LONDON--(BUSINESS WIRE)--A survey of almost 300 companies in chemicals, construction, commodities and technology reveals that 20 percent plan for profit growth of over 20 percent whilst 12 percent expect profit decreases.
Simon-Kucher & Partners‘ survey in seven EU countries found expectations highest in building technology (20 percent profit growth), followed by mechanical & plant engineering (14 percent), then construction materials (13 percent); 14 percent of respondents expect profits to remain at 2011 levels.
New products and services boost sales
Two-thirds of managers expect strong profit growth from improved efficiencies, combined with rising sales. Around 60 percent plan new products and services to boost sales.
The importance of product pricing varies; 65 percent of chemicals and base materials respondents regard price increases as a profit driver, but in electrotechnology and mechanical & plant engineering it’s only 29 percent. “Companies are losing opportunities,” warns Stefan Herr, partner and head of Simon-Kucher’s Technology division. “It’s crucial to pass on cost increases and combine market share with profitability.”
Long-term profit investments
Profit investment is consistent; respondents plan investment in R&D, optimization projects, capacities, internationalization and employee development. “Companies are setting long-term strategies,” reports Dr Fabian Braun, partner at Simon-Kucher. The debt crisis hasn’t changed the long-term focus.”
Investment areas vary by industry; in building technology and mechanical & plant engineering, 75 percent will focus on R&D. Investment in new capacity remains important, but tops the agenda for only 47 percent of respondents.
The UK; focus on margins needed to counter price war risk
Sebastian Strasmann, senior director in Simon-Kucher’s UK office comments, “The UK construction market’s output levels remain significantly below 2007/2008 peak levels, and the latest manufacturing output figures are bleak. It’s important to focus on extending product and service offerings to improve sales. Nearly half of respondents cite boosting market share as a core strategic requirement, which obviously can’t work for every participant - especially in sluggish markets.”
Strasmann fears market share will be gained via price cuts, instead of better product performance. In an uncertain market, he believes focus on margin optimization - not market share - is critical. “Companies must demonstrate price leadership to achieve profit growth.”