February 27, 2020 / 6:08 AM / a month ago

Australian companies count coronavirus cost as markets tumble

SYDNEY, Feb 27 (Reuters) - The coronavirus epidemic has prompted Australian firms to cut over $500 million from profit forecasts in the current financial year, a Reuters analysis showed, as a stock sell-off sparked by the outbreak wipes billions of dollars from company valuations.

While most listed Australian companies have not put dollar figures on their exposure to the outbreak, 19 that reported half-yearly profit this month forecast losses totalling A$793 million ($523.06 million) for 2020 due to the its impact, a Reuters review found.

Most companies to put a value on their coronavirus exposure were in the travel sector. The group also included retailers, consumer goods exporters and even technology companies, which rely on parts from China - the epicentre of the virus, and where containment measures have upended supply lines.

“Companies that have over-stretched balance sheets and high operational leverage are most at risk because they might not be able to support their operations over extended periods of disruption,” said Australian Eagle Chief Investment Officer Sean Sequeira.

On Thursday, Flight Centre Travel Group Ltd cut its full-year profit guidance by as much as A$70 million due to the outbreak, and on Feb. 20, Qantas Airways Ltd said its annual earnings could fall by as much as A$150 million.

“It is impossible to really quantify this accurately or reliably ... but there’s no doubt it will lead to subdued activity, particularly in the next couple of months, but probably through the end of this financial year,” Flight Centre Chief Executive Graham Turner said at an earnings briefing.

Hearing implant maker Cochlear Ltd, software developers Altium Ltd and WiseTech Global Ltd, and shopping mall landlord Vicinity Centres all gave financial estimates of the virus impact on earnings.

Others such as Sydney Airport Holdings Pty Ltd, logistics group Brambles Ltd and packaging maker Pact Group Holdings Ltd said earnings could be affected by the virus spread, without specifying by how much.

Mark Vassella, chief executive of BlueScope Steel Ltd , told investors the firm no longer expected its business in mainland China - where it is Australia’s biggest employer - to contribute to group earnings this year due to the outbreak.

“It’s very difficult to contemplate that the supply chains could immediately come back to work and accelerate to a level that means that material, for example, would clear in the immediate term,” Vasella said.

“You just can’t get trucks to deliver your products. There’s going to be a backlog in the supply chain for a period of time that it is really difficult for us to forecast.”

Australian company profit disclosures for the six months to December-end coincided with reports of the coronavirus spread accelerating outside China, prompting Australia’s share market to lose A$152 billion in value in the past four days, a 6.7% fall that wiped all gains made since the start of the year. ($1 = 1.5161 Australian dollars) (Reporting by Paulina Duran; Editing by Byron Kaye and Christopher Cushing)

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