The Hindu Business Line : Paint industry draws a rosy picture

FOR the Indian paint industry, the September quarter's performance was testimony of its optimism about sales growth continuing in the backdrop of good monsoon and the return of the feel-good factor.

Despite high raw material costs constricting margins, leading paint companies have been able to turn in revenue and profits that help them to maintain growth.

During the September quarter, sales of both the decorative segment as well as the industrial segment were good and are expected to keep up the momentum in the next couple of quarters.

Asian Paints had reported a net profit of Rs 46.77 crore during the quarter, up by 13 per cent from the year-ago's net profit of Rs 41.3 crore. Net sales increased by 16 per cent to 494.23 crore (Rs 425.78 crore). Growth would have been higher for Asian Paints, but for the decline in turnover and profits of its chemicals business.

Goodlass Nerolac Paints Ltd reported a 33 per cent increase in profit after tax at Rs 18.76 crore (Rs 14.09 crore) during the second quarter. Sales rose by 20 per cent to Rs 261.58 crore (Rs 217.98 crore).

ICI India ended the September quarter with 2 per cent increase in sales at Rs 203.06 crore (Rs 199.41 crore). Post-tax profit without including extraordinary items were Rs 12.04 crore (Rs 13.98 crore). The company said its paint sales grew ahead of the market with good performance in key brands.

Berger Paints has turned in a net profit of Rs 14.14 crore against Rs 9.17 crore in the same quarter of the previous year. Sales revenue was Rs 211.37 crore (Rs 187.21 crore).

According to industry representatives, the third and the fourth quarters are better in terms of demand in comparison to the earlier quarters, especially the second quarter.

Therefore, going forward the paint industry is expected to reap in the benefits of an overall improvement in the economic sentiment brought on by good South-West Monsoon.

"With strong growth in the housing and the automobile sector, paint industry is expected to do well in the next two quarters," said Mr Ashok Saini, Vice President - Special Projects, Goodlass Nerolac Paints Ltd.

In the automobile sector, the passenger car segment has been growing at 24 per cent and the commercial vehicle segment at 32 per cent. "If this trend continues it is good for Goodlass,'' Mr Saini said. The company has a strong presence in the industrial paints segment and is a leader in the automotive paints with a market share of 65 per cent. Currently, 45 per cent of its turnover comes from industrial paints, 55 per cent coming from the decorative segment.

The continuing 30 per cent growth in the housing sector should maintain growth for the decorative segment, said an analyst.

At the current juncture, paints companies are faced with firm raw material prices. As paints industry uses up to 600 different raw materials, rising input costs remains an area of concern. According to Mr Saini, prices of titanium dioxide, an important raw material, has been rising.

"Prices of most raw materials should stabilise at current levels and then start edging down,'' said Mr Saini indicating the paint industry's hope of a possible decline in prices.

Equity analysts tracking the sector were hopeful of good financial performance over the next two quarters and that in turn driving stock values.

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