Consumer Durables News

q1 preview: Summer products give the chills to top consumer durables makers

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NEW DELHI: This summer is giving the chills to many consumer durables firms with significant summer portfolios, as they stare at depressing earnings in the all-crucial June quarter. A recovery for the makers of small-ticket appliances is visible though, following the relaxation in lockdown, analysts said.

Usually, June quarter accounts for nearly 35-40 per cent of annual turnover for summer products of the consumer durables makers. Given the Covid-19 hit on the economy, analysts said the impact was severe for air conditioner makers with shorter sales windows than those ones selling fans, etc.

“Although post-lockdown economic activity resumed from May 4, we expect Q1 performance to be impacted adversely, as activity in key urban centres remained subdued due to high incidence of Covid-19 cases and complete washout in critical days of sale for seasonal products like AC, air coolers and fans,” said Prabhudas Lilladher.

Channel checks suggested that the consumer durables sector saw negligible sales in April. In May sales were down 75-80 per cent, but some improvement was visible in June, but sales were down 20-30 per cent, said Nirmal Bang Institutional Equities.

“The summer season categories of air-conditioners and air-coolers were impacted the most,” it said, while expecting coverage companies such as Havells India, Crompton Consumer, Orient Electric and V-Guard Industries to report 54-57 per cent drop in YoY sales, along with over 80 per cent fall in profit.

Analysts said while commodity prices were benign during the quarter, it would hardly lift earnings due to lower procurement. Emkay Global said companies might have resorted to significant cost rationalisation to minimise the impact of a sharp revenue fall. These may include reduction in advertising, logistics, product warranty, travel, power and fuel costs.

Some estimates showed demand for fans reached 75 per cent of the Pre-Covid levels by June end, led by entry-level products. In the case of the lightning segment, demand reached 55 per cent of pre-Covid levels, as there was only B2C replacement demand in rural areas. Sales for kitchen appliances are in fact 10 per cent higher than pre-Covid levels in June on pent-up demand.

Demand for washing machines has been low as its season starts in July, Emkay said, adding the refrigerator segment benefitted from pent-up demand. “In our coverage universe, Whirlpool is likely to see relatively the lowest revenue fall of 40 per cent YoY,” Emkay said. Whirlpool mainly deals in refrigerators and washing machines.

Prabhudas Lilladher said there was increased demand for everyday use low-ticket items like kitchen appliances and personal grooming products. In case of Bajaj Electricals, the brokerage expects a 55 per cent fall in sales with margins likely to be negatively impacted due to poor scale of operations and higher EPC provisioning.

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