LONDON/FRANKFURT: From advertising and luxury goods to cars and heavy engineering, European industry is retrenching and abandoning its already modest growth targets, a worrying sign for investors who bought into the summer stock market rally.
The signals from third quarter results so far are that Asian, emerging market and resources sector demand is no longer making up for weakness at home.
The car industry has turned in a story of tumbling profits, plant closures and the first industry bailout since the 2008 crisis for Peugeot. Advertisers are seeing budgets cut, machine tools makers ABB and Sandvik have lost much of the previously buoyant demand for mining equipment and oil rigs.
Top German grocer Metro turned in a 35 percent plunge in profits and warned of worse to come, and even luxury clothing group Gucci’s previously insatiable Chinese customers are curbing their appetites. “We’re seeing evidence of a weak economy all around us,” Royal Dutch/Shell’s Chief Financial Officer Simon Henry told reporters.
As well as being Europe’s largest company selling fuel to millions of drivers and manufacturers, Shell also provides the chemicals that go into making everything from detergents to refrigerators via waterproof clothing and computer parts.
“European consumer and commercial/industrial demand is pretty weak across the board, including chemicals, and (there are) very few signs of recovery,” Henry said.
Thomson Reuters Starmine data shows that out of the 53 percent of leading European companies outside the energy sector that have reported earnings so far, 44 percent undershot forecast profits. More worryingly, as an indicator of future earnings growth and the robustness of demand, 53 percent missed expectations for revenue.
Reuters
