Swissmem members are in a demanding adaptation process because of the strong CHF
At a press conference on August 19, 2015 Swissmem, the umbrella organisation for Swiss machinery, electro and metal industry, informed on a survey among its members and presented an outlook for 2015, particularly under the aspect of the strong CHF and its consequences for the member companies
According to the latest survey conducted among member companies in July 2015, only 28.1 % of the respondents expect more orders from abroad. Exactly the same percentage expects deceasing order volumes. However, as against April 2015 the quote of optimists is slightly higher and thus those of pessimists a bit lower. The slight decrease of the external value of the Swiss Franc is welcomed and assists companies to adjust. However, the Swiss Franc is still considered to be overvalued. To sustainably improve the situation of the member companies a marked and durable decrease of the outside value of the Swiss Franc would be mandatory.
The shock after the January 15, 2015, coupled with the up-trending outside value of the CHF has forced the industry to take immediate actions. More than two third (69 %) had in the first half of 2015 to decrease prices to avoid order losses. In addition the investment in natural hedging, meaning to diversify cost blocks from CHF into EUR. The relevant measures were taken by 77 % of sector companies. Another focus in most of the companies is on product and process optimisation, including general increases of efficiency and a rigorous production cost management (70 % of the member companies). Almost two third (63 %) of the companies have enhanced their innovation development.
Despite all of these efforts there are important negative consequences because of the strong outside value of the CHF. Almost two third (64 %) of the companies expect a decline of turnover in the order of five to 20 %. Even more important are the massive declines in margins. 52 % of the companies expect a decline of margins in the order of four to 15 percentage points. This leads to the fact that 35 % of the surveyed companies expect an negative operational result for 2015.
In the first half year of 2015 there is a confirmation of negative effects. Order volume was reduced in comparison to the same period of 2014 by 14.7 %. The first (-17.1 %), as well the second quarter (-12.3 %) were contributing to this high decline. The index of order intake sank to the second lowest level of the past ten years.
Turnover of the sector was reduced also (year to year) in the first half year 2015 by 7.1 % (first quarter -8.2 % and second quarter -6.2 %). The decreasing order volume and turnover affects large companies as well as SMEs and in similar proportions. The decreasing order intake influences the capacity load of the companies, it continuously decreased and in July 2015 was earmarked at 87.1 %, thus only slightly above the long year average of 86.3 %.
Exports of the industry have shown declining aspects according to custom authorities statistics, they dropped by 2.2 % on a year to year basis in the first semester and amounted in value to CHF 31.6 billion. The most important export regions showed a mixed bag. The exports to Asia (+5.3 %) and to the USA (+11.4 %) were dynamic, despite these were not able to compensate the decreasing exports to the most important area, namely the EU (-5.2 %).
Looking at the subsectors of the industry, it is noteworthy that machinery exports dropped by 5.4 %, electro-technique and electronics by 5.0 % and those of the metal industry by 4.2 %. Only precision instruments showed a slight up-trend of 0.6 %.
Swissmen projects that the strong CHF will leave marked traces among member companies, and it forecasts that in the second half year of 2015 short time working and restructuration measures will be on the increase. With an exchange level of CHF 1.05 against the EUR 18 % of the Swissmem members opt for the relocation of at least parts of their production abroad. If such relocation decisions are really taken, this would mean in turn a substantial loss of working places in Switzerland.
However this does not mean that the Swiss industry will not overcome the difficulties. The companies are acting and the majority will find solutions – however the realisation will not take always place in Switzerland – to master the situation. To enforce the international competitiveness of the sector, Swissmem founded jointly with three other associations the initiative “Industry 2025”. This should facilitate the access of member companies to digitalisation and networking within “Industrie 4.0”. These entail a great potential for the enhancement of productivity and efficiency and at the same time also for the development of new business models. Swissmem is in favour of the continuing bilateral contracts with the EU, because these are supporting decisively the attraction and the competitiveness of the Swiss working place, thus an important prerequisite for the industrial sector.
Swissmem declares also that it is high time that politic authorities are delivering their part to sustain the Swiss work place by terminating continuous regulations and costly additional tasks to the industry. As examples the association cites the energy politics, the presentation of a green economy and the application of Swissness rulings. In this respect, Swissmen has issued a catalogue of measures to ease the effects in the industry of the strong CHF.