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Coronavirus cost St. Petersburg’s Jabil $53 million — so far

Factories that all but shut down in February are back to near-normal. Now the question turns to what does the pandemic mean for demand?
Jabil's corporate headquarters in the Gateway area of St. Petersburg. (Times file photo)
Jabil's corporate headquarters in the Gateway area of St. Petersburg. (Times file photo)
Published Mar. 13, 2020|Updated Mar. 13, 2020

ST. PETERSBURG — Factory labor shortages, supply chain hiccups and other business interruptions caused by the outbreak of the coronavirus pandemic cost Jabil $53 million in February.

But now that production has ramped back up to near-normal levels, a key question for the St. Petersburg-based global manufacturing company is what will happen to the demand for the huge range of products it makes.

“Things are very murky," Jabil chief executive officer Mark Mondello told analysts on a conference call Friday. “We are planning for demand to soften a bit,” though it’s remained steady up until now.

“Just this week alone, if you look at what’s happened in the U.S. in terms of professional sports, concerts, group events and whatnot, in some way, shape or form that’s going to have an impact on small business,” he said.

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“Let’s just hope that this is finite. I think it will be temporary. It’s just a matter of a definition of finite and temporary,” he said. “Does this last three months or does it last 12 to 18 months?”

For the three months that ended Feb. 29, Jabil, one of the Tampa Bay area’s largest public companies, reported:

• Net revenue of $6.1 billion, which was in line with analysts’ expectations.

• Year-over-year revenue growth of 1 percent in both its electronics and diversified manufacturing services divisions. Jabil makes a huge range of smart phones, appliances, medical devices, data centers, product packaging, electronics and other industrial and consumer products for customers that include Amazon, Apple, Cisco Systems, GoPro, Hewlett-Packard, LM Ericsson and Nokia Networks.

• Earnings of 50 cents per share, which was below expectations. Without the coronavirus-related expenses, Jabil said its earnings would have been 75 cents per share, which would have beat expectations.

Immediately following the outbreak, which led officials in China to extend the work stoppage that traditionally goes with the Lunar Year by up to two weeks, labor shortages were the immediate issue in China.

Early on, factory production in China dropped by as much as 80 to 90 percent. By late February, supply chain problems began to emerge.

Related: St. Petersburg's Jabil says coronavirus is hurting its business

“February was a bit of a perfect storm,” Jabil chief financial officer Michael Dastoor said.

Based on square footage, nearly 62 percent of Jabil’s facilities are in Asia, with a significant portion of its manufacturing, design, support and storage operations in China. There, it has locations in Beijing, Chengdu, Deqing, Huangpu, Huiyang, Shanghai, Shenzen, Suzhou, Tianjin, Weihai, Wuhan, Wuxi and Yantai, as well as in the semi-autonomous Chinese territory of Hong Kong.

In response to the slowdown, Jabil continued to pay employees who were quarantined or restricted from returning to work and streamlined testing for employees in partnership with local hospitals. It also incurred costs because of travel disruptions and restrictions, shortages in supplies its factories needed and the costs of supplies like hand sanitizer and face masks to keep its employees safe.

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Along the way, Jabil has been producing its own surgical masks for its workers in Asia and elsewhere.

Later in February and into March, production returned to close to normal levels. Some pockets of inefficiency remain, mostly because of lingering supply chain issues, “but largely our footprint’s up and running,” Mondello said. The “few pockets” that are not yet up to normal operations are off the pace by only 5 to 10 percent.

“In some odd way, as we sit here today, China is the least of our concerns,” he said.

Jabil stock was trading at $22.49 a share around noon Friday, down 4 percent. Jabil’s share price has dropped about 48 percent from a recent high of $43.21 on Jan. 23.

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