Outlook
Overall economic environment
Global GDP is expected to weaken further in 2019. Accordingly, global economic output will grow by only 3.5 percent in 2019. This is 0.2 percentage points less than in 2018 (+ 3.7 percent). Experts see this pessimistic assessment founded on continuing trade and customs conflicts, weak growth rates in many countries, especially in the second half of 2018, as well as the effects of an imminent no-deal Brexit. Global growth would thus have peaked last year for the time being.
Results for Germany, the largest sales market of the Würth Group, are likely to be similarly pessimistic: For 2019, the IMF only expects gross domestic product to grow by 1.3 percent (2018: + 1.4 percent). Experts for the EU Commission forecast an even gloomier future with 1.1 percent, while the Federal Government predicts only 1.0 percent growth. The OECD’s latest forecasts paint an even gloomier picture of only 0.7 percent. The discussion about diesel driving bans, production difficulties in the automotive industry, lower external demand, but also weaker private consumption, are blamed for these trends. According to experts, this would be compounded by the uncertainty surrounding Britain’s withdrawal from the EU and the budget imbalance in Italy, which would ultimately endanger the entire economy in Europe. Moreover, the fact that a weakening economy will reduce tax revenues in Germany must not be underestimated. The construction industry, on the other hand, is considered to be the growth driver and is also considered to be a pillar of the economy in 2019 and one of the most important sales guarantors for the Würth Group.
The sales focus of the Würth Group lies in the eurozone. As early as 2018, GDP growth in the 19 countries forming the Monetary Union was significantly slower (2018: + 1.8 percent). For 2019, experts are forecasting a further slowdown of 0.5 percentage points to only 1.3 percent growth. The Spanish economy continues to lose momentum, which is why growth of only 2.2 percent is forecast for 2019 (2018: + 2.5 percent). Early elections in April 2019 could slow economic growth again and plunge the country into recession. Europe’s fourth-largest economy, Italy, is also in recession. As a result, experts have again revised the growth forecast for 2019 significantly downwards to an increase of only 0.2 percent (2018: + 0.8 percent). The picture looks a little better in France. In France, the economy held its ground at the beginning of the year despite the “yellow vest protests”. The French government currently expects economic growth to increase by 0.2 percentage points to 1.7 percent in 2019 (2018: + 1.5 percent).
Forecasts for the UK remain weak. Growth of only 1.2 percent is expected in 2019 (2018: + 1.4 percent). The British economy would thus be heading for the lowest GDP gain since the financial crisis ten years ago.
The US economy grew by 2.9 percent last year, primarily as a result of President Donald Trump’s tax reform. For 2019, however, a slowdown of 0.4 percentage points, to a total of 2.5 percent, is expected.
The emerging markets of China and India, which are very important to the Würth Group, will remain global growth drivers. However, China’s growth stalled in 2018: At 6.6 percent, China reported its lowest growth for almost three decades. For 2019, experts expect economic growth to weaken further to a gain of 6.2 percent. One of the reasons for this is the ongoing trade conflict with the USA. Consumption and investments were already declining toward the end of 2018.
After a mixed fiscal year in 2018, India is looking to the future with renewed optimism. Exports in particular are expected to grow strongly in 2019. Accordingly, gross domestic product is expected to increase by 7.6 percent. This means that India will remain the fastest growing economy and could replace the UK as the fifth-largest economy.
Experts from the Federal Ministry of Finance predict that Latin America’s GDP will rise again in 2019. Forecasts call for growth of 2.2 percent. Since there will be no major elections in the individual countries in 2019, political stability can be expected for the most part. However, falling commodity prices could become a risk. Unrest in Venezuela, the country with the largest oil reserves, could also cloud the positive outlook.
For Russia, lower GDP growth of only 1.2 to 1.7 percent is expected in 2019 (2018: + 2.3 percent). One reason for this is the deterioration in the medium-term outlook for oil prices. Growth is expected to remain weak in the coming years as there are no signs that market economy reforms will be implemented.
