Swiss companies expect more growth

SGS is just the first Swiss blue chip company to post rising profits Keystone

The reporting season has begun for Swiss companies, with inspection services firm SGS announcing strong growth in profit, a trend likely to continue this year.

Switzerland’s two biggest banks, UBS and Credit Suisse, said on Monday the economy would perform well in 2007, although not quite at the same level as last year.

SGS reported a 19.4 per cent increase in net profit, reaching SFr443 million ($355 million). The group’s revenue rose 15.5 per cent to SFr3.8 billion.

It will not be alone in this case. Analysts reckon that net profits from the 225 companies listed at the Swiss stock exchange are expected to exceed a total of SFr80 billion ($64.2 billion), 23 per cent more than in 2005.

UBS, Credit Suisse, pharmaceutical giants Novartis and Roche as well as food multinational Nestlé could account for SFr46 billion alone.

SGS said thanks to a strong global economy, growing international flows of trade and rising demand for raw materials added up to a bigger volume of transactions. It expects the positive trend from last year to continue in 2007.

Most Swiss business sectors see sales and earnings growth continuing, albeit at a slower rate after one of the strongest years in the past two decades, according to a UBS survey.

“Last year was one of the best in two decades on all counts: sales, earnings growth, selling prices, personnel and investment,” the bank said. “The difficult global economic environment looming ahead is putting a damper on corporate expectations in almost every sector.”

Economists at the Swiss National Bank (SNB) have warned that economic growth will drop to two per cent from three in 2006, which was the highest rate in six years.

The UBS survey of 4,200 firms found that the financial, electrical engineering, chemical and watchmaking sectors were expecting the strongest momentum in 2007.

Long-term potential

Credit Suisse is more optimistic, pointing out that the Swiss economy expanded faster than its long-term potential growth rate for the third straight year, with this trend set to continue.

The bank said that the last time Switzerland enjoyed such a sustained period of strong economic activity was in the early 1970s. Credit Suisse expects the national Gross Domestic Product to increase by 2.2 per cent this year.

Its analysts believe the chemical/pharmaceutical industry and precision instruments will benefit from high levels of growth.

“Thanks to demographic aging, increasing healthcare expenditure, rising prosperity and a global trend towards luxury, demand for medicines, technical medical products and watches continues unabated,” Credit Suisse said.

Companies continue to find it difficult to hire staff to cope with full order books, according to the UBS survey. Almost all sectors added personnel in 2006, with watchmakers, banks, computer service providers and capital good producers struggling to find the right people.

The SNB sees Switzerland heading towards full employment, with jobless rates falling below three per cent this year.

swissinfo with agencies

Potential winners and losers

UBS outlook

Best performers:

Pharmaceuticals
Banks
Watchmaking
Chemicals

Worst performers:

Textiles
Media
Food
Non-food


Credit Suisse outlook

Best performers:

Chemicals and pharmaceuticals
Precision instruments
Post and telecommunications
Electronics

Worst performers:

Agriculture
Clothing
Hotels and catering
Textiles