The forecasts have been blown up. Budgets are already a piece of paper. The coronavirus crisis has ruined before the end of the first quarter the approaches that companies had made for the entire year.
The companies still hope that the stoppage of activity caused by the Covid-19 will pass as soon as possible, but they are aware that the damage has already been done. To a greater or lesser extent, the pandemic will leave scars on the accounts of Ibex companies this year and on their strategy for the future.
The impact is uneven, but serious in all cases. The main reason is the slowdown in economic growth worldwide, which can even turn into a recession in the eurozone. And that damage to the activity reaches practically all sectors, so that there is no company immune to the virus.
All in all, the impact is especially severe in some of the Ibex 35 companies. Tourism and travel are the sectors where the immediate effect is being more devastating.
In the Ibex 35 there are five companies directly affected by this drop in travel: IAG, Meliá, Amadeus, Aena and, to a lesser extent, Ferrovial. The representatives of Iberia and Vueling workers, both from IAG, They are warned about the more than possible activation of a considerable cut in production due to the impact of the coronavirus on demand, while taking days to reprogram routes.
The cancellation of flights with China and Italy and the fall in occupancy in the rest are causing the cancellation of thousands of flights by all companies. Amadeus, the leader in reserve management, is directly suffering the impact.
These cancellations harm airport operators along the way. The growth plans of Aena in Asia they are disrupted and the company was not able to make forecasts regarding the impact of the coronavirus, which is expected to be severe in the short term. Ferrovial is affected to the extent that it manages Heathrow and several British regional airports, which have already experienced a large drop in traffic.
Without mobility or travel, there is no tourism or hotel demand. Meliá It is already having a strong impact in China (where its presence is less) and in Italy (a very profitable market), but the great threat is if the fall in reserves hits Spain, Mexico and the Dominican Republic squarely.
In anticipation of a slowdown in the world economy, the demand for raw materials and with it prices have plummeted. Arcelor Y Ruffx they suffer that cyclical deterioration. Crude suffered its biggest drop in almost 30 years on Monday, aggravated by the price war declared by Saudi Arabia. This collapse conditions the strategic plan of Repsol and its promises of shareholder remuneration, depending on whether the price decline is temporary or lasting.
In turn, the cheaper hydrocarbons lso makes them more competitive against renewable production. That can punish Siemens Gamesa, but indirectly also to Acts, Iberdrola, Naturgy Y Endesa. the electricity companies, in addition, can suffer from the fall in demand and prices, like the system operators, Red Eléctrica Y Enagás, somewhat more protected.
In the case of banks, the prolongation of an ultra-low interest rate scenario and economic deterioration are the great threats to profitability and solvency. The economic slowdown can increase delinquencies and increase the need for provisions, eroding capital.
Banks expect some relief from the monetary authorities. In the cases of Santander Y BBVA, the weakness of some emerging currencies can take an exchange rate and in the Bankia, the fall in the price makes it impossible to think about privatization.
Corporate operations are also conditioned by the new scenario. so it is with the spin-off of Línea Directa by Bankinter, the sale of the services business Ferrovial or with the strategic rearrangement of Telefónica, who has dared, however, to step forward to buy Oi’s mobiles.
The fall in consumption and supply problems will slow the growth of Inditex, affected in China and Italy, two of its main markets.
This is how the health crisis affects each of the Ibex 35 companies:
Special measures. The coronavirus will not only have an impact on companies’ profit and loss accounts and the fulfillment of their forecasts and strategic plans, but it has drastically altered the day-to-day life of companies. Teleworking, quarantine of infected people and their close contacts, suppression of meetings, cancellation of trips and flexibility measures for the workforce have been the usual pattern in most companies.
Banks. The Single Supervisory Mechanism (SSM) dependent on the European Central Bank (ECB) required banks to have contingency plans at their disposal in the event of an eventual worsening of the situation. Some banks have chosen to separate and transfer critical personnel to protect them.
Together. Banks and companies are taking steps to facilitate telematic participation and discourage physical presence at shareholders’ meetings, eliminating traditional gifts or cocktails, for example. The CNMV supports that practice. BBVA, Santander, Naturgy, Iberdrola and Bankinter are among the companies that have recommended not to physically attend the meetings.