The Hindu Business Line : Demand makes paint sector buck input costs pressure

Prices of most inputs have remained firm, barring vegetable oil, putting pressure on the profit margins for the paint industry, company officials said.

"But demand growth has been very good and the pressure on margins are lower than what it was a year ago," said an official of a paints company.

Prices of zylene, styrene and mineral turpentine oil have moved up in the last 12-18 months; but prices of titanium dioxide have marginally edged down in the last six months.

However, paint companies are not expected to repeat their first quarter performance.

"During the first quarter, the companies recorded very good sales. This is primarily because in the last quarter of the previous fiscal, Value Added Tax (VAT) hitches had hit offtake," said the official.

Therefore, demand was robust in the first quarter of the current fiscal, as dealers had deferred purchases.

Many paint companies had marked up prices for some products in the first quarter, in a bid to improve margins. "Though raw material costs have been rising, increased volumes have offset this," said Mr Ashok Saini, Vice President - Special Projects, Goodlass Nerolac. He ruled out a price hike at this juncture.

Goodlass Nerolac, which announced on Tuesday that it was setting up a joint venture in Malaysia with Kansai Paints of Japan, has embarked on brand promotions for decorative paints. The company recently launched a new category of interior paints — Beauty Emulsion — in the economy range. "This product is aimed at capturing customers who are in the process of converting from distemper to emulsion," Mr Saini said.

The decorative paints segment continues to show robust growth. But the industrial paints segment may edge down as automobile sales have begun to slow down.

However, as India is predominantly a decorative paints market, the industry's growth rate and overall sales are expected to be higher this fiscal compared to the last, an industry official said. "Growth should be in the range of 12-13 per cent in value terms," the official said.

The December and March quarters are robust for the paints industry.

Besides, the monsoon has been fairly good, industry representatives said.

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