Even if sales fall: Swiss companies defy inflation

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Swiss companies had a mixed summer quarter. The strong Frank, uncertainties in the global economy and post-pandemic normalization put pressure on sales and orders. However, in this environment, companies surprised with their strong profitability.

The generally very strong sales progress so far this year has weakened significantly recently. In the figures presented for the third quarter, only one in every two companies reported increased revenue.

Expectations are often missed

In their half-year results, two out of three companies reported revenue growth. This is revealed by an assessment by the AWP news agency, which takes into account the results of 45 listed companies published since the beginning of October.

A large percentage of companies have recently missed analysts’ expectations in this regard, and in almost a third of cases even the most pessimistic forecasts did not come true. The normalization following the strong franc, economic and geopolitical uncertainties and supply chain bottlenecks creates problems for companies.

In this environment, new orders increasingly awaited the industry: Only three out of ten companies whose incoming orders were previously predicted by analysts were able to exceed average expectations. But even for these companies, new orders were generally down from the previous year. On average, the decline was more than a quarter.

Normalization after the corona explosion

But the affected companies attributed, among other things, the declines to normalization, which was extraordinarily strong compared to previous years. Reciprocating compressor manufacturer Burckhardt Compression has recently benefited greatly from advanced investments in energy conversion.

Electronic components maker Lem has experienced a boom in orders following Covid and subsequent delivery bottlenecks. It was stated that customers now order again in a shorter time, as before the pandemic.

But economic downturns also put pressure on orders: Rieter’s orders collapsed due to economic and geopolitical uncertainties, and the company responded with a large-scale savings program.

The Oerlikon industrial group also found itself facing a challenging environment in industrial production. The weakness of the chip industry was effective in Comet.

Passing through costs led to high profits

Despite the pressure on sales and incoming orders, the companies performed well in terms of profitability. Almost three in four companies achieved higher operating results. A similar number also managed to beat consensus expectations. Computer accessories maker Logitech, personnel services provider Adecco and measurement technology company Landis+Gyr performed particularly well.

In response to last year’s sharp rise in energy and raw material prices, high inflation and the strong franc, many companies have launched comprehensive savings and efficiency programs. In addition, most companies were able to pass on the increasing costs to their customers through price increases and benefit from the falling energy and raw material prices.

Positive outlook for most companies

For example, Logitech managed to increase operating profit by 23 percent despite an 8 percent decrease in sales, thanks to cost reductions. Other savings programs may follow: Oerlikon, for example, has stated that costs will soon be reduced again.

Companies are also showing flexibility when looking ahead: Of the 32 specific annual outlooks, 18 have been confirmed, nine have been increased and only six have been lowered. However, companies evaluate the next year very differently.

While some believe the bottom will be reached this year, others are bracing themselves for rising headwinds for now. Based on various economic indicators, the environment is likely to remain challenging. (SDA)

Source :Blick