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Coronavirus: Lufthansa imposes hiring freeze as Diageo profits suffer Coronavirus: Lufthansa imposes hiring freeze as Diageo profits suffer
(about 5 hours later)
Airline offers unpaid leave, beverage firm fears £200m hit and Danone also voices concernAirline offers unpaid leave, beverage firm fears £200m hit and Danone also voices concern
Lufthansa has announced a hiring freeze and is offering employees unpaid leave as part of a range of cost-saving measures to attempt to limit the financial impact of the spread of the coronavirus. Lufthansa has imposed a hiring freeze and is offering employees unpaid leave as part of cost-saving measures to limit the financial impact of the spread of the coronavirus.
The German airline, which has already cancelled all flights to China until the end of March, also said it will expand part-time work options and cancel flight attendant and other personnel training courses from April onwards. Those that are already on courses will not be hired. The company said it aimed to offer affected trainees “employment contracts in the long term”. The German airline, which has cancelled flights to China until the end of March, also said it would expand part-time work options and cancel flight attendant and other personnel training courses from April. People already on courses would not be hired but the company said it aimed to offer jobs to affected trainees “in the long term”.
“In order to counteract the economic impact of the coronavirus at an early stage, Lufthansa is implementing several measures to lower costs,” the company said. “It is not yet possible to estimate the expected impact of current developments on earnings.” The Lufthansa cutbacks came as several other European companies also warned that the coronavirus outbreak was hurting their operations, amid intensifying fears that the global economy will be hit.
Lufthansa said the measures will result in a cut to its budget in administrative areas by 20%. The company said that looking at all the cutbacks in its flight schedule to China and Hong Kong, “in purely mathematical terms, 13 Lufthansa Group aircraft are currently on the ground”. On Tuesday, Chevron sent home about 300 workers from its office in Canary Wharf, London, after an employee who had recently returned from a country infected with coronavirus reported flu-like symptoms.
Diageo, the drinks company behind Guinness and Johnnie Walker, said Covid-19 could hit its profits by up to £200m as restaurants and bars in China stay shut.
SSP Group, the British operator of restaurants and bars in airports and railway stations, said its sales across the Asia Pacific region would slump by half in February.
Lufthansa said it had to cut costs “to counteract the economic impact of coronavirus”. It added that it was “not yet possible to estimate the expected impact of current developments on earnings”.
Lufthansa said the measures would reduce its administrative costs by 20%. It added that cutbacks in its flight schedule to China and Hong Kong meant 13 of its aircraft were “currently on the ground”.
Shares in Lufthansa fell 3% on Wednesday morning as European stock markets suffered further heavy losses.Shares in Lufthansa fell 3% on Wednesday morning as European stock markets suffered further heavy losses.
Several other European companies also warned that the coronavirus outbreak was hurting their operations amid intensifying fears that the global economy will be hit. Diageo, the world’s largest liquor company and home to brands including Smirnoff vodka and Tanqueray gin, predicts a decline in profits of £140m-£200m in the year to the end of June.
Diageo, the drinks giant behind Guinness and Johnnie Walker, said Covid-19 could hit its profits by up to £200m as restaurants and bars stay shut and international travel is curbed. Sales are expected to be down by up to £325m. Its estimates excluded the impact of the coronavirus on other markets beyond Greater China and Asia Pacific.
The world’s largest liquor company, home to brands including Smirnoff vodka and Tanqueray gin, said that it expects a £140m to £200m decline in profits in the year to the end of June. Sales are expected to be down £225m to £325m. Diageo said the majority of consumption of its products in China took place in bars and restaurants, which mostly remain closed.
The company warned that its estimates, which depend on the “timing and pace of recovery”, exclude the impact of the coronavirus on other markets beyond Greater China and Asia Pacific. “We have seen significant disruption since the end of January, which we expect to last at least into March,” it said. “Thereafter we expect a gradual improvement, with consumption returning to normal levels towards [June].”
Diageo said that the majority of consumption of its products in China is in bars and restaurants, which mostly remain closed. “We have seen significant disruption since the end of January, which we expect to last at least into March,” the company said. “Thereafter we expect a gradual improvement, with consumption returning to normal levels towards [June].”
The company also highlighted the impact in South Korea, Japan and Thailand, where events have been postponed, conferences and banquets have been cancelled and a drop in tourism has also had an impact on consumption in bars and restaurants.The company also highlighted the impact in South Korea, Japan and Thailand, where events have been postponed, conferences and banquets have been cancelled and a drop in tourism has also had an impact on consumption in bars and restaurants.
The significant drop in international air travel, especially across Asia Pacific, has also hurt Diageo’s business, including sales in airports.The significant drop in international air travel, especially across Asia Pacific, has also hurt Diageo’s business, including sales in airports.
“We remain confident in the growth opportunities in our Greater China and Asia Pacific business,” the company said. “We will continue to invest behind our brands, ensuring we are strongly positioned for the expected recovery in consumer demand.” Diageo’s share price was down 1.6% in early trading. Danone, the maker of products including Volvic and Evian bottled water, and Activia yoghurts, said it would take a €100m (£84m) sales hit in the first quarter as a result of the spread of the coronavirus.
Danone, the maker of products including Volvic, Evian and Activia, said that it will take a €100m sales hit in the first quarter as a result of the spread of the coronavirus. The French-based company was experiencing a “severe demand slowdown” for its Mizone water brand in China, which is Danone’s second biggest market and accounted for 10% of global sales last year.
The French-based company said that it has experienced a “severe demand slowdown” for its Mizone water brand in China, which is Danone’s second biggest market and accounted for 10% of global sales last year. Cécile Cabanis, Danone’s chief financial officer, said that a crucial relaunch of the brand planned for March is being pushed back to the second quarter. Danone employs 8,200 staff in China and has eight factories, seven of which support its water business. The company said water production resumed on 17 February except for at its factory in Wuhan, which is at the centre of the outbreak.
“The current coronavirus outbreak is having a significant impact on first-quarter sales,” she said. “It is mostly sold in convenience stores and through traditional channels, which have been heavily impacted by the outbreak. We will delay the relaunch, which is an important step to reignite growth in Mizone.” SSP said in the Asia Pacific region, which generates 8% of group revenues, domestic and international air travel relating to China was down 90%, Hong Kong was down 70% and Singapore, Thailand, Taiwan and the Philippines were down 25% to 30%.
Danone said that there there had been no disruption in the supply of its specialised nutrition products but travel limitations in China had had an impact on “indirect sales” and its pipeline of new product innovations has been delayed. Its share price fell almost 4% in on Wednesday morning and the company said group revenue would be down by £10m-£12m in February, with operating profits down £4m-£5m.
Danone employs 8,200 staff in China and has eight factories, seven of which are for its water business. The company said water production resumed on 17 February bar its Wuhan factory, which is at the centre of the outbreak.
SSP Group, the British operator of restaurants and bars in airports and railway stations, said that sales across the Asia Pacific region will slump by half in February as the coronavirus outbreak hits air travel in the region.
The company said that in Asia Pacific, which accounts for 8% of group revenues, domestic and international air travel relating to China is down 90%, Hong Kong is down 70% and Singapore, Thailand, Taiwan and the Philippines are down 25% to 30%.
SSP’s share price fell almost 4% in early trading and the company said that group revenue would be down £10m to £12m in February, with operating profits down £4m to £5m.