Paint prices go up on high input costs

Abhishek Law Kolkata | Updated on March 12, 2018

Abhijit Roy, MD & CEO, Berger Paints India

Margins for paint majors continue to remain under pressure

Paint prices have moved up between 5 and 6 per cent since March this year with top manufacturers such as Asian Paints, Berger and Kansai Nerolac increasing product prices.

While market leader Asian Paints hiked prices twice — once in March and again in May, Berger — the number 2 player – and Kansai Nerolac have also initiated similar price hikes, during this period.

Kansai Nerolac resorted to a price hike of 2.5-3 per cent in March and 3 per cent in May this year. The company spokespersons were not available for comments.

“We effected an one per cent increase in May on the back-over price increase effected in March,” KBS Anand, MD and CEO, Asian Paints, said during an analysts call in July.

Incidentally, Berger Paints India’s MD and CEO Abhijit Roy also confirmed the price hike.

Cost push

The price hikes were initiated following a northward movement in input costs primarily titanium dioxide (TiO2) and monomers.

TiO2 prices were demand-supply driven. Monomers, on the other hand, are said to be crude oil derivatives. But their price movements are not related directly to crude oil prices.

Availability of TiO2, industry sources said, is tight and no large swing or correction downwards is expected.

In fact, softening of TiO2 prices, if any, are primarily due to offtake issues globally.

On the other hand, monomer prices have been impacted because of shutdown of large manufacturing plants in Europe. These are expected to come onstream soon.

Industry sources do not rule out further price hikes by paint majors if cost of raw materials inch up.

Margin pressure

Incidentally, despite the price rise, margins for paint majors continue to remain under pressure.

For Asian Paints, the operating profit margin saw a sequential decline to 16.78 per cent in Q1 FY-18 (April to June) from 17.14 per cent (in the January-March quarter).

Kansai Nerolac saw a minor 18 basis point dip sequentially to 15.79 per cent in Q1FY-18.

In case of Berger, OPM per cent declined to