According to international credit insurer Coface, this trend is illustrated by a first improvement in the assessment of a sector risk which has long been considered as very high - the automotive and metal industry sectors. These now join the category of high risks.
Ten consecutive months of rising car sales have benefited parts manufacturers, and the market has become more dynamic in Germany, the UK and Spain. This recovery is benefiting the metal industry sector, where the sales and profitability of companies has greatly improved. However, although investments are picking up, the sector remains handicapped by persistent over-capacities.
Coface maintains the assessments of the twelve other Western Europe sectors, which continue to post a high or medium risk. Despite this stabilisation, in contrast to North America and emerging Asia, no European sector has yet reached a risk level that can be considered as moderate.
Buoyed by balanced growth and dynamic consumption, Coface says North American companies have a stable outlook, despite the difficult weather conditions in Q1 2014. The majority of sectors remain in the medium risk category.
The outlook is positive for the automotive industry, which still has a comfortable financial foundation and sales increased by 4.6% at the end of July 2014, over one year. The dynamism of the automotive industry offers outlets to companies in the chemicals sector. In fact, their profitability increased by close to 12% at the end of June 2014, over one year, due to access to cheaper energy and raw materials.
Contrary to Western Europe and North America, where risks are tending to stabilise, emerging Asia is following a reserve path, despite sustained growth in China and India. Due to the process of consolidating over-capacities currently underway, stocks are accumulating and company debt is increasing.
The metal industry has seen steel prices fall. It is the only Asian industry to be assessed as a very high risk sector since last April.
The deterioration of sector risks continues in construction and paper-wood. Construction moves from medium risk to high risk, threatened by weakened demand, more severe credit conditions and the appearance of ghost towns in China. The increase in insolvencies of SMEs in the paper industry, combined with over-capacities, leads Coface to downgrade the risk in the paper-wood sector to medium.
