TITULO V - NORMAS LEGALES APLICABLES
ARTICULO 52 º LICENCIA POR TRASLADO PERMANENTE
13.1. Global economy faces increasing risks in 2012
The most recent forecasts by the International Monetary Fund (IMF) assume that the pace of growth for the global economy will slow significantly in 2012 compared to the two previous years to just 3.3%. This is primarily due to the negative impact of the financial crisis in Europe, which may lead this region’s economy into a moderate recession (-0.5%). Further development in Europe depends to a great extent on whether or not it is possible to sustainably master the euro and government debt crisis. These issues will also have a perceptible impact on the pace of growth in the world’s other economies. Growth in the USA is forecast at 1.8%, the total for all industrial nations (aggregate) is put at just 1.2%. After the economic slump caused by natural catastrophes in 2011, Japan can hope that its domestic product will increase again by 1.7%. The IMF is much more confident about emerging and developing nations, where economic output is again expected to increase by 5.4%, however this is significantly lower than the growth enjoyed in 2011 (6.2%). The economies in China (8.2%) and India (7.0%) are of key importance in this forecast. Experts are showing cautious optimism for the two other BRIC countries Russia (3.3%) and Brazil (3.0%).
In view of the unquantifiable impact of the financial crisis on the real economy, and the high level of insecurity regarding the ability to implement the necessary reform programs to rectify the global problem of sovereign debt, economic researchers are not able to rule out the risk of a massive dete- rioration in the global economy, through to a global recession. In order to avoid this, the necessary steps must be put in place in good time.
If it is possible to successfully tackle the problems mentioned in 2012, according to the IMF, expecta- tions for the following year, 2013, are significantly more confident. In this case, the global economy will expand by 3.9%, with the economies in industrial nations recovering only slowly with growth of 1.9%. The economic output in emerging and developing nations should increase by 5.9%, driven by strong dynamism in China.
13.2. Steel industry is cautiously optimistic in 2012
As around 90% of the SKW Metallurgie Group’s revenues are recorded with steel industry, its growth is significant for the company’s operating business. Assuming that emerging nations will continue to expand, albeit at a weaker pace, thus driving global economic growth, industry experts at the World Steel Association are cautiously optimistic regarding growth in steel demand in 2012. They are fore- casting global steel consumption to increase by 5.4% to 1,474 billion tons. Growth rates of 2.5% and 4.9% are being forecast for the European Union and NAFTA, two particularly relevant sales regions for SKW Metallurgie. Emerging nations will continue to be the driving force behind steel demand. Renewed dynamic growth of 6.6% is forecast for these countries. The increase in steel consumption in the BRIC countries is set to total 6.4%. After the economic consolidation at the end of 2011, demand for steel in Brazil, a key sales market for the SKW Metallurgie Group, is expected to revitalize. This
Experts cautiously optimistic for economic development
Expected further growth of steel production volume should lead to increased demand for products of the SKW Metallurgie Group
country can expect positive impetus as the men’s Soccer World Cup (in 2014) and the Summer Olym- pics, which will also be held in Brazil (in 2016), will result in an additional boost in demand. Growth in the other industries relevant for the SKW Metallurgie Group’s special products - the copper and foundry industries, the gas industry and the aviation sector - is also closely linked to general economic trends. This also applies to the producers of industrial starches (a pre-product for paper production), who are supplied by the SKW Metallurgie subsidiary Quab. If the forecasts for moderate global economic growth prove to be correct, this will also have a positive impact on demand in these industries.
The programs the experts had been hoping for to subdue the debt and financial crisis have been put in place, and the recovery in the global economy will have a positive effect on demand for the indus- tries that are relevant for the SKW Metallurgie Group. This applies to steel production in particular.
13.3. Key indicators for the SKW Metallurgie Group
The most important external indicator for demand for the SKW Metallurgie Group’s steel related products and thus for a large proportion of the Group’s business activities is the volume of global raw steel production, in particular for high and higher-value steels. Changes in the quantities of steel produce are reflected practically one to one in demand for products that the SKW Metallurgie Group develops and sells. The fact that emerging economies are less well equipped in terms of infrastruc- ture and long-term consumer goods compared to industrial nations, suggests that substantial growth in steel production can also be expected for these countries in the coming years.
A meaningful internal indicator for the performance of the SKW Metallurgie Group is the trend in the gross margin. However, the meaningfulness of this indicator falls in line with the percentage of mate- rial costs to total costs. In contrast, the Group does not have any order books in the traditional sense. A large number of customer contracts are concluded for the long term but in comparison, individual quantities and specifications are determined for the short term.
13.4. Forecast by the executive Board for the financial position
and results of operations of the SKW Metallurgie Group and
SKW Stahl-Metallurgie Holding AG in 2012 and 2013
The Executive Board believes that the expert opinions detailed above on the future growth of the overall economy and the steel industry are being the most probable scenario. This results in the following forecast for the SKW Metallurgie Group and the top level group company SKW Stahl-Metal- lurgie Holding AG for 2012 and 2013:
On the balance sheet date and also on the date this combined management report was prepared, the group was feeling the insecurity resulting from the sovereign debt crisis, in particular in some Mediterranean eurozone countries. During the remainder of 2012 and 2013, the Executive Board is still optimistic that the group companies’ sales and revenues will grow in line with the growth in the quantities of steel produced in the geographic markets that the group serves, and also via its new plants in Sweden and Russia. The new plant in Bhutan will mostly supply the group and will thus not generate any additional revenues with third parties.
Positive outlook by the Executive Board for the SKW Metallurgie Group and for SKW Stahl-Metallurgie Holding AG; increase in revenues and EBITDA expected
As a result of the anticipated above-average growth in emerging nations, the Executive Board believes that sales in these countries will make a significant contribution to consolidated earnings and, in particular, to increasing EBITDA.
In terms of the balance sheet, the Executive Board is not forecasting any significant increase in con- solidated debt in 2012 and 2013 as a result of the preliminary completion of the Group’s expansion. The Executive Board believes that growth in the Powder and Granules and Cored Wire segments will mostly be parallel, as both of these segments depend, to a major extent, on the volume of steel production.
In terms of products, the SKW Metallurgie Group will also focus on innovative, higher-margin prod- ucts that offer significant added value for customers in 2012 and 2013.
The Executive Board believes that the group’s top-level parent company, SKW Stahl-Metallurgie Holding AG will record net retained profits in 2012 and 2013 which will allow an attractive dividend to be paid. The future financial situation of the top-level parent company SKW Stahl-Metallurgie Holding AG is determined by income from the group transfer agreements and by dividends from sub- sidiaries to the group’s parent company SKW Stahl-Metallurgie Holding AG. As a result, the future financial situation of the group’s parent company SKW Stahl-Metallurgie Holding AG depends on the future earnings of its subsidiaries and second-tier subsidiaries, which, in turn, depend on the volume of production in the steel industry in the geographic markets they serve, as described above. Unterneukirchen, Germany March 14, 2012
SKW Stahl-Metallurgie Holding AG The Executive Board
Ines Kolmsee Oliver Schuster Reiner Bunnenberg Chairperson (CEO)