Wednesday, June 10, 2020

Fitch says companies will lose $5 trillion in revenue

Risk rating agency Fitch Ratings estimates that the tracked portfolio of companies around the world is expected to post revenue losses of $5 trillion in 2020 compared to 2019, due to the effects of the covid-19 pandemic on the economy. By 2021, the situation is not expected to improve, with projected losses of another $3 trillion. The projections were made from the evaluation of analysts who follow more than 80 sectors and subsectors around the world. The figures refer to companies accompanied by the agency, which account for $14 trillion of the $74 trillion of debt issued. Fitch's calculations indicate that revenue losses will be more intense in five segments: oil and gas, retail, leisure, transportation and the manufacturing industry. These sectors represent 50% of the revenue from the portfolio of companies followed, but will account for 77% of the losses. The oil and gas segment, in particular, should feel the main effects of the covid-19 crisis. The industry's revenues are expected to fall 40 percent this year, representing losses of $1.8 trillion. For the agency, although oil prices have recovered from historically low levels, they are still not at a good level. Fitch also estimates that oil demand will remain low even after the end of social isolation measures. The leisure and transportation sectors jointly account for 3% of the total aggregate revenue of Fitch's portfolio, but are expected to see more than $440 billion in revenue fall this year. The agency points out that, like retail companies, the two segments have few companies evaluated, especially outside the United States, which means that the projection made from the portfolio of covered companies may be underrepresenting the effects of the pandemic in these segments. "More than half of the projected revenue for [the leisure and transportation] sectors in 2020 and 2021 is lost within our baseline scenario, and even our $600 billion estimate in revenue destruction significantly underestimates the real impact [of covid-19], especially in leisure," says an excerpt from the report. In the manufacturing industry, the negative highlight is the automotive segment, which is expected to record the second largest drop in revenue in the year. Fitch projects a 20% drop in worldwide sales in 2020, but with recovery in 2021, up 15%.
G1 - 09/06/2020 News Item translated automatically
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