It is not surprising to hear companies, in different industries, blaming the European crisis as the culprit for their poor earnings performance during the second quarter of 2012.
Last May, our reporter, Debbie Baratz, noted the same reason as the primary excuse of several companies that missed their target earnings during the first quarter of the year. Some of the companies she identified include ING Groep N.V. (NYSE:ING), Fossil, Inc. (NASDAQ:FOSL), Exxon Mobil Corporation (NYSE:XOM), and The Dow Chemical Company (NYSE:DOW)
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
The trend of blaming the European financial crisis as the root of the weak earnings results among companies, remains during the second quarter earnings season. Ford Motor Company (NYSE:F) reported a 58 percent profit decline from its $2.4 billion profit during the second quarter of last year, to the $1 billion profit of this year. The automaker cited its $404 million loss in Europe as one the reasons. Prior to its second quarter earnings report, Ford already projected that 80 percent of its losses will come from Europe. During the first half of the year, Ford’s sales in the European market dropped by 10 percent. According to Allan Mullaly, Ford’s president and CEO, the entire automotive industry suffered the same experience in the European market. He said, “We are assuming that this is a structural issue. It’s not going to come back fast and be saved by volume. I think you’re seeing the same viewpoint from most of the automobile companies.”
Chipmaker, Texas Instruments Incorporated (NASDAQ:TXN) pointed at the lingering debt crisis in Europe weakening their business operations. Ron Slymayer, Texas Instruments vice president and head of investor relations, said that its sequential growth fell only in the Europen region during the company’s second quarter earning conference call. He also expects “little more downshift” in revenues from the region.
Several other multinational corporations, such as Unilever plc (NYSE:UL) and AstraZeneca plc (LON:AZN) (NYSE: AZN), cited that consumer demands declined during the second quarter, and the negative impact of the European crisis is spreading. Unilever’s sales revenue in Europe dropped by 2.2 percent, while Aztra Zeneca’s sales declined by 21 percent. According to Paul Polman, chief executive officer of Unilever, the economic woes in Europe are no longer confined in the south. AztraZeneca said it was hurt by the European government’s austerity measures.
Meanwhile, Deutsche Bank AG (NYSE:DB), the largest lender in Germany, said that its second quarter profit slumped due to weak European currency. Its operating expenditures rose in the United States and Britain. Its profit slumped by 40 percent, to 700 million euros ($844 million). In a statement, Deutsche Bank said, “The increase in costs “is mainly a result of the bank’s U.S. dollar and pound sterling cost base being negatively affected by the weakening of the euro.”
Dominique Barbet, economist at BNP Paribas SA (EPA:BNP), said that companies, households, and governments are afraid of the current global economic situation. According to him, households cut spending due to government austerity, causing lower tax receipts, which leads to more austerity. He pointed out, “We are in a vicious circle.”
Pointing fingers, blaming something or someone, is a common practice by most people—top executives or ordinary employees alike. Many lack the courage to face their own mistakes. The blame game is also a vicious habit that needs to changed.