Industrial Stocks Suffer From COVID-19 Woes, But Stay Calm Amid Turbulent Market

Industrial Stocks Suffer From COVID-19 Woes, But Stay Calm Amid Turbulent Market

Over 339k confirmed cases. More than 14.7k deaths. A Pandemic that has the globe shaken!

Yes, the most recent coronavirus outbreak, COVID-19 has created havoc in our daily lives, making people ill, impacting businesses, and forcing slumped economies to inculcate wartime measures to rein in the virus’ spreading.

While there is paranoia surrounding us no matter which corner of the world we are in, it should be noted that medical science has been making slow yet steady progress to get lives back to normalcy, as total recoveries from the ailment are about 98.7k, as per a John Hopkins research index.

Good Read- Positive developments in ASX healthcare stocks amid COVID-19 pandemic- AEI, NSB, OSL

Let’s move onto how the industrial sector has acknowledged the virus outbreak:

Industrial Sector Amid COVID-19

It’s a harsh fact that no industry can operate in isolation, which translates to the fact that no economy operates in isolation. The ripple effect of COVID-19 has disrupted manufacturing and production units globally, in the wake of people either quarantined, self-isolated or requested to stay in due to country lockdowns. The physical restriction has prevented the continuation of major economic activities and spending, and factories have remained closed. This has further roiled supply chains across the globe.

Employees in the industrial sector are mostly on field - construction and manufacturing units. With isolation being a key deterrent for COVID-19, companies in the sector have been forced to ensure the safety of their staff and adhere to measures implemented by governments in relation to non-essential service closures. Planning business continuity in such crisis times is a task at hand which needs a proactive and vigilant call.

In this backdrop, let us graze over two ASX-listed industrial stocks that have made headlines for their updates pertaining to COVID-19:

BINGO Industries Withdraws FY20 Earnings Guidance Due to COVID Misfortune

Once a small family-owned skip bin business and currently a fully integrated recycling and waste management company, BINGO Industries (ASX:BIN) offers solutions across the waste management supply chain (collection, processing, separation, recycling and disposal).

The Company recently delivered solid 1H20 results with strong growth in earnings in a challenging operating environment, increasing EBITDA margin by nearly 700 basis points to 33 per cent and registering net revenue of $ 271.2 million.

But right when it was basking this achievement, the COVID-19 calamity broke in Wuhan City, China and slowly spread across Australia, where BIN operates.

Subsequently, the Company has withdrawn its FY20 earnings guidance due to the deteriorating economic conditions and resultant market uncertainty caused by COVID-19. This has been further propelled by the Fed and State Authorities norm to close non-essential social gatherings and services, together with the decentralisation of workforces.

What’s worrisome is the fact that the biggest impact is likely to be seen in the commercial, retail, hospitality, leisure and shopping centre end markets- which make up a portion of BIN’s revenue. Disruptions to the supply chains and economic dislocation might cause delays in the commencement of new projects.

But there is hope!

BIN has seen negligible disruption to the present construction projects. Moreover, the government stimulus packages that are aimed at ramping up infrastructure and construction activity might have the Company back on track with time.

Meanwhile, BIN is taking proactive measures to ensure the safety of its people, sustained services to customers and preserve cash flow. It seeks to lower capex and has undertaken a thorough review of its operational expenditure as well.

The financial performance for Q320 is in line with FY20 Underlying EBITDA guidance. The strong balance sheet, backed by significant property assets is a boon, and it will be interesting to watch the Company cope with the current calamity.

Atlas Arteria Suspends H120 Distribution Guidance, Pandemic Management Plan Envisaged

A global operator and developer of toll roads, Atlas Arteria’s (ASX:ALX) Board has resolved to defer any announcement of an H219 distribution until further notice and have decided to suspend the guidance for the H120 distribution of 18 cps. All due to the ongoing COVID-19 pandemic.

The Board will consider using the funds due to be distributed to shareholders, to either repay debt facilities or to pay the H219 distribution at a later time in 2020, depending upon the duration of the lockdowns, stay-at-home and reduced public gathering orders across Europe and the US.

But there is hope!

The Company is implementing a pandemic management plan across all businesses to reduce exposure for employees, manage potential virus cases and address operational changes required to maintain business continuity.  Moreover, ALX remains well positioned in terms of its liquidity, with cash within the head companies valued at ~$340 million.

The Company owns a 31.14 per cent interest in the APRR toll road group in France, wherein traffic for January and February has been strong relative to the prior corresponding period. Even though March traffic has been impacted by the consequences of the progressive French and global containment measures, adverse impact in the first half of March was moderate, and a further traffic announcement is expected later in the week.

In the US, the Government has closed its borders to all foreign nationals and encouraged all US residents to cancel non-essential travel. In this region, the Company has a complete economic interest in the Dulles Greenway, a 22 km toll road in the Commonwealth of Virginia. Even though a decrease in traffic is expected, it remains well placed from a liquidity perspective (US$215 million of cash on the balance sheet as at 31 December 2019).

In Germany, ALX’s Warnow Tunnel has been elevated due to road works on the surrounding roads.

As inferred, there is no doubt that companies are suffering, and the industrial sector has been hit hard at the back of the COVID-19 consequences. But one should note that the World Health Organization, which has been updating the world about the COVID-19 scenario consistently, believes that the pandemic can be controlled if the globe co-operates timely and effectively.

Likewise, these businesses are doing their bit to ensure safety and blueprinting a better future, as hope and pray continue in isolation!

Good READ - How To Use Psychology To Aptly React To The Coronavirus Pandemic


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