The Coronavirus may not have been traced in South Africa yet, but it's going to affect local companies, Bidcorp CEO, Bernard Berson warned on Wednesday.
During the presentation of the company's interim results for the six months ended in December 2019, Berson said consumption is already down significantly in China and the outbreak has affected tourism sector drastically, and therefore demand for food services by hotels and restaurants.
The international food service group, founded by SA entrepreneur Brian Joffe, has an established business in China that's been there for 14 years. It has operations across 26 cities and a staff complement of around 2 000 people.
Berson said many other companies will likely follow Apple's lead of announcing on Wednesday that its revenue will be hit by production and sales limitations in China as the outbreak ravages the Asian nation.
"It [the Coronavirus] is going to have an impact and we don't know how long this going to go on. The impact isn't only in China. The impact is biggest in China, but the wave ripples out from there," said Berson, adding that Hong Kong, greater Asia, and Australasia -where China is the largest tourism trading partner - have all been affected, as tourism has ground to a halt. Bidcorp has operations in all those geographies.
"It hasn't slowed down, it [has] stopped," he said.
'Basically closed for business'
In other geographies, a larger proportion of Bidcorp's business is focused in healthcare, military, education and other sectors, providing some resilience when the tourism sector is in trouble. But in Asia, including China, they are largely geared towards the leisure and hospitality sector, which has been hit hard by the shutdown in activity.
"China is basically closed for business at the moment. They are attempting to reopen it very slowly, but time will tell how that transpires," said Berson.
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Berson said while Bidcorp is bracing itself for short-term disruptions in these markets because of the virus, there will be opportunities when the situation is under control and the market will bounce back. He said there is already talk that some of Bidcorp's competitors in China might not survive the outbreak, and that Hong Kong may have few casualties as well, which may present new opportunities for Bidcorp in future.
"We are focused on what the opportunities might bring. I don't know whether it's going to be organic growth or acquisitions, because [the] opposition can't carry on doing what they were doing and might fall by the wayside," said Berson.
In the six months to December, Mainland China showed an uptick in overall profit compared to the prior year, said Bidcorp. The company had started penetrating the supermarket segment. In Hong Kong, its business was affected by the fall in consumption and tourism numbers due to protests that lasted most of the second half of 2019.
Still, Bidcorp was able to increase its trading profits from continuing operations by 9.2% to R3.6 billion, and its headline earnings by 4%, as Europe, the UK and other emerging markets grew both revenues and trading profits. Australasia is the only region where revenue was flat, but it also managed to grow trading profit by 8%.