Bloomberg said that it is a matter of time when rising costs and supply chain pressures appear in corporate earnings reports, as the crisis intensifies The Red Sea That affects shipments of everything from cars to energy.
She pointed out that many companies warned of the impact of the tensions, as the American electric car manufacturer Tesla plans to stop production for two weeks in a German factory due to shipping delays, while the Swedish company Volvocar announced that it will stop production for 3 days in its Belgian factory, and British retail companies – such as: Tesco, Next and Marks & Spencer – to the risks of rising prices to consumers.
Long paths
The agency attributed the matter to the fact that at least 2,300 ships take long routes to avoid attacks Houthi group Yemen in the Red Sea, a waterway that typically handles more than 12% of global maritime trade.
The Houthis target Israeli ships or those heading to Israel In an expansion of the repercussions of its war on Gaza stripThe United States and Britain responded by targeting sites belonging to the group, which prompted them to announce that ships belonging to the two countries had become legitimate targets.
Central bankers warn of a rise Inflation Which may hinder interest rate cuts, and for many companies, especially in Europe, this increases transportation times, increases the value of shipping bills and insurance costs, prompting analysts to rethink corporate profit estimates during the year.
In the past three months, the combined profit expectations of automakers decreased by 5%, according to data compiled by Bloomberg. On the other hand, shipping companies emerged among the winners, with container shipping prices rising by 300% on some lines, as estimates of profits for the European Transport Index (MS) increased. CI 7% in just two weeks.
The head of the equity department at Lazard Freres Gestion in Paris said that the automobile sector is “one of the first sectors to suffer due to the complex and tense supply chain,” and it also avoids retail sales. Because he “may suffer from a lack of products to sell,” the agency quoted him as saying.
Brenner predicted that if this continues for another month or two, corporate profit warnings will certainly be issued.
Here’s a look at how earnings shape different sectors:
Shipping and insurance
If current container shipping costs persist, they could increase headline inflation in Britain and the eurozone, starting in late 2024 and early 2025, according to Bloomberg Research estimates.
But the events are boosting the fortunes of global shipping companies, such as: Maersk and Gabagh Lloyd in Europe, ZIM Integrated Shipping listed in the United States, and Mitsuri OSK in Japan, and insurance companies are supposed to benefit as well, with insurance premiums estimated at ten times. What you get under normal conditions on some freight routes.
David Vernon of Sanford C. Bernstein expects an increase in profits for logistics companies as well, including freight forwarders, if companies that have run out of shipping options turn to air freight.
“Air freight is definitely the winner,” Vernon said, referring to companies; Such as: FedEx and DHL are among the potential beneficiaries.
Retail
Next, which imports most of its fashion and home supplies from Asia, was among the first retailers to report the attacks.
Breakmark, which is owned by Associated British Food and H&M, has significant exposure to ocean freight, according to RBC Capital Markets analyst Richard Chamberlain, while Zara’s owner Inditex SA’s supply comes mostly from neighboring countries.
Likewise, Brian Garnier & Co. highlighted French furniture retailer Maisons du Monde as being particularly vulnerable, as it buys 75% of its goods from Asia and transports 90% by sea.
Frederic Carrière, from RBC Wealth Management, says that the problem for such companies is the difficulty of passing on higher costs to consumers, due to their economic background, which makes them responsible for absorbing the costs, which puts pressure on profit margins, according to what the agency quoted him as saying.
the cars
Tesla and Volvo Cars are the only ones that have announced the cessation of production, so far, but such supply delays “may represent a new risk to light vehicle production this year,” the agency quoted Morgan Stanley as saying.
However, most likely the industry will not witness a repeat of the difficulties of the Corona epidemic, and Bank of America analyst John Murphy wrote, “More expensive fuel, additional days with rented space for transportation, and higher freight rates will have a negative impact on companies’ profits and losses, but, With this in mind, transportation costs are approximately 57% lower than Covid levels,” the agency quoted him as saying.
energy
The impact on oil prices has been relatively weak, but that may change if a prolonged conflict causes supply shortages.
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However, oil markets are bracing for turmoil that could last for weeks, and fewer tankers are passing through the Bab al-Mandab Strait at the southern end of the Red Sea, according to Vortexa data compiled by Bloomberg, and the numbers show that the number of ships carrying crude petroleum products or similar materials has decreased. By 25% this year until January 19 of the previous year.
