ELUXY AB Electrolux (PK)

Supply-chain bottlenecks persist, with shortages of components and surging prices of critical raw materials squeezing manufacturers around the world. Below is a selection of commentary from this week on how leading European companies have fared and their prospects ahead:

Airbus Deliveries Could Be Disrupted by Supply Chain Issues in 2021

Supply chain issues are still a risk to Airbus's deliveries in the short term, Morgan Stanley says. "Management was clear on the nature of the issues here--less reliable timing and quality from suppliers has led to rework requirements at Airbus," the bank says. Despite concerns about the supply chain, overall the European plane maker seems to benefit from strong demand for new narrowbody aircraft, it says. Airbus expects deliver 600 commercial jets this year. (olivia.bugault@wsj.com)

Valeo's Cost Discipline Should Offer Some Consolation Amid Chip Woes

Valeo cut its guidance due to sectorwide pressures stemming from the chip-shortage, but its remarkable execution so far this year should go some way toward alleviating investors' concerns, Berenberg analysts say. Reflecting lower global car production, the French auto supplier cut its 2021 sales guidance, but its adjusted Ebitda margin target is still above consensus views and the company's own adverse scenario, Berenberg says. The brokerage says the guidance cut was largely priced in by the market already, and that it shouldn't detract from Valeo's good performance in a challenging environment, especially on costs. (cristina.roca@wsj.com; @_cristinaroca)

Component Shortages to Get Worse Before They Get Better, Nokia CEO Says

Component shortages are expected to get worse before they get better, Nokia CEO Pekka Lundmark told reporters on a call after the company's third quarter earnings. The global semiconductor situation is expected to worsen in the final quarter of the year, and although the issues will be resolved, it's very difficult to say when, Mr. Lundmark said. However, the 5G market is still growing and he expects it to take a few years to peak. Unlike the 4G market, which peaked and then fell away, he expects the 5G market to peak and remain elevated as new industrial applications are developed. These new industrial uses will fuel 5G investments for years to come, until 6G hits the commercial market, which Nokia estimates could be around 2030. (dominic.chopping@wsj.com)

Volkswagen 3Q Looks Better Than Anticipated Amid Supply-Chain Headwinds

German car maker Volkswagen has reported a third quarter that looks better than anticipated, Bernstein analysts say. "In light of the severe supply-chain disruptions and how VW prepared the market for Q3, actual results are a relief (break-even free cash flow)," they say. Volkswagen's namesake VW brand seems to take the biggest hit from the semiconductor shortages, and the current headwinds put the company's fixed costs in the spotlight, which are exceptionally high, the analysts say. "Results won't impact our FY21 numbers and we expect the very negative recent investor sentiment to lighten towards the end of year," they say. Preference shares in Volkswagen trade 2.2% lower at EUR199.48. (kim.richters@wsj.com)

BASF 3Q Was Mixed Amid High Demand, Supply-Chain Woes

BASF's third-quarter results were mixed, with continuing strong demand but multiple segments struggling under supply-chain constraints and higher input prices, Stifel says. Production and supply-chain disruptions, as well as hurricanes in the U.S., had a negative impact on product availability, particularly hitting the materials segment, Stifel says. However, even there, volume was 7% up year-on-year, with the surface technologies division the only segment with declining volumes, as the automotive industry slumped under the semiconductor shortage, Stifel says. BASF increased its 2021 guidance for EBIT before special items to EUR7.5 billion-EUR8 billion from EUR7 billion-EUR7.5 billion, or around EUR1.0 billion-EUR1.5 billion in 4Q. That translates to a range of outcomes from -10% to +35% year-on-year, Stifel says, which keeps its buy rating. (edward.frankl@dowjones.com)

Sulzer's Full-Year Targets Aren't at Risk From Supply Squeezes

Swiss industrial-machinery maker Sulzer remains positive about hitting its full-year targets despite supply-chain pressures, and has good prospects as a consolidator in the flow-control sector, Morgan Stanley says after the company's nine-month results. Management struck an upbeat tone at the post-results conference call as it reiterated 2021 guidance, though it warned supply-chain pressures could mean sales come in at the lower end of the guided range, MS says. Pressures are more acute for customers than the company itself but the constraints are nevertheless causing some delays--though costlier raw materials have been offset with price increases, the bank adds. Shares slip 0.4% to CHF91.30. (joshua.kirby@wsj.com; @joshualeokirby)

Electrolux 4Q Seen Weighed by Supply-Chain Issues

Electrolux reported a 0.3% fall in organic growth on the year, explained by the 10% hit to revenues from restrictions at the supplier level, Kepler Cheuvreux says. The company now sees headwinds from external factors of SEK4.5 billion from SEK3 billion-SEK3.5 billion, and said it needs further price increases to compensate for the higher costs. Electrolux also warns 4Q will be even more challenging than 3Q in terms of the supplier situation and hopes that things will improve in 2022. "Operating profit developed better than lower consensus expectations, but with a warning for fourth quarter operating profit we still expect downward pressure on the consensus and the share price today." Shares trade 1.2% higher at SEK200. (dominic.chopping@wsj.com)

Schneider Electric's Growth Improved in 3Q

Schneider Electric's 3Q results show that growth accelerated on quarter, and the company has pointed to improvement in late-cycle markets, Citi says. The French engineering company's supply-chain constraints will continue for another two to three quarters, but the impact looks less severe than for its peer ABB, which cut its guidance last week. Schneider instead retains its full-year outlook of 11%-13% in organic revenue growth, but if 3Q comparisons with 2019 continue to 4Q, consensus is likely to move to the upper end of the guidance range. Third-quarter sales of EUR7.22 billion were a touch ahead of consensus, with organic growth of 8.8% well above expectations of 7.9%, Citi says. The bank keeps its neutral rating on the stock with a EUR140 target price. Shares rise 2.4% to EUR146.32. (edward.frankl@dowjones.com; @Ed_Frankl)

Puma Seen as Coping Well With Global Supply-Chain Disruption

Puma's narrowed full-year guidance for EBIT indicates that the German sporting-goods company is handling the global supply-chain disruption well, Jefferies analysts say, adding, however, that the headwind will get worse in the last quarter of the year. Puma's 3Q is considered very strong, with its brand healthy in Western markets and resilient in the Asia-Pacific region where it is affected by coronavirus restrictions, the analysts say. "China likely has remained amply dilutive to the region, with the group noting the "very difficult market situation," reflecting a much greater preponderance of new cases and restrictions relative to 1H," Jefferies says. Shares in Puma trade 2.8% higher at EUR105.40. (kim.richters@wsj.com)

(END) Dow Jones Newswires

October 29, 2021 09:12 ET (13:12 GMT)

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