By Nina Trentmann 

Finance chiefs are boosting cash holdings, slashing costs and collecting outstanding payments to ensure their companies remain sufficiently capitalized to withstand financial hits from the coronavirus epidemic.

Companies across sectors are exposed to outbreak-related losses and challenges, including in the manufacturing, retail and travel industries amid factory closures, travel restrictions and changes in consumer behavior.

Sabre Corp., a Southlake, Texas-based travel technology company that builds reservation systems for airlines and hotels, began implementing expense control measures last month in response to the anticipated impact of the virus, according to a spokeswoman. "While we hope its impact will be short-term in nature, coronavirus will have a material impact on our 2020 financial results," the company said in February.

United Airlines Holdings Inc. said Wednesday it plans to store some wide-body jets and is offering staff unpaid leaves of absence in April. The airline scrapped its full-year guidance citing uncertainty about how the virus outbreak could impact its business.

Lufthansa AG said in February it would start slashing costs to offset a coming hit to revenue and profit from canceled flights. Among other measures, Lufthansa is offering its staff voluntary, unpaid leave. Other carriers, including Cathay Pacific Airways Ltd. and Singapore Airlines Ltd., have taken similar steps. European budget airline easyJet PLC also vowed to bring down costs.

Many other companies are expected to announce cost-cutting measures in the weeks and months to come. Car manufacturers, technology companies, retailers and luxury-goods makers -- including many U.S. companies -- have all reported lower sales because of the spread of the virus.

"It's important to think in scenarios, for example about what would happen if there was a vaccine, or if the virus went away like a flu," Craig Bailey, an associate principal at consulting firm Hackett Group Inc., said.

Fort Lauderdale, Fla.-based software company Citrix Systems Inc., for instance, keeps a business continuity plan for natural disasters, credit-market challenges and health issues. "You are prepared for these kinds of situations," said Arlen Shenkman, finance chief at Citrix.

Mr. Shenkman has regular meetings with the company's internal audit team and evaluates sales and cash forecasts, he said. "You monitor your cash balances and make sure that you have working capital," Mr. Shenkman said.

Citrix has an untapped $250 million credit facility, and around $600 million in cash on hand, Mr. Shenkman said. "I consider that adequate," he said.

The outbreak is testing CFOs' liquidity plans and overall preparedness.

"The key element is to be not dependent on the availability of [external] capital," said Jaap Tonckens, finance chief at Unibail-Rodamco-Westfield SE, a global real-estate company with dozens of shopping malls in the U.S.

The company has $9.2 billion in undrawn credit lines and usually collects rents a quarter in advance. Mr. Tonckens said he is watching foot traffic -- which mostly held up in February -- and wider supply-chain issues that could result in tenants closing shop. "That would be a much bigger issue," Mr. Tonckens said.

Companies also should look at their outstanding bills and payments to reduce risks to their balance sheet, according to Hackett Group. Management should watch closely whether business customers delay payments, and offer discounted rates for early payments, Mr. Bailey said. "That is easier with a healthy cash position," Mr. Bailey said.

Companies should set weekly and monthly cash collection targets, and make sure they avoid billing errors to make sure business customers don't use those as an excuse to delay settling their bills, Mr. Bailey said.

In some instances, it might make sense for companies to extend their payment terms to reduce pressure on suppliers, but that requires careful case-by-case analysis, Hackett said.

Write to Nina Trentmann at nina.trentmann@wsj.com

 

(END) Dow Jones Newswires

March 05, 2020 17:55 ET (22:55 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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