Relaxo Footwears declines as lockdown impacts overall demand

Relaxo Footwears fell 2.62% to Rs 643.80 after the company said its profits have been adversely affected due to lockdown.

The footwear maker said manufacturing and sales operations were shut down in last few days of March and April 2020 due to nationwide lockdown. The overall demand of footwear decreased substantially, but due to easing lockdown restrictions, demand for open slippers has improved. Due to limited operations, fulfilling the demand will be a challenge.

In lockdown 3, the company started manufacturing in two plants with limited volume. In lockdown 4, the firm started four more plants with reduced restrictions. It is in the process of starting operations in remaining manufacturing plants.

There is no impact on capital and financial resources and the utilization of working capital is well within limits. However, the profits have been adversely affected due to lockdown. The exact impact on profitability is yet to be determined as on date.

There has been constant improvement in collection and the firm is also making regular payments to vendors. The company has no long term debt and other financial arrangement, except working capital limits.

The company said it sees no immediate impairment requirement for any assets due to Covid-19. The firm has taken a cautious view on new assets and capital expenditure. Meanwhile, it has not faced any inbound supply chain problem while outbound supply chain was marginally affected.

On a standalone basis, Relaxo's net profit jumped 52% to Rs 54.16 crore in Q3 December 2019 from Rs 35.62 crore in Q3 December 2018. Net sales for the period stood at Rs 599.83 crore, rising 8.8% YoY.

Relaxo Footwears is engaged in production of Hawaii slippers, light weight slippers, canvas shoes, PVC footwear etc.

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