Thule Group AB, in a statement released today, said that the “rapidly developing global situation related to the coronavirus has led to a more negative view of the effects on the business with the conclusion that there will be a material financial impact in 2020.”
The company said it is taking mitigating actions to protect earnings and cash flow. On March 22, Thule Group provided an update on developments related to the coronavirus and informed of the board of directors decision to withdraw the previously communicated proposal of a dividend. The company said at the time there was a considerable risk of a material financial impact during the rest of 2020.
In the subsequent days, several additional authorities globally have imposed strict countermeasures, including the closure of industrial activities, retail shops and cross-border transit. This development has caused a sharp decrease in demand and to some extent the possibility to produce products.
Given the severity of the situation, which has led to that a number of retailers have stopped all business for the coming weeks, as well as a majority of the customers making large order revisions from retailers in recent days, the company expects a material financial impact in 2020. Management sees a minor impact in the first quarter, as previously communicated, with a significantly larger impact starting from the second quarter, which is normally the peak season for the company.
Thule said it could not, at this point in time, quantify or predict the full impact, but the company is now implementing significant actions to mitigate the risk to earnings and cash flow. In addition to furloughs for employees affected by reduced activity, these actions include significantly reduced discretionary spending and reprioritizing capital expenditure. In addition, Thule Group is continuously adjusting its global production network to be in line with expected sales volumes and will temporarily close impacted factories as necessary or mandated by authorities.
“Thule Group has a strong financial base, with good liquidity and long-term confirmed financing in place. We will continue to drive the business with a long-term sustainable strategy and mindset, but we must at the same time act in the extreme market situation,” said Magnus Welander, CEO and president of Thule Group. “We are in close dialogs with our supplier and customers. It is a priority for Thule Group to be a reliable and stable partner, even in difficult situations. Similarly, the well-being and safety of our employees are in focus and comprehensive procedures and measures have been activated to prevent the spread of infection.”
Photo courtesy Thule Group