matters has been structured in each case as follows:

**<sup>1</sup>** In the Company's consolidated financial statements goodwill amounting in total to EUR 30.4 million is reported under the "Intangible assets" balance sheet item. Goodwill is tested for im-pairment by the Company once a year or when there are indications of impairment to

**<sup>2</sup>** Accounting treatment of project orders recognized over time

report.

**FINANCIAL STATEMENTS**

**<sup>1</sup>** Recoverability of goodwill

**<sup>2</sup>** Audit approach and findings **<sup>3</sup>** Reference to further information

**<sup>1</sup> Recoverability of goodwill**

Hereinafter we present the key audit matters:

**<sup>1</sup>** Matter and issue

a separate audit opinion on these matters.

Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report" section of our auditor's report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated financial statements and on the group management

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2023. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our audit opinion thereon; we do not provide

KSB Group / Annual Report 2023

deter-mine any possible need for write-downs. Impairment testing is carried out at the level of the cash-generating units to which the relevant goodwill is allocated. The carrying amount of the relevant cash-generating unit, including goodwill, is compared with the corresponding recoverable amount in the context of the impairment test. The recoverable amount is generally calculated on the basis of the value in use. The present value of the future cash flows from the respective cash-generating unit normally serves as the basis of valuation. The present values are calculated using discounted cash flow models. For this purpose, the adopted medium-term business plan of the Group forms the starting point which is extrapolated based on assump-tions about long-term rates of growth. Expectations relating to future market developments and assumptions about the development of macroeconomic factors on the business activities of the Group are also taken into account. The discount rate used is the weighted average cost of capital for the relevant cash-generating unit. The impairment test determined that it was necessary to recognize write-downs amounting to a total of EUR 0.7 million. The outcome of this valuation is dependent to a large extent on the estimates made by the executive directors with respect to the future cash inflows from the respective cash-generating unit, on the discount rate used, the rate of growth as well as other assumptions, and is therefore subject to considerable uncertainty. Against this background and due to the complex nature of the valuation, this matter was of particular significance in the context of our audit.

**<sup>2</sup>** As part of our audit, we assessed the methodology employed for the purposes of performing the impairment test, among other things. After matching the future cash inflows used for the calculation against the adopted medium-term business plan of the Group, we assessed the appropriateness of the calculation, in particular by reconciling it with general and sector specific market expectations. We also assessed the appropriate consideration of the costs of Group functions. In the knowledge that even relatively small changes in the discount rate applied can have a material impact on the value of the entity calculated using this method, we focused our testing in particular on the parameters used to determine the discount rate applied and assessed the calculation model. We evaluated the sensitivity analyses performed by the Company, in order to reflect the uncertainty inherent in the projections. We verified that the necessary disclosures were made in the notes to the consolidated financial statements relating to the cash-generating units for which a reasonably possible change in an assumption would result in the recoverable amount falling below the carrying amount of the cash-generating units including the allocated goodwill.

Overall, the measurement inputs and assumptions used by the executive directors are in line with our expectations and are also within the ranges considered by us to be reasonable.

**<sup>3</sup>** The Company's disclosures on goodwill are contained in section III "Accounting policies", IV. "Balance sheet disclosures" note 1 of the notes to the consolidated financial statements.

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#### **<sup>2</sup> Accounting treatment of project orders recognized over time**

**<sup>1</sup>** In the Company's consolidated financial statements revenue totaling EUR 2,819.0 million is reported in the consolidated income statement. The Company has put in place comprehensive systems and processes throughout the Group for the purposes of accurately recognizing and deferring revenue. Revenue amounting to EUR 676.5 million is attributable to project orders recognized over time and the service business. In the case of project orders, the stage of completion is estimated based on the ratio of costs already incurred to budgeted total costs. IFRS 15 requires estimates and judgments to be made for certain areas, which were assessed for appropriate-ness in the context of our audit. In particular, the estimation of the planned total costs of the project orders to be recognized over time and the appropriate allocation of costs incurred to the orders are based on the estimates and assumptions made by the executive directors. Against this background and due to the resulting estimation uncertainties and the complexity of the accounting treatment under Group-wide application of IFRS 15, this matter was of particular significance in the context of our audit.

