E_mg_GB_03_vorne-29_3_04

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72 solvadis holds up well in a difficult market environment solvadis’ earnings for 2003 fell year on year. However, not all strategic business units contributed equally to this trend. Whereas the Specialty Chemicals and Distribution business units (base and industrial chemicals) held up well despite the difficult market conditions, earnings in the Natural Products strategic business unit were down by more than 50 percent. This was attributable to lower gross margins, the weak U.S. dollar, and higher costs in connection with the closure of its naturalrubber business in North America. On the whole, the Specialty Chemicals business performed in line with expectations. With economic activity in the relevant markets persistently weak – especially in the French automotive industry – earnings were more or less consistent with the previous year’s result. Business in Spain and Portugal was encouraging. The Distribution business unit performed soundly. This was mainly due to its activities in base chemicals. In addition, part of the methanol business in North America was sold. Industrial chemicals repeated their performance of the previous year. Earnings were depressed by restructuring costs. In order to continue the streamlining of its administrative functions, which had begun in the previous quarters, solvadis implemented a plan to optimize its administrative functions in Germany in the fourth quarter of 2003. solvadis’ earnings also include the anticipated loss on the sale of Safic-Alcan in January 2004. OUTLOOK Since mid-2003, indicators of market sentiment have all been pointing to a global economic recovery. In their fall report, Germany’s leading economic research institutes forecast that global GDP would grow by 3.1 percent in 2004. However, the strength of this recovery will vary from region to region. Various adverse factors such as rising oil prices, the ongoing instability of the geopolitical situation, the continuing appreciation of the euro against the U.S. dollar, and the high current account deficit in the U.S. could still jeopardize any global economic expansion. Dynamic U.S. economy The driving force behind the global economic recovery in 2004 will once again be the U.S. Having bounced back in the second half of 2003, the world’s largest economy is likely to continue on its path of expansion. The Kiel Institute for World Economics (IfW) is forecasting U.S. GDP growth of 4.1 percent for 2004.
MANAGEMENT SHARE STRATEGY SPECIAL SECTION MANAGEMENT REPORT FINANCIAL STATEMENTS FURTHER INFORMATION Economic Environment • Situation of the Company • Organization and Structure • Risk Report • Employees • Performance of the Subgroups • Outlook The Asian economies will also continue to grow. China’s economy will continue its rapid pace of expansion in 2004. However, the country’s currency problems still need to be resolved. Experts also expect the southeast Asian emerging markets to achieve stellar growth. Germany’s economic research institutes believe that Japan’s modest economic recovery will continue. The German Institute for Economic Research (DIW) is forecasting Japanese GDP growth of 1.5 percent for 2004. The improved political framework in the Latin American emerging markets has given their economies a new lease on life. Euro-zone economy recovering only slowly The performance of the euro-zone economy will be somewhat less impressive. The European Central Bank is forecasting that GDP in the euro-zone will grow by around 1.7 percent in 2004 and roughly two percent in 2005. By contrast, the central and east European countries joining the EU on May 1 this year should have good growth prospects. According to Germany’s leading economic research institutes, GDP in these countries should grow by 3.7 percent in 2004. Relatively lackluster growth is predicted for Germany. While the German government expects the country’s GDP to grow by up to two percent, the forecast of the German Institute for Economic Research is for growth of only 1.4 percent. A major reason for this sluggish performance is Germany’s chronically weak domestic demand. Nonetheless, exports are expected to grow in 2004. Slightly improved prospects for mg’s major markets According to trade associations, the growth prospects for mg’s key markets have marginally improved since last year. After a disappointing year in 2003, the German Engineering Federation (VDMA) expects to see output grow by two percent in 2004. The substantial increase in the volume of new orders received last autumn has fueled hopes that demand for capital goods will start to grow in Germany as well. Germany’s Chemical Industry Federation (VCI) is forecasting a modest recovery. After output in 2003 was only slightly up on the previous year, the federation expects to see output and sales in the German chemical industry rise by 1.5 percent and producer prices to fall slightly in 2004. According to its estimates, the fine and specialty chemicals sector will grow by around 2.5 percent and the pharmaceutical industry by roughly two percent. Experts believe that the relatively non-cyclical food industry, which is one of GEA’s most important markets, will continue to perform well. Demand for high-quality processed food in particular will grow. The automotive industry is cautiously optimistic about 2004. Experts see continued strong demand from Asia and eastern Europe. After a disappointing year in 2003, U.S. output is likely to increase marginally in 2004. The German Association of the Automotive Industry (VDA) is forecasting an increase of roughly three percent in new vehicle registrations in Germany. The automotive industry is one of Dynamit Nobel’s key markets. The weakness of the U.S. dollar against the euro, which intensified throughout 2003 and continued at the beginning of 2004, makes accurate forecasting difficult. Some trade associations, including Germany’s Chemical Industry Federation, have already indicated that they might have to revise downwards their forecasts for 2004 if the U.S. dollar continues to slide. 73
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Key Figures for the mg Group RESULT
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