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Sharp decline in carmaking drives third consecutive drop, as second-quarter eurozone growth is revised down to 0.1%

A sharp decline in carmaking fuelled a deepening downturn in German industry as production fell for the third consecutive month in July, intensifying pressure on the government to do more to lift the economy out of the doldrums.

The 0.8 per cent month-on-month decline reported by Germany’s statistical office exceeded the 0.5 per cent fall forecast by economists in a Reuters poll. It would have been even bigger without a rebound in energy and construction output in July. Production in Germany’s car-making sector fell 9 per cent.

Europe’s largest economy has shrunk or stagnated for the past three quarters and its recovery from the coronavirus pandemic has been slower than the US or the overall eurozone, with higher energy prices, rising interest rates and a slowdown in trade with China — its second-biggest export market — hitting Europe’s industrial heartland particularly hard.

Ralph Solveen, an economist at German lender Commerzbank, said the continued decline in industrial production had affected “all manufacturing groups”, indicating it was likely to continue “contributing to a contraction of the German economy in the second half of the year”.

Adding to the gloom, the EU’s statistics office cut its official estimate for eurozone growth in the second quarter from 0.3 per cent to 0.1 per cent. The move follows reductions to growth estimates by Italy, Ireland and Austria and means the eurozone is lagging further behind the US, whose gross domestic product grew 0.6 per cent in the quarter.

The euro fell 0.2 per cent to $1.0707 against the US dollar on Thursday, taking it close to a three-month low.

There are rising fears about German industrial groups shifting production abroad. BASF, the country’s leading chemicals company, chose to build a new €10bn petrochemicals plant in China and it is downsizing its sprawling headquarters on the banks of the Rhine in Ludwigshafen.

The German Chamber of Commerce and Industry recently found that 32 per cent of companies surveyed favoured investment abroad over domestic expansion.

“Germany’s industrial production continues its nosedive and even diehard pessimists are getting frightened,” said Carsten Brzeski, an economist at Dutch bank ING, who calculated German industrial production was still 7 per cent below its pre-pandemic levels.

The government has come under intense pressure to tackle the country’s economic woes. This week chancellor Olaf Scholz vowed to boost growth and banish the “mildew of bureaucracy” by speeding up digitalisation for online government services and e-invoices — areas in which Germany lags behind — and making it easier to found and grow start-ups.

Scholz has rejected the idea of a subsidised electricity price for energy-intensive companies or a large stimulus package to boost growth. Last week he unveiled plans for a €7bn package of corporate tax relief, which includes new rules on the depreciation of investment costs for construction, digitisation and green energy. 

“The positive news is that the sense of urgency has finally increased,” said Brzeski. “Let’s now wait for more concrete policy action. Until then, stagnation in industry and the broader economy looks like the new normal.”

Destatis, the federal statistical agency, said the year-on-year decline in industrial production in July was 2.1 per cent. The most energy-intensive industries, such as chemicals, metals and glass, have suffered a bigger year-on-year fall of 11.4 per cent.

German manufacturers are working through their backlogs of orders but these are shrinking. New orders for German industry fell 10.7 per cent in July from the previous month, the biggest decline since the first pandemic lockdown shut many factories in April 2020.

“Though the backlog of unfilled orders is still high, it has been declining steadily so is unlikely to support production much longer,” said Franziska Palmas, an economist at consultants Capital Economics. “We expect production to drop further in the rest of the year and contribute to Germany falling back into recession.”

Another factor holding back many German companies is the shortage of labour. A survey of 9,000 companies in the country by the Ifo Institute last month found 43.1 per cent reported a shortage of qualified workers, an increase from the previous month but down from an all-time high of almost half of all companies last year.

The Italian designer remains the sole shareholder of his group, which he is determined to keep out of French hands

“I don’t know how any of us can think any of this is replicable without me,” says Giorgio Armani, speaking in a small backstage meeting room a few hours before his “One Night Only Venice” catwalk show, held last weekend at the Arsenale di Venezia, an ancient complex of shipyards dating back to the 12th century. 

Armani, whose show dovetailed with this year’s subdued Venice Film Festival, has been determined to do things differently from many of his Italian contemporaries. While Valentino, Gucci and Versace have all been sold to foreign investors, he remains the sole shareholder of the business that bears his name, a decision some analysts say has undervalued the group.

