The corona pandemic has a significant impact on the global economy and in particular on the automotive industry, where vehicle production has been temporarily suspended across most European and North American OEMs and to a certain degree in Asia as well. These OEM plant closures at almost all customers of Kongsberg Automotive in almost all regions except China and South Korea will result in significant revenue declines at most automotive players in the current year, the extent of which cannot yet be accurately estimated. The OEM plant closures have been announced as temporary, however, there is great general uncertainty as to how long they will last. The length of the closure periods will depend primarily on the further development and seriousness of the corona pandemic and at what speed and volume capabilities the global supply chains of the automotive industry can resume previous output levels. Thus, the impact on Kongsberg Automotive from the corona pandemic is equally difficult to estimate.
From a pure automotive standpoint, what was initially triggered by health concerns led to mandatory shutdowns in certain countries and to insurmountable supply chain challenges for OEMs in other countries effectively shutting down the automotive industry, predominantly in Europe and North America. It is unknown and impossible to accurately estimate when, whether or to what extent the end user vehicle demand will return to previous levels. The likelihood of a downcycle seems high.
Already in the last full week of March, Kongsberg Automotive revenues declined by more than 50%. In the week that started March 30, we saw the declines widening which will most likely be followed by further declines in following weeks. With the dramatic impact on income and cash flow being caused by such very strong revenue declines we have attempted to estimate our cash flows under various scenarios. Such scenarios have varying degrees of revenue decline in the various regions for different shut down period durations. In conclusion, we see that Kongsberg Automotive will most likely have liquidity needs in addition to our current liquidity reserves of between €90 million and €150 million for the FY 2020 at a peak level. Dependent on the severity and duration of the shutdowns, we estimate the peak liquidity needs taking place in the July to September timeframe. We intend to fund this liquidity need through a combination of debt and equity financing. The liquidity need range is wide, driven by the wide range of underlying assumptions we have used for our various scenarios.
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SOURCE: Kongsberg Automotive
