Coronavirus starts hurting companies; likely to impact economy

A large number of companies have started saying that the temporary shutdown of operations is likely to impact earnings for March quarter

Companies across the world with operations in China are temporarily halting business as they continue to grapple with the coronavirus outbreak. Fears of the outbreak have derailed commerce in China over the past one week and have so far already created a significant impact on the global market.

Death and infection from the virus escalated this week with more than 250 lives already lost. Local governments in China too have extended holiday following the Lunar New Year from January 31 to February now. This has is not only impacting commerce in China but also all foreign companies having operations in the Chinese mainland.

Commerce and industries suffer

Coronavirus outbreak in China (Representational picture) Pixabay

A large number of European, US and other Asian countries with sizeable presence in China are halting operations, temporarily closing factories, withdrawing employees and suspending travelling. The World Health Organisation's declaring the virus outbreak as "global health emergency' has further raised fears. On Saturday, Apple said that it will temporarily close all stores in China till February 9.

A number of other tech giants like Google and Samsung too have closed down shops in China. Samsung said that it has extended its holidays in line with the Chinese government. However, the company declined to comment on the impact. IKEA has also closed all its 30 stores in China, while Toyota Motor has temporary shut factories in China till February 9. Deere and Co said that it has closed all its facilities in China till it finds it appropriate to resume operations. Earlier this week, Walt Disney closed its resorts and theme parks in Shanghai and Hong Kong.

Coronavirus to impact global economy

Illustration photo of U.S. Dollar and China Yuan notes
Illustration photo of U.S. Dollar and China Yuan notes. REUTERS/Thomas White/Illustration

Not only China but coronavirus is biting into the profits of companies across the world. This is likely to impact the global economy, at least in the first quarter. The airline companies are feeling the immediate impact of the virus outbreak, with both travel plummeting as well as the airline companies cancelling hundreds of flights to China.

Companies too seem to be feeling the heat with many predicting that their first quarter earnings will be impacted. Royal Caribbean Cruises, which cancelled three trips of its China-based liner has trimmed its 2020 earnings forecast and said that it could further decline by another 10% in restrictions on travel continue till February end. McDonald's, however, has said the impact on its profits can be "fairly small" if the virus doesn't spread much outside China.

Levi Strauss also said that the closure of more than 50% of its stores in China will impact its near-term profits. Also, Tesla said that, the temporary closure could hurt its March-quarter earnings. With most companies temporarily shutting operations, airline companies cancelling flights and people cancelling travel, corononavirus finally has started hurting the economy and it is likely to impact further if the crisis continues till February end.

Related topics : Coronavirus