Report on Economic Position
Macroeconomic and sector-specific environment
According to the most recently available figures from the International Monetary Fund (IMF), the global economy faced rising growth expectations in 2018. Forecast growth in 2019 is expected to be slightly below the level of the two previous years. Although the global economy thus continues to expand, growth in the third quarter of 2018 fell short of expectations in a number of economies. Risks to global growth include, in particular, a further rise in trade barriers and the outflow of capital from emerging economies.
Expressed in figures, according to the latest IMF forecasts global gross domestic product (GDP) rose by 3.7% in 2018, equivalent to a slight decline in the growth rate in comparison with 2017 (3.8%). Strong regional differences and differences between industrial nations and emerging economies could be seen. Industrial nations registered a slight weakening of growth to 2.3% (2017: 2.4%). At 4.6% (2017: 4.7%), growth in the emerging economies and developing countries also declined slightly. The GDP of the United States, the world’s largest economy, grew by 2.9% (2017: 2.2%). By contrast, the eurozone recorded a weakening of GDP growth to 1.8% (2017: 2.4%). The emerging economies of Asia registered stable growth of 6.5% (2017: 6.5%). As in 2017, India at 7.3% (2017: 6.7%) and China at 6.6% (2017: 6.9%) were the strongest growth drivers. In the industrialized countries of Asia, the GDP of Japan grew by 0.9% (2017: 1.7%) and that of Taiwan by 2.7% (2017: 2.9%). Korea registered growth of 2.8% (2017: 3.1%).
Organic sales growth of the Group was above the IMF’s global growth expectations in 2018 and came to 6.1%. It was supported by all regions. Asia-Pacific accounted for the largest share of growth across the Group at around 42%, followed by Europe at 24.6%, North America at 20.2%, Latin America at 11.5% and the Middle East and Africa at 1.8%. Growth was driven primarily by the Healthcare and Life Science business sectors, while Performance Materials came in slightly above the 2017 figure. Growth in the Asia-Pacific region was supported by all business sectors. Healthcare and Life Science made a positive contribution in Europe as well as in the Latin America region. Growth in North America was principally the result of operations in the Life Science business sector.25 KB EXCEL
|Global pharmaceutical market||4.8%||2.7%|
|Market for multiple sclerosis therapies2||2.6%||7.4%|
|Market for type 2 diabetes therapies2||9.7%||9.2%|
|Market for fertility treatment2||9.2%||7.4%|
|Market for the treatment of colorectal cancer3||5.1%||– 0.7%|
|Market for laboratory products||3.6%||3.4%|
|Share of biopharmaceuticals in the global pharmaceutical market2||27.9 %||25.9%|
|Growth of wafer area for semiconductor chips||7.6%||10.0%|
|Growth of LC display surface area4||8.6%||6.0%|
|Global sales of cosmetics and care products||3.3%||3.5%|
|Global automobile sales volumes||0.0%||2.2%|
In the latest study published in October 2018 by the pharmaceutical market research firm IQVIA entitled “Market Prognosis 2018 – 2022”, the growth of the global pharmaceutical market for 2018 is quantified at 4.8%. By comparison, in 2017, sales growth was still 2.7%. As was already the case in 2017, the EMEA and Latin America regions were the main contributors to growth in 2018. North America also fueled growth. Growth in the United States accelerated substantially to 5.2% (2017: 1.4%). Latin America continued to see strong growth of 8.3% (2017: 8.0%). The EMEA region generated growth of 5.0% (2017: 3.6%). The Asia-Pacific region recorded a slight increase in growth to 3.2% (2017: 2.8%).
Not only the growth of the pharmaceutical sector as a whole, but also in particular the development of the biopharmaceutical market is relevant for our business. According to IQVIA, the market volume of biological pharmaceuticals was approximately € 249 billion in 2018. In recent years, the share of the global pharmaceutical market accounted for by these products has grown continuously and already amounted to 27.9% in 2018 (2017: 25.9%). Globally, the largest share, or 37.8%, was attributable to the U.S. market.
