Coronavirus Costs Companies Billions in Market Value, Reducing Revenue Projections

RIO DE JANEIRO, BRAZIL – The impact of the coronavirus Covid-19 has generated billion-dollar losses in the global market.

The spread of the disease around the world and China, the epicenter of the outbreak, which is still paralyzed by quarantines and restrictions that reflect the decrease in production and consumption, has led large multinational companies to reduce their revenue projections for the first quarter of this year.

The last one to announce a decrease in its projections, Microsoft lost US$62 billion in market value on Thursday’s trading session, February 27th, a day after announcing that it would not be able to reach the revenues projected between US$10.75 billion and US$11.15 billion for its “More Personal Computing” business. The segment relies directly on China, since that is where most of its components are manufactured.

Apple, which has China as one of its largest markets, has also felt the impact of the country’s restricted supply and demand. After closing all its stores in the country, the giant said it would no longer meet its revenue projections for the quarter, which generated a loss of US$26 billion in market value.

The company expects temporary shortages of items for iPhone production, due to the slower than expected pace of Foxconn’s activities.

The devices assembled in the country – due to cheap labor – supply the stores in Apple’s strategic markets, such as the United States, Europe and China itself. The suspension of production, according to Reuters, could delay the launch of the new iPhone.

To offset losses and meet the demand for new devices, Foxconn’s plants in China have offered bonuses to their employees and opened new vacancies to increase production.

Coca-Cola has announced to its investors that the company estimates a reduction in profit of up to US$0.02 cents per share in the initial quarter of this year. The outbreak has disrupted the supply chain, including the shipment of artificial sweeteners from China – the company’s third largest market. In the trading session following the announcement, Coca-Cola lost US$6 billion in market value.

Mastercard, on the other hand, in addition to reducing its first quarter projections, also cut annual projections. Reflecting the impact of the virus on the travel and e-commerce segment, the credit card company expects quarterly turnover to decrease from two to three percent if the outbreak continues to grow at its current pace.

“There are many uncertainties about the length and severity of the situation and we are monitoring it closely,” the company said, adding that it would update investors again on its first-quarter earnings figures.

The Norwegian cruise company Royal Caribbean International is projecting a loss of US$0.90 per share in 2020 due to the coronavirus. The company, which lost US$1.5 billion in market value, has canceled several trips to Asia and changed its itinerary in the region, adding that the cancellation of all trips to the Asian mainland by April would add another US$0.30 loss to the profitability of its shares.

The third largest airline in the United States, United Airlines has also felt the impact of travel restrictions to the world’s most populous country. The company lost US$1.2 billion in market value after a report disclosed “approximately 100 percent decrease in short-term demand for China” and a 75 percent drop in demand for other transpacific routes.

Source: Infomoney