Complete pause in orders: Tough months ahead for Swiss industry

Oetterli probably imagined his entry into Rieter differently. He was previously CEO of elevator manufacturer Schindler, but had to leave there suddenly. He arrived at Rieter in March after working briefly with controversial property financier Norbert Ketterer, 57, who sponsors FCZ football club Nokera. The reduction will be carried out in close consultation with the Board of Directors. The main shareholder Peter Spuhler (64) works here and holds 33 percent of the industrial group.

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Rieter is experiencing a downturn that companies rarely experience. The company, whose roots date back to 1795, makes most of its sales from spinning machines. These are produced as part of large-scale projects commissioned by textile manufacturers. This project work is particularly subject to economic cycles.

Order intake halved

The figures announced on Friday show how dramatic the development is. Sales in the first nine months of this year amounted to 1,093 million francs. The number of orders received in the same period was only 452 million. You don’t need to be a foresight to understand that “sales will inevitably be significantly lower in the coming quarters and profits will therefore fall,” says Raiffeisen economist Matthias Geissbühler.

Rieter is not the only investment owned by Peter Spuhler that has fallen on hard times. Things look even bleaker for steelmaker Swiss Steel. The company is in existential difficulties. The strong franc and rising energy prices are creating deep holes in the balance sheet. There is no rapid improvement in sight.

The stagnation in orders affects the entire industry. Companies such as central Swiss industrial supplier Bossard, once a favorite of many stock market investors, have also fallen under the hammer following weak sales figures and a cautious outlook, losing six per cent on the stock market. Things got really bad for Comet from the Freiburg Sense, which lost more than ten percent on Wednesday, and even for Meier Tobler from Schwerzenbach ZH, which lost 20 percent.

Managers no longer understand the world

Things are also going badly for Lonza, one of the leading names in the chemical and pharmaceutical industry based in Basel. The share price collapsed following weak quarterly figures and another profit warning on Monday. On Friday, the championships lost over 20 percent. The market value of over two billion francs literally disappeared.

Lonza President Albert Baehny, who had to serve as interim CEO at the age of 71, was visibly surprised by this violent reaction. “I don’t understand the market’s concerns,” the successful manager said in an interview with “Finanz und Wirtschaft”. Investors are not forgiving him for the collapse of his corona vaccine business.

What are the reasons for the decline in orders? According to economist Geissbühler, central banks’ “massive interest rate reversal” is having a growing impact. The global economy has already weakened significantly and is expected to lose further momentum in the coming months. Especially the industrial sector is in a difficult situation.

Early indicators for the industry, called the purchasing managers’ index, point to a recession. Important trading partners such as Germany are already together. The strong Swiss franc creates an additional burden for Swiss industrial companies, which are predominantly export-oriented. Its price fell to a new record low of 95 centimeters per euro this week.

Corona effect expires

Many companies have so far been able to benefit from the large number of orders that quickly filled their order books after the Corona epidemic and could be fulfilled with a delay due to delivery bottlenecks. “The picture has now changed significantly,” says Geissbühler. Incoming orders have been declining sharply since the second quarter of this year, and a trend reversal is not expected any time soon.

All this points to weak sales development in the coming quarters. “Accordingly, we remain of the view that profit forecasts for 2024 are generally too high and a downward revision is necessary,” says Geissbühler, Investment Director responsible for investment strategy at Raiffeisen. Therefore, the negative headwind for industrial stocks continues for now.

Many industrialists are aware that the wind is getting stronger. “Anyone who doesn’t go into the winter with a well-stocked order line is going to have a very difficult time,” says one who has not experienced a first-time downturn. He is sure of this: Prices will fall further because analysts have not yet adequately taken into account the collapse in incoming orders.

* Business journalist Beat Schmid has worked for many major media companies throughout his career. He writes about financial matters at SonntagsBlick.