1 Spains Equity Story Strengths and forecasts of the Spanish economy Madrid, July 2011.
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Transcript of 1 Spains Equity Story Strengths and forecasts of the Spanish economy Madrid, July 2011.
1
Spain’s Equity StoryStrengths and forecastsof the Spanish economy
Madrid, July 2011
2
Situation
3
Spain’s GDP Year-on-year variation rate (%)
(p) Projection
Source: CEC based on INE
Annual variation
%
2009 -3.7
2010 -0.1
2011 (p) 0.8-5
-4
-3
-2
-1
0
1
2
3
4
2008
TI
2008
TII
2008
TIII
2008
TIV
2009
TI
2009
TII
2009
TIII
2009
TIV
2010
TI
2010
TII
2010
TIII
2010
TIV
2011
TI
2011
TII
2011
TIII
2011
TIV
Quarterly
Year-on-year
Year-on-year variation
%
2009 -3.7
2010 -0.1
2011 (p) 0.8
4
Spain, well positioned to face the new era
5
65,4%
12,2%
18,7%
Spain3,7%
France
Italy
Rest of EU15
59,2%
13,9%
17,5%
Spain9,4%
France
Italy
Rest of EU15
Share of Nominal GDP 1960 Share of Nominal GDP 2010
Source: European Comission and CEC
Spain has tripled its weight in EU15
6
Variations in Population in the Last 50 Years
Source: Eurostat
Population has grown over 50% in the last 50 years
In the last 10 years, the labour force has increased 27%, 5 times higher than the European average. Since 1994 Spain represents 1/3 of the total growth on labour force in the EU.
77
In the last years we have won international respect… even excluding the building industry
*European core countries: France, Germany, Italy, Austria and The Netherlands Source: IMF forecasts 2011-2015
GDP 1994-2014(Based on Euroconstants; 1993=100)
100
120
140
160
1993 1995 1997 1999 2001 2003 2005 2007 2009
European Core*
SPAIN
Since 1994, Spain’s GDP has increased over 60%, 2.3 times higher than in European core
countries…
… this sets Spain as 4th economy
regarding per capita income and
5th in size…
… with the highest investment rate excl. housing
(infrastructure & capital goods).
SPAIN excl. building
industry
8Source: Eurostat
% GDP per Capita 2010
Fourth largest GDP per capita among the foremost EU15 countries
107,3104,8
96,9
92,4 91,3 90,5
Germany UnitedKingdom
France Spain Italy EU27
9
Spain’s Strenghts
10
Attractive country to Institutional Investmentthanks to high profitability for the shareholder
Source: Wharton Business School
Total Shareholder Return
-5
5
15
25
35
45
Pre-crisis yearly average(1995-2006)
Crisis yearly average(2007-2009)
Ibex-35 CAC-40 FTSE-100 DAX-30 DJIA
%
Before the crisis, profitability was 3 times higher than the rest of European countries.
During the crisis, it was twice as high.
11
EuroStoxx 300 (Securities Exchange Index for the Euro Area): share by listed company nationality
Source: Factset
Spanish companies account for 12.1% of the European EuroStoxx 300 index
Factors: Spain’s main markets include 1,100 million people (Europe and Latin America) and the country has high productivity levels compared to its competitors.
12Source: OECD Compendium of Productivity. Formulated by CEC
Labour Productivity by Company Size
0
20
40
60
80
100
120
140
España Alemania Reino Unido
1 a 910 a 1920 a 4950 a 249más 250
base 100 = average productivity of firms in USA
Spain Germany UK
1 to 910 to 1920 to 4950 to 249> 250
Nr. of workers
13Source: CEC based on WTO data.
Invariant share of world export market
Share of World Export Market2000-2009
The exporting rate is still very high and in the last term it has increased 23% since 2010.
14
Spanish companies’ leadership
15
Non-tourist services world exports grew by 40% in the last decade
(yearly expansion average was 7%).