Development of the Würth Group
- Increase in sales and operating result
- Expansion of e-business activities
- New transshipment depot for sustainable growth
With sales of EUR 13.6 billion and an operating result of EUR 870 million, the Würth Group set new records for both key figures again in 2018. The increase in sales comes to 7.1 percent, while the operating result grew by 11.5 percent. This is proof that our customers value the quality of our products and the wide range of services we offer, and that Würth as a supplier is firmly anchored in their business processes. We also increased the accessibility factor, which is important for our customers, with the first Würth24 shop in 2018: Here, customers can shop around the clock 6 days a week—even outside regular opening hours—and are thus even more flexible and independent in covering their immediate needs. Access is via the Würth App using a QR code. Highly-innovative technology electronically records merchandise and orders. In this way, we are making opportunities offered by digitalization available to our customers via advanced innovations in products and services and bringing traditional models into the future. Whether via the online shop, our extensive network of branch offices or sales representatives: Würth’s customers know that Würth is available everywhere, and that Würth delivers. Because our trade customers’ working radius has changed as well. Today, the professional craftsman is often in action beyond their home region. Reliable service and quality products available locally also represent deciding factors for craftspeople when satisfying their own customers.
The corporate culture deeply rooted in the Group’s tradition and the understanding of values in partnership with our customers, along with the cooperation of our employees, form the basis of all our actions. This was underscored by the fact that Focus-Business once again named us a “TOP national employer 2019”. Predictability, reliability, respect and esteem in dealing with one another are no less important at Würth, even in the age of Industry 4.0, and form the core of all relationships. This responsibility is also reflected in our involvement in society, to which we feel committed as a prospering business. Currently, this is reflected most visibly in the expansion of Carmen Würth Forum. The culture and convention center will be supplemented by a flexible conference area and a museum, thus offering all the prerequisites for successful top-notch conventions and conference events. Carmen Würth Forum is already firmly established in the region: Around 100 events with over 72,000 visitors were held in 2018. The investment amount for the expansion amounts to around EUR 39 million. The opening is planned for April 2020.
E-business activities
The expansion of e-business activities continues to be a strategic focus for the Würth Group. The international implementation of central online shop, app and e-procurement systems provides the foundation for the rapid multiplication of digital sales and service initiatives. More than 50 companies now use a central online shop, which was once again awarded a top prize for best B2B shop in the first quarter of 2019. In addition, numerous companies are offering individual solutions tailored to the respective customer target group.
Different digital strategies were developed based on this system landscape for the variety of business units across the Würth Group. These include differentiated recruiting and budget plans, close cooperation with digital marketing agencies, long-term partnerships with start-ups and established software manufacturers as well as customer seminars or e-business days for different customer target groups.
Within the Würth Line, the topic of e-procurement is gaining in importance in order to offer customers integrated digital solutions. Specialists have been deployed in numerous countries who are analyzing the ordering and warehouse management processes for defined target customers in order to reduce the process costs of our customers in C-part management by means of e-procurement implementations.
In selected regions such as China and parts of South and East Asia, cooperation with marketplaces and platforms is also being promoted in order to better implement the multi-channel strategy.
Big Data is one approach that complements these activities in a focused manner. In addition to a specialized unit in Berlin, data scientists are being set up in various companies in order to develop specific sales activities, new service modules and approaches for process optimization based on the purchasing and information behavior of our customers.
Expansion of logistics
Adolf Würth GmbH & Co KG is building a new transshipment depot close to the company’s headquarters next to the A6 highway, which combines various shipping points and external warehouses. The groundbreaking ceremony took place in June 2018. The objective of the logistics strategy is to avoid delivery splits and to bundle the items per order so that the customer receives exactly one package or consignment, thus reducing the number of packages and amount of filling material. A separate main transshipment base (HUB)—collection point and hub—creates the prerequisites for pooling together flows of goods for redistribution within Germany and throughout Europe. Around 20 percent of all orders for the new warehouse go directly to other European countries.
Thanks to the building concept, the warehouse is multifunctional, with a floor area of around 50,000 m² and 62 docking stations for loading and unloading trucks. The total investment amounts to some EUR 73 million. Completion is planned for summer 2020.
Overall statement on the future development of the Würth Group
Profitable growth is the driver of all activities within the Würth Group and thus a strategic goal in itself. A specific package of measures is in place for each business area to achieve this goal. These measures have one thing in common across all divisions: the expansion of our sales team in order to be closer to our customers and to identify and meet their needs even better and faster. In the Würth Line, the largest business division with 56 percent of sales, we are focusing on the further expansion of our multi-channel approach, consisting of sales representatives, pick-up shops and e-business. This multi-channel approach is being used more and more abroad, where our market shares are even lower.
The Würth Group expects to achieve sales growth in the mid single-digit range and corresponding growth in its operating result in the 2019 fiscal year. We expect proportionate development in gross profit to remain constant. We predict a slightly positive development in collection days, stock turnover and staff turnover. All of these statements are subject to the proviso that innovation, employment and global economic growth continue to show positive development.