Outlook and opportunities
Based on its projections for world trade, Jungheinrich expects to see a general stagnation of the economy in fiscal 2009. Whereas western industrial nations are exposed to a recession caused by the world financial and economic crisis nearly across the board, emerging regions such as Asia, with China and India leading the way, are likely to display a significant drop in momentum, recording only moderate economic growth. It is impossible to quantify the effects the major economic aid packages launched the world over will have on the world economy’s future development or the direct or indirect impact this may have on the material handling equipment sector.
Estimated economic growth (GDP 1) in %
| Region | 2009 |
|---|---|
| World | 0.5 |
| USA | – 2.5 |
| China | 6.5 |
| Eurozone | – 2.5 to – 3.0 |
| Germany | – 3.0 to – 4.0 |
| 1) Gross domestic product. | Source: Commerzbank. |
In view of this economic scenario, our sector’s economic prospects for 2009 remain gloomy. Irrespective of the substantial uncertainty in assessing the market, the world market for material handling equipment can be expected to shrink to far less than 700 thousand forklift trucks. The unit decline will prevail across all the world’s sales markets, albeit to varying degrees. This market contraction will curtail Jungheinrich’s sales potential accordingly. Nevertheless, the company is convinced that it is well equipped to prevail in a difficult market environment. Jungheinrich set the stage for solid financing early on in 2008, initiated measures to adjust production to the lower level of demand, and stepped up its inventory and cost management activities. Moreover, the continued rise in the Jungheinrich trucks’ penetration of the pan-European market will have a positive impact on the after-sales services business, which has less cyclical exposure, and ensure that this business displays a relatively stable sales trend.
In 2009, the development of business will be determined by a steeper decline in demand in new truck business and manufacturing capacity utilization in the plants. On completion of the new manufacturing site in Landsberg near Halle (Saxony-Anhalt), full production capacity will be available across all lines towards the end of the year. In light of the market’s weak constitution, construction of the new production site for warehousing and system equipment in Degernpoint near Moosburg (Bavaria) will be postponed until the economy picks up again. Expansion of the worldwide direct sales and service network will continue regardless of the sector‘s adverse environment, but it will be adapted to regional needs with good measure. The next step towards expanding the scope of our mail-order business is about to be taken. In sum, capital expenditures will be markedly lower than the previous year’s level.
The Jungheinrich Group will maintain its high level of development activity and provide proof of its potential with respect to key technologies in 2009. This applies especially to drive technology, an area in which energy efficiency combined with enhanced performance takes centre stage. Once implemented, environmentally friendly drive concepts will make a valuable contribution to reducing CO2 emissions. Moreover, the permanent renewal and expansion of the broad-based product range remains a major point of focus of Jungheinrich’s development work.
In 2009, the earnings trend will be mainly determined by the worldwide decline in demand for material handling equipment and the substantial reduction of plant productivity resulting from it. The extent of the negative impact on new truck business will largely depend on the duration and severity of the recession on relevant markets. The continued decrease of the temporary workforce and work time account balances as well as the introduction of short-time work will provide for a certain degree of relief. Crowding-out and price-on-price competition will persist in view of the market‘s weak constitution. In contracts, the relief in raw material prices is likely to persist and have a positive effect in the second half of the year. In light of the difficult economic setting, Jungheinrich expects the overall business and earnings trend to be unfavourable in fiscal 2009.
Business volume can likely be expected to expand moderately in 2010. The prerequisite for this is that the global economic and sector-specific conditions stabilize and lead to economic recovery during the second half of 2009, also taking account of the substantial stability and economic programs initiated in many industrialized nations. This would contribute to improving the Jungheinrich Group’s earnings trend. The material handling equipment sector will continue to be marked by fierce price-on-price competition. Should the world economy recover sooner than anticipated, the Jungheinrich Group would be able to benefit from the additional available manufacturing capacity and the resultant progress in productivity.
Unforeseen developments may cause the actual business trend to deviate from expectations, which are based on assumptions and estimates made by Jungheinrich company management. Factors that can lead to such deviations include changes in the economic and business environment, exchange and interest rate fluctuations, and the introduction of competing products.