Annual Report 2023

Annual Report 2023

Report on Expected Developments

Expected macroeconomic developments

The escalation in the Middle East has created an additional uncertainty factor for the global economy. Provided the conflict does not escalate and the oil price does not rise significantly, the impact on inflation and growth is expected to remain limited. However, the long-term effects of monetary and fiscal policy will continue to shape the economy and the capital markets in 2024. Although most of the major central banks have probably already completed their interest rate hikes, the first interest rate cuts are not likely to take place until the second half of 2024. The high level of interest rates is helping to reduce the very high inflation in almost all regions of the world in the medium term. The loss of purchasing power caused by inflation will increasingly be offset by wage increases and should help to stimulate consumption. Overall, growth in the industrialized countries is expected to remain largely weak, while growth in the emerging markets will present a mixed picture and must therefore be viewed in a differentiated manner.

The European economy is characterized by many years of zero and negative interest rates. Adapting to the new interest rate regime takes much longer than normal interest rate hikes. Economic weakness is therefore likely to persist for an unusually long time and will characterize both 2024 and 2025. The economy could emerge from recession in the spring, but the usual upturn that normally follows a recession is unlikely. Due to declining but still high inflation, the European Central Bank (ECB) is unlikely to consider lowering its key interest rates until the end of 2024. In addition, not only the ECB but also all other Western central banks have raised interest rates significantly, which means that monetary policy will continue to slow down the economy in 2024. The slowdown in the Chinese economy is further dampening the prospects for growth in the eurozone through exports. Against this backdrop, overall economic production is likely to grow at a below-average rate over the course of the year. The level of capacity utilization in the economy is therefore likely to decline, which points to a moderate rise in unemployment figures. In addition, the sharp rise in wages may represent a further burden for companies.

There are no signs of a far-reaching recovery for the German economy in 2024 either. The economy first has to get used to the new interest rate environment, and this process is likely to take longer. The first interest rate cut is not expected until fall 2024. Most economists therefore expect only a slight increase in economic output in 2024. The inflation rate is likely to fall further in the first few months. This is due to the fact that companies have now largely passed on their significantly increased costs for primary products, energy, and other raw materials to their customers. However, the next cost push has already begun with the sharp rise in wages, which could lead to inflation being significantly higher in the foreseeable future than the European Central Bank (ECB) is actually aiming for.

The United States has recorded robust economic growth until recently, mainly due to an unusually expansive fiscal policy. However, the dampening effect of the previous massive key interest rate hikes is likely to become noticeable in 2024. The higher interest rates are weighing on construction projects, investments and the debt-financed part of consumption. Coronavirus savings are likely to be largely exhausted. Consumer spending will therefore rise more slowly than incomes, which could lead to a mild recession in the summer half of 2024. Despite the likely decline in economic output in the medium term, the Fed is unlikely to cut interest rates any time soon. After all, it is unlikely to jeopardize the hard-won successes in the fight against inflation lightly. The first interest rate cut is expected at the beginning of the third quarter of 2024. Slight US growth is expected for the year as a whole.

The depreciation of the yen is having a negative impact on the purchasing power of the Japanese population, which is likely to slow economic growth in 2024. The yen is not expected to appreciate again until the central banks in the USA and the eurozone cut interest rates again or the Japanese central bank raises them. According to market experts, the latter is not expected until the first quarter of 2024 at the earliest, if at all. Even in this case, the Japanese central bank’s room for maneuver will be limited by the high level of government debt.

The emerging markets, too, continue to be hit by the ailing global economy. At the same time, there are opportunities to position themselves well for the future and realign the economy. In 2024, the Chinese economy is likely to suffer from the long-term consequences of policies that have led to a significant crisis in the real estate sector, among other things. This could have negative effects on the Chinese economy for several years. Another factor behind the low growth is the loss of confidence in government economic policy due to the coronavirus policy and in particular the crackdown on the technology sector. The political tensions between China and the USA, which are limiting the supply of high-tech products, are further exacerbating the situation. Although short-term growth in China could benefit from further political impetus, the multi-year economic slowdown in China is likely to continue. The Russian government is using various methods to burden the economy with taxes and duties. However, there is a risk that these measures to increase revenue will also slow down economic growth. The difficult situation on the labor market is also curbing growth potential. The budget for 2024, which earmarks a large part for “national defense”, is a further indication that Russia is continuing its war of aggression against Ukraine. After a surprisingly positive 2023, the Brazilian economy is optimistic about 2024. Falling interest rates should boost investment, but there are risks due to high government spending. The interest rate cuts are expected to stimulate investment and consumption. Especially against the backdrop of the ongoing restructuring of the Chinese economic model, the Southeast Asian emerging markets now have the opportunity to position themselves as a new production base for the world. The Indian economy is expected to grow at a similar rate in 2024 as in the previous year. The pace of growth, which is outstanding by international standards, will be driven by domestic demand. The Middle East is expected to be spared the effects of the global economic slowdown in 2024. Cuts in oil production quotas by OPEC+, comparatively robust growth in Asia’s most important markets, and strategies to diversify trade and investment should support regional growth. However, geopolitical risks in the region are increasing and the ongoing conflict shows no signs of easing.

