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METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 12. SUPPLEMENTARy ANd FORECAST REPORT 12. Supplementary and forecast report Supplementary report Events after the balance sheet date No events that are of material importance to an assessment of the earnings, financial and asset position of METRO AG and METRO GROUP occured between the balance sheet date (31 december 2010) and the auditor’s report (28 February 2011). Forecast report This forecast report considers relevant facts and events that were known at the time of preparation of the financial statements and that can have an impact on business developments at METRO GROUP. Economic parameters 2011 and 2012 Future economic situation At the end of 2010, the pace of the global recovery from the financial and economic crisis dropped off somewhat. Like the world Bank and most other economic research institutes, we expect growth rates to weaken in general in 2011 compared to the financial year 2010. while emerging markets will see only a slight loss of momentum and remain the global growth engines as a result of their strong domestic demand, the developed economies, in particular, will continue to feel the effects of the financial and economic crisis. The following factors will impact economic developments in the years 2011 and 2012: The growth witnessed in 2010 occurred on the back of the crisis-related collapse of economic output in 2009. The subsequent recovery process has slowed again of late. At the same time, the stimulus programmes of the past years have been replaced by austerity measures aimed at → p. 134 reducing public debt. These savings measures place a particular burden on private consumption, for example through increases in value-added tax in such countries as Greece, the UK, Romania and Spain. In addition, persistent global economic risks exist – from the ongoing consolidation of bank balance sheets to the effects of expansive monetary policies and overheating tendencies in the Chinese economy. however, we also expect the labour market recovery to continue on the back of moderate growth, providing a positive impulse for private consumption and the retail industry. As a result, we expect the gradual upward trend in the retail industry to continue in 2011, particularly given the fact that the retail industry is a late-cyclical sector. however, the rise in commodity prices, especially in food prices, is likely to lead to a continuation of the increase in consumer prices that started at the end of 2010 in 2011. The factors dampening the economic recovery should gradually dissipate in 2012. Like the “Kiel Institute for the world Economy” and other research institutes, we therefore project a return to stronger global growth rates in 2012. Germany Germany is likely to remain western Europe’s economic growth engine in 2011. All of Germany’s economic research institutes expect the German economy to grow by far more than 2 percent. Although this would represent a slowdown from the record growth rate of 3.6 percent notched in 2010, it would still amount to above-average growth. At the same time, the institutes expect the positive trend on the labour market to continue. despite additional burdens on the population, which result, amongst other things, from rising statutory health fund contributions and higher electricity costs, private consumption looks set to make a bigger contribution to overall economic growth. Most institutes now project a price-adjusted increase in private consumption of more than 1 percent, after 0.5 percent in the previous year. The retail industry will also develop relatively favourably. As in earlier economic cycles, however, it will profit only disproportionately from the overall recovery. All in all, the recovery in Germany is on a solid footing and is likely to continue beyond 2011. Given the high public debt burdens, however, future economic developments in particular in Europe present a certain risk.
METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 12. SUPPLEMENTARy ANd FORECAST REPORT Western Europe Growth is likely to remain subdued in many western European countries in 2011. Public deficits and austerity programmes will continue to serve as a brake on growth this year. Most experts expect varying levels of economic development: the debt problems will keep the Greek economy in recession in 2011, Spain and Portugal are likely to see very little growth. weak growth of about 1 percent is forecast for Italy. Aside from Germany, the Scandinavian countries of denmark and Sweden as well as Switzerland are likely to continue their positive development. In 2010, labour markets in most western European economies also trailed the recovery on the German labour market. The gradual improvement on labour markets during the second half of 2010, however, is likely to continue in 2011, buttressing the retail industry as well. Eastern Europe Recovery in Eastern Europe is likely to continue in 2011 at varying rates. Although growth is expected to remain relatively weak in Bulgaria, hungary and Romania, these countries will likely improve their performance compared to previous years with growth rates of about 2 percent in 2011. At about 4 percent, growth rates in Turkey, Russia and Poland, in turn, will probably be twice as high as in the other regional economies. According to our forecasts, average growth in Eastern Europe will be somewhat stronger than in 2010, and we project another increase for 2012 compared to 2011. while the regional economies will not return to the high growth rates of the pre-crisis years, just like Asia, Eastern Europe continues to boast strong economic potential. As a result, we expect the Eastern European economies to generate strong growth momentum over the medium term – thanks also to their continually high catch-up demand. Therefore, we also expect the retail industry to grow faster this year. Asia/Africa despite persistent risks, the Asian emerging markets will probably remain the world’s fastest-growing region in 2011 and 2012 – although their economic strength is likely to decline slightly. The growth momentum in the retail industry will also remain high. we project double-digit nominal growth for China, India, Pakistan and vietnam, but the situation in Japan is more difficult. Economic growth will weaken markedly there in 2011, negatively impacting the retail sector in the process. due to fundamental political changes, it is difficult to assess future developments in Egypt at the moment. → p. 135 Building on our forecast for economic and retail development, the following section provides an overview of the resulting implications for individual sectors as well as the METRO GROUP sales divisions. Future sector trends and development at METRO GROUP Metro Cash & Carry The development of the self-service wholesale sector will continue to be impacted by the economic recovery in 2011 and 2012, the pace and intensity of which varies from region to region. Accordingly, we expect the divergent trends within the cash & carry segment to continue. Market volume in Germany and western Europe will change only slightly in the next two years. Growth momentum is not expected to be produced by the hotel and restaurant trade, two of the main customer groups of the cash & carry segment. As a result of expected price increases, we anticipate growth in food items to lag slightly behind the overall inflation rate, whereas retail sales in nonfood items will remain stable. The Eastern European cash & carry segment is expected to continue to grow in the next two years, but at starkly varying speeds. while sales in the cash & carry segment will increase in most countries, we expect negative growth rates in Greece and hungary for at least the duration of 2011 as a result of the tense economic situation. The overall positive revenue trend in Eastern Europe will be fuelled by a strong rise in demand for both food and nonfood items. Price increases, in particular in food items, will also lead to an increase in revenue. we expect the strong growth trend of the cash & carry segment in Asia to continue unchanged for the next two years. The growth dynamic in the cash & carry segment will remain higher than in the modern food retail business. Some countries of the region, for example India, continue to protect the traditional retail sector through restrictions on foreign companies’ entry into their attractive retail markets. This has two sets of implications: on the one hand, the customer base of the cash & carry segment, the traditional retailers, remains intact. On the other, cash & carry stores there are faced with little competition from other modern formats in the food retail business.
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