Other services
To business
Tourism
Spanish Service Exports by Industry(% total, 2000)
Other services
To business
Tourism
Spanish Service Exports by Industry(% total, 2010)
It has leading companies in key industries: sucessful diversification into non-tourist services
16
… advancing in high added value sectors, such as in SERVICES…
Distribution and apparel: the world ready-to-wear leader company is Spanish, and three Spanish firms are among the top 50 retailers world-wide.
Biotechnology: 3rd place world-wide in agrobiotechnology, and 5th place world-wide in biochemistry and molecular biology.
Hotel and restaurant trade: with the recent trend toward innovation in restaurant services, Spain has taken 5th place in the number of Michelin stars.
Finance and insurance: 4 Spanish financial institutions are among the 50 most reliable in the world, and 2 Spanish insurers rank among the largest in the world.
E-Health, e-government: significant advances place Spain 9th on the list of the world’s most highly developed countries
17
… or in CONSTRUCTION, ENERGY and MANUFACTURING industries…
Infrastructure: 7 Spanish companies manage and/or build nearly 40% of the major transport franchises in the world, mainly airports, ports and motorways.
Renewable energies: 2 of the 10 major companies are Spanish.
Environment, water treatment and desalination: Spain produces more desalinated water than any other country in the world.
Automobile and automobile components industry: Spain is the number one manufacturer of automobile cladding world-wide and the eighth largest vehicle manufacturer world-wide.
Aerospace: Spain has Europe’s 5th highest turnover and very high investment in R&D.
18
… and also on the new information and communication technologies (ICT)
3 of every 5 flights world-wide would be controlled using Spanish air navigation systems
Spain is a world leader and a European benchmark in mobile telephone and broadband coverage
9.1% ICT market growth in Spain in the last 5 years.
Investment in innovation (R&D+I) in ICT has almost doubled (x1.9) in the period between 2003-09.
One of the 5 largest telecommunications companies is Spanish.
19Source: AFI, World Tourism Organisation and Tourism in OECD countries 2008.
Maintaining its leadership in TOURISM,
5 firms are among the 30 most important hotel companies in the world
Tourist Industry Revenues in 2009(billion euros)
Tourist Industry Contribution to GDP(% in 2006)
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
80
90
100
20
Imbalances under correction
21
Foreign indebtednessby the private sector
Adjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded.
Private sector deleveraging, banking sector consolidation, and labour market flexibility
22
Tasa Inversión (% PIB): desglose entre componentes (Promedio 2000-07)
86 6 5 3
20
1314 17
14
España Alemania Francia Italia Reino Unido
Residencial No residencial
Fuente: Oficinas Estadística Nacionales
Source: National Treasuries
Spain Germany France Italy UK
Investment Rate (% GDP) Broken Down by Components(Mean 2000-07)
Housing Non-housing
23
... also with one of the best infrastructure networks and its position as strategic enclave
Km of Motorway per Million Inhabitants
Source: Eurostat, Adif (Spanish railway and infrastruture agency), McKinsey andCEC.
61
112133
152168172
193197
203241
276
UK
Italy
Finland
Germany
Belgium
France
Sweden
Denmark
Austria
Protugal
Spain
24
Adjustment in housing investment is complete, having reached pre-boom levels
Housing investment(% GDP)
3.0%
4.5%
6.0%
7.5%
9.0%
mar-95
jun-96
sep-97
dec-98
mar-00
jun-01
sep-02
dec-03
mar-05
jun-06
sep-07
dec-08
mar-10
Source: WTO formulated by CEC.
25
Adjustment in housing
Unsold Housing Stock(thousand units)
Source: Ministry of Internal Development and CEC.
26
Foreign indebtednessby the private sector
Adjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded.
Labour market flexibility
Reform on September 2010 and current collective bargaining.
