Apple impacted by coronavirus and takes into account the epidemic in its forecasts and seeks to limit the consequences

Apple impacted by coronavirus and takes into account the epidemic in its forecasts and seeks to limit the consequences

To date (February 30, 2020) The coronavirus has already affected more than 6,000 people and has left more than 130 dead. In Wuhan, the cradle of the epidemic, several Apple suppliers are paralyzed, which could end up having repercussions on its production.
Apple had never made as much money as it did in its first fiscal quarter 2020, when its sales reached $ 91.8 billion. Sales of iPhone 11 are doing well, those of AirPods and Apple Watch also while growth in services (Music, TV +, News +, Arcade, etc.) reached 17%. An enthusiasm that is found on the production side, since Apple decided to increase the production rate of the iPhone in the first half of 2020 by 10%. The only downside is that the coronavirus epidemic could thwart his plans by paralyzing certain production chains in China.

Uncertainty taken into account in financial forecasts
Exceptionally, Apple has therefore taken into account in its forecasts the uncertainties linked to the coronavirus. Indeed, in addition to an impact on production, the epidemic forces Apple to keep some of its stores closed and to limit the journeys of its employees from and to China, while disrupting the distribution of products internationally. Cautious, the firm leaves a wider margin of error than usual and anticipates revenues of between 63 and 67 billion dollars for the current quarter. Figures that remain higher than analysts' expectations.

Tim Cook himself has made coronavirus an important topic in presenting these financial results. "We have a few suppliers in the Wuhan region. These are alternative suppliers and we are obviously working on mitigating the consequences of this epidemic, to compensate for any expected loss of production (...) We have taken this into account. in our forecasts even if as regards the sources of supply located outside the area of ​​Wuhan, it is for the moment difficult to foresee the impact which the virus will have ", declared the boss of Apple.

Shareholders notified

According to several specialists, assemblers of high-tech products - such as smartphones - generally have several weeks of components in advance (between 2 and 8 weeks depending on the factories). In the short term, it is likely that this will not have an impact on production, except in the case where the workforce is under house arrest. On the other hand, if the epidemic sets in over time and continues to spread, then everything could very quickly evolve and - effectively - block entire sections of production and the logistics circuit.

A plausible scenario for Apple as some suppliers in the Chinese province will not reopen at the end of January, but rather around February 10. This is the case of the factories of Foxconn, one of Apple's main partners. Not yet enough to cut Apple in its tracks (its sales in China increased by 3%), but the laying of the company is already preparing the ground in case the coronavirus really comes to slow its growth. The shareholders are notified.


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