Struggling with tariff issues, OC Oerlikon from Switzerland adjusts its full-year projections downward
Swiss Manufacturer OC Oerlikon Affected by U.S. Tariffs
The U.S. tariffs on Swiss goods, scheduled to take effect on August 7, are expected to impact Swiss manufacturers, including OC Oerlikon. The Swiss mechanical, electrical, and metal (MEM) industry, which accounts for 24% of Switzerland's exports, is particularly vulnerable.
According to a report edited by Christopher Cushing and Milla Nissi-Prussak, the U.S. has a punitive tariff rate of 39% on Swiss goods, higher than most other Western trading partners. This high tariff could make Swiss products more expensive and less competitive in the U.S. market.
OC Oerlikon, a Swiss industrial group, operates within the SME-heavy Swiss manufacturing sector. The majority of Swiss MEM industry members and SMEs do not have U.S. production sites, leaving them exposed to the full impact of these tariffs.
The tariffs could potentially reduce Swiss exports to the U.S., one of Switzerland’s largest export markets, historically absorbing about 18% of Swiss exports. This could force companies like OC Oerlikon to either relocate production to the U.S. to avoid tariffs or face profit margin compression due to the increased costs imposed by tariffs.
Despite these challenges, OC Oerlikon's reported second-quarter order intake was above the consensus, coming in at 405 million Swiss francs, 6 million Swiss francs higher than the company-compiled consensus. However, the group has lowered its full-year guidance due to weak industrial demand and the impact of U.S. trade tariffs. The operational EBITDA margin is expected to be between 17.0% and 17.5%.
The group had previously guided for stable to low single-digit percentage organic revenue growth and an operating margin of around 18.5%. However, the new guidance forecasts flat to slightly lower sales at a constant foreign exchange rate.
The report was prepared by Maria Rugamer and Bartosz Dabrowski in Gdansk. The tariffs have had a negative impact on OC Oerlikon's second-quarter orders, with the company adopting a wait-and-see approach due to trade tensions causing customers to delay their orders.
In summary, OC Oerlikon and similar Swiss exporters can expect increased costs, reduced competitiveness, and potential strategic shifts such as relocating production to the U.S. market, unless there is a mitigation via future trade negotiations.
- The increased costs imposed by the tariffs could potentially lead OC Oerlikon, operating within the SME-heavy Swiss manufacturing sector, to consider trading in foreign exchange, as they might need to relocate production to the U.S. to avoid tariffs.
- The U.S. tariffs could impact the finance sector, as companies like OC Oerlikon, in the Swiss industrial group, could face profit margin compression in the business industry due to the high tariff rate on Swiss goods, making their products less competitive in the U.S. market.