**<sup>2</sup>** As part of our audit, among other things we assessed the processes and controls established by the Group for the recognition of revenue from project orders recognized over time, taking into account the stage of completion. In addition, with respect to project orders recognized over time we examined projects on a sample basis to determine whether they met the requirements for recognizing revenue over time in accordance with IFRS 15. We assessed the estimates and judgments made by the executive directors with respect to the recognition and deferral of revenue for the various business models of the Group companies. Furthermore, we assessed the calculation of percentage of completion and the proportionate recognition of revenue and profit derived from this. In this connection we examined the calculation of both the budgeted total costs and the costs actually incurred. We assessed the pro-gress of the respective projects, among other things based on interviews with project manag-ers and by inspecting project documentation. In addition, we assessed the consistency of the methods used to calculate the costs incurred.

We also addressed the inherent audit risk in this audit area by means of audit procedures that were consistently applied throughout the Group. We were able to satisfy ourselves that the systems, processes and controls in place are appropriate and that the estimates and assumptions made by the executive directors are sufficiently documented and substantiated to ensure that revenue is appropriately accounted for.

**<sup>3</sup>** The Company's disclosures on the accounting treatment of project orders recognized over time are contained in sections III. "Accounting policies", IV. "Notes to the balance sheet", nos. 8 and 13 and V. "Notes to the income statement", no. 14 of the notes to the consolidated financial statements.

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#### **OTHER INFORMATION**

**186** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

**<sup>2</sup> Accounting treatment of project orders recognized over time**

was of particular significance in the context of our audit.

revenue is appropriately accounted for.

financial statements.

**<sup>1</sup>** In the Company's consolidated financial statements revenue totaling EUR 2,819.0 million is reported in the consolidated income statement. The Company has put in place comprehensive systems and processes throughout the Group for the purposes of accurately recognizing and deferring revenue. Revenue amounting to EUR 676.5 million is attributable to project orders recognized over time and the service business. In the case of project orders, the stage of completion is estimated based on the ratio of costs already incurred to budgeted total costs. IFRS 15 requires estimates and judgments to be made for certain areas, which were assessed for appropriate-ness in the context of our audit. In particular, the estimation of the planned total costs of the project orders to be recognized over time and the appropriate allocation of costs incurred to the orders are based on the estimates and assumptions made by the executive directors. Against this background and due to the resulting estimation uncertainties and the complexity of the accounting treatment under Group-wide application of IFRS 15, this matter

**<sup>2</sup>** As part of our audit, among other things we assessed the processes and controls established by the Group for the recognition of revenue from project orders recognized over time, taking into account the stage of completion. In addition, with respect to project orders recognized over time we examined projects on a sample basis to determine whether they met the requirements for recognizing revenue over time in accordance with IFRS 15. We assessed the estimates and judgments made by the executive directors with respect to the recognition and deferral of revenue for the various business models of the Group companies. Furthermore, we assessed the calculation of percentage of completion and the proportionate recognition of revenue and profit derived from this. In this connection we examined the calculation of both the budgeted total costs and the costs actually incurred. We assessed the pro-gress of the respective projects, among other things based on interviews with project manag-ers and by inspecting project documentation. In addition, we assessed the consistency of the methods used to calculate the costs incurred.

We also addressed the inherent audit risk in this audit area by means of audit procedures that were consistently applied throughout the Group. We were able to satisfy ourselves that the systems, processes and controls in place are appropriate and that the estimates and assumptions made by the executive directors are sufficiently documented and substantiated to ensure that

**<sup>3</sup>** The Company's disclosures on the accounting treatment of project orders recognized over time are contained in sections III. "Accounting policies", IV. "Notes to the balance sheet", nos. 8 and 13 and V. "Notes to the income statement", no. 14 of the notes to the consolidated

KSB Group / Annual Report 2023

The executive directors are responsible for the other information. The other information comprises the section "Description of Key Features of the Internal Control System, the Risk Management System and the Compliance Management System in Accordance with the A.5 DCGK 2022 Recommendation" as an unaudited part of the group management report.

The other information comprises further

- the statement on corporate governance pursuant to § 289f HGB and § 315d HGB
- the separate non-financial report to comply with §§ 289b to 289e HGB and §§ 315b to 315c HGB
- all remaining parts of the annual report excluding cross-references to external information – with the exception of the audited consoliated financial statements, the audited group management report and our auditor's report

Our audit opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information mentioned above and, in so doing, to consider whether the other information

- is materially inconsistent with the consolidated financial statements, with the group management report disclosures audited in terms of content or with our knowledge obtained in the audit, or
- otherwise appears to be materially misstated.

