Report 2010 - Italcementi Group

2010 Annual Report
Presentation 6
Consolidated Annual Report Directors’ report 28
Corporate Governance Consolidated financial statements 68
Italcementi S.p.A. financial statements 158
The international economy and industry trends
After the economic collapse of 2009, the world economy saw a strong recovery in
production and trade. The central driver of the growth process was Asia, specifically China
and India, but generally speaking all the emerging areas reported very substantial
progress. By contrast, in the more industrialized areas the recovery proceeded at a
moderate overall pace, with far greater performance differences, with North America, Japan
and Germany reporting far stronger upturns than the euro zone as a whole. A feature
common to the advanced nations was the weak situation in employment, where the
response to the rise in production and demand was very limited.
While the real economy improved, the financial sector continued to display a high level of
volatility, largely due to the emergence of potential crisis situations in the sovereign debt of
some countries in the euro zone. In part in response to these difficulties in public finances,
restrictive fiscal policies were introduced almost everywhere to correct the stimulus
measures adopted previously to combat the 2008-2009 recession. Monetary policies in the
most industrialized countries continued to take a permissive approach, with domestic price
trends staying easily under control despite widespread increases in prices for raw
materials, notably energy.
The instability of the financial situation was reflected on the foreign exchange market: the
euro lost almost 20% against the dollar in the first half of the year, recovering much of the
lost ground in the second half; meanwhile a situation of ample international liquidity
fostered a strong outflow of funds toward the faster growing emerging countries, exerting
upward pressure on a number of currencies in that area.
In the construction sector, the recessionary wave that hit the Group’s industrialized
countries eased only slightly in 2010 after the heavy slowdowns reported in 2009.
Specifically the business downturn continued for the fifth consecutive year in the USA,
where the residential sector – whose decline is close to 60% of the previous peak –
struggled to pick up in a situation of unabsorbed surplus supply on the market.
In the Group’s main euro zone countries the contraction in the construction sector
continued for the third consecutive year, affecting all segments. Moreover, in Spain and
Greece, the difficulties in the real estate sector combined with the general domestic
recessionary conditions kept performance in the construction industry at very modest
levels. More generally, although the fiscal stimulus measures – based in part on investment
in infrastructure – helped mitigate the severity of the recession in the construction industry
in 2009, in 2010 the budget policies of the mature area took a restrictive stance almost
everywhere, thus accentuating the weakness of market factors in construction demand.
Meanwhile, the picture remained very favorable in the Group’s emerging countries. A
strong macroeconomic trend and expansionary monetary and fiscal policy helped generate
important growth in construction, with significant recoveries also reported in countries like
Turkey and Thailand that had suffered a recent slowdown.
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