Companies already assume the slowdown in their accounts due to the war in Ukraine

Companies already assume the slowdown in their accounts due to the war in Ukraine

Antonio Ramirez CerezoFOLLOW, CONTINUECarlos Manso ChicoteFOLLOW, CONTINUEMadrid Updated: 04/16/2022 00:44h
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The war in Ukraine has thrown away all the economic forecasts that Spanish companies had made for this year. 2022 was conceived as an exercise in which to consolidate the post-pandemic recovery, with the shortcut of the energy and raw materials crisis, and the return to normality of logistics activity worldwide. Perspectives that were lost as soon as Putin razed the Ukrainian border on February 24.

One of the most dismayed is the industry, which had expectations of leaving behind the high prices of electricity and fuel, in addition to the complications of prices and reception of supplies. The Association of Internationalized Spanish Industrial Companies (Amec) collected this confirmation by its associates in a survey in February.

However, the Russian invasion forced them to reformulate a questionnaire that reflected a clear change in forecasts. «The current scenario has changed in a matter of days in a very important way. Until the end of February, the perspectives of industrial companies were that this 2022 should be a great year, but the war in Ukraine and the increase in energy prices, together with an upturn in logistical problems, are causing a sudden change in trend", they indicated from Amec in the presentation of the annual report Situation 2021 and Perspectives 2022.

A document that reveals the great uncertainty that companies in the sector are currently experiencing: four out of ten have already revised their business volume and results for 2022 downwards. On average, they place their expectations 12% below the initial ones . Only three out of ten say they will maintain their initial forecasts. By 2022, companies had planned to increase their exports by 12.7% compared to 2021, prospects that exceeded the forecast made the previous year by 6 percentage points, and that after the invasion of Ukraine lowered by 0.5%, until the 12.2%.

But it is not so much the loss of business, but the cut in profit margins that the situation brings. In fact, the AMEC report shows how the greatest concern about the war came from the energy side. Companies have skyrocketed the costs of energy and materials and components, as indicated by seven out of ten companies. Similarly, six out of ten consider that their results will also be affected by the slowdown in the European economy, while half believe that the conflict will have an impact on delivery times.

The general director of this industrial employer, Joan Tristany, pointed out that the effects are currently multiple and "may go beyond what one might think", since the value chain has been affected in some cases. He illustrates it in the following way: "We have a company with a stopped production line because it has a supplier in Italy who has informed it that it will not be able to deliver the products it needs for manufacturing for another 3 months, because its supplier in this case is located in Ukraine. Therefore, the Spanish industrial company cannot continue with its production until its Italian supplier does not have an alternative supplier».

These are not the only logistical and production tensions that industries have experienced in the first quarter of the year. Last month, the carrier strike put all the country's economic sectors in check, with violent pickets taking over the key places for Spanish logistics and causing the supply chain to break. The damage has not yet been quantified, but it will not be trivial. Supermarkets alone estimated losses at 130 million daily during the first week of protests, according to estimates by their employer, Asedas.

The wound has been deep. The representative of the steel companies, Unesid, was also forced to request government intervention due to the transport stoppages, which forced dozens of plants to reduce or even stop production due to the lack of supply of raw materials and the inability to deliver products to customers. Some factories that had already been stopping in recent weeks.

In mid-March, the electro-intensive industries (metallurgical, chemical, steel and industrial gases sectors) sent a letter to the European Commission for what they considered "an unprecedented industrial emergency". In it they warned that if the situation was not straightened out (which they have been experiencing since the summer) many companies already in temporary closures would be forced to launch ERTE, and there was even the risk of possible relocation of production, given the loss of competitiveness of producing in Spain for a sector in which electricity can represent more than half of its operating costs. Therefore, they urged the EU Commissioners for Energy and the Internal Market to immediately disassociate fossil fuels from the formation of the price of electricity, in line with the requests that the Government took to the European Council at the end of March.

A demand that did not materialize, so the Executive ended up applying a temporary reduction of 80% of the electricity tolls paid by these companies in their bills until the end of the year, as well as greater compensation for the cost of CO2 passed on to electricity .

tourism drowned

Tourism has been left out of the list of sectors benefiting from the government's package of measures, and despite the fact that it is reactivating after two years of the pandemic, it is not experiencing its expected recovery. Companies in the sector are being forced to raise prices, but also to reduce margins. Therefore, although they expect to close the year with more than 90% of the activity of 2019, they will do so with a serious cut in profits compared to what was expected, due to the inflationary spiral.

The sector's employers, Exceltur, already warned last week that the lack of state aid for tourism will have consequences for investment activity and the creation of jobs in tourism companies.

The conflict in Ukraine also represents a real headache for the more than 30,500 companies that make up the agri-food sector in Spain, 96% of them SMEs, and which represent 10% of GDP. This is added to other problems such as the consequences of the drought or the formation of prices. Employers such as the Spanish Federation of Food and Drink Industries (Fiab) warn against "the shortage of some raw materials as a result of the war" and urge the Commission to act "to guarantee the free movement of goods in the EU." From companies as relevant as the oil cooperative Dcoop, the interest is in factors such as "the rise in the price of raw materials."

They have another vision from the meat sector, indicated as one of the great beneficiaries of the approved aid. Specifically, the Spanish Serrano Ham Consortium, which brings together manufacturers such as Campofrío, laments the rise in energy and cereal prices. "Large distribution does understand a very moderate price increase, although the bulk is assumed by the production companies," explains its marketing manager, Carlos del Hoyo. In any case, they recognize that the conflict in Ukraine does close an "interesting" market, to which they sold 860 tons of Serrano ham last year (out of a production of 53,000) and that already surpassed Japan.

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