25-2-2020
Ratings agency ICRA has downgraded its outlook on cut and polished diamond (CPD) industry in mainland China and Hong Kong from stable to negative in view of the ongoing lockdown, which can have a serious bearing and potentially impact players' credit profile.
The country’s jewellery manufacturing activities has just 20 to 30 percent capacity due to supply chain disruptions and factories suspension buoyed by the coronavirus outbreak. Vice president of corporate ratings at ICRA Jay Sheths pointed out that the industry was also hit hard by weak demand in key markets and pressure on gross margins due to declining processed diamond prices. If the business continues to be shutted down, the pressure will aggravate and create impacts on cash flows. The virus outbreak in China will also affect global demand and delay demand recovery, not to mention the industry is already bearing the brunt of on-going US-China trade disputes.
China’s retail jewellery sales may have declined by as much as 70 percent. If the virus is not contained by the first quarter of fiscal 2021, orders and subsequent exports could witness further pressure, according to the report.