Sennheiser 2011 Annual Report Download - page 27

CONSOLIDATED MANAGEMENT REPORT 2011
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CONSOLIDATED MANAGEMENT REPORT 2011
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CONSOLIDATED MANAGEMENT REPORT 2011
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PRELIMINARY REMARKS
As a parent company, Sennheiser electronic GmbH & Co. KG is obliged to draw up consolidated financial
statements.
The company’s production sites are located in Wennebostel (Germany), Tullamore (Ireland) and Albuquerque
(New Mexico, USA). While Wennebostel chiefly manufactures wireless and wired microphones and microphone
capsules, monitoring systems and headsets, the plant in Albuquerque concentrates on wireless microphones
and monitoring systems. The Tullamore facility manufactures headsets and headset transducers. The company
has a branch office in Singapore that manages the functions of product management, marketing, purchasing
and part of product development for the consumer electronics area.
Besides the parent company Sennheiser electronic GmbH & Co. KG, the Sennheiser Group includes six subsidiaries
within Germany and 18 subsidiaries abroad, as well as the joint venture Sennheiser Communications A/S, based
in Copenhagen, Denmark.
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ECONOMIC DEVELOPMENTS DURING THE 2011 FINANCIAL YEAR
Overall Business Developments and Development of the Industry
2011 GLOBAL ECONOMY
Global economic growth slowed considerably in 2011. Recovery has been muted by structural weaknesses,
especially in terms of debt and high unemployment prevalent in many industrialized nations, as well as natural
disasters and political crises. The Japanese economy has now recovered following the slump in production in
the second quarter, while the downfall of regimes in North Africa only slightly impacted the global economy.
Overall, the world remains divided into the fast-growing emerging markets and the sluggish economies of the
Western industrialized countries. In global terms, price inflation peaked in 2011 although significant inflation
risks remain in the fast-growing emerging markets.
Central banks worldwide are using declining price inflation and the dampened economic outlook to loosen the
fiscal reins in the second half of the year. The fiscal policy pursued by the US Federal Reserve remained expansive,
which likely weakened the US dollar, although it did profit from its status as a global and reserve currency despite
a downgrading of US government bonds by a leading ratings agency. The debt crisis once again put pressure
on the euro in the second half of the year. Currency values in many countries, especially in Eastern Europe, which
again added fuel to the debate regarding a currency war with protectionist government measures, fell in
response to the flagging global economy and concerns surrounding the public finances of industrialized coun-
tries, the economies of which are marked by weaker growth.
The global economy will again weaken in 2012, although the extent of the downturn is associated with consider-
able risks. The slump in consumer demand in most industrialized countries, in combination with fiscal austerity
programs and a lack of confidence in the decisions being made by those in power, makes the economic uncer-
tainty expected for 2012 appear extraordinarily high. According to calculations by IHS Global Insight, the global
economy is likely to grow by 2.7% in 2012, down from that seen in 2011 (3.0%). Had the Japanese economy not
recovered following the tsunami, thereby giving growth a boost, global growth in 2012 would have been even
lower.
The risk of a worldwide recession has increased slightly but remains moderate. This is based on the assumption
that the high level of growth experienced in China does not come to a sudden and abrupt end and that the crisis
in the Eurozone does not then bring about the collapse of the European Economic Community. While US economic
growth will remain relatively weak, Europe, and the Eurozone in particular, will find it very difficult to avoid
sliding into a mild recession. The debt crisis will continue to plague the financial markets in 2012, with the risk
of Greece exiting the EEC rising considerably. However, the collapse of the entire Eurozone remains unlikely.
THE EUROPEAN UNION
The economic recovery from the financial market crisis observed in Europe since mid-2009 peaked at the begin-
ning of 2011 but weakened gradually over the course of the year. Gross domestic product in the European Union,
and particularly in the Eurozone, in all likelihood declined in the closing quarter. This development in 2011 is due
in part to the above-mentioned economic slowdowns in the USA as well as in key emerging markets, especially
China and Brazil. Most European countries also changed from a course of expansive fiscal policies in 2009/10
– resulting from various aid programs and the acceptance of recession-triggered tax revenue shortfalls – to
ones of consolidation in order to get a handle on extensive budget deficits. The main cause of all this, however,
is the deepening Eurozone debt crisis.
Nevertheless, it should be remembered that the European economy was in the grips of a mild recession at the
turn of the year. This is due, on the one hand, to increased efforts by most European countries to cut budget
deficits and introduce structural reforms in a bid to improve competitiveness. On the other hand however, there
is a relatively high level of distrust among banks, many of which are being forced to strengthen their equity
bases by mid-2012 in response to EU banking supervisory authorities’ requirements. This will at the very least
hamper lending in Europe in 2012.
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