Analysis: Corporate Mexico feels heat from global supply chain crunch – Reuters

Cars and trucks made by Nissan are parked in the substance of the Nissan manufacturing complex in Aguascalientes, Mexico October 6, 2021. REUTERS/Liberto Urena NO RESALES. NO ARCHIVES/File Photo

MEXICO CITY, Nov 9 (Reuters) – From the auto industry to manufacturers of bathroom tissue and cement, Mexican business have actually been struck hard by traffic jams in international supply chains, depressing development prospects for Latin Americas second-largest economy.
Thousands of cars have actually rested on Mexican assembly lines awaiting missing out on semiconductors, however the effect of raw product scarcities has actually been felt best across the corporate landscape.
Time and once again in third quarter reports, companies flagged concerns over the interruptions that are progressively bleeding into their bottom line in Mexico, an economy built around totally free trade that depends greatly on worldwide supply chains.
Sellers and cars and truck business anticipate the phenomenon to eat into standard pre-Christmas sales, while increasing input costs have fanned high inflation, pushing up interest rates even as growth expectations for Mexico have been downsized.
” You can see the impact everywhere,” stated James Salazar, an analyst at bank CI Banco. “The issue is that if we keep seeing a healing in demand, lots of companies will be in a jam.”
Logistical bottlenecks have actually forced automakers, which contribute some 3.4% of Mexican gdp (GDP), to bring out a variety of momentary work blockages, suppressing business.
Lower output crimped 3rd quarter sales at conglomerate CYDSA (CYDSASAA.MX), a maker of coolants for the vehicle sector, by 2%. At Vitro (VITROA.MX), which produces windows, sunroofs and windscreens, incomes in its vehicle company were down 14%.
Maker Nemak (NEMAKA.MX), which supplies elements for companies such as Audi and Nissan, had to reduce its 2021 sales target to $3.82 billion from $3.9 billion formerly.
HOLD-UPS
Absence of delays and products have taken the shine off the healing many business had actually anticipated as the hit they soaked up in lockdowns triggered by the COVID-19 scourge wore away.
Mexicos economy shrank 8.5% last year, its worst efficiency since the 1930s. It is anticipated to broaden about 6% this year, analysts polled by the main bank in October shaved 2 tenths of a portion point off their 2021 forecast.
The reserve bank just recently approximated the semiconductor squeeze might knock one portion point off GDP growth in 2021.
That discomfort radiates far beyond carmaking, likewise swallowing up global cement giant Cemex, a bellwether for broader demand.
The Monterrey-based company (CEMEXCPO.MX) stated in the third quarter international logistics problems and greater costs struck its operating EBITDA – a sign of success – despite the fact that sales grew in almost all of its markets.
Cemex Chief Executive Fernando Gonzalez said that due to provide chain disturbances it had lowered 2021 capital expense assistance by $100 million to $1.2 billion.
Internet service provider Axtel (AXTELCPO.MX) stated shortages would knock some $2.5 million off its profits in the 2nd half of 2021 since delays meant shipment times of four to 6 weeks had become 5 or 6 months, making some projects unfeasible.
Rival America Movil (AMXL.MX), the company controlled by billionaire Carlos Slim, is likewise feeling the pinch.
” I think in all the world, in all Latin America … there is absence of handsets,” stated Daniel Hajj, America Movils CEO.
CONSUMERS PAY
With Christmas only weeks away, business hopes of lifting sales threats falling nasty of an absence of stocks.
Enrique Guijosa, financing chief of El Puerto de Liverpool (LIVEPOLC1.MX), one of Mexicos main outlet store chains, told analysts he anticipated lacks in sporting equipment because of pandemic-induced shutdowns in nations like Vietnam and China.
Limitations on products accessibility have equated into higher costs as business pass on added costs to consumers. Inflation is now above 6%, double the main banks target.
Gruma (GRUMAB.MX), a manufacturer of Mexican staple food tortillas, said it needed to put up its cornmeal costs, and flagged additional possible increases next year.
Kimberly-Clark de Mexico (KIMBERA.MX), whose portfolio of brands consists of Petalo bathroom tissue and Kleenex tissues, revealed typical rate increases of 7% that would become fully reliable at the end of the first quarter of 2022.
Reporting by Noe Torres, Editing by Dave Graham and Angus MacSwan
Our Standards: The Thomson Reuters Trust Principles.

Mexican companies flag supply chain worries in profits reports
Traffic jams struck economy as recovery from pandemic hits speed bump
Shortage of inputs stokes fears about currently high inflation

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