- Confidence in consumer facing companies takes a hit on supply chain issues
- Motor manufacturing shrinks
- Lithium miner offer
Consumer-facing concerns
Confidence among consumer-facing companies is slipping, according to a survey conducted by the CBI. After the initial rebound as restrictions were slowly lifted during the second quarter of the year and into the early summer, several issues have manifested themselves in recent weeks including a continued lack of capacity in supply chains and the labour market.
The HGV driver shortage has been well flagged, indeed we reported on it in June, but this week its effect on supply chains was voiced by the likes of Iceland, where bosses warned of 30-40 deliveries a day being cancelled and began to raise concerns over Christmas, and Tesco, whose chairman John Allan yesterday admitted 'We are very short of drivers'. Furthermore, in the past week Nando’s has had to shutter ten per cent of its stores due to shortages of chicken and McDonalds stopped selling milkshakes as supplies ran dry. The shortage of capacity in delivery has been exacerbated in recent months by the ‘pingdemic’ hammering food production and distribution services with staff shortages caused by people self isolating made worse by a jobs market which, at last calculation, has almost a million unfilled vacancies.
The CBI survey of the service industry today illustrated a dichotomy within the sector with professional services companies still on a high and confidence for the coming months remaining strong but consumer facing businesses far more gloomy. Overall confidence in the sector fell to a reading of minus 17 per cent, from a positive reading of 47 per cent in May when restrictions were being gradually lifted.
Read more:
How will the booming jobs market hit gig economy giants?
Car manufacturing stalls
Further gloom in the manufacturing sector where car makers reported a slump in production in July with UK factories producing just 53,400 new vehicles in July - the lowest level of monthly production for July since as long ago as 1956 and down more than 37 per cent on the same month last year.
Supply chain issues are at play here too, particularly the supply of microchips which are ever more essential components in the modern motor car. This supply issue has been well known and is hampering industries beyond automotive around the world. Subsequently global manufacturers such as Volkswagen and Toyota have already scaled back production.
Notably in the UK, the smaller total sales pool has resulted in a leap in the representation of electric and hybrid electric cars among the industry’s figures with almost a quarter of cars produced in July being at least partially electric.
One of the biggest frustrations for car makers in the current situation is that demand for cars has remained strong throughout the pandemic and indeed may have been enhanced by the public’s continuing reluctance to return to public transport. Read our analysis of this from earlier this month.
Read more:
Carmakers focus on electric future as chip shortage drags on
Picking the winners of the electric vehicle revolution
Global energy sapped
As we warned earlier this week when covering results from oil services specialist Wood Group(WG.) the resurgent oil price during the opening months of 2021 has yet to feed through to demand for oil services companies. Today Wood’s peer Hunting (HTG) recorded a small loss of $3.6m for the six months to June on revenues which came in 35 per cent lower than 2020 and warned that the second half recovery would be weaker than the company previously expected. Management referenced continued concerns around Covid flare ups, especially in its Asian markets, as reason for caution around its second half performance and said full year earnings are now likely to be in the region of $10m lower than last year.
Ganfeng offer for Bacanora Lithium finally arrives
One of London's most advanced battery metal plays, Bacanora Lithium (BCN), will likely be taken over by its major shareholder Ganfeng.
A board-backed formal offer of 67.5p a share has arrived, months after the Chinese battery giant said it would buy out Bacanora, which is developing the Sonora lithium mine in Mexico. Ganfeng already owns 29 per cent of the mining hopeful and has a project-level stake in Sonora. On top of the cash, the deal will also hand shareholders a stake in Zinnwald Lithium (ZNWD), which was spun out of Bacanora. Shareholders and Bacanora lender Red Kite need to approve the deal. Bacanora chairman Mark Hohnen said the cash sale was a good way for investors to get a return. "As it looks forward to the construction phase, the Bacanora board is cognisant of the risks that are inherent in single asset companies and elevated in mining development projects," he said.
