Jabil CEO Expects Up to $170M in COVID-19 Costs Through August

Contract manufacturer Jabil expects up to $170 million in COVID-19 costs for FY 2020 ending Aug. 31, said Mark Mondello on a Q3 call Friday. It’s targeting $50 million in annual savings through worldwide workforce reductions, he said. At the peak, Jabil was burning $60 million a month in COVID-19 costs, mostly for factory safety protocols and personal protective equipment for employees, said Mondello. Expenses recently have “trended down a bit,” he said. “We’re becoming more optimized." “Fair conversations” with customers about passing along the pandemic costs “are going on all the time,” said Mondello. “Our customers understand we have a business to run. We also want to be very, very thoughtful to our customers because they’re going through tough times as well.” Jabil endured significant supply chain disruptions as the pandemic hit beginning in February that haven’t fully normalized, said Mondello. If the supply chain activity pre-COVID were graded a 10, “we hit our biggest divot” in March and April when the grading plunged “to a five or a six,” he said. “I’d say today we’re back to an eight or nine. I think it stays there until we get to the back side of COVID, whenever that is.” It forecasts roughly a 5% revenue decline for the year, said Mondello. “To have this feeling like COVID’s behind us, the stock market’s doing great, the world’s getting back on its feet -- I don’t think that’s the case.” The CEO conceded he personally “underestimated how broad-based this digital learning, digital schools and videoconferencing” would become during the pandemic: “I don’t think that’s going to be so temporary.”