Shares of Titan Company fell over 2 percent in the early trade on Wednesday.
Shares of Titan Company fell over 2 percent in the early trade on Wednesday after the company said that the COVID-19 situation is expected to adversely affect the profitability during the first half of this year.
The stock declined 2.81 percent to hit an intraday low of Rs 868 apiece on the BSE. At 10 am, the shares were trading 1.75 percent lower at Rs 877.50.
In a regulatory filing on Tuesday, the company said that in the last 2 months, its operating cash flow was negative due to virtually zero sales during the first 6 weeks of lockdown, increase in mark-to-market cash outflow on gold hedge due to rising gold prices and committed costs being incurred.
However, the mark-to-market cash outflow is expected to be recovered when sale of jewellery commences, it added.
Titan Company’s operations were hit substantially from March 17 till the first week of May, when lockdown was gradually lifted. Corporate offices, regional offices, retail operations and manufacturing facilities were fully shut during the period and the company was able to get only very marginal sales through its online channel at the end of April but delivery for these have been affected due to classification of its products as non-essential so far.
The company’s sales were also hit on Akshaya Tritiya and during the wedding season of April and May, which are big contributors to the jewellery sales for the industry.
“The jewellery business of the company has deferred the launch of two of its collections till a time that most of the stores are re-opened,” a statement said.
The company is predominantly dependent on retail operations being robust as it sells its products through nearly 1,850 retail outlets in the country. The share of online business is around 2 percent of its sales. The sales in stores that have opened up are at around 50 percent of the sales in a normal period and improving gradually.
Meanwhile, customer sentiment pointing to reduced spends on discretionary items might impact demand for most of the company’s products. The drop in sales is also expected to impact store profitability in the near term and hence store rollouts will be calibrated in the immediate future till more clarity emerges, it said.
The company does not see incremental risk to recovery of assets (inventories, investments, receivables, etc.) given the measures being taken to mitigate the risks. There is also no impact on internal financial controls due to the COVID-19 situation, Titan added.
There is minimum disruption in the supply chain of the company as most of its vendors have re-started their production and are ready to provide required supplies. Supplies from international vendors for watch business, eyewear business and for accessories have commenced. Manufacturing facilities are ready for production and will commence depending on the demand and the inventory being liquidated.