MEM industries: new orders above pre-crisis level
Zurich (ots)
Figures for the first quarter of 2021 released by the Swiss mechanical and electrical engineering industries (MEM industries) show a significant easing: new orders rose by +4.8% compared to the same period last year. Exports were also up, increasing by +3.3%. The key indicators suggest that most of the past year's pandemic-related declines will have been made up by the end of 2021. Margins in the MEM sector remain unsatisfactory, however: almost a quarter of Swissmem's member companies report that they ended the past year with a loss at EBIT level. Prevailing conditions must improve if the current tailwind is to develop into sustainable growth with adequate margins. The National Council has the power to take the first step by suspending industrial tariffs in its summer session.
New orders in Swiss MEM industries were up +4.8% in the first quarter of 2021 (Q1/21) compared with the same quarter of the previous year. This also impacted factory capacity utilization, which rose from 77.0% in Q4/20 to 81.7% in Q1/21. This upward trend continued in April 2021, with capacity utilization in the MEM industries at 85.6% - only just below the long-term average of 86.1%. Sales in Q1/21, conversely, fell by 0.5% compared with the same period last year. The domestic market was solely responsible for this decline.
Rising exports to the EU and Asia
Exports of goods by the MEM industries increased by +3.3% in Q1/21 compared to the same quarter last year, reaching a value of CHF 16.3 billion francs. Growth in exports to the EU was particularly pronounced at 8.1% but exports to Asian markets also grew, gaining +2.5%. China achieved a peak value here, with a plus of almost 20%. Only exports to the USA were down, declining by +2.7%. The picture also differs for individual product groups. Metal exports rose by +11.6%, as against rises of 2.6% in mechanical engineering and +2.2% in electrical engineering and electronics. Only in precision instruments did exports decline (-1.7%).
Further recovery expected
Business figures for the MEM industries in the first quarter of 2021 show a clear easing of the situation. Swissmem Director Stefan Brupbacher: "It is gratifying that the upward trend - already apparent at the end of 2020 - is continuing, and I look forward to the coming months with a certain degree of optimism. The key indicators suggest that sales will also be back to pre-crisis levels in the second half of the year." And at current levels the industrial Purchasing Managers' Index (PMI) does indeed point to growth - and in places even vigorous growth - almost everywhere in the world. The results of the latest Swissmem survey of member companies also indicate a positive trend: 57% of entrepreneurs expect new orders from abroad to be higher in the next twelve months. Only eight per cent of company heads believe orders will fall. Growth stimuli are expected above all from Germany, China and the USA, though on a current view it is not yet possible to judge whether this is a sustainable growth trend or merely a catch-up effect.
Despite this encouraging picture, the COVID pandemic leaves deep scars. In previous years a significant proportion of MEM companies had already been struggling with weak margins, and in the past year this situation deteriorated further. 24% of companies responding to a Swissmem survey said they had ended the 2020 financial year with a loss at EBIT level, while another 31% had an unsatisfactory EBIT margin of less than five per cent. Only 17% of companies achieved an industry-standard margin of up to five per cent, while 28% achieved an excellent margin of over eight per cent.
Remove the industrial tariffs now!
If the current tailwind is to develop into sustainable growth with adequate margins, the pandemic must finally be defeated and prevailing conditions for the export industry must be improved. The Council of States approved the suspension of industrial tariffs in its 2020 winter session, and the National Council's Committee for Economic Affairs and Taxation (WAK-N) has now followed suit. "I am pleased that the WAK-N found the arguments of industry convincing", says Martin Hirzel, President of Swissmem. "Now the entire National Council has the ball in its court. I very much hope it will approve this real improvement in prevailing conditions in its summer session."
Swissmem supports the CO2 Act
Due not least to the target agreement system, Swissmem's member companies have already reduced their carbon emissions by 56% compared with 1990 and they are committed to taking targeted measures to reduce them further. In return they are exempted from the CO2 tax. This successful model will be continued and extended to all companies with the new CO2 Act, opening up substantial additional potential for reduction. The new CO2 Act is an opportunity for Swiss industry. Carbon prices are rising throughout the world, thus making it more and more attractive to develop new climate-friendly technologies. MEM is a world-class industry, especially in key technologies such as building control systems, e-mobility and hydrogen use. By exporting these new products, it achieves an enormous leverage effect in the reduction of CO2 emissions worldwide. This benefits not only the climate but Switzerland as a manufacturing location.
Contact:
Ivo Zimmermann, Head of Communications
Tel. +41 44 384 48 50 / Mobile +41 79 580 04 84
E-Mail i.zimmermann@swissmem.ch
Philippe Cordonier, Head of Romandie
Tel. +41 21 613 35 85 / Mobile +41 79 644 46 77
E-Mail p.cordonier@swissmem.ch