But the 89-year-old designer and chief executive says he has never doubted his choices, and is especially keen to avoid a takeover by one of the French luxury conglomerates. “These French groups want to do everything, I don’t get it . . . it’s a bit ridiculous,” he says. “Why should I be dominated by one of these mega structures that lack personality?”

Although he told American Vogue in 2021 he was open to a “liaison with an important Italian company” — quickly kindling speculation the company was for sale — he says now that he’s not going anywhere: “Everyone tells me I should just retire and enjoy the fruits of what I’ve built, but I say no . . . absolutely not.”

When Armani attended the film festival in Venice for the first time around the late 1970s, he says he felt like an “intruder”, a lesser-known character among a firmament of stars.

“Photographers pictured me with some actor friends and I thought I didn’t deserve it, I knew I had to work hard to deserve it and eventually I did,” Armani recalls.

The show, a revamped version of the harlequin-inspired spring/summer 2023 haute couture collection he showed in Paris in January, underlined how far he’s come. Actors Sophia Loren, Jessica Chastain and Benicio Del Toro were there in spite of the SAG-AFTRA strike that has kept many in Hollywood away. They joined fashion personalities including Santo Versace and Remo Ruffini of Moncler in a five-minute-long standing ovation at the end.

To many of those present, including some of Armani’s senior staff, the two-day event resembled something of a farewell.

Earlier that day, the designer — known for his rigour and formality — had taken a press conference by surprise as he strayed from the details of the show to describe how it was the general public who appreciate him as a person and not the stars that make his efforts worthwhile.

“The other day I [took] a picture with an old lady, who must have been 85 and was probably never able to afford any of my designs in her life, and she cried. It was hard to hold back the tears,” he said, teary once again.

Armani began working in fashion in 1957 after dropping out of medical school. He took a job on the design team as a window dresser at the Milanese luxury department store La Rinascente, going on to design for Nino Cerruti’s Hitman men’s collection before founding his own fashion house in 1975 alongside the late architect Sergio Galeotti. His deconstructed take on men’s jackets was the anthesis of the typical Savile Row structured suits. His breakthrough came five years later when he dressed Richard Gere in the film American Gigolo.

Fashion historians consider Armani, a favourite of Hollywood stars spanning multiple generations, the most influential figure of the 20th century in Italian high fashion alongside the late Gianni Versace and Valentino Garavani.

The group, which includes brands Emporio Armani and Armani Exchange as well as the higher-end Giorgio Armani line, posted €2.35bn in revenues in 2022, up 16.5 per cent on the previous year. Armani is Italy’s second-richest man, after the heir to the Nutella empire Giovanni Ferrero, and his business now also includes restaurants, luxury hotels and a beauty license with L’Oréal.

Armani has been laying plans for the company’s future — admitting, candidly, that he is “afraid to die”.

“I know Giorgio Armani, the company, is identified with me, so it is my responsibility to make sure this will continue and that the company will have a footprint that will resemble il signor Armani,” he says.

In 2016 Armani set up the Giorgio Armani Foundation, designed to fund social projects and shield his group from a future takeover or breakup — a set-up similar to that of Swiss watchmaker Rolex. As part of his succession plan, the foundation will own an undisclosed stake in his fashion empire, with the rest going to his family. Nieces Roberta and Silvana Armani work for the group, while Andrea Camerana, his nephew, is a board member.

Pantaleo Dell’Orco, who heads the men’s style office and has worked with Armani for 46 years, is also taking on an increasingly important role within the company. He sits on the foundation’s board and is also poised to inherit a stake in the company. At a men’s show in 2021, Dell’Orco joined the designer for the customary end-of-show bow, a suggestion that he may one day succeed Armani as menswear designer. Silvana Armani, meanwhile, works with her uncle on the women’s collection.

Armani’s designs have evolved over the decades. The Venetian catwalk shimmered with black headpieces and ruffled harlequin-like collars, sequinned lozenge-patterned dresses, tops and trousers in a variety of unconventional colours.

Armani says he’s changed over time and he has accepted the evolution of fashion, but only to a certain extent. “At one point I knew I could either [stick to] my own style, or [give up as] I would have never adapted to the new trends.”

“Change is happening and I have also changed . . . the thing is that today’s designers draw inspiration from the past and it’s not like they are inventing anything unless they do a mattana,” a colloquial Italian expression to describe an erratic behaviour. 

