Jaysawal Neco estimates significant impact due to Covid-19

At the moment the company faces muted demand and negative customer sentiments.

Jul 03, 2020 03:07 IST India Infoline News Service

Jayaswal Neco Industries Limited informed the exchanges Friday that the Covid-19 outbreak has significantly affected the business of the company in the short term. The majority of the end customers operations are located in the Industrial belts presently into Red Zones. The trajectory of business recovery is very difficult to predict at this juncture.

The company’s production has been interrupted due to lockdown. Supply chain disruptions have resulted into increase in cost of goods manufactured and non-availability of desired quality of raw material in timely manner. The situation has led to rising inventories of raw material and finished goods.

At the moment the company faces muted demand and negative customer sentiments. Customers not lifting finished goods against old orders, suppressed selling prices due to excess supplies, reduced margins are affecting the company’s business.

Jayaswal Neco Industries Ltd trade ended at Rs3.81 down by Rs0.19 or 4.75% from its previous closing of Rs4 on the BSE.

“Timely recovery from customers remain big challenge due to serious liquidity issues with all the customers. The fall in turnover volumes, value and margins over Pre Covid-19 period would eventually represent the financial impact of Covid-19 pandemic on the business,” company said.

The company is engaged in the business of manufacturing alloy steel billets, rolled products, pig iron, sponge iron, pellets, captive power generation and Iron & Steel - Automotive and Construction Castings. The products manufactured by the company find applications in automotive and auto components, engineering, power, railways and construction sectors.

The Alloy steel sector (Long Products) was facing strong headwinds from the end of November, 2018 as the Indian automobile sector started facing unprecedented slowdown.

The nationwide lockdown, since last week of March 2020 due to Covid-19 pandemic outbreak has significantly affected company’s liquidity and its future prospects.

Given the closure of operations in most industries and significant dip in future demand, the nation's steel demand in FY21 is slated to fall by 15-20%.

The company, being an Integrated Steel Player would focus on sale of more Metallic i.e Iron Products (Pig Iron, Sponge Iron and Pellet) till demand for Alloy Steel starts picking up.

After gradual relaxation orders in the lockdown conditions as issued by the Governmental authorities, the company had partially resumed operations from the mid of MaY,2020.

The operations would be scaled up post their recommencement depending on the revival of Auto Sector demand. The revival might take couple of quarters.

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