According to a forecast by the International Monetary Fund, global GDP will continue to grow in 2011, although momentum will slow slightly. The regional diff erences in growth rates will persist; much faster growth is again predicted for Asia and Latin America than for the economies in North America and Europe.
Assuming this background, we are expecting the following developments in local currency, i.e. excluding exchange rate eff ects, for the Group and its segments in 2011 and 2012:
The company plans to grow all relevant earnings parameters. With effi ciency further improving, we are planning to keep the rise in operating expenses moderate so that the increase in operating EBITDA should be higher than the growth of operating gross profi t, which is based on higher volumes.
In the Europe segment, we expect operating gross profi t to continue to grow, largely as a result of an increase in volumes. Together with the benefi ts gained from exploiting the potential to cut operating expenses, this should lead to a rise in operating EBITDA. The growth rates in the Europe segment are expected to be slightly below the Group average owing to lower economic growth.
As far as North America is concerned, we believe that volumes will increase signifi cantly although we may not manage to fully translate this increase into higher operating gross profi t. However, with operating expenses only rising moderately, we expect to translate higher operating gross profi t into even higher operating EBITDA. After the Latin America segment was hit in 2010 by the unfavourable political and economic developments in Venezuela, we now expect no further deterioration of the general economic environment. Therefore, we are confi dent that we can harness the forecast momentum generated by industrial output to achieve an above- average increase in operating gross profi t and operating EBITDA compared with the Group as a whole. The Asia Pacifi c segment was dominated by the acquisition of the EAC Group in July 2010. In 2011, we are expect- ing operating gross profi t and operating EBITDA to jump as a result of the EAC Group being fully consolidated for the entire year and of the organic growth of the other Brenntag companies in this segment. Given the dynamic economic momentum in this region, we should also see above-average growth of operating gross profi t and operating EBITDA in 2012.
Given the likely increase in business volume and assuming moderate price developments, we are expecting working capital to rise. We believe that our continual focus on the management of customer and supplier rela- tionships and our eff orts to optimize warehouse logistics in all regions will lead to an increase in working capi- tal turnover. By contrast, for the Group as a whole, we are expecting a slight fall in the turnover rate as a result of the acquisition of the EAC Group, which, because of its business model with a high proportion of specialty chemicals, has a lower turnover rate than the rest of the Group.
As we also have to make moderate adjustments to property, plant and equipment capacities, investments in property, plant and equipment are likely to be slightly above the level of depreciation in the years to come. Nevertheless, we should not see any signifi cant increase over the 2010 level.
Overall, we are optimistic that we can further increase free cash fl ow and continually improve the Group’s liquidity position.
We intend to continue our successful strategy of taking over suppliers’ distribution activities and extending our geographical presence through acquisitions. The growth markets of Asia and Latin America are particularly interesting to us. We expect the concentration process in the chemical distribution market seen in recent years to continue. Large distributors such as Brenntag with global coverage and a comprehensive portfolio of products and services off er increasing advantages for suppliers and customers alike.
Therefore, in the years to come we will also continue to develop and adapt our product portfolio to suit the demands of the regional markets. One focus will be on the attractive market segments of water treatment, personal care, pharmaceuticals, food, oil & gas as well as in the fi eld of adhesives, sealants, coatings, paints and elastomers. We believe that we can also grow results by stepping up distribution of fuel additives to reduce emissions in Europe and North America. We are also aiming to expand business with regional and pan-regional key accounts, who benefi t particularly from our broad geographical presence and our comprehensive product portfolio. To capitalise on the ongoing trend towards outsourcing, we will continue to actively position ourselves as an attractive partner for producers of chemicals.
Increasing cost effi ciency in the Group by optimizing our warehouse and transport logistics as well as steadily improving procurement and sales processes are also points of constant focus. We remain committed to the principles of responsible care and responsible distribution and strive to further improve the quality of work and the safety precautions at our sites.
Overall, we believe that the market for chemical distribution will grow, also in the long-term. On the one hand, momentum from the growth of industrial output will have a positive eff ect and, on the other hand, the trend towards chemical producers outsourcing their distribution activities to distributors will continue. We believe that the emerging economies in Latin America, Asia and Eastern Europe will enjoy more dynamic growth than the mature markets in Western Europe and North America. Our broad market presence, both with regard to customer industries and regions, will enable us to participate to a reasonable extent in this trend in the next few years. By focusing on attractive growth segments, we may even be able to reap an above-average benefi t from this trend.
The future economic development of the Group’s lead company, Brenntag AG, basically depends on the develop- ment of its subsidiaries which operate throughout the world. Here, it must be remembered that the economic development of the subsidiaries is not refl ected immediately in the fi nancial statements of Brenntag AG but indirectly and possibly with a time lag through income from investments. In addition to the profi ts or losses of domestic subsidiaries transferred under profi t-and-loss transfer agreements, dividends of foreign subsidiaries may also be received. Furthermore, the intra-Group fi nancing activities also infl uence the results of Brenntag AG.