The post-pandemic rebound is over

As one of the most cyclical sectors, machinery and equipment is often hit hard and fast during slowdowns and recessions, which was the case during the global pandemic-linked downturn in 2020 when revenues dropped by around -6% due to the decline in demand. Still, the post-pandemic recovery of the M&E sector was sharp as various end-market customers restarted operations and therefore increased their orderbooks. Revenues in the sector jumped by around +22% in 2021.

Today, the global M&E sector has a market value of around USD280bn, relying heavily on the APAC and North America regions, which account for 34% and 30% of revenues, respectively. The remaining geographic market share is split as follows: EMEA (18%), South America (11%) and the rest of the world (11%).

The good post-pandemic results have been fading as fears of a global recession increase, particularly since both the Chinese and US economies (the main suppliers and demanders of machinery in the world) are not expected to grow in 2023. As a result, we now have a negative short-term outlook for the sector. We expect new orders to fall and companies' margins will deteriorate due to the current high production costs.

Nevertheless, we think that in the long-term there is a lot of growth potential, especially in the most tech-oriented subsectors, such as robotics machinery, because the automation of processes is gradually becoming a priority for sectors such as automotive and electronics, which are dependent on tech transformation to keep growing their businesses. In the agri-food machinery subsector, we will also see an increase in demand in the future, knowing that greater amounts of food will have to be produced to guarantee the food security of a continually growing population. However, we should keep in mind that all this growth potential can be achieved only if coherent capital investments are made.