#### **RESPONSIBILITIES OF THE EXECUTIVE DIRECTORS AND THE SUPERVISORY BOARD FOR THE CONSOLIDATED FINANCIAL STATEMENTS AND THE GROUP MANAGEMENT REPORT**

The executive directors are responsible for the preparation of the consolidated financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and financial performance of the Group. In addition, the executive directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud (i.e., fraudulent financial reporting and misappropriation of assets) or error.

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In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.

Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group's position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group management report.

The supervisory board is responsible for overseeing the Group's financial reporting process for the preparation of the consolidated financial statements and of the group management report.

#### **AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND OF THE GROUP MANAGEMENT REPORT**

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group management report as a whole provides an appropriate view of the Group's position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the consolidated financial statements and on the group management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could 

{188}------------------------------------------------

reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group management report.

**188** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.

Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group's position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide

The supervisory board is responsible for overseeing the Group's financial reporting process for the preparation of the consolidated financial statements and of the group management report.

**AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL** 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group management report as a whole provides an appropriate view of the Group's position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the consolidated financial statements and

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could

sufficient appropriate evidence for the assertions in the group management report.

**STATEMENTS AND OF THE GROUP MANAGEMENT REPORT**

on the group management report.

KSB Group / Annual Report 2023

We exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the consolidated financial statements and of the group management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
- Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness of these systems.
- Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.
- Conclude on the appropriateness of the executive directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor's report to the related disclosures in the consolidated financial statements and in the group management report or, if such disclosures are inadequate, to modify our respective audit opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to be able to continue as a going concern.

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- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express audit opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinions.
- Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with German law, and the view of the Group's position it provides.
- Perform audit procedures on the prospective information presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.

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**190** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

 Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express audit opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit

 Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with German law, and the view of the Group's position it provides.

 Perform audit procedures on the prospective information presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant

We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our

auditor's report unless law or regulation precludes public disclosure about the matter.

deficiencies in internal control that we identify during our audit.

actions taken to eliminate threats or safeguards applied.

requirements of German commercial law pursuant to § 315e Abs. 1 HGB.

opinions.

KSB Group / Annual Report 2023

## **Other Legal and Regulatory Requirements**

#### **REPORT ON THE ASSURANCE ON THE ELECTRONIC RENDERING OF THE CONSOLIDATED FINANCIAL STATEMENTS AND THE GROUP MANAGEMENT REPORT PREPARED FOR PUBLICATION PURPOSES IN ACCORDANCE WITH § 317 ABS. 3A HGB**

#### **Assurance Opinion**

We have performed assurance work in accordance with § 317 Abs. 3a HGB to obtain reasonable assurance as to whether the rendering of the consolidated financial statements and the group management report (hereinafter the "ESEF documents") contained in the electronic file ksbsecokgaa\_KA\_LB\_ESEF-2023-12-31.zip and prepared for publication purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the electronic reporting format ("ESEF format"). In accordance with German legal requirements, this assurance work extends only to the conversion of the information contained in the consolidated financial statements and the group management report into the ESEF format and therefore relates neither to the information contained within these renderings nor to any other information contained in the electronic file identified above.

In our opinion, the rendering of the consolidated financial statements and the group management report contained in the electronic file identified above and prepared for publication purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the electronic reporting format. Beyond this assurance opinion and our audit opinion on the accompanying consolidated financial statements and the accompanying group management report for the financial year from 1 January to 31 December 2023 contained in the "Report on the Audit of the Consolidated Financial Statements and on the Group Management Report" above, we do not express any assurance opinion on the information contained within these renderings or on the other information contained in the electronic file identified above.

#### **Basis for the Assurance Opinion**

We conducted our assurance work on the rendering of the consolidated financial statements and the group management report contained in the electronic file identified above in accordance with § 317 Abs. 3a HGB and the IDW Assurance Standard: Assurance Work on the Electronic Rendering, of Financial Statements and Management Reports, Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB (IDW AsS 410 (06.2022)) and the International Standard on Assurance Engagements 3000 (Revised). Our responsibility in accordance therewith is further described in the "Group Auditor's Responsibilities for the Assurance Work on the ESEF Documents" section. Our audit firm applies the IDW Standard on Quality Management: Requirements for Quality Management in the Audit Firm (IDW QMS 1 (09.2022)).

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**Responsibilities of the Executive Directors and the Supervisory Board for the ESEF Documents** The executive directors of the Company are responsible for the preparation of the ESEF documents including the electronic rendering of the consolidated financial statements and the group management report in accordance with § 328 Abs. 1 Satz 4 Nr. [number] 1 HGB and for the tagging of the consolidated financial statements in accordance with § 328 Abs. 1 Satz 4 Nr. 2 HGB.

