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Corporate virus victims multiply as Meggitt dives on air travel slowdown

AFP via Getty Images
AFP via Getty Images

Plane parts giant Meggitt warned the coronavirus outbreak may sap its profitability as fears over the economic impact took a further toll on markets on Tuesday

Global air travel is likely to slump this year as people travel less to stop the spread of the bug.

The FTSE 100 company makes braking systems for jumbo jets and a large proportion of income comes from maintenance and repairs on these parts.

If planes fly less they will need less maintenance, meaning there is less to do for Meggitt’s engineers, which will hurt the firm’s margins.

Meggitt said margins will be 18.5%-19% in 2021 down from the nearly 20% previously forecast. The grounding of the 737 Max is also contributing to the margin pressure.

Shares fell 5%, making it the largest faller in the FTSE 100.

That was despite posting a strong 9% sales rise for 2019 to £2.3 billion.

Chairman Sir Nigel Rudd revealed plans to step down at the firm’s annual meeting in May 2021.

Meggitt chief executive Tony Wood said the most tangible impact from coronavirus so far had come from a slowdown in production at its Chinese factory.

The firm closed the site, which employs over 300, for an extra week after China’s New Year holidays but production is ramping back up again.

Coronavirus put more fear into the market on Tuesday, the FTSE 100 fell again after yesterday’s slump and Europe’s flagship Stoxx 600 index was also down.

Markets were rocked yesterday after a surge of cases in Italy prompted fears of a deeper economic slowdown in Europe.

Two giant multinationals, Mastercard and Philips, also warned of a negative hit from the outbreak.

Mastercard cut revenue forecasts, saying the fall in cross-border travel and business would hammer sales and warning: “There are many unknowns as to the duration and severity of the situation and we are closely monitoring it.”

Consumer goods giant Philips also said the bug was hitting demand for its consumer electronics in China.

“The company cannot quantify the magnitude and duration of such impact at this time given the fluidity of the situation,” it said.