Companies Race for Cash to Tide Themselves Over in Virus Crisis -- WSJ
March 24 2020 - 2:02AM
Dow Jones News
By Sarah McFarlane and Benjamin Katz
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 24, 2020).
As the coronavirus outbreak looks to extend, some of the world's
biggest and best-capitalized companies are racing for cash.
Airbus SE and Royal Dutch Shell PLC joined in the scramble of
companies Monday that are slashing costs, shelving buybacks, or
cutting dividends and asking banks to extend credit.
In response to the coronavirus's rapid spread around the world,
retailers have closed storefronts, and companies in other
industries have directed employees to work from home. Manufacturers
have closed plants, and hoteliers have begun laying off employees.
Many governments have imposed restrictions on large gatherings
aimed at reducing the virus's spread.
Ford Motor Co. said Thursday that it was suspending its dividend
to try to preserve its dwindling cash pile. Mining giant
Freeport-McMoRan Inc. announced Monday that it was cutting its
dividend, and analysts expect some miners to follow suit.
Several U.S. retailers, squeezed by a drop in revenue after
closing their stores, have moved to draw down their credit lines in
recent days. On Friday, Macy's Inc. tapped its $1.5 billion credit
line and suspended its quarterly dividend. Earlier last week, J.C.
Penney Co. borrowed $1.25 billion from its line of credit to
increase its cash position and preserve financial flexibility, the
retailer said in a financial disclosure on Friday.
On Saturday, Best Buy Co. drew down its full $1.25 billion
credit facility and suspended its share buybacks. AT&T Inc. has
suspended share repurchases as it looks to preserve cash, while
General Electric Co. said it would cut 10% of its U.S. aviation
workers.
Oil companies have been hard hit by the combination of falling
demand spurred by the pandemic and by rising supply from Saudi
Arabia, which has resulted in crude prices halving in a matter of
weeks. At the same time, the coronavirus has stunted the aerospace
industry, leading to groundings of fleets across the globe and
triggering a mass of order deferrals for new aircraft.
Occidental Petroleum Corp. slashed its dividend earlier this
month, while France's Total SA eked out $5 billion of savings
through cost-cutting and took out a $4 billion loan to make up for
an expected $9 billion shortfall caused by lower oil prices. The
lower energy prices are helping the sector's working-capital
requirements, but ultimately the oil rout will hurt their
profits.
Shell halted its share buyback program and said Monday that it
plans to cut spending to boost its balance sheet. The oil giant
preserved its dividend but halted the $25 billion share-buyback
program it launched in July 2018. Investments were reduced by 20%
to $20 billion.
"The combination of steeply falling oil demand and rapidly
increasing supply may be unique, but Shell has weathered market
volatility many times in the past," said Chief Executive Ben van
Beurden.
Shell said its liquidity remained strong with $20 billion in
cash and $10 billion of undrawn credit lines.
At the same time, Airbus said it was dropping its guidance for
the full year and boosting its credit facility by about $10.7
billion as it manages the fallout on the aviation industry from the
coronavirus outbreak.
It has withdrawn its 2019 dividend proposal valued at about $1.5
billion in cash and is suspending a top-up payment to pension
funding. The company now has around $32 billion in available
liquidity, it said in a statement Monday.
The company is also reopening its factories in France and Spain
at reduced rates on Monday after pausing production to deep clean
the facilities and provide safety measures for staff.
Airbus's move follows similar efforts made by Boeing Co., which
said Friday that it was suspending its dividend while Chief
Executive David Calhoun and Chairman Larry Kellner are forgoing pay
through the rest of the year. The U.S. plane maker is seeking at
least $60 billion in financial help from private sources, as well
as taxpayer support, for itself, suppliers and the broader
aerospace sector.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Benjamin
Katz at ben.katz@wsj.com
(END) Dow Jones Newswires
March 24, 2020 02:47 ET (06:47 GMT)
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