German industrials: Global ambitions

Corporate releases suggest that German industrials plan to grow international sales through direct foreign investment in regions such as China and the US. For example, Grammer and SHW both outlined plans for acquisitions and/or greenfield developments in the US in order to align costs and revenues in the NAFTA region. Their confidence is borne out of export success, often on the back of supply contracts with German OEMs. We think it signals a belief that economic growth in these regions will outperform Europe over the long term (note, the US now has 14 consecutive quarters of GDP expansion and a recovering housing market). FDI outside Europe also helps German companies to diversify eurozone currency risk. Across the industrials sector, corporate balance sheets are healthy and cash generation is strong. Both act as great facilitators for FDI. Using our value and momentum tools we highlight four companies with international operations that screen well and have low financial gearing (and thus capital to invest): Steico, Deutz, WashTec and Krones.

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