Consumer durables firm Voltas has said re-mobilisation of workforce at project sites remains a challenging task amidst the COVID-19 outbreak.
In its March quarter (Q4) results, the company posted a 12.7 percent year-on-year (YoY) growth in net profits at Rs 160 crore. Revenue growth was flat at Rs 2,150 crore in Q4 compared to Rs 2,120 crore in the year-ago period.
Voltas in its updates on the COVID-19 pandemic said that on the domestic front, post lifting of the lockdown, remobilisation of work force at project sites is challenging and could result into delay in project completion.
COVID-19 led to a nationwide lockdown from March 25 and factories across the country were temporarily shut down. With no source of livelihood in urban areas, workers went back to their home locations once special trains were arranged by the Indian railways from May 1 onwards. Several others either went by foot, buses or by private transport.
In its business updates due to COVID-19, Voltas said that inventory assessments have been carried out and suppliers have been informed to defer/short close orders to align with future revenues without affecting long-term relationship.
The company said that representations have been made to the concerned ministries for waiver of detention and ground rent charges due to influx of the containers at port and restriction on movement of non-essential items.
What about the outlook?
Voltas said that Cooling Product sales in March to May (peak summer season) contributes around 35-40 percent of the total volume of annual sales. The company said that this was lost this year due to COVID-19.
"The inventory with channel partners, shorter season period, and aggressive pricing may pose challenges in covering up the lost season sales in the coming months. The demand pattern and behaviour of the Consumers might undergo a change, and spend towards discretionary products may be withheld, temporarily affecting the growth of the industry in 2020-21," the company said in a statement.
Voltas holds the top position in the air conditioning category in India. The company said that the manufacturing operations have been resumed in the factories and demand for the product has started flowing from the unaffected areas.
"The company is cautiously optimistic for the rest of the year, considering prediction of hot weather and demand recovery in the subsequent months," said Voltas.
On the international projects, Voltas said that sharp decline of oil prices and stressed liquidity may affect the spend on the infrastructure, and some of the mega events like Dubai Expo are being rescheduled.
In the midst of lockdown, it added that the pace of execution at project sites, job closures and work certification may be adversely impacted, thereby affecting the liquidity and working capital.
However, it said that a recent announcement by the government allowing extension of time of six months due to COVID-19 pandemic impact would be helpful given that majority of the projects under execution by Voltas are either government projects or are sponsored by them.
"At the same time, given the subdued demand, material prices have come down and savings are expected to accrue on the future project material sourcing. In addition, the careful selection of projects and protected contractual terms would help in mitigating the liquidity risk and margin erosion," said Voltas.
What about liquidity?
Voltas said that while it has a strong balance sheet and cash position, proactively managing day-to-day cash becomes critical during these difficult times.
It said that containing discretionary spend given the prevailing circumstances continues to be a focus area. Capital investment is also being limited towards protecting long-term strategic objectives, it added.
Employee safety and well-being
Voltas said that all government notifications and advisories have been implemented across all their establishments.
Further, the company said that payment to the labour contractors have been made to the extent feasible to ensure that no hardship is caused to them during such testing times and to enable them in turn, pay salaries and wages to their employees.Follow our full coverage of the coronavirus outbreak here