China Slowdown shouldn’t have Major Impact on EMEA Cosmetics Industry

« With China facing an economic slowdown, the question has arisen as to what this means for the many companies in Europe who have an invested interest in the country; although market analyst firm Moody’s says that there shouldn’t be too much concern for cosmetics manufacturers.

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According to Moody’s, the consumer goods industry faces moderate exposure to the slowdown, and it is rather EMEA‘s mining sector that faces the most exposure to the expected gradual slowdown in China, followed by oil & gas, shipping, chemicals and auto manufacturing.
Speaking with Paolo Leschiutta, Vice President – Senior Credit Officer, and Motoki Yanese, Vice President – Senior Analyst at Moody’s, they explain that the cosmetics industry should not be too concerned by the slowdown, and that firms from EMEA and other parts of Asia can still target growth, and that organic growth is most likely to be affected.

Moody’s does not expect any major impact on cosmetic companies from a slowdown in China but rather a reduction in organic growth rate,” they tell CosmeticsDesign-Europe.com.
“For example, Shiseido has been benefitting from sales to Chinese tourists who are active buyers of Japanese cosmetics products and the company is still aiming for reasonable growth with its Chinese business, although this may be curtailed somewhat by the recent slowdown.”

Still strong enough for most

Moody’s has released a report, entitled ‘Non-financial corporates – EMEA: Impact Of China Economic slowdown Is Significant for Some, Immaterial for Most’, that details the impact for many industries, with the aforementioned being hit the hardest, stating consumer product companies have only moderate exposure to China.

It says that for most manufacturers, growth in China is still strong enough to limit any impact of a slowdown, while organic growth could slow for some.
Moody‘s recently slightly revised its GDP growth forecast for China to 6.3 % for 2016 and maintained its forecast of 6.8 % for 2015.
It says that while this represents a significant slowdown over previous years, the country’s growth rate remains significantly ahead of most other developed countries, and notably the Euro area.

Further policy support is likely to ensure that the economic slowdown in China remains gradual, and in spite of the slowdown, Moody’s says that a number of European companies still expect industry growth in China to exceed that of other regions where they operate.

« The impact of developments in China for many EMEA sectors… will be negligible.
While these sectors are not irrelevant to the Chinese economy, they tend to be more regionally focused, so any exposure is too minimal to affect their creditworthiness », comments Richard Morawetz, a Moody‘s Group Credit Officer for the Corporate Finance Group and author of the report.
« A handful of manufacturing companies have also shifted production to China and export to other countries, so they could potentially benefit from a weaker Chinese currency, if that happens, or slowing wage inflation.”


Source:
Article by Andrew Mc Dougall
http://www.cosmeticsdesign-europe.com/Business-Financial/China-slowdown-shouldn-t-have-major-impact-on-EMEA-cosmetics-industry

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