The developments in the therapeutic areas of relevance to the Group generally reflect robust growth, albeit with different trends. The market for the therapeutic area type 2 diabetes excluding the United States showed a positive trend with a growth rate of 9.7% (2017: 9.2%) and those for fertility and the treatment of colorectal cancer also saw positive growth rates of 9.2% (2017: 7.4%) and 5.1% (2017: – 0.7%), respectively, whereas the market for multiple sclerosis patients registered a weakening of growth to 2.6% (2017: 7.4%).
Our Life Science business sector is a leading supplier of products and services for both research and applied laboratory applications, as well as for formulating, purifying, manufacturing, and quality-assuring drug therapies of chemical and biological origin.
According to the market research firm Frost & Sullivan, the laboratory product market relevant to Research Solutions and Applied Solutions achieved growth of 3.6% in 2018 (2017: 3.4%). Strong growth continued over the course of the year and was driven primarily by customers in the biopharmaceutical industry, specifically emerging biotech companies. The European market grew by 2.4% compared with the previous year (2017: 3.5%). The weakening of growth is attributable to continuing uncertainties, for example resulting from Brexit. The market in the United States grew by 4.2% (2017: 3.1%), driven by increased National Institutes of Health (NIH) funding and the tax reform. The emerging countries recorded higher growth rates, particularly in China and India. The Chinese market grew by 7.0% (2017: 7.8%). Although Chinese GDP growth is slowing down and the tariff and trade relationships have led to uncertainties in procurement, China remains interested in financing scientific tools and in product investments in the laboratory area, which are considered key priorities of the 13th Five-Year Plan. India generated growth of 8.2% (2017: 8.0%) with laboratory products and is focusing more strongly on supporting academic and government research.
The demand for Process Solutions products depends heavily on the sales of biopharmaceutical companies with biologics as well as on the productivity of their research & development activities.
According to IQVIA, the market volume of biotechnological pharmaceuticals grew in 2018 to € 249 billion (equivalent to 27.9% of the global pharmaceutical market). Around 7,800 biotechnological drug candidates were in preclinical phase 2 of clinical development. In 2018, monoclonal antibodies accounted for around 25% of these drug candidates (2017: 23%). Biosimilars are a small, but fast-growing part of the pharmaceutical market. For 2018, annual sales of biosimilars were estimated at US$ 5.95 billion; this figure is expected to increase to US$ 23.63 billion by 2023.
The semiconductor industry is the most important market for business with material for integrated circuits (IC Materials). The growth rates of the wafer area for semiconductor chips is independent of cyclical prices, for example for memory, and is a good indicator of demand for semiconductor materials. According to the global industry association SEMI, the area of delivered wafers rose by just under 8%, in 2018, mainly thanks to consistently strong demand from consumers. Sales of semiconductor manufacturers, which have grown even more sharply, are affected by the price trend of DRAM and NAND memory chips.
With its Liquid Crystals business, the Group is the leading producer of liquid crystal mixtures for the display industry. The growth rates of display surfaces totaled on average around 7% in 2017 and 2018, according to surveys by market researchers at IHS DisplaySearch. This growth was mainly attributable to increasing average display size amid slightly declining sales volumes. Liquid crystals will continue to play a key role in the display industry in future. OLED technology, for which the Group also ranks among the leading material suppliers, is gaining importance in the high-quality display sector.
The markets for automotive coatings and cosmetics are crucial to our Pigments business. As reported by IHS, global automobile sales in 2018 remained at the 2017 level. Only a few emerging economies recorded growth while Europe, North America and China showed a slightly negative trend after high 2017 figures. In the second half of 2018, in particular, economic relationships between the United States and China together with political uncertainties in Europe contributed to a weakening of demand. According to Statista, global sales of cosmetics and care products rose by approximately 3%.