Restructurers – get focused!

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HANSE Interim | Team RESEARCH: Where is the work for interim restructurers? Which industries in Germany are currently in crisis?

The Coface Industry Barometer elaborates on which industries interim CROs and the restructuring industry need to focus on in the future!

Most of the main industries in Germany were still showing signs of weakening from the effects of the Corona pandemic at the end of 2021. Thus, according to Coface’s analysis, 11 of the totals of 13 industries considered had at least a medium risk of default in Q4 2021, and 5 times even a high or very high risk was attested. The only exceptions are the chemical and pharmaceutical industries, which in turn benefited to a certain extent from the pandemic.

  • What effects can be expected from the war between Russia and Ukraine?
  • Which industries will be particularly affected by sanctions?
Restructurers beware. COFACE Barometer - The industry risks
Source: Coface

General impact of the war in Ukraine

In the wake of the war between Russia and Ukraine, many industries will face further negative repercussions and an increase in default risks is likely as a result.

Implications for restructurers. Russia: Oil and gas are important for Europe
Sources: Gazprom, BP Statistical
Review: Coface

In addition to significant oil and gas exports to Germany, Russia and Ukraine are important suppliers of agricultural commodities such as wheat, but also of metals.

Due to the export ban on these goods, commodity prices are rising, higher inflation is limiting purchasing power and growth is declining.

Sector-specific effects

According to Coface’s analysis and the assessments of HANSE’s research department, the following industries in particular are at increased risk from the effects of sanctions:

Energy sector: The shortage of raw materials has led to a significant increase in energy prices. In principle, all sectors are affected by this – especially manufacturing companies.
Food industry: Leading grain traders suspended their operations in Ukraine, prices for corn and coarse grains will increase. Higher feed costs will cause meat to become more expensive. Higher natural gas prices mean lower fertilizer production and/or higher prices, which in turn means lower agricultural yields.
Transportation industry: Rising fuel prices increase the risk of insolvency for logistics companies. In addition, air traffic will be adversely affected. This is due to rising kerosene costs and increased kerosene consumption because of flying around the war zone. There is also a disruption in rail freight traffic between Asia and Europe.
Chemical industry: A halt to imports of Russian natural gas will lead to a drastic increase in the price of raw materials. The raw material neon gas, which is particularly important in the automotive industry, is particularly affected.
Automotive sector: There is a complete production standstill at Ukrainian suppliers. In addition, there is a shortage of palladium from Russia for catalytic converters. About one fifth of the palladium imported to Germany comes from Russia. Similarly, Russia is a producer of nickel, an important raw material to produce lithium-ion batteries and necessary for electromobility.
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Conclusion

Due to the current situation, the general uncertainty continues to increase.

Due to the sharp sanctions introduced, an increase in industry default risks and thus corporate insolvencies can be expected. Of course, in addition to CROs, functional interim managers from supply chain and logistics to secure supply chains and buyers to manage material price increases and supply will have enough to do in these industries.

What developments do you expect in the future?

Your HANSE Interim Team

Andreas Lau and Christian Heuermann
Management

Sources: HMC research department, statista, BdS, npd group, IBISWorld, press

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