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

Covid-19 antibodies found in 86.64% Mumbai citizens

As many as 86.64% citizens of the city of Greater Mumbai have antibodies, according to the fifth sero-prevalence survey. Among the people who are fully or partially vaccinated, the antibodies were found in 90.26%, while among the unvaccinated citizens, 79.86% had antibodies. The Municipal C

`Bad Bank`: All you wanted to know about NARCL

The cabinet has cleared the formation of ‘National Asset Reconstruction Company Limited’ (NARCL) which will acquire “stressed assets” of about Rs. 2 Lakh crore in phases within RBI regulations in order to address the problem of humongous amounts of bad loans in public sector banks.

Citizens Charter: How this less-known law empowers us

When consumer rights and RTI activist Mohammad Afzal was shifting to a new residence in a different area, he required changes in various documents. He decided to take the help of the Citizens Charter along with other friends who also required similar work with authorities. The Citizens Chart

Minister for Ports, Shipping & Waterways emphasises on setting up of National Transport Facilitation Committees

Union Minister for Ports, Shipping & Waterways and AYUSH, Sarbananda Sonowal has underlined the importance of cross-border connectivity among India and developing nations of South-East Asia. Addressing the ASEAN summit on Future of India-ASEAN Connectivity Partnerships virt

Ministry of Finance organises advance training programme in PPP for states

The Department of Economic Affairs (DEA), Ministry of Finance and the Indian Institute of Management Bangalore has organised a virtual advance level training programme on Public-Private Partnership. Additional Secretary DEA, K Rajaraman, Joint Secretary, DEA, Baldeo Purushartha

Ministry of Agriculture signs MoUs for Digital Agriculture

Modernisation of the Agriculture sector will continue by infusing new technologies so that farmers can increase their income, states Agriculture Minister Narendra Singh Tomar. The Ministry of Agriculture and farmer welfare has signed MOUs for pilot projects with Cisco, Ninjacar