Supply chain issues pressure European industrial firms: Fitch

Full recovery could be delayed until first half of 2022, rating agency says.

Supply chain issues pressure European industrial firms: Fitch

Global supply chain disruptions, longer shipping times and chip shortages are putting pressure on European industrial firms and their revenues, Fitch Ratings said in a statement on Tuesday.

"The supply chain disruptions are resulting in longer lead times to convert order books into revenue," the global rating agency said.

"New orders intake for the next year could even be subdued by producers’ selective approach, aiming to ensure timely deliveries," it added.

Fitch said companies’ production and delivery capacities have been affected by their capital expenditure cuts and inventory burn-down during the pandemic, which further constrain their ability to catch up with increased demand.

The agency said it expects disruptions to continue in the fourth quarter, adding full recovery could be delayed until the first half of 2022.

"Most large diversified industrial manufacturers should be able to eventually pass on increased costs associated with disruptions, including higher freight costs, rising raw material prices and energy costs, alleviating pressures on margins, which have been temporarily affected," the agency explained.

Fitch warned that the decline in demand and higher costs could have a negative effect on some companies' credit ratings.