Corrected: Coronavirus hits Arkema earnings by €20m Jan-Feb, disruption continues

PARIS (ICIS)–The impact of the coronavirus outbreak cut Arkema’s earnings by €20m to the end of February this year, with production and supply chain issues continuing to be felt, the CEO of the France-headquartered company said on Thursday.

Production and demand impacts are being felt up and down the supply chain, according to Arkema CEO Thierry Le Henaff.

“Customers can be in China and Asia might not have virus problems [directly] but the whole chain is interconnected, it has a lot of repercussions,” he said, speaking at a company earnings press conference in Paris.

Arkema has projected that earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2020 will be on a par with 2019 – itself a 1.2% fall from 2018 – but that is likely to exclude the impact of coronavirus.

The fragile global economic recovery has been thrown into disarray from the outbreak, which is projected to cut China GDP growth to 5.5% this year, according to the latest economic analysis.

China represented 12% of Arkema’s sales in 2019, as the company moved to further reposition its global footprint to a balance between Asia, North America and Europe. During the year, Asia and the rest of the world accounted for 32% of sales, compared to 32% in North America and 36% in Europe.

“The impact of [the outbreak] is uncertain,” Le Henaff said. “In January to February it cost us cost €20m EBITDA already so we will see what will happen in next few months… maybe we will catch up, we don’t know.”

Production has resumed to some extent at most but not all of Arkema’s China-based facilities, but impacts such as access to raw materials or customer demand remain disrupted.

“If we don’t have the people, the administrative functions can come on… [but] if you don’t have the raw materials, [you can’t manufacture], if you manufacture, you have to dispatch that [material] and this is where you see that certain customers have resumed their activities some have not,” Le Henaff said.

There were some signs of stabilisation in terms of the number of new cases in China reported toward the end of the month, although the virus is continuing to spread through the rest of the world, and if it persists through the year the impact could be much stronger, Le Henaff added.

“If [the outbreak lasts] longer, if it impacts world growth then we won’t catch up [with Arkema targets] but this is well beyond Arkema, it’s within the scope of the World Health Organization,” he said.

“It all depends how long the situation persists. All we can do is manage the situation as best we can,” he added.

Front page image – Arkema’s headquarters in Colombes, France
Source: Arkema