What bothers Armani, though, is what he defines as a lack of loyalty by the younger generation of fashion consumers. “It’s very hard nowadays, because what young people like today, they won’t like tomorrow . . . and this underworld of [VIPs] set trends, there’s a lack of culture, of substance . . . everything is very, very superficial,” he says.

Armani remains closely involved in the day-to-day of running the business. His aides claim there isn’t a single document Armani doesn’t personally sign off nor a single figure he doesn’t look at in running the company. 

“Detail is essential . . . it is often the minutia that makes the difference, not the great idea as those are rare,” he says.

The night before the show he welcomed his guests, including a small group of journalists, on his yacht for a drinks reception. When they headed off to dinner, also hosted by Armani, he took a water taxi to the show venue instead. He wanted to make sure the lights on the runway were perfect.

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Europe’s biggest packaging company says it would shift primary listing to US should deal complete

Two of the world’s largest packaging companies — WestRock of the US and Ireland’s Smurfit Kappa — are in advanced merger talks to create a global giant valued at nearly $20bn.

The combined company, to be named Smurfit WestRock, would have its global headquarters in Dublin and Americas operations based in Atlanta, Georgia, the Irish company said in a statement.

It would be listed on the New York Stock Exchange and cancel its premium London listing and its listing on the Euronext Dublin exchange, making Smurfit, Europe’s biggest packaging company, the latest major company to retreat from London in favour of the US.

The combined group would retain a secondary listing in London and is expected to be led by Tony Smurfit, chief executive of the Irish company since 2015. A spokesperson for Smurfit declined to comment further on the proposed merger.

CRH, the world’s largest building materials group and another of Ireland’s corporate giants, is switching its listing to the US from London this month.

The proposed tie-up between the packaging companies, which have a combined market capitalisation of about $18.7bn, according to Financial Times calculations based on Bloomberg data, would create the world’s “go-to packaging partner”, the statement said. The joint group would have combined revenue of about $34bn, based on sales from the last year at the two companies, it added.

Smurfit provided no financial details of the proposed merger transaction, expected to happen through an Irish scheme of arrangement, a routine legal transaction that would require court approval.

The Irish company in 2018 rejected an almost €9bn takeover offer from International Paper of the US, saying even the sweetened proposal undervalued the group.

On the proposed WestRock tie-up, it said the two companies were targeting more than $400mn in annual pre-tax savings by the end of the first year following the deal. The tie-up would require one-off costs of about $235mn, it said.

The combined packaging group would have adjusted earnings before interest, tax, depreciation and amortisation of $5.5bn.

Smurfit highlighted “strong cash flows for future growth and capital returns” and said combining the two firms’ 500 operations and 67 mills would give the merged company “unparalleled geographic reach” across 42 countries, especially in Europe and the US.

The deal would deliver “compelling benefits” to shareholders based on improved operating efficiency and increased returns, it said.

Smurfit, founded in 1934, was acquired by Jefferson Smurfit in 1938 and consolidated its position as a European leader through a merger with Kappa Packaging of the Netherlands in 1974.

Any deal would be subject to shareholder and regulatory approval. The company did not say when it expected the deal to complete. It was not immediately clear who would run the merged company.

WestRock, formed in 2015 through the merger of MeadWestvaco and RockTenn, did not immediately respond to a request for comment.

Justin Jordan, packaging analyst at Davy in London, said Smurfit and WestRock each had about 20 per cent market share of the typical brown boxes used by retailers and ecommerce groups in Europe and the US, respectively.

“There is strong commercial logic,” he said, adding that for large global consumers like Amazon, the merged company would create a “clear global leader” in packaging. The expected synergies he described as “eminently achievable” and even a “conservative estimate”.

The packaging sector saw strong demand during the pandemic when ecommerce surged but has since fallen back. Jordan expects demand will recover in 2024 with a drive to switch to paper from plastic packaging a possible spur to growth.

Selon « Le Monde », l’opération a été confiée à deux banques. Objectif : réduire l’endettement de l’opérateur télécoms dirigé par Patrick Drahi.

Face au vertige des montants, et après plusieurs promesses ces dernières années, Patrick Drahi semble déterminé à engager le désendettement d’Altice, son groupe de télécoms et de médias. Au point d’aller jusqu’à vendre une partie du capital de SFR, son principal actif en Europe. Selon nos informations, la banque d’affaires Lazard a été chargée de ce dossier, avec l’appui de BNP Paribas. Objectif : trouver les meilleurs acheteurs potentiels et les mettre en concurrence pour faire monter le prix. La taille du bloc mis en vente n’est pas connue. Ni le prix espéré. Altice, Lazard et BNP Paribas ne font pas de commentaire.

