5 days ago
Swedish Industry's Tariff Navigation Clouded by Currency Hit
(Bloomberg) -- Currency headwinds are darkening the outlook of Sweden's industrial companies, clouding a fairly resilient performance in the face of US President Donald Trump's trade war.
As the country's leading sector — industrial companies make up almost half of the 30-member OMX index's weight — its fate is crucial for Sweden.
Atlas Copco AB took the biggest hit thus far with a 1.5 billion kronor ($156 million) impact on profit in the second quarter. The air compressor and vacuum manufacturer's earnings for the period missed analyst expectations. Shares fell as much as 10% in Stockholm trading.
The currency impact will be 'difficult' to mitigate, Chief Executive Officer Vagner Veloso da Silva Rego said in an interview, while customer hesitancy is also growing in the face of uncertainty.
'We see a lot of discussions, but fewer decisions,' he said. 'Customers want to have a bit more clarity before they make decisions, especially for large equipment. This is where we suffered the most.'
Fellow industrials fared better for now as seals and bearings manufacturer SKF AB, lawn-mower maker Husqvarna AB and mining equipment provider Sandvik AB all reported robust numbers, having mitigated the impact from tariffs by implementing price increases and rerouting trade flows. Though the hit from currency fluctuations is hard to ignore.
'We are living in a volatile world and currencies are something we just have to work with,' SKF CEO Rickard Gustafson told Bloomberg. 'It's not just the Swedish Krona. We have large flows from euro to dollars and euros to China.'
The group's adjusted operating profit beat estimates for the second quarter as aerospace and electric vehicle demand rose, though was down year-on-year due to 'significant' currency headwinds last quarter, with a further 500 million kronor hit expected on third-quarter earnings.
Meanwhile, Husqvarna — which also beat estimates — said it continued to experience uncertainty related to tariffs and noted 'significant currency fluctuations,' which particularly impacted North American markets, while Sandvik flagged an 800 million kronor hit on third-quarter profit from currency fluctuations earlier this week.
The group also warned of trade war-induced volatility with tariffs remaining a question mark on the investment side, Sandvik CEO Stefan Widing said on Wednesday's earnings call.
--With assistance from Jonas Ekblom.
(Adds details from Atlas Copco from third paragraph)
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