Inevitably though, the current and future quarter results are and will be severely impacted by the COVID-19 outbreak and subsequent lockdowns in countries around Europe since March, as short-term demand for critical supplies to the food, pharmaceutical and medical markets surged and retail chains started stockpiling in anticipation of prolonged lockdown periods and consumer hoarding.
While demand in UK was hit by a significant decline in the months surrounding Brexit, Scandinavia showed a mixed picture, and demand growth in central Europe was slowed down by below-average but still robust growth in Germany, Southern European countries which were most severely hit by Covid-19 (with the exception of France) showed growth numbers in excess of 5% YOY growth was strongest in Eastern Europe with leading markets showing annualized growth rates in excess of 10%.
Although the COVID-19 lockdowns started only in March, it can be assumed that their impact already came into force in February as customers (both for critical and non-critical goods) started stockpiling. In view of these numbers, it should be no surprise that lead times for self-adhesive materials, especially for non-critical goods have increased substantially. Apart from the availability of raw materials (not only p-s materials but also critical chemicals for the manufacture of consumables such as inks, adhesives and silicones), label converters are facing the impact of lockdowns through the reduced availability of staff on the shop floor, adjustments necessary to comply with tightened operational safety and health measures (OSHA), and cashflow issues related to unilateral extension of payment terms by customers.
FINAT has set up a special COVID-19 web page and is hosting regular webinars to update members of the label community on the latest developments, and stimulate the exchange of best practices. The most recent webinar held on April 28 confirmed that companies have started to look beyond COVID-19 in the prospect of gradual relaxation of lockdown measures in different countries. Apart from raw materials issues and short-term peak supply tensions, of major concern is the impact of a prolonged economic crisis beyond the current government support packages provided in different countries for the coming three to six months. It is anticipated that once these packages expire, layoffs increase and credit ratings continue dropping, demand could face a severe downturn.
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