Fund manager Roger Peeters is significantly more optimistic than the general sentiment about the impact the looming energy crisis could have on local companies.
August 8, 2022. FRANKFURT (pfp Adisory). One crisis follows the next. After extreme scenarios including industrial standstill have been discussed for months thanks to Vladimir Putin’s politically desired shortage of gas supply, we are also heading towards an electricity crisis. The spot prices are already climbing into unbearable and further increasing dimensions. Many politicians are happy to appease that we “only have a gas problem, but no electricity problem”. With the end of the sun and wind season, it will be exciting, especially when more nuclear power plants are shut down. It will remain uncomfortable for our economy and consumers alike if nothing is done.
If nothing is done, mind you. But this is definitely the case. Especially in the current phase of the company reporting season, in which countless companies from the most diverse sectors report on their business development and update their outlook, one notices clear changes across the board. Everyone recognizes the problem, everyone works on solutions within the range of their own possibilities. And these solutions are diverse and of course often debatable, for example whether they are sustainable (eg if oil and coal are experiencing a renaissance). But something is happening: energy-intensive production is being relocated to other regions, energy-saving potential in companies is becoming a top priority and research is being carried out more intensively than I have ever seen. Early hedging of purchase prices provided breathing room. The construction of small self-sufficient power plants in industrial companies is also a big topic.
Of course, none of this is perfect protection against whatever adversity may come, and dependency on third parties remains. But I would definitely not downplay such measures. Because as with the supply chains that have been massively disrupted for around 2 years or the corona pandemic, I at least would not bet against the concentrated innovative and transformative power of companies. Even in these extreme phases, there were certainly corporations that were simply lost and could only be cushioned by the state. However, many more companies that were not hit head-on have changed their business models very quickly and adeptly, in the pandemic phase significantly towards significantly more digital business models. To exaggerate, the necessary change has accelerated massively under pressure.
And this is also the hope in the current phase. The immense pressure on many companies (and also on private households) will accelerate change. There is probably no one left who doesn’t question their consumption of gas and electricity in a completely different way than in the past. In my opinion, the fact that this is done at least as adeptly in business as in private life has a lot to do with capitalism, which shows its essential strength in such a phase. Analogous to humans, who in the wild can often unleash undreamt-of powers when it comes to survival, companies as institutions have a powerful urge to continue to exist, filled with workers who want to keep their jobs and owners who want to lose their capital afraid.
Of course, one must not be naive and downplay current problems and dangers, especially in geopolitics. But what I take away from a broad look at the corporate landscape in the summer of 2022 is certainly not as fatalistic as public perception often suggests. If politicians perceive the will to change, which in my opinion is very prevalent, and back it up with the right decisions, then that will probably not protect us from drifting into recession, but it can lead to the economy not without exception, but in some of breadth, even strengthened, will also emerge from this crisis.
von Roger Peeters, 8. August 2022, © pfp Advisory
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