The COVID-19 pandemic is expected to cost Jabil between $160 million and $170 million for the fiscal year that will end Aug. 31, the company disclosed Friday.
As a result, Jabil is taking “aggressive action” to reshape the organization and prepare for the next fiscal year, said CEO Mark Mondello.
“We will reduce our workforce and in return lower our cost structure by roughly $50 million,” Mondello said.
He described it as a difficult decision that’s correct for the business.
Mondello did not provide any details about the planned workforce reduction, such as which jobs or locations might be impacted. Jabil (NYSE: JBL), a manufacturing solutions company with global operations, is the largest business headquartered in St. Petersburg. It has 200,000 employees worldwide, including about 2,000 local workers.
For the three months ended May 31, the third quarter of fiscal year 2020, Jabil reported $6.3 billion in net revenue and a net loss of $51 million, or 34 cents a share.
For the current quarter, the fourth quarter of FY 2020, Jabil is projecting $5.8 billion to $6.6 billion in net revenue. The company expects operating income of $79 million to $189 million for the current quarter. It did not provide guidance for net income or loss, but expects earnings per share between 4 cents and 50 cents in the current quarter.
Jabil has major operations in China, the first location to feel major impacts of COVID-19. Starting in February, Jabil employees faced travel lockdowns, quarantines and the need for social distancing. At one point, sites in China were operating at less than 50 percent of capacity.
As COVID spread, impacting other regions, Jabil factories by and large continued to build products, Mondello said. There were disruptions that shut down plants for a week or two, and Jabil continued to pay idled workers.
Factories are now running at 90 percent to 95 percent of capacity, Mondello said, and the company has created a COVID playbook of protocols and best practices that it shares with customers, suppliers, communities and competitors.
Mondello highlighted several critical business catalysts for the third quarter.
Healthcare. “We joined the fight against COVID as it was simply the right thing to do. Our teams quickly transformed manufacturing lines around the world, contributing to the production of critical products, such as ventilators, specialized manifolds, 3d printed components, face shields, protective masks and test kits,” he said.
Packaging, which serves many of the world’s top consumer brands. “Demand was strong in areas like cleaners and disinfectants, touchless dispensers, antibacterial products and eat-at-home food product.”
Internet usage “exploded,” prompted by remote learning and video conferencing. “Teams from our cloud sector, along with teams from our mobility and edge device sectors, were in full blown customer care mode, as end users sought digital access to family, friends, business colleagues and patients, a trend likely to be part of the world’s new normal.”
Those areas of strength were offset by weakness in Jabil’s automotive and transport, and print and retail sectors, Mondello said.
Jabil is navigating current issues while being thoughtful about new challenges, Mondello said.
“Looking ahead, I believe our business landscape and how we choose to conduct our business may look and feel a different. It will possibly be more efficient. It will possibly be more optimized.” That could have benefits, as long as Jabil remains focused on customer care, he said.
Mondello also believes key secular trends will remain in Jabil’s favor. “Plenty of stuff will still need to be built, and building stuff is exactly what we do,” he said.