In addition, the executive directors of the Company are responsible for such internal control as they have considered necessary to enable the preparation of ESEF documents that are free from material non-compliance with the requirements of § 328 Abs. 1 HGB for the electronic reporting format, whether due to fraud or error.

The supervisory board is responsible for overseeing the process for preparing the ESEF documents as part of the financial reporting process.

#### **Group Auditor's Responsibilities for the Assurance Work on the ESEF Documents**

Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error. We exercise professional judgment and maintain professional skepticism throughout the assurance work. We also:

- Identify and assess the risks of material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error, design and perform assurance procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for our assurance opinion.
- Obtain an understanding of internal control relevant to the assurance work on the ESEF documents in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these controls.
- Evaluate the technical validity of the ESEF documents, i.e., whether the electronic file containing the ESEF documents meets the requirements of the Delegated Regulation (EU) 2019/815 in the version in force at the date of the consolidated financial statements on the technical specification for this electronic file.
- Evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the audited consolidated financial statements and to the audited group management report.
- Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019/815, in the version in force at the date of the consolidated financial statements, enables an appropriate and complete machine-readable XBRL copy of the XHTML rendering.

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**192** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

Nr. 2 HGB.

format, whether due to fraud or error.

throughout the assurance work. We also:

technical specification for this electronic file.

for our assurance opinion.

controls.

documents as part of the financial reporting process.

**Responsibilities of the Executive Directors and the Supervisory Board for the ESEF Documents** The executive directors of the Company are responsible for the preparation of the ESEF documents including the electronic rendering of the consolidated financial statements and the group management report in accordance with § 328 Abs. 1 Satz 4 Nr. [number] 1 HGB and for the tagging of the consolidated financial statements in accordance with § 328 Abs. 1 Satz 4

In addition, the executive directors of the Company are responsible for such internal control as they have considered necessary to enable the preparation of ESEF documents that are free from material non-compliance with the requirements of § 328 Abs. 1 HGB for the electronic reporting

The supervisory board is responsible for overseeing the process for preparing the ESEF

Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error. We exercise professional judgment and maintain professional skepticism

 Identify and assess the risks of material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error, design and perform assurance procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis

 Obtain an understanding of internal control relevant to the assurance work on the ESEF documents in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these

 Evaluate the technical validity of the ESEF documents, i.e., whether the electronic file containing the ESEF documents meets the requirements of the Delegated Regulation (EU) 2019/815 in the version in force at the date of the consolidated financial statements on the

 Evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the audited consolidated financial statements and to the audited group management report.

 Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019/815, in the version in force at the date of the consolidated financial statements, enables an appropriate and complete machine-readable XBRL copy of the XHTML rendering.

**Group Auditor's Responsibilities for the Assurance Work on the ESEF Documents**

KSB Group / Annual Report 2023

#### **FURTHER INFORMATION PURSUANT TO ARTICLE 10 OF THE EU AUDIT REGULATION**

We were elected as group auditor by the annual general meeting on 4 May 2023. We were engaged by the supervisory board on 20 September 2023. We have been the group auditor of the KSB SE & Co. KGaA, Frankenthal, without interruption since the financial year 2015.

We declare that the audit opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).

#### **REFERENCE TO AN OTHER MATTER – USE OF THE AUDITOR'S REPORT**

Our auditor's report must always be read together with the audited consolidated financial statements and the audited group management report as well as the assured ESEF documents. The consolidated financial statements and the group management report converted to the ESEF format – including the versions to be filed in the company register – are merely electronic renderings of the audited consolidated financial statements and the audited group management report and do not take their place. In particular, the "Report on the Assurance on the Electronic Rendering of the Consolidated Financial Statements and the Group Management Report Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB" and our assurance opinion contained therein are to be used solely together with the assured ESEF documents made available in electronic form.

#### **German Public Auditor Responsible for the Engagement**

The German Public Auditor responsible for the engagement is Dirk Fischer.

