Strong franc continues to hurt machine industry

Turnover was down 7% at Swiss machine manufacturer Tornos over the first nine months of 2015 compared with the previous year Keystone

The Swiss machine industry continues to suffer due to the pressures of the strong franc. Orders were down 13% last quarter – the fourth in a row. There is no sign of any improvement on the horizon and further job cuts are expected, the sector’s lobby group has declared. 

Orders during the third quarter of 2015 fell 12.8% compared with the previous year, Swissmem, the lobby group for the machine, electrical and metals industry, said on Friday. 

This is the fourth consecutive quarter fall – the equivalent of 14.1% over the past nine months. Turnover was down 7% and exports fell 3.9% over the same period, for a total value of goods of CHF46.8 billion. 

“The drop in exports has accelerated since the start of the year,” Swissmem said in a statement. 

The sector is struggling to remain competitive and relieve pressure on margins due to the strong franc. In January, the Swiss National Bank (SNB) abandoned its cap on the franc at CHF1.20 per euro – sending shockwaves through Switzerland’s export-driven economy. One euro is currently worth CHF1.08.   

The branch exports nearly 80% of its products, of which 60% are exported within the eurozone. The lower costs for imported materials only partially compensate for the currency-related price increases. 

“On top of the collapse of orders and turnover, the main problem is major losses on margins which hurts,” said Swissmem. 

A survey earlier this year showed that more than one third of companies in the machinery sector are expecting an operating loss for 2015. 

The outlook for the next 12 months is not rosy. Less than 30% of firms foresee an increase in orders. 

Swiss companies have reduced working hours, cut jobs and even moved production abroad to relieve pressure on their margins and remain competitive after the SNB abandoned its franc ceiling. 

Swissmem estimates that the sector, which represents 9% of gross domestic product, cut 4,500 jobs between January and July.