Private sector deleveraging, banking sector consolidation, and labour market flexibility
27
-2
0
2
4
6
8
10
12
2007 2008 2009 2010
Differential Unemployment Rate(Spain vs. France-Germany Avg.)
Differential Growth France-GermanyAvg. vs. Spain)
p.p.
Compared adjustment of cycle and unemploymentbetween Spain and the average of France and Germany
28
Active employment rate yearly variation %
Unemployment rateworkforce %
Source: CEC baded on INE data and own projections.
Employment
29
Foreign indebtednessby the private sector
Adjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded.
Labour market flexibility
Reform on September 2010 and current collective bargaining.
Banks solvency
Restructuring, recapitalisation and a change in savings bank governance underway.
Private sector deleveraging, banking sector consolidation, and labour market flexibility
3030
Sistema Financiero: Hipotecas concedidas por oficina y año (unidades)
12
16
20
24
28
32
mar-04 mar-05 mar-06 mar-07 mar-08 mar-09 mar-10 mar-11
Fuente: Banco de España e INE, julio 2011
Adjustment plan:reduction of the excess of installed capacity
España: Oficinas operativas(mar-1990=100)
80
100
120
140
160
180
200
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Fuente : Banco de España, septiembre 2010
Bancos
Cajas
Financing system: mortages approved per office and year(units)
Source: Bank of Spain and INE, july 2011Source: Bank of Spain and INE, sep 2010
BanksSavings banks
Spain: Operational Branches(Mar-1990=100)
3131
Solvencia de los grupos consolidados de entidades de crédito (% APR)
7
8
9
10
11
12
13
2007 2008 2009 2010Fuente: Banco de España, julio 2011
Ratio de solvencia
Ratio de solvencia básico
Adjustment plan: advanced process of losses and capitalization recognition
Source: Bank of Spain, july 2011 Source: Bank of Spain, may 2011
Generic reductions
1,5
Specific provisions with profit
5,5
Specific provisions with bank reserves
2,1
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
Provisions of the financial institutions constituted since 2008% GDP
Core capital in financial institutions%APR
Core capitalBasic core capital
32
Pension system sustainability
Directed toward reducing mid-term pension spending (-2/4 pp GDP)
Public finance sustainability
Ambitious fiscal consolidation plan underway: towards 3% budgetary deficit by 2013.
…although there is a higher risk for autonomous communities.
Reforms with an impact in the short term: pension system and public finance solvency
Market concerns Reform
33
Budget balance and public debt
Budget Balance(% GDP)
Public Debt(% GDP)
-12.0
-9.0
-6.0
-3.0
0.0
3.0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Estructural
Total
España: Saldo Público (% del PIB)
30
40
50
60
70
80
90
2000 2002 2004 2006 2008 2010 2012
Fuente : Comisión Europea
EurozonaAlemaniaEspaña
Source: Ministry of Economy, july 2011 Source: European Comission
Structural
Total
Euro AreaGermanySpain
34Source: AFI, AMECO and Bloomerg
Diversification of maturity dates on sovereign debt: long mean term
Treasure Debt Average Maturity(years)
5
5,5
6
6,5
7
7,5
France Italy Spain Germany Portugal TheNetherlands
Belgium
35
Conclusion
36Source: FMI & OECD
…with a big impact on growth on the long term
Spain-Euro Area Differential – YoY Growth Rates
37
The challenge is to increase the growth potential
Spain has good international position and reputation, especially its large-scale companies, leading in key sectors and more productive than their European equals.
It has a high potential talent (it is placed 11th in the world ranking according to “Mapping Global Talent”)
The imbalances accumulated in the past are undergoing an advanced adjustment.
The reforms underway are directed at enhancing the growth potential in the mid-long term.
The Spanish economy is undergoing a change in its growth patterns; facing the new era:
In order to culminate the process, the reforms must conclude successfully and the adjusments plans underway must be followed rigorously.
38
Spain’s Equity StoryStrengths and forecastsof the Spanish economy
Madrid, July 2011