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Coronavirus: Apple Expands List of Disrupted Companies

Apple will not reach its sales targets this quarter due to the epidemic of the new coronavirus, a sign that the slowdown in production and consumption in China is affecting the major groups more and more seriously.

The health crisis weighs on both supply and demand. The tech giant cites difficulties in supplying iPhones, made in China, and demand for its products while its stores are closed in the country.

In late January, when the record results were published thanks to strong demand for the range of iPhone 11 released before the holidays, Apple had already pointed out that the epidemic was causing uncertainty.

The group had therefore given a range of forecast sales for its second quarter wider than usual, between 63 and 67 billion dollars.

But the American company no longer plans to achieve this, even if production in China “begins to resume”.

Apple has subcontractors in the Wuhan region, the epicenter of the epidemic, but also alternative suppliers.

“The return to normal conditions takes more time than we had anticipated”, details the Californian group, referring to a “shortage of iPhones which will temporarily affect our income in the world”.

– The luxury sector affected –

In terms of demand, the company specifies that it has only decreased in China.

“We are in the process of gradually reopening our stores and we will continue to do so as regularly and securely as possible,” said Apple, adding that its offices, call centers and online stores have never stopped function.

Since the onset of the disease in December in Wuhan (center), more than 1,800 people have died and more than 72,300 have been infected in mainland China, according to the latest official figures released on Tuesday.

A passerby in front of a Beijing Apple Store closed to the public, February 8, 2020 (AFP / Archives – GREG BAKER)

“Our thoughts go first to the communities and individuals most affected by the disease (…). Apple will more than double its previously announced donation to support this historic public health effort,” said the American group.

The Managing Director of the International Monetary Fund, Kristalina Georgieva estimated the impact at 0.1-0.2 points less for global growth, but stressed that it was still very difficult to assess the impact for the economy.

Apple is not the first group to change its forecast due to viral pneumonia.

Last week, Pernod Ricard revised down its annual objective of organic current operating income, because China is its second market, where it achieves 10% of its sales.

The luxury industry is particularly concerned. Kering (Gucci, Yves Saint Laurent, etc.) thus recorded a sharp drop in sales in mainland China and the clothing house Burberry warned of a “significant negative impact”.

– Losses for Disneyland –

Several car manufacturers are also affected by the closure of the city of Wuhan. The second Chinese manufacturer, Dongfeng, is located there, as are multiple subcontractors, as well as the French Renault and PSA.

Japanese Toyota and German Volkswagen had to delay the resumption of production in their assembly plants.

High-end electric vehicle maker Tesla announced when its results were released in late January that its mega-factory in Shanghai would be shut down on the orders of the Chinese government, which would cause delays in production of the Model 3 and could slightly affect the group's quarterly profits.

Disney, for its part, estimated that its amusement parks in Shanghai and HongKong could lose $ 280 million in all, if they remain inaccessible for 2 months.

In Brussels, the president of the Eurogroup, the inner circle of the 19 finance ministers of the euro zone, said on Monday that he expected a “temporary” impact of the new coronavirus on European growth.

“The appearance and spread of the coronavirus and its impact on public health, human lives and economic activity are a source of growing concern,” the European Commission said on Thursday in a statement.

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