Three leading U.K. companies sounded the alarm over the coronavirus on Monday as fear spread into markets at the start of a busy earnings week.
Associated British Foods (ABF) /zigman2/quotes/204493701/delayed UK:ABF +0.22% , owner of retail chain Primark, warned there could be supply shortages on some of its clothing lines.
Ascential MU:ASCE +2.33% , which hosts conferences and exhibitions, postponed an event and said it was concerned about travel restrictions for delegates of future events while Dechra Pharmaceuticals /zigman2/quotes/209485565/delayed UK:DPH -0.05% said pet medicine could run out in the long-term.
The flurry of warnings and the intensifying spread of the virus outside China sent the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.62% index plunging 3.3%. It was a dire start to what will be one of the busiest weeks for corporate earnings. Engineering giant Rolls-Royce /zigman2/quotes/203646520/delayed UK:RR +2.95% , mining firm Rio Tinto /zigman2/quotes/202627887/composite RIO -2.31% and Durex maker Reckitt Benckiser /zigman2/quotes/205203836/delayed CH:RB -7.46% will all deliver full year figures.
Investors will be analyzing updates for coronavirus developments as they build the risk into earnings models and valuations.
In Europe Budweiser brewer Anheuser-Busch InBev /zigman2/quotes/202879787/delayed IT:ABI +1.23% gives its full year update on Thursday. The brewing giant is heavily dependent on customers drinking its products in bars and clubs around the world—something that would be threatened if increasing number of people get sick and stay at home.
Chris Towner, at financial risk management firm Chatham Financial, said: “It is clear now that first quarter global growth will be impacted by the spread of the virus, especially in China where small to medium sized businesses are strapped for cash amid the obligation to carry on paying staff.”
Firms are beginning to build the impact into their trading updates. On Primark, ABF wrote in a statement: “If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases.
“We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions.”
The firm’s food and drinks products, which include Ovaltine, have been affected.
“A number of our food businesses have operations in China,” it said adding that some factories “are operating, but at reduced capacity due to labour and logistics constraints.”
While revenues from Chinese customers remain relatively small for Ascential, which operates the Cannes Lions International Festival of Creativity, it has postponed its Money 20/20 conference.
The company wrote: “We have moved the date . . . from March to August 2020.
We continue to monitor the potential impact of travel restrictions for Chinese delegates and sponsors to events in Europe (such as Retail Week Live in London in March).”
Veterinary pharmaceuticals firm Dechra has a team assessing the potential impact of the Covid-19 Virus.
“We have no direct or indirect revenues in China,” it said. “We have sufficient inventory of Chinese sourced materials to deal with near term supply, however a prolonged period of interruption would lead to out of stocks.”