Procurement market trends

In 2024, we expect a further correction on important raw materials and packaging markets, driven by increased capacity. However, inflationary pressure on production costs is set to remain high, influenced by energy, labor, and higher borrowing costs. A key uncertainty factor is the ongoing critical macroeconomic situation, which, not least due to the conflict in the Middle East, has effects on the important commodity markets.

Sales market trends

After a year of strong market growth, we expect a continued positive trend in the Consumer Business Segment in 2024, albeit at a significantly lower level than in the previous year. The environment will remain uncertain given the economic situation and major political volatility. With continued high commodity prices, the declining but still high inflation rates, and stretched consumer budgets, the market faces constant challenges. The expectation of an inflationary environment with the growing risk of a global recession remains. Price rises to offset increased product costs are not anticipated on the same scale as in 2023. We therefore expect more moderate growth for 2024, driven chiefly by continued strong demand in the skin care categories and in the emerging markets along with North America.

For tesa, we expect business to remain volatile in 2024. In Europe and North America, we are planning cautiously but expect less positive momentum for our business in 2024 than we saw in the previous year. We expect moderate growth in Asia, with Southeast Asia in particular becoming ever more important as a growth market. China will remain a centrally important market. Consumer sentiment, the declining but still high inflation in Europe, the performance of the global automotive market, and our rather modest expectations for the electronics industry will heavily influence developments.

Our market opportunities

Despite a still fraught global geopolitical situation, there are signs that inflationary pressure will weaken in 2024 after the very high levels seen in 2023. Lower commodity and logistics prices are set to be the main drivers of this easing, while wage costs will continue to rise. Overall, a recovery in the world economy is expected in 2024. We see ourselves as well positioned in the Consumer Business Segment and expect our growth to outperform the market with our large proportion of products for everyday use. A focus on skin care products, strong innovations, and implementing our sustainability and digital strategy will continue to drive growth.

We will build on our sound financial structure and strong earnings position together with our dedicated employees to continue exploiting future opportunities with our internationally successful brand portfolio. Extensive research and development activities resulting in successful, consumer-driven innovations will be flanked by targeted marketing measures, creating enduring confidence among our consumers.

For tesa, expected growth for the coming year is slightly above the global market trend. This applies to business with both end consumers and industrial customers. The close collaboration with the electronics industry in Asia remains positive; however, its project-based nature continues to entail a high risk of volatility. tesa expects to bolster its market position with ongoing investment in product and technology development and the expansion of its innovative product portfolio.

Business development

The described challenges in large areas of the world result in a high degree of uncertainty with regard to the outlook for sales markets and our business development.

Independently from the development of the skin care market, we will continue to achieve above-market sales growth. We expect further improvement of the global skin care market in 2024. Based on this, we expect organic sales growth in the mid-single-digit range in the Consumer Business Segment. The EBIT margin from ongoing operations (excluding special factors) in the Consumer Business Segment will be 50 basis points above the previous year level.

Subject to the same uncertainty regarding market development in 2024, we also expect sales growth above the market in the tesa Business Segment. Based on this, we expect organic sales growth in the low-to-mid-single-digit range. The EBIT margin from ongoing operations (excluding special factors) will be on the level of previous year.

Based on the forecasts of the two business segments, Group organic sales growth is expected to be in the mid-single-digit range. We expect the consolidated EBIT margin from ongoing operations (excluding special factors) to be slightly above the previous year’s level.

Hamburg, February 7, 2024

Beiersdorf AG

The Executive Board

EBIT Margin
The EBIT margin is calculated from the ratio of EBIT to sales.
Organic Sales Growth
Organic sales growth shows nominal revenue growth, adjusted for exchange rate effects, as well as structural effects from acquisitions and divestments.
Special Factors
Special factors are income or expenses from one-time, non-operational business transactions.
  • Topic filter

    Results for