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Underlying Conditions - Overall Economy and Our Industry |
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- Global Economy Grew by 3.7 Percent; Significant Economic Slowdown at Year-End
- Increased Demand for Print Products in Emerging Markets
- Problematic Exchange Rate Situation for European Suppliers
Global Economy Grows Further - Despite Slowdown in the US
All eyes were directed towards the US economy in 2007. Beginning at mid-year, it suffered increasingly from the weakness of the real estate market. The major banking crisis that resulted was to spread to many financial markets by the end of the year. Nevertheless, although the US economy began to stumble, the favorable forecasts in the European region and in Asia came close to realization. Unlike in the past, the US seemed to no longer act as the principal engine for growth for the global economy. The rapidly growing markets in the emerging markets offered good export opportunities. Moreover, they are characterized by notably stable, independent economic conditions. Despite the ongoing high prices for energy, which hampered primarily the consumer behavior of private households, in 2007 the global economy grew overall by 3.7 percent - close to the previous year's pace.
Highly Varied Development of the Print Industry in Our Biggest Markets
Demand for print products continued to grow in the emerging markets, in some countries at a disproportionately more rapid pace than overall economic growth. High-quality printed products have become increasingly important. In the industrialized countries, print shops focused above all on streamlining investments. As in the past, they were only able to pass on their higher costs for energy and paper as well as higher staff costs to their final customers to a limited extent. The mood could have hardly been more different in the print industry in our two biggest markets - Germany and the US - than it was during the financial year although the two economies grew at similar rates: The German print industry continued the previous year's trend, with the business situation and the employment rate further improving even though production in 2007 increased by a mere 2.6 percent over the previous year (Source: bvdm). The capacity utilization of print shops rose towards the end of the year, amounting to over 85 percent on average for the year. By contrast, the US print industry was noticeably affected by the broadly rather weak economy. Capacity utilization in the US reached only 75 percent at financial year-end.
Competitive Structure of Our Industry: Exchange Rate Developments Strongly Favor Non-European Competitors
Over the past five years, exchange rate structures have shifted considerably to the advantage of suppliers who have situated their value added outside the Euro Region. Contrary to our forecast, circumstances worsened further to our disadvantage due to the additional marked decline in value of the US dollar during the financial year. We are the world market leader in the area of sheetfed offset printing technology. In addition to our two principal competitors, König & Bauer and MAN Roland, who are also domiciled in Germany, there are also several Japanese competitors in this area, such as Komori, Ryobi and Mitsubishi, who have benefited enormously from the devaluation of the yen and the dollar in recent years. Furthermore, Japanese competitors are taking advantage of the exchange rate structures to penetrate in various European and Southeast Asian markets to a greater extent than in the past. The competition thereby further intensified. We made mention in the previous year’s Risk Report of the threat of such a development and its impact on our scope to set prices.
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As at: July 2008
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