European Companies Anticipate Supply Chain Issues Will Stretch Into 2022

By Mauro Orru

European companies across sectors and markets are citing the effects of supply chain issues in their latest earnings reports, with some expecting pandemic-related disruptions, supply bottlenecks and a shortage of semiconductors to stretch into the new year. Below is a roundup of comments made by European companies on supply-chain issues:

German chemicals company BASF SE posted higher sales in the third quarter, citing significantly higher prices due to strong demand alongside low product availability and higher prices for raw materials.

However, it conceded that production and supply-chain disruptions due to hurricanes in the U.S. and raw material shortages harmed product market availability.

"BASF assumes that supply bottlenecks will continue to negatively impact [the] global economic recovery in the fourth quarter of 2021," it said Wednesday.

French energy-management company Schneider Electric SE said Wednesday that pressure in global supply chains, such as from component shortages, increased in the third quarter and are unlikely to abate for at least another two or three quarters.

The company expects it will continue to face higher input costs for raw materials, freight and the sourcing of electronic components, despite the stabilization of some commodity prices in the third quarter.

"We continue to operate in an increasingly constrained supply chain environment, globally, resulting in shortages, and increased input and freight costs, which we continue to manage with our customers and suppliers. Against this backdrop, we confirm our full year targets," said Chief Executive Jean-Pascal Tricoire.

German sporting-goods company Puma SE said Wednesday that gross profit margin in the third quarter climbed but it confirmed that higher freight rates had a negative effect.

"As a result of the longer-than-expected lockdown in South Vietnam as well as port congestion and container shortages, the industry faces delays, which are having a negative impact on Puma's product supply in the short-term. Puma will continue to maneuver through these challenges by building on its brand momentum and operational flexibility," the company said.

Italian aperitif maker Davide Campari-Milano NV said Tuesday that sales in Asia Pacific rose 30% organically in the first nine months, with Australian sales up 5.7%. However, it attributed a normalizing trend in the third quarter to an unfavourable comparison base, snap lockdowns in the country and some supply constraints.

"Regarding the outlook for the rest of the year, we expect the positive brand momentum and favorable sales mix to continue in the last quarter, helping to partially offset the intensifying input cost pressure, particularly logistics costs, accelerated brand building investments, as well as structure costs phasing. Looking beyond the current year, whilst uncertainty remains in connection with the evolution of the pandemic and its induced effects such as logistic constraints and intensified input cost pressure, albeit mitigated by the improving outlook for agave, we remain confident of our solid business momentum," Chief Executive Bob Kunze-Concewitz said.

Swedish home-appliance manufacturer Electrolux AB said Wednesday that supply-chain constraints hit production output by an estimated 10% during the third quarter and will become even more challenging in the fourth quarter.

"The tight conditions for electronics and ocean freight also led to significant temporary cost increases, such as express logistics and spot buys, of about SEK300 million that could not be fully offset in the short term. In particular, our North American business area was affected since the congestion at important U.S. ports amplified the supply constraints. In addition to a negative impact on volumes and mix, the business area also faced higher costs, driven by the use of more express logistics and high production inefficiency caused by limited planning visibility," said Chief Executive Jonas Samuelson.

"We continue to have a tight collaboration with suppliers to mitigate global supply shortages, but we estimate that the fourth quarter will be even more challenging than the third quarter. Although we anticipate sequential improvements in 2022, we expect challenging conditions to remain in meeting continued strong demand," he added.

Sweden's lock maker Assa Abloy AB said Wednesday that material shortages, supply-chain challenges and higher costs will continue to harm its markets for the rest of the year.

"Thanks to several price adjustments and operational improvements we achieved an operating leverage of 22%, despite the significantly higher material costs, higher logistical costs, and operational challenges linked to component shortages," Chief Executive Nico Delvaux said.

"We also assume material shortages, logistic challenges and cost inflation to continue to impact our markets during the rest of the year," Mr. Delvaux added.

London-based book publisher Bloomsbury Publishing PLC said Wednesday that pretax profit for the first half of fiscal 2022 rose nearly four-fold, with revenue up 29%.

The company said it mitigated print supply chain challenges in the first half, as it printed well in advance of its usual peaks in the run-up to Christmas and the beginning of the academic year in the fall.

"Retailers and online booksellers have significantly increased stock levels over previous years to ensure they have sufficient stock for Christmas given the supply chain problems. Our first-half revenues have therefore been boosted by customers ordering earlier than in previous years," the company said.

It said it is confident of achieving market expectations for the year ending Feb. 28 despite supply chain impediments.

Write to Mauro Orru at [e-mail]; @MauroOrru94

(END) Dow Jones Newswires

October 27, 2021 07:38 ET (11:38 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.