Switzerland: Industry is working its way out of the crisis
Weak earnings the industry
The positive picture is only clouded by the still unsatisfactory earnings situation. The main reason for this is that the weakening of the Swiss franc against the euro and thus the improvement in margins did not begin until mid-2017. The latest Swissmem survey showed that 15 % of companies at EBIT level were in the red over the entire past year. Another 29% of companies achieved an insufficient margin of between 0% and 5% in 2017. Overall, the earnings situation is still unsatisfactory for 44% of MEM companies. It has improved slightly compared to 2016.
According to the current survey, 21% of companies posted losses in 2016 and a further 30% of companies kept their EBIT margin below 5%. However, the survey results show that an upswing of a few months is not sufficient to compensate for the sometimes massive margin and asset losses of recent years. According to the association, the MEM industry now needs a longer growth phase with significantly better margins in order to be able to invest more in the future again.
The export figures show the great importance of the EU market. The EU's export share has risen from 57.7 % to 59.6 % since 2015 despite the strength of the Swiss franc. In relative terms, exports to the USA grew more strongly in 2017 (7.4% compared with 5.9%). In absolute figures, however, export growth to the EU is 3.7 times higher (export growth EU: CHF 2.222 billion, export growth USA: CHF 0.599 billion). Although other markets are gaining importance for the MEM industry in relative terms, the EU internal market remains the most important sales market in the long term. For this reason, Swissmem is in favour of Switzerland putting its relations with the EU on a new, sustainable basis with a framework agreement. And for the same reason Swissmem will fight the dismissal initiative of the Swiss People's Party (SVP). It calls into question today's almost non-discriminatory access to the European internal market.
Jean-Philippe Kohl, Swissmem Director ad interim, is optimistic about the outlook for the Swiss MEM industries. “The new orders index has remained at a high level since the middle of 2017. Sales and earnings should therefore increase further this year. This is a necessary development in order to make up for the massive decline in margins and the intrinsic depreciation of recent years.”
This article was first published on www.etmm-online.com.