Mannheim, 12 March 2024

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft

Dirk Fischer Matthias Böhm Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]

Matthias Böhm

Wirtschaftsprüfer

[German Public Auditor]

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# <span id="page-193-0"></span>**Glossary**

#### **ABBREVIATIONS**

#### **ASEAN**

Association of Southeast Asian Nations

#### **CSR**

Corporate Social Responsibility

#### **DIIR**

Deutsches Institut f
 Interne Revision **Chief Compliance Officer** e.V. [German Institute of Internal Auditors]

#### **ESG**

Environmental, Social and Governance

#### **IMF**

International Monetary Fund

#### **OECD**

and Development

#### **UNGP**

Business and Human Rights

#### **VDMA**

Verband Deutscher Maschinen- und **Geheimrat Dr. Jacob Klein-** Anlagenbau e.V. Industry Association]

#### **KEY CORPORATE AND TECHNICAL TERMS**

#### **Additive manufacturing**

house gas emissions
typing: a process which enables rapid and cost-effective production of patterns, samples, prototypes, tools and final products

Assesses and reviews, inter alia, compliance with applicable law and internal guidelines by staff

#### **Corporate governance**

Organisation for Economic Co-operation Management, as well as the relevant product, for example the extent to which The company-specific Corporate Governance System encompasses the entirety of relevant laws, directives, codes, memoranda of understanding, corporate guidelines and practices of the company's supervisory bodies.

#### **Fraud activities**

United Nations Guiding Principles on Technical term used in internal auditing Groups of people who are directly or intransactions

# **Unterstützungseinrichtung e.V.**

[German Mechanical Engineering Charitable organisation in the form of a benevolent fund which provides support to current and former employees and their immediate families in cases of urgent financial need

#### **Greenhouse Gas Protocol**

Standard for calculating CO2 and greenPreviously referred to as rapid proto-

#### **International Labour Organisation (ILO)**

Specialised United Nations agency responsible for drawing up and overseeing international labour standards and social standards

#### **Lost Time Accident Rate (LTAR)**

This occupational health and safety indicator measures the number of working hours lost due to accidents per employee and year.

#### **Material circularity indicatoR**

The MCI measures the circularity of a it can be recycled.

#### **Stakeholders**

directly affected by a company's activito describe fraudulent practices and ties; KSB's main stakeholders are customers, suppliers, investors, employees and the public.

{194}------------------------------------------------

**194** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

**KEY CORPORATE AND TECHNICAL TERMS**

Previously referred to as rapid prototyping: a process which enables rapid and cost-effective production of patterns, samples, prototypes, tools and final

Assesses and reviews, inter alia, compliance with applicable law and internal

The company-specific Corporate Governance System encompasses the entirety of relevant laws, directives, codes, memoranda of understanding, corporate guidelines and practices of the company's Management, as well as the relevant

Technical term used in internal auditing to describe fraudulent practices and

**Geheimrat Dr. Jacob Klein-Unterstützungseinrichtung e.V.** Charitable organisation in the form of a benevolent fund which provides support to current and former employees and their immediate families in cases of

urgent financial need

**Additive manufacturing**

**Chief Compliance Officer**

**Corporate governance**

guidelines by staff

supervisory bodies.

**Fraud activities**

transactions

products

**Greenhouse Gas Protocol** Standard for calculating CO2

**International Labour Organisation (ILO)** Specialised United Nations agency responsible for drawing up and overseeing international labour standards and

**Lost Time Accident Rate (LTAR)** This occupational health and safety indicator measures the number of working hours lost due to accidents per employee

**Material circularity indicatoR**

The MCI measures the circularity of a product, for example the extent to which

Groups of people who are directly or indirectly affected by a company's activities; KSB's main stakeholders are customers, suppliers, investors, employees and

house gas emissions

social standards

and year.

it can be recycled.

**Stakeholders**

the public.

and green-

KSB Group / Annual Report 2023

**ABBREVIATIONS**

**Glossary**

Association of Southeast Asian Nations

Deutsches Institut für Interne Revision e.V. [German Institute of Internal

Environmental, Social and Governance

Organisation for Economic Co-operation

United Nations Guiding Principles on

Verband Deutscher Maschinen- und

[German Mechanical Engineering

International Monetary Fund

Business and Human Rights

Corporate Social Responsibility

**ASEAN**

**CSR**

**DIIR**

**ESG**

**IMF**

**OECD**

**UNGP**

**VDMA**

and Development

Anlagenbau e.V.

