The turnover of the Swedish listed companies for the second quarter of the year is about 3 percent better than expected, says Lars Söderfjell, head of equities at the Bank of Åland. The operating results beat expectations by almost 2 percent.
“The reports are quite good given the conditions,” he says.
Impressed by pressured companies
Söderfjell is impressed by how well the companies handled the quarter’s “difficult environment”. So does Mattias Eriksson, analyst and equity manager at Pam Capital.
“It is hugely impressive that basically all major companies manage to do this and manage to maintain high profitability despite the difficulties,” he says.
The component shortage is still a real problem and causes many companies to hedge with larger stocks, says Eriksson. It can also be seen in the companies’ cash flow, which has been negatively affected. But generally speaking, there are no steep falls in the results and the margins are at good levels, says the stock manager.
— When the reports were released in April, they said that Q2 will be a complete disaster, and that has not been the case at all.
Manufacturing companies’ profit margins are affected by the much-talked-about disruptions in supply chains, says Söderfjell, but they still report better than expected.
“Aside from the manufacturing industry, the banks are delivering strong results, despite the fact that the effects of the increased key interest rates have not yet been seen, which will be good for them in the short term anyway,” he says.
The economic turmoil is not visible
Concerns about inflation and recession are not reflected in the second quarter’s reports in the form of deteriorating demand, says Söderfjell. Among the 30 largest listed companies, however, quite a few have clear consumer exposure.
— Even if demand were to plummet now during the autumn, it would take a while before it hits these companies’ demand.
In the retail trade and in the housing market, it is clearer that households have been affected by higher interest rates and energy prices, says Söderfjell.
— It is the retail trade that has taken a beating so far. We have seen a lot of profit warnings from especially e-commerce companies here during the late summer.
Lower demand this autumn
Towards autumn and winter, the falling demand can also reach the larger companies, says Söderfjell.
– Preparations are being made for the fact that we will have lower demand towards autumn and winter, but it is difficult to say anything about how difficult it will be.
And as for the companies’ future prospects, they are expressed with caution in the reports, says Eriksson.
— I think the companies are generally worried about painting too positive a picture which they then have to lower and continues:
— It is wise not to say too much. The risk is that the stock market will be disappointed and the share price will go down.
“Relief rally” on the stock market
The stock market is still volatile and unstable, says Eriksson, but the steady reports still provide security.
— There will be a small relief rally when the reports come in so well.
After the end of the reporting period, however, the stock market decline seen during the year risks continuing a little longer, he says. This is because the focus can once again shift towards macroeconomic factors such as inflation and the economy.
For the stock market to turn upwards, it may be required that the companies confirm a gloomier picture and deteriorating demand, says Eriksson.
— Then the stock exchange can look ahead and say that “now we have the worst behind us”, but we are not there yet.