Market Monitor - Machinery - Denmark 2016

• Stable performance, but high input costs
• The agricultural machinery segment faces some troubles
• No insolvency increase expected

The Danish machines/engineering sector is very export-oriented. Some of the larger companies have global footprints in the production and sale of energy optimisation products (i.e. thermostats, pumps, compressors) and equipment for the global mining industry. Other subsectors, such as equipment for the slaughtering/food processing industry and machines for the agricultural sector are more oriented towards closer markets like the Nordics, Germany and the UK.

The sector has shown a stable performance over the last 2-3 years. Key success factors for Danish machinery businesses have been their ability to streamline costs, continued investment in product development/new technology and expansion to new export markets. However, structural weaknesses are high energy and labour costs. Labour costs in the Danish manufacturing industry are among the highest in the EU.

Danish engineering value added growth is expected to increase 3.4% in 2016 and 2.0% in 2017. The overall performance outlook for 2016 and 2017 is stable for certain segments, such as exporters of energy optimisation products used in areas such as heating, cooling, and water treatment. The same accounts for suppliers to the globally growing wind turbine sector and for producers of machines for automatisation in the manufacturing process. That said, the outlook for producers of agricultural machines is subdued, due to lower investments made in the European farming sector.

Payment behaviour has been good over the last two years and the number of payment delays, defaults and insolvencies is expected to remain stable in 2016. Bankruptcies mainly hit smaller players with high production costs and where restrictive access to bank financing has put pressure on liquidity. Therefore, we monitor smaller players more closely, while our general underwriting stance of this sector is generally open to neutral.