Expected revenue loss for companies: $5 trillion! -Governance Now

Expected revenue loss for companies: $5 trillion!

Covid-19: Fitch Ratings expect recovery to be slow and halting

GN Bureau | June 10, 2020

#Covid-19 #Coronavirus #economy #corporate sector #energy #oil and gas

(Illustration: Ashish Asthana)

The corporate sector around the world is expected to suffer losses in revenue worth USD 5 trillion, according to a report prepared by Fitch Ratings.

“The most stringent period of lockdown is over for many jurisdictions, signalling the start of a challenging period of reopening,” Fitch Ratings said in a release issued in London Tuesday. It has published a sector-by-sector analysis of its assumptions for the road to recovery, for more than 80 corporate sectors and sub-sectors globally.

“Our projected revenue-recovery curves for corporate sectors, using our baseline scenario, confirm a slow and halting recovery process for many sectors. Our recovery narratives suggest revenue destruction of more than USD5 trillion in 2020, compared to the USD26 trillion of revenue reported by our corporate portfolio in 2019, extending to more than USD8.5 trillion of revenue destruction by end-2021,” the release said. “This estimate only covers our corporate rated portfolio, which in turn represents USD14 trillion of the estimated USD74 trillion corporate debt globally.”

The oil and gas sector accounts for the most revenue destruction in dollar terms, representing 40% of the aggregate revenue fall, it said. While the oil price has recovered from historic lows, pricing is still well inside Fitch’s price-deck estimates and it expects economic sentiment to remain subdued after the initial post-lockdown euphoria dissipates.

It projects a decline in car sales of about 20% globally in 2020 (followed by a recovery of around 15% in 2021), making the automotive segment – a critical element of the global manufacturing base – the second-largest revenue victim after oil and gas, albeit by a large distance. Further downside revision is possible if demand for big-ticket items weakens further, the release added.

The most severe relative declines for any sector occur in the leisure and transport sectors, Fitch said, projecting for it revenue losses of 40%-60% in 2020. Although the underlying segments account for a relatively minor share (just 3%) of the aggregated global corporate revenue in the Fitch portfolio, they have a disproportionate contribution to employment in the wider economy.

The report also identifies a range of sectors and sub-sectors that Fitch expects to prove resilient post-lockdown, including telecoms and individual segments within technology, healthcare and even retail.

“The range of region-specific variations we analyse in our report do not meaningfully change the shape of the global recovery curve, with all regions generally adhering to a global pattern of a slow recovery from a traumatic 1H20,” it said.

More detail on the regional distinctions and the full narrative for all 87 sector curves are included in the report ‘The Road Back: Post-Lockdown Assumptions for Global Corporates’, available at fitchratings.com.

Comments

Other News

Understanding immunity: How to boost it during Covid-19

In a first, the Department of Home Science, Sri Padmavati Mahila Visvavidayalam (Women’s University) Tirupati, Andhra Pradesh, recently organized an international webinar on “Nutrition and Immune System Support during COVID-19 Pandemic”. Speakers included eminent national and internationa

Covid-19: India’s recovery rate improves to 59.43%

Even as Unlock enters the second phase, the number of Covid-19 infections continues to rise to record levels and India remains No 4 in the worldwide list, yet there is glimmer of hope: its recovery rate is also rising in tandem. There are 1,27,864 recovered cases more than the active Covid-1

Coming soon at a station near you: private trains!

A long-debated idea is finally coming to fruition as the Indian railways has decided to join hands with the private sector, in running some train services to begin with. The ministry of railways has invited ‘request for qualifications’ (RFQ) for private participation for operatio

A place of local democracy in pandemic governance: The case of Mumbai

Democracy in India is now taken for a fact, with an unstated assumption that all our institutions are democratic and hence often our successes and more often failures are attributed to ‘democracy’. However, a key frontier where democracy remains a challenge is that of local governments and that

Why TikTok, other apps were banned: “Engaged in anti-India activities”

India, facing China’s aggressiveness at border, has banned 59 smartphone apps, including TikTok, as they were indulging in activities harmful to India’s sovereignty and integrity. The reason cited was: “in view of information available they are engaged in activities which [

Gaganyaan mission not affected by pandemic

The launch of India’s first human space mission, ‘Gaganyaan’, will not be affected by Covid-19 and preparations are going on in the right direction even amid the pandemic. This was disclosed by minister of state (independent charge) development of north eastern region (DoNE