Swiss companies hold their own in a difficult environment
Published: Thursday, Nov 23rd 2023, 10:10
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Swiss companies had a mixed summer quarter. The strong franc, uncertainties in the global economy and the normalization following the pandemic put pressure on sales and orders. In this environment, however, companies surprised with robust profitability.
The generally strong sales performance so far this year has recently weakened considerably. In the figures presented for the third quarter just ended, only every second company was able to report growing revenue.
In the half-year results, two out of three companies still reported rising revenues. This is shown by an analysis by the news agency AWP, which took into account the results of 45 listed companies that have been published since the beginning of October.
A good half of the companies recently failed to meet analysts' expectations in this regard, and in almost a third of cases not even the most pessimistic estimates were achieved. The strong Swiss franc, economic and geopolitical uncertainties and the normalization following supply chain bottlenecks are causing problems for companies.
Normalization and headwinds
In this environment, new orders in industry were also increasingly slow to materialize: of ten companies whose incoming orders were estimated by analysts in advance, just three were able to beat average expectations. However, even for these companies, new orders fell overall compared to the previous year. On average, the decline was over a quarter.
However, the companies concerned also attributed the declines to a normalization compared to exceptionally strong previous years. For example, reciprocating compressor manufacturer Burckhardt Compression had recently benefited greatly from upfront investments in the energy transition.
And electronics component manufacturer Lem had seen a boom in orders in the wake of Covid and the subsequent supply bottlenecks. However, customers are now ordering at shorter notice again - as was the case before the pandemic, according to the company.
However, economic headwinds also put pressure on orders: Orders at Rieter collapsed due to economic and geopolitical uncertainties - to which the company responded with a large-scale cost-cutting program.
The industrial group Oerlikon was also confronted with a difficult environment in industrial production. Comet, on the other hand, was affected by the weakness of the chip industry.
Robust profitability
Pressure on turnover and incoming orders or not - the companies did well in terms of profitability. Almost three out of four companies achieved a higher operating result. And a similar number also managed to exceed consensus expectations. The computer accessories manufacturer Logitech, the personnel services provider Adecco and the measurement technology company Landis+Gyr performed particularly well.
In response to the sharp rise in energy and commodity prices in the previous year, high inflation and the strong Swiss franc, many companies launched extensive savings and efficiency programs. Most were also able to pass on the increased costs to their customers through price increases and then benefit again from falling energy and commodity prices.
Thanks to cost-cutting measures, Logitech, for example, was able to increase its operating profit by 23 percent despite an 8 percent drop in sales. Further cost-cutting programs could follow: Oerlikon, for example, has indicated that costs will soon be cut again.
Looking ahead, companies are also proving resilient: of 32 specific annual outlooks, 18 were confirmed, nine were even raised and only six were lowered. However, companies' assessments of the coming year vary greatly.
While some see the economy bottoming out before the end of the year, others are bracing themselves for increasing headwinds for the time being. According to various economic indicators, the environment is likely to remain challenging.
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