Here’s What European Companies Are Saying About the Trade War

(Bloomberg) --

Another busy earnings week has seen more European companies cite the trade war between the U.S. and China for a slowdown in business. “Uncertainty” was the theme of the week, with many firms still reeling from President Donald Trump’s surprise escalation of the dispute on Aug. 1.

There’s no letup in sight either: The yuan dropped to a fresh low versus a basket of trading-partner currencies on Friday while sentiment was also tempered by a report that the White House is holding off on a decision over licenses for business with Huawei Technologies Co.

Some companies are making last-ditch lobbying attempts to be spared from the final list of U.S. tariffs, while others have been using quarterly reports to bemoan the impact of the saga. Below is a summary of what European companies have had to say over the past five days.

Transportation

Tough economic times call for difficult sacrifices. That became clear this week with the news that the trade war has hit the private jet industry. BBA Aviation Plc reported that tariffs, along with Gulf tensions and a slowdown in China, have caused a “reduction in discretionary flying, which has been most notable in our charter customer segment’’. BBA’s Signature division, which operates over 200 private jet terminals worldwide, suffered a 2.6% decline in adjusted operating profit.

The auto sector has been one of the worst hit by the trade fallout, and Continental AG Chief Financial Officer Wolfgang Schaefer hinted during a Bloomberg Television interview this week that the parts maker could alter its manufacturing plans in response. The company isn’t preparing for a scenario where the dispute will end “in the next weeks, or the next months,” he said. The tire manufacturer “will have to adjust to different footprints of customers,” he added.

Meanwhile U.K. fuel tank maker TI Fluid Systems Plc warned of rising costs because of tariffs amid a slowdown in China, while aircraft parts supplier Senior Plc said tariffs, as well as Brexit and “other likely geopolitical events,” could affect “some or all” of the sectors within which it operates.

Industrials

The private jet industry might be the poshest sector hit by the trade war, but diamonds come close. Evgeny Agureev, director of Russian mining company Alrosa PJSC, warned that the dispute is also affecting consumer demand for its gems.

Elswehere, specialist valve supplier Rotork Plc blamed a reduced operating margin in its gears division on the tariffs, while there’s more evidence of businesses moving at least some manufacturing out of China. Satellite manufacturer Global Invacom Group Ltd is reducing activity there, “in light of further recent tariff increases.” The company also has factories in the U.K., U.S., Israel and Malaysia, although its largest site is in China.

Meanwhile, photography product specialist Vitec Group Plc confirmed it is sourcing goods from alternative countries, as well as increasing prices, to mitigate the effects of the dispute. Its strategy appears to be working, after the company reported a “robust” performance, ”despite photographic market headwinds and the impact of U.S./China tariffs.”

Finance

Asia-focused HSBC Holdings Plc isn’t expecting any material change to its principal risks for the next six months, “despite increased uncertainties arising from the tensions between the US and China.” The bank did, however, attribute an increase in its expected credit losses as a percentage of customer advances to the trade tensions.

Interdealer broker TP ICAP Plc reported that first-half revenue from interest rate products in its global broking division fell 2% as expectations of rate increases were pushed back “against a backdrop of slowing economic growth and the impact of the U.S. China trade war.”

Professional Services

Profits at Savills Plc fell after political instability damped investor confidence in the U.K. and Hong Kong. But as well as the Brexit saga and political unrest, the real estate broker noted that “the imposition of Sino/U.S. trade tariffs has affected investment confidence, particularly in Hong Kong, where office investment volumes declined by 34% during the period."

Recruitment giant Pagegroup Plc, which reported operating profit up 11% in the first half of the year, also noted challenging conditions in Asia Pacific “due to the trade tariff uncertainty in Greater China,” with the “contagion” spreading as far as Singapore.

Apparel

Adidas AG is looking at the trade war from a slightly different perspective, focusing on fluctuations in the yuan, rather than the tariffs. “When you look upon the macros of it, the currency war is much more severe with much bigger consequences than the tariffs,” Chief Executive Kasper Rorsted told Bloomberg TV. The company earned about 17% of its 2016 revenue in China, according to Bloomberg data. A weaker yuan reduces the company’s revenue when translated into euros.

Next Week...

Watch out for A.P. Moller-Maersk A/S’s numbers, with the performance of the world’s largest shipping company seen as a bellwether for global trade.

To contact the reporter on this story: Ivan Edwards in London at iedwards16@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Joe Easton, Phil Serafino

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