Industry Association]

Auditors]

#### **Sustainable Development Goals (SDG)**

17 goals for sustainable development set out by the United Nations

#### **UK Modern Slavery Act**

British law combating modern slavery, forced labour and human trafficking

#### **UN Global Compact (UNGC)**

United Nations initiative for responsible corporate governance based on ten universal principles

#### **Vision Zero**

Prevention concept developed by the International Social Security Association (ISSA) in order to reduce the number of occupational accidents

{195}------------------------------------------------

# <span id="page-195-0"></span>**Contacts**

#### **EDITOR**

KSB SE & Co. KGaA JohannKleinStraße 9 67227 Frankenthal, Germany Tel. +49 6233 860

#### **GROUP INFORMATION**

You will find the latest news [on the KSB Group at: ksb.com](http://www.ksb.com) 

Should you need addtitional information. please contact:

#### **INVESTOR RELATIONS**

Dieter Pott Tel. +49 6233 862615 [Email: investorrelations@ksb.com](mailto:investor-relations%40ksb.com?subject=)

#### **COMMUNICATIONS**

Sonja Ayasse Tel. +49 6233 863118 [Email: sonja.ayasse@ksb.com](mailto:sonja.ayasse%40ksb.com?subject=)

#### **CONCEPT AND DESIGN**

KSB Corporate Comunications, Frankenthal 3st kommunikation, Mainz, Germany

#### **PHOTOGRAPHY**

katatonia, Adobe Stock (Title) Robert Kwiatek, Frankenthal, Germany (pp. 8, 10, 14)

Image /page/195/Picture/18 description: The image is a logo for "The Global Compact". The logo features a blue globe in the center, surrounded by the text "THE GLOBAL COMPACT" in a circular arrangement above the globe. Below the globe, there are two olive branches forming a semi-circle. Underneath the olive branches, the text "WE SUPPORT" is displayed.

As a signatory to the United Nations Global Compact, KSB is committed to endsorsing the ten principles of the international community in the areas of human rights, labour standards, enviromental protection and anticorruption.

The KSB Group's Annual Report is also available in German.

**Digital Annual Report** [Online Annual Report with](http://ksb.com/online-report/2023)  additional functions: ksb.com/onlinereport [PDF version for download:](http://www.ksb.com/en-global/annualreport2023) [ksb.com/annualreport](http://www.ksb.com/de-global/geschaeftsbericht2023)

Image /page/195/Picture/22 description: The image contains two symbols. The first symbol on the left is an open book on top of a rectangular surface. The second symbol on the right is a rectangle on top of a vertical rectangle.

{196}------------------------------------------------

# <span id="page-196-0"></span>**Financial Calendar**

**26 March 2024** Reporting on the 2023 financial year Financial press conference, 10:00, Frankenthal

**25 April 2024** Interim report January – March 2024

**8 May 2024** Annual General Meeting 10:00, Frankenthal

**31 July 2024** Halfyear financial report January – June 2024

**12 November 2024** Interim report January – September 2024

**30 January 2025** Preliminary report on the 2024 financial year

You will find the latest information on the 2024 Annual General Meeting at: [ksb.com/agm](http://www.ksb.com/agm)

As a signatory to the United Nations Global Compact, KSB is committed to endsorsing the ten principles of the international community in the areas of human rights, labour standards, enviromental protection and anti-

The KSB Group's Annual Report is

also available in German.

**Digital Annual Report** Online Annual Report with additional functions: ksb.com/onlinereport PDF version for download: ksb.com/annualreport

corruption.

**196** Management and Issues 2023 Combined Management Report Consolidated Financial Statements **General Information**

KSB Group / Annual Report 2023

**Contacts**

KSB SE & Co. KGaA JohannKleinStraße 9 67227 Frankenthal, Germany

Tel. +49 6233 860

please contact:

Dieter Pott

**GROUP INFORMATION**  You will find the latest news on the KSB Group at: ksb.com

**INVESTOR RELATIONS**

Tel. +49 6233 862615

**COMMUNICATIONS** Sonja Ayasse

Tel. +49 6233 863118 Email: sonja.ayasse@ksb.com

**CONCEPT AND DESIGN** 

katatonia, Adobe Stock (Title)

**PHOTOGRAPHY**

(pp. 8, 10, 14)

Email: investorrelations@ksb.com

KSB Corporate Comunications, Frankenthal 3st kommunikation, Mainz, Germany

Robert Kwiatek, Frankenthal, Germany

Should you need addtitional information.

**EDITOR**

{197}------------------------------------------------

Image /page/197/Picture/0 description: The image shows the logo for KSB. The logo consists of a blue graphic on the left and the letters "KSB" in silver on the right. The graphic on the left is a stylized "b" inside of a square with rounded corners. The "b" is blue and has a small blue square at the bottom right. The letters "KSB" are in a sans-serif font and have a gradient from light to dark silver.

**KSB SE & Co. KGaA** [67225 Frankenthal \(Germany\)](http://www.ksb.com) www.ksb.com