Coface downgrades chemicals, pharmaceuticals, automotive sectors in Europe

PARIS – In a quarterly update of risk increase noted since April, trade credit insurer Coface has downgraded its credit risk assessment in three business sectors: chemicals, pharmaceuticals and automotive.

In chemicals, the risk moves from ‘medium’ to ‘high’ in Europe and in Emerging Asia. Coface says that in Europe, the profitability of chemical companies has fallen by 19% in one year, due to sluggish demand and competition from US exporters. In Emerging Asia, and more particularly in China, SMEs have become the first victims of the drying up of credit supply.

In pharmaceuticals in Europe,  the risk is now ‘high’. “In Emerging Asia and in North America we note a relative stabilisation (risk considered moderate and medium respectively). In Europe, dispensaries (whose sales and margins are falling) and distributors are affected by measures to reduce the growth in health spending.”

In automotive, Europe is seen as the most affected sector, with risk downgraded to ‘very high’. Coface says the 2009 crisis drastically changed the stakes for the global automotive industry. Europe was particularly affected, and has continued to decline, faced with structurally high production costs and a lack of domestic outlets.

“The new wave of bankruptcies in the French automotive sector illustrates the European problem: between August 2012 and July 2013, their number increased by 11%. Worse still, the financial cost of these bankruptcies for suppliers is up 35%, following a greater number of larger companies going bankrupt, particularly among traders (58% of the total) and sub-contractors (24% of the total).” www.coface.com (ATI).