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St. Petersburg’s Jabil says coronavirus is hurting its business

It’s not alone. Other Tampa Bay area companies are on alert, too. The health crisis also is seen increasing the chances of a Florida recession.
St. Petersburg-based Jabil said Tuesday it's projecting that the spread of the coronavirus will hurt its second-quarter performance. [Handout photo]

ST. PETERSBURG — The growing coronavirus health crisis is becoming an economic crisis, too, and not just for the stock market.

Jabil, one of the Tampa Bay area’s largest public companies, said Tuesday the outbreak has slowed its electronics factories in the affected part of China to 65 to 70 percent of normal output.

A few hours later, the chief economist for the pro-business Florida Chamber Foundation said the health crisis is driving up the chance of a recession.

“It will have a ripple effect here,” agreed Olga Pina, a Tampa international trade attorney whose clients are worrying about delays, shortages and higher prices for Chinese imports.

Jabil, No. 140 on the Fortune 500 list of largest publicly traded U.S. companies, has more than 200,000 employees at 100 sites in about 30 different countries.

“Our first priority is the overall safety of our people," Jabil chief executive officer Mark Mondello said in a statement. So Jabil has “broad testing and quarantine protocols” for those on-site and keeps in touch with employees "unable to return to work due to ongoing travel restrictions.”

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Jabil’s announcement came a day after the Dow Jones Industrial average dropped more than 1,000 points, or 3.5 percent, following news of new clusters of coronavirus infections in South Korea, Italy and Iran. The Dow closed down another nearly 900 points on Tuesday.

Related: Global markets fall sharply as virus cases spread

Partly as a result, the chances of Florida going into a recession in the next nine months have risen to 24 percent, according to Jerry Parrish, the chief economist for the Florida Chamber Foundation.

The Florida industries considered most vulnerable to disruption are its 14 million international visitors a year, its cruise ship industry, its manufacturing sector and its import and export business.

Along with turmoil in financial markets, coronavirus-related declines in industrial production and forecasts like Jabil’s play into the likelihood of a recession, Parrish said.

“All of this is having an effect on Florida’s economy, and it could continue,” he said in an online update about the state’s economy. "This is certainly a concern, but it’s not anything to panic about.”

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Headquartered in St. Petersburg, Jabil makes a huge range of products, including smart phones, appliances, medical devices, data centers, product packaging and electronics for the automotive, aerospace, industrial, energy and consumer goods sectors.

Its facilities include a 186,000-square-foot factory at the Great Wall of Innovation and Technology Park in Wuhan, China.

Jabil's 186,000-square-foot factory at The Great Wall of Innovation and Technology Park in Wuhan, China. (Jabil photo) [Jabil]

Wuhan, with a population of 11 million — more than New York and Houston combined — is ground zero for the virus and is a hub of high-tech manufacturing. Jabil’s factory there designs, develops and makes optical components and other products for a range of high-tech industries.

“The supply base is where we have a few trouble spots,” Jabil executive vice president and chief executive officer for enterprise and infrastructure Alessandro Parimbelli said during a Feb. 12 technology conference sponsored by Goldman Sachs.

“For a few critical commodities,” he said, suppliers were operating at half capacity, though the situation “changes every day. ... It’s getting better, but when it’s going to be back to full normal, still TBD” — to be determined.

Related: Jabil opens R&D innovation center as part of $67 million expansion of its St. Petersburg campus

Jabil started its current fiscal quarter with stronger than expected performance. But Mondello said the “very dynamic labor and supply chain situation” caused by the outbreak will hurt its second-quarter performance.

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Jabil isn’t the only large bay area company on alert.

Largo-based electronics distributor Tech Data has more than 14,000 employees worldwide. And one of its biggest suppliers is Apple, which expects worldwide iPhone supply to be temporarily constrained as a result of the crisis.

“We are doing everything possible to mitigate service disruptions to our channel partners, including working with our vendors to ensure we have adequate supply to accommodate potential disruptions from China,” the company said in a statement to the Tampa Bay Times.

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Big companies like Jabil and Tech Data might have the capital to pivot to a new source of supply, Pina said.

Smaller companies often don't.

One of her clients imports many kinds of fasteners for construction projects from China, said Pina, an attorney in the Tampa office of Shutts & Bowen. If those kinds of products aren’t available, building could slow down.

“The big names make the big headlines, but so many little business employ people in the area," she said. “If those guys go out, maybe they had 10 employees and now all of the sudden they have five. It doesn’t make the headlines, but they add up.”

Finally, Pina noted that China does a lot of business with Cuba, where, according to Reuters, it has investments in alternative energy and has done development financing in light industry and communications.

What if, she said, an infected Chinese visitor spreads the virus to Cuba, which still also gets visitors from Florida and the Tampa Bay area.

“I was wondering if we might not see the health impacts here earlier than we would have anticipated via Cuba," she said, “as opposed to where we might expect (them like) somewhere on the West Coast.”

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At Port Tampa Bay, officials have seen no indications that the port’s 1 million-passenger-per-year cruise ship business will be affected, port vice president of business development Wade Elliott said.

Likewise, the number of containers moving across Tampa’s docks increased 43 percent during January and February compared with the same months the year before. That’s good news so far for the port, which has welcomed three new weekly container ships from Asia in a little more than a year.

“We’re keeping a close eye on the coronavirus situation to see what impact that may have,” Elliott said.

In conversations port officials have had with distributors who import goods from China, a group that includes companies such as Rooms to Go and W.S. Badcock Furniture, a lot have said their inventories were well-stocked before the Chinese New Year.

“But obviously,” Elliott said, “the longer it goes on, the more potential it has to cause disruption.”

•••

The Tampa Convention Center hasn’t had any events cancel, but a few convention organizers have asked City Hall what it’s doing in response to the outbreak.

The short answer is Tampa officials are taking guidance from state health officials and the U.S. Centers for Disease Control and Prevention.

“We’re paying attention,” Tampa Mayor Jane Castor said. “We would be looking at any conventions that would be international and would bring individuals from regions that have been infected. … It is a topic that’s being discussed and we have preparations in place, but the focus right now would be more on early detection and prevention.”

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