Some of Minnesota’s largest companies on Tuesday reported financial damage from the coronavirus outbreak in China, the clearest confirmation yet of anxiety that has been growing since the deadly illness began to rapidly spread last month.
Economic activity in China has slowed dramatically in the wake of widespread quarantines and stringent limits on travel, and the impact is beginning to reverberate around the globe.
Executives at Ecolab, the St. Paul-based maker of cleaning and sanitizing products, became the first Minnesota company to quantify the virus’ effects so far. They said the company’s 2020 profit will narrow by about 5 cents per share, a bit less than 1%, from the approximately $6.40 a share they expect. That figure could get bigger if work and everyday life in China stays compromised into spring and summer.
“We are not yet able to estimate and forecast the impact for the second quarter through fourth quarter,” Doug Baker, Ecolab’s chief executive, said.
Meanwhile, General Mills, based in Golden Valley, said about half of its Häagen-Dazs ice cream shops in China are closed because of the outbreak but that it was too early to quantify the impact. And Medtronic, which has its corporate office in Fridley, said it expects an impact because 7% of its sales are in China, but that it would know more precisely in coming weeks.
Those statements came a day after Apple, the most valuable U.S. company by market capitalization, said it wouldn’t meet its forecast sales of iPhones, which are assembled in China, due to the slower output from its factories there and purchasing by Chinese consumers.
Apple’s warning weighed down stock trading on Tuesday. The Dow Jones industrials lost 0.5% and S&P 500 0.3%, with Apple falling 1.8%, and Intel, the world’s leading chipmaker, down 1.7%.
Later Tuesday, David Joy, chief market strategist at Minneapolis-based Ameriprise, wrote in a note to clients that investors in general continue to have faith that coronavirus effects will be short-lived.
“The extent of the economic damage caused by the virus remains unclear,” Joy wrote.
He said some data releases later in the week, including Markit’s survey of manufacturing and service indexes in most developed economies on Friday, will give executives and investors more clues.
More than 150 million people in China, or about 10% of its population, are confined to their homes, and the movements of residents in about half the country are restricted in some form, though they are able to leave. The virus has claimed nearly 2,000 lives in the world’s most populous nation.
During the Lunar New Year, a two-week holiday in China when nearly all factories close, Ecolab kept one of its hand- sanitizer factories partly running. Last week, after the Chinese government extended the holiday in an effort to slow the spread of the virus, Ecolab reopened two other plants.
Demand for hand sanitizer grew, but sales for other Ecolab products softened in China as people avoided hotels, restaurants and offices.
“We are seeing it clearly. Hospitality, food service and travel is way down in China, and hotels are clearly impacted,” Baker said. “And then we have industrial production that has also been curtailed.”
As people stay home in China, General Mills’ chain of 470 ice cream shops curtailed operations. Nearly half are closed with the rest open for short periods, under government orders.
“The safety of our consumers, employees and other stakeholders is our top priority,” Kofi Bruce, General Mills’ chief financial officer, said Tuesday.
Nestlé owns the Häagen-Dazs brand in the United States and Canada, and General Mills owns the brand internationally. In China, General Mills’ ice cream shops are destinations for special occasions. About 40% of General Mills’ sales in China, or around $264 million, come from its Häagen-Dazs and other food service outlets there.
For medical device giant Medtronic, the virus effect in China amounts to manufacturing disruptions and lower demand for its products, since hospitals are performing fewer procedures involving devices.
China represents about 7% of Medtronic’s global revenue, and sales in the country grew 14% in its latest quarter ended Jan. 24. All of Medtronic’s manufacturing operations in China were up and running, CEO Omar Ishrak said.
“Our top concern is the health and well-being of our employees in China and across the globe,” he said Tuesday. “We’re committed to helping the Chinese government and Chinese physicians address this crisis.”
Another medical device maker, Boston Scientific, which has a sizable operation in the Twin Cities, said earlier this month it may lose as much as $40 million in revenue at the start of 2020 because of canceled medical procedures in China and disruptions to its supply chain there.