Gloomy demand outlook to maintain residence decor corporations in cost-cutting mode
MUMBAI:The producers of discretionary objects have been severely impacted by the coronavirus disaster. A few of these casualties are tile, sanitaryware and plywood makers. For key listed corporations on this sector, Kajaria Ceramics Ltd, peer Somany Ceramics Ltd, Century Plyboards Ltd and Greenlam Industries Ltd, March was a washout quarter. These corporations put up a dismal present on most key earnings parameters.
Gross sales volumes noticed steep declines within the March quarter, thus weighing on earnings and realisations. Whereas no steering has been offered, administration commentaries level to a bleak demand outlook. Till normalcy resumes, these corporations might face working capital challenges. The businesses thus plan to stay to their cost-cutting plans to wade by way of this disaster.
In a put up earnings convention name with analysts, Somany’s administration mentioned that it has labored on controlling varied prices like IT, workers price, working prices, and so forth. It targets to be worthwhile even with a 20-25% drop in gross sales. Equally, competitor Kajaria is concentrating on an almost 15% minimize in worker price and 10-12% discount in different bills. The corporate is predicted to avoid wasting Rs800 million with these strikes.
Century Plywoods administration mentioned price saving initiatives have led to financial savings of Rs100 million every within the final two months. Greenlam too is seeking to rationalise fastened prices, notably on worker prices and commercial spends.
It stays to be seen how quickly these steps yield the specified outcomes and whether or not or not they result in margin expansions in FY21. Till then, these shares are prone to be below stress. On a year-to-date foundation, shares of those corporations have taken a beating. On the valuations entrance, they’re buying and selling at one yr ahead price-earnings multiples of 16-35 occasions.