The German industrial giant Siemens expects the coronavirus epidemic to dent its financial performance this year but how much is still not clear, the head of its Swiss business said in an interview with CNNMoney.
Siemens’ factories in China were closed for three to four weeks this month after the government ordered a shutdown to curb the outbreak. While most plants have resumed operations, production remains well below capacity, Swiss CEO Matthias Rebellius said Wednesday evening at an event in Zurich.
“We are trying to mitigate—in working with other suppliers, in shifting to other factories—but there will be an issue, and we have to face that,” he said. “We expect, of course, some revenue impact and also profit impacts to come.”
Authorities and businesses in China have gone to extremes to contain the highly contagious virus. As infections spread beyond China to South Korea, Japan, and Europe, fears are rising that similar measures might be necessary on a global scale.
“The fact that the virus has now been spreading on an international scale has increased the risk of further damage to global growth, with a high uncertainty over the ability to contain the outbreak, at least in the short term,” Michael Strobaek, global chief investment officer at Credit Suisse, said in a note Wednesday. The bank lowered its outlook for global growth to 2.2 percent from 2.4 percent.
Authorities in Switzerland, which recorded its first coronavirus cases this week, have not introduced any drastic measures so far. For its part, Siemens has canceled some internal events and is advising employees to avoid travel to affected areas, Rebellius said.
With 5,700 employees in Switzerland, the company is one of the largest employers. Sales and distribution are the main activities.
Siemens joins a growing number of companies warning that the economic damage from the epidemic may spill over to their financial results. The prospect of tough times ahead triggered a broad-based sell-off in stock markets in recent days. In Switzerland, the blue-chip SMI is down more than 8 percent since Feb. 20, when it hit a new high in intraday trading.
Credit Suisse remains neutral on equities, saying investors should not overreact. Production may rebound in the coming months as the focus in China shifts from containment to getting people back to work, Strobaek said.
Rebellius sounded less certain, saying the entire global supply chain is slowing down.
“We expect some recovery, but you don’t know what’s coming, and it’s not only China,” he said. “Now you’re talking Italy and South Korea.”