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Swiss Industrial Sales to Drop as Order Drought Continues

Swiss industrial companies may have declining sales in the second half after a 1.4 percent rise in the first six months, mechanical and electrical engineering trade group Swissmem said in a statement.

New orders for the 290 members of Swissmem, which include ABB Ltd. and OC Oerlikon AG, dropped for a fifth successive quarter as declining exports to European Union countries and pricing pressure from Switzerland’s strong franc mean “there will be no short-term improvement,” Swissmem said.

Swiss companies have outsourced production and more than half of employees at Swissmem companies are in factories abroad, Hans Hess, president of the group, said in an interview. Firms will continue to automate production and relocate factories to lower-cost countries, he said.

Switzerland’s machinery exporters are facing prolonged margin pressure as the strong franc, capped at 1.20 to the euro, makes their goods more expensive, while fixed costs are higher than for competitors in the euro zone.

ABB, the world’s largest maker of power transformers, said last month that second-quarter revenue was unchanged from a year earlier at $9.7 billion. Oerlikon, the largest maker of textile machinery, is increasing margins through efficiency measures after textile orders began slowing last year, it said Aug. 3

Raises ‘Unthinkable’

Negotiating higher wages this year is “unthinkable,” Hess said. Swiss manual labourers earn 45 euros ($56) an hour on average compared to 30 euros in Germany and less than 5 euros in China, Hess said.

Machinery exporters are considering ways to cut wage bills as capacity utilization in the mechanical and electrical engineering industries declined in the second quarter to 85.3 percent from 89.9 percent in the first quarter, Hess said.

Switzerland’s franc ceiling will remain for at least a year and will continue to weaken export prices, which dropped 2.3 percent in the first half, said Hess, who is also chairman of medical-equipment supplier Comet Holding AG.

More than 50 percent of Swissmem companies expect no improvement in new orders from abroad in the next 12 months, and the number expecting a weaker order intake has risen from the first quarter, Swissmem said.

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