(Reuters) - Belgian battery producer Umicore (UMI.BR) warned on Thursday of a considerable fall in 2020 core profit as coronavirus-related restrictions weighed on market demand and global car production.
Although results for the first-quarter exceeded those of the same period in 2019, Umicore said it expected full-year recurring earnings before interest and taxes (EBIT) to be considerably below last year’s level as the duration of pandemic-related restrictions remained highly uncertain, making visibility on market demand extremely low.
To preserve cash and offset the impact of COVID-19 on results, the company adjusted its production capacity where needed and furloughed 10% of its workforce.
It also reduced its capital expenditure expectations for the year to 400-450 million euros ($435-$489 million), also well below the levels of 2019, by delaying certain investments.
The automotive industry, to which Umicore supplies batteries for electric vehicles, was severely hit by the crisis globally, the company said, resulting in a 25% year-on-year decline in car production in the first quarter.
In China, the market is slowly picking up with car production down 45% year-on-year in March, while the assembly lines in Europe are gradually restarting production with the same expected in North America around mid-May.
In 2019, the company generated 39% of revenue in the Asia-Pacific region, while Europe and North America accounted for 40% and 14% respectively.
Umicore expects, however, end-consumer demand to remain fragile as cars are not a first-need product when customers’ purchasing power declines in a post-pandemic reality.
The firm expects 2020 global car production to be down 25% year-on-year, while inventory levels remain high.
Last month, Umicore withdrew its full-year outlook of revenues and earnings growth, despite the results for January-February period exceeding last year’s levels. It also halved its proposed dividend to 0.375 euros per share.
Reporting by Piotr Lipinski in Gdansk; Editing by Kim Coghill and David Evans