"Europe's energy crisis is squeezing the small and midsize firms that form the backbone of the continent's economy, leading some business owners to curb production or close up shop.
Katrien Vandenheuvel recently decided to shutter her family's grocery store -- nestled in a village outside Antwerp, Belgium -- after realizing she needed to sell about 3,000 more loaves of bread every month to cover the higher natural-gas bills. The store had already been charging higher prices for pastries and cheeses than chain stores, she says. Raising prices enough to cover expenses would have driven more customers away.
"We didn't want to go further in debt," says Ms. Vandenheuvel, a 41-year-old former schoolteacher. Local bakeries and regional meat suppliers are losing customers, she says, "and I think it's not the end yet."
Many smaller companies in Europe -- from bakeries and masons to makers of clothing and carpets -- lack the economies of scale to shoulder the surge in energy prices fueled by the sanctions on Russia and Russia's decision to throttle the flow of natural gas to Europe. Global giants that produce steel, chemicals, fertilizer and other energy-intensive goods have been among the first to feel the sting of higher gas prices, closing smelters and other high-cost operations in Europe.
European firms without a global footprint, however, are finding it hard to quickly shift production outside the continent, where energy prices are lower. Instead, these companies say they are getting squeezed by suppliers and unable to pass higher costs along to customers. The burden comes on top of supply-chain shocks, just as many businesses were mounting a recovery from the worst of the pandemic.
Price increases will be tougher on Europe's smaller and midsize companies than on multinationals, says Hauke Burkhardt, Deutsche Bank AG's head of corporate lending, based in Germany.
Bigger companies also benefit from long-term energy contracts they negotiated before energy prices leapt. Some use financial-market derivatives to hedge price-volatility risks, and they invested more in cutting their energy usage before the worst price jumps hit, according to economists and bankers watching their loan books for signs of distress among business customers.
"Size, purchasing power, efficiency and cost structure," says Heimo Scheuch, chief executive of listed Austrian construction-materials giant Wienerberger AG, checking off reasons for his edge over struggling smaller peers. The world's biggest brickmaker, Wienerberger operates across Europe and sells bricks and plastic pipes in the U.S. and Canada. "It's actually very dangerous for European industry," Mr. Scheuch says.
Companies with under 250 employees make up around 99% of European Union businesses and more than half of the bloc's gross domestic product, according to the European Commission. They employ around 100 million people, according to commission data.
German insurer Allianz SE expects natural-gas price increases this year to shave around $150 billion from 2022 earnings before taxes and other expenses for European small and midsize firms in the manufacturing sector. That is a hit of about 2 percentage points off the estimated margin of those manufacturers, says Ana Boata, Allianz's head of economic research.
She says the hardest-hit will be energy-thirsty makers of metals, paper and pulp, chemicals, food and beverages, and textiles.
"The situation is actually pretty dramatic right now," says Pau Vila, 27 years old, the general manager and fifth generation of a family-run paper business in the Catalonia region of Spain.
The LC Paper 1881 SA factory makes gigantic rolls of tissue that become toilet paper and kitchen towels for hospitals, airports and offices, and also produces retail-packaged toilet paper for supermarkets. "Customers have big purchasing power, and they expect a lot of stability," says Mr. Vila. Sometimes gas prices go up so quickly a sale makes no economic sense by the time the order is completed, he says.
Raising prices to cover energy bills can hurt demand, so LC Paper might cut back a work shift to save money, Mr. Vila says. But buyers are shopping by price, and costs are affecting many manufacturers of commodity products. Manufacturers have increasingly been asked to shrink the volume of rolls to keep prices from rising too dramatically, he says. "We're not giving you a cheaper product, we're giving you less product. Supermarkets don't want to raise prices."" [1]
1. World News: Europe's Rising Gas Bill Hampers Smaller Firms
Strasburg, Jenny.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 26 Aug 2022: A.9.
Komentarų nėra:
Rašyti komentarą