Ceramics and tiles-maker Orientbell cuts back production as demand slumps

Ceramics and tiles maker, Orientbell Tiles — owned and promoted by the Kolkata-based Daga family (which managed Orient Ceramics) — has cut back on production while fast forwarding maintenance requirements at plants in a bid to tide over a “temporary” slump in demand.

A second wave of Covid infections have impacted markets, particularly upcountry ones which so far had been driving numbers through new housing projects and home renovation needs. Regional lockdowns too have been imposed leading to restrictions on movement of supplies.

The company has three own units — NCR (National Capital Region), Bengaluru and Baroda- and this apart, has two JV arrangements at Morbi in Gujarat.

Also read: Orientbell Tiles lays the ground for a turnaround

According to Aditya Gupta, CEO, Orientbell Tiles, production across its three plants have been lower in April — May as compared to March.

At present, the company is mostly catering to “project requirements” - which include direct supplies to large real estate developers like Tatas, Godrej or big brands even in the mid-scale ranges. On the other hand, supplies to infrastructure segment continue.

Typically, sales to large projects accounts for 35-40 per cent of its turnover (handled directly by the company), while 60-65 per cent come through supplies to mid-range construction projects, home improvements / interior decor or individual home constructions (handled either directly or through distribution networks). Sales through distribution networks are currently suspended in places where there are lockdowns or a restricted as per partial lockdown rules.

“Production at present is lower than what it was in March mainly because of the demand scenario. Construction sites are operational. Large projects, direct supplies to construction sites in mid to smaller ones or supplies in infra sites are happening. But sales through shops are mostly closed. Peope have postponed or delayed home renovations for the time being. So we have adjusted our production units accordingly. Fast forwarding maintenance, speeding up installation work where possible, reworking on lines are all taking place at the moment,” he told BusinessLine .

Outlook

Gupta, however, says these are “short term” issues. The “medium to long-term outlook” looks ‘good’. The present surge in virus and subsequent lockdowns will “just postpone demand by a quarter or so”.

Two lines across its unit in the NCR are currently under renovation. They are expected to be operational over the next couple of months coinciding with the period when demand is likely to pick up.

“Many people stopped ongoing home renovation midway in April. This demand will be back. People are renovating homes to accomodate work from home. Infra spending is happening. Home sales are happening and interest rates are low. So the medium- to long-term outlook for us is good and strong. What we see now are immediate disruptions that should be over on the coming weeks. We have been through this drill earlier during the first wave,” he said.

“Our website continues to attract visitors. And channel partners continue to use our digital tool Quicklook to reach out to customers over the phone,” Gupta added.

Exports and acquisitions

A rejig in top level management, and cost-cutting measures have bode well for Orientbell Tiles that turned debt-free in FY21.

The management is now exploring the possibility of acquisitions or even a new Greenfield plant as cash flows “improve considerably”.

Export is also being mulled as global markets derisk supply chains by moving away from China. There’s increasing demand for Indian suppliers and units in Morbi have been tapping these export markets aggressively.

“We may explore exports as a de-risking option. But our units are not located near Mundra port. Plus there is a volume and price factor at play for exports. Yes, acquisitions look like a good bet, but its time consuming and needs a lot physical surveys. We have cash. And are wondering why not set up a Greenfield unit in its place. So at the moment there is no firm plan on the exports. Everything is being looked at,” Gupta said.

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