« SFR est perçu comme la tour Eiffel (marque, réseaux, organisation, qualité…) et nous aurons beaucoup d’options », a confié Patrick Drahi, le mercredi 6 septembre, selon les propos rapportés par des investisseurs réunis pour une présentation financière à Londres. Racheté par Altice France, en avril 2014, après une bataille épique contre Bouygues Telecom, l’opérateur est numéro deux en France derrière Orange. Il compte 20,5 millions de clients dans le mobile et 6,5 millions dans le fixe (ADSL et fibre). Mais il souffre d’une lourde dette : 23,8 milliards d’euros au 30 juin dernier. Un fardeau qui va devenir de plus en plus lourd à porter du fait de la remontée des taux d’intérêt ces derniers mois, d’autant qu’il traverse une mauvaise passe commerciale. SFR a perdu 235 000 abonnés dans le mobile depuis le début de l’année.

Malgré ces mauvaises performances, des fonds d’investissement pourraient se montrer intéressés par un bout du capital de l’opérateur télécoms, un secteur relativement sûr et générateur de cash. Ces investisseurs connaissent également bien M. Drahi et certains d’entre eux, comme Cinven ou Carlyle, ont gagné énormément d’argent ces vingt dernières années avec lui, notamment lors d’opérations financières sur Numéricable, l’ancêtre de SFR.

Rêve de concentration des opérateurs français

Une participation des trois autres opérateurs français – Orange, Bouygues Telecom et Free – semble en revanche plus compliquée à envisager, même s’ils rêvent tous, depuis des années, d’une concentration du marché français. Une telle opération entraînerait un examen approfondi des autorités européennes de la concurrence. Or, celles-ci restent réticentes à voir des opérateurs nationaux se rapprocher, de peur que cela alimente une hausse du prix des forfaits.

Sur ce plan, l’avis de Bruxelles attendu dans les prochaines semaines sur le projet de rapprochement, en Espagne, d’Orange et de MasMovil permettra de voir si la Commission a changé de religion. Un feu vert ouvrirait-il un rapprochement d’ampleur en France ? « Le potentiel de consolidation est plus important, mais nous devons attendre de voir ce qui va se passer en Espagne », a expliqué M. Drahi.

Pour assurer le désendettement de son groupe, en France et à l’international, M. Drahi envisage d’autres ventes. Les Echos indiquaient, le 6 septembre, que le groupe était sur le point de conclure la cession de ses centres de données en France avec un fonds d’investissement de la banque américaine Morgan Stanley. « Nous avons les meilleurs actifs, et pas seulement en France. Portugal Telecom est le meilleur actif de télécommunications en Europe, avec une croissance à deux chiffres du chiffre d’affaires par an dans les années à venir », a lancé le fondateur d’Altice devant ses investisseurs.

Le groupe éclaboussé

Là encore, selon nos informations, Lazard travaille sur le dossier portugais, logé chez Altice International. D’autres banques ont été mandatées pour d’autres actifs, comme Morgan Stanley et Goldman Sachs pour la société de vidéo publicitaire, Teads, ou un opérateur télécoms en République dominicaine. Altice International porte une dette de 8,5 milliards d’euros. Seul BFM-TV et les autres actifs dans les médias en France (RMC…) échapperaient à ce passage en revue, malgré de nombreuses marques d’intérêt. « Début août, Patrick Drahi a été très clair. Ils ne sont pas à vendre », a déclaré Arthur Dreyfuss, le PDG d’Altice France, dans Le Figaro du 28 août.

Ces projets de cession interviennent alors qu’une affaire de corruption éclabousse Altice depuis l’arrestation, le 13 juillet, au Portugal, d’Armando Pereira, associé historique de M. Drahi et numéro deux officieux du groupe de télécoms. Devant les investisseurs, le fondateur d’Altice s’est voulu rassurant, en insistant sur le fait que son groupe n’est pas mis en cause mais que l’affaire concerne des personnes privées, dont plusieurs dirigeants et salariés d’Altice, et des sous-traitants. « Altice a coupé les liens avec 90 % des fournisseurs liés à l’affaire et devrait avoir terminé d’ici la fin de l’année », a précisé M. Drahi, convaincu que ce scandale n’aura pas de conséquences sur ses projets.