Multinationals in the time of virus: who wins, who loses?

Milan – The coronavirus pandemic, set to provoke a severe global recession this year, is hitting multinational companies disproportionately.

Here is a list of winners and losers, according to a study published on Tuesday from the research unit of Italian bank Mediobanca, based on results from the first quarter of 2020.

 

THE WINNERS

 

– Internet –

Global internet companies are the top performers, managing to maintain their momentum even during the worst of the coronavirus crisis. Revenue for the sector jumped by 17.4 percent, with net profit rising 14.9 percent.

“It’s a sector that has always grown much faster than the others and it has maintained this speed,” commented the Mediobanca research centre.

During the epidemic, growth has been driven by cloud services (+27.4 percent) as they benefited from increased teleworking, new subscriptions (+26.5 percent) and e-commerce (+22.8 percent). Conversely, online travel sales were hit hard during the quarter.

As a sign of their robust health, which is expected to continue, most companies in the sector confirmed the payment of dividends to shareholders or even increased them, with an average boost of 11 percent.

Graphic contrasting the share price of selected companies in the “coronavirus economy”

 

– Large-scale distribution –

The pandemic has led to “unprecedented growth in demand from the mass retail sector,” wrote the Mediobanca research centre, although what is in consumers’ shopping baskets has changed. Food, health and hygiene products (think hand sanitiser) have increased while products deemed less essential have fallen.

On average, the sector’s sales grew by 9.1 percent with European online food sales growing 40 percent. Net profit rose 34.8 percent. Experts expect this growth to slow in the second quarter due to inventories built up when the epidemic broke out.

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– Pharmaceuticals –

Higher sales of  antivirals and respiratory drugs drove growth in the sector, which partially offset lower demand for other drugs due to fewer surgeries and medical consultations unrelated to Covid-19. The segment’s sales grew by 6.1 percent, while net income jumped 20.5 percent. The outlook is “positive”, even if inventories could be a brake on growth, the study found.

 

– Other winners –

Another performer was the electronics sector, up 4.5 percent, driven by an increase of more than 20 percent in sales of semiconductors and microprocessors. Despite a drop in money transfers and less travel, electronic payments rose 4.7 percent. Nevertheless, the sector’s net profit fell by 17 percent.

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THE LOSERS

 

– Oil and energy –

The biggest loser in the pandemic: the oil and energy sector, which saw its sales fall by 15.9 percent, suffering net losses due to the collapse of crude oil prices.

Multinationals, which have decided to reduce investments by an average of 25 percent as a result of the crisis, are expecting a very difficult year, with a drop in sales of around 30 to 40 percent, Mediobanca estimated.

 

– Fashion –

Always a “solid” segment, fashion was deemed non-essential during the coronavirus emergency. Moreover, most shops selling clothing were closed during lockdowns. Revenue slid by 14.1 percent during the quarter despite a robust 25 percent rise in online sales. Net profit fell by 92 percent.

Certain categories suffered the most, such as jewellery, while the sale of eyeglasses performed better.

 

– Transportation –

The pandemic has brought the sector to a halt. The automobile industry has seen its sales fall by 9.1 percent and its net profit by 92.4 percent. For aircraft manufacturers, the pandemic is synonymous with net losses and a 22.1 percent drop in revenue. Most companies in the sector, which faces a “difficult” future, have cancelled or reduced dividends, while reducing investments and R&D spending.

Chart showing international air traffic since 1945

 

– Telecoms-

While telecom revenues declined by only 2.6 percent, net profit fell 20.4 percent, mainly due to unfavourable exchange rates.

“Although traffic volume increased (…) it did not lead to an increase in turnover because these companies often offer packages,” said the study centre, while raising the possibility of a recovery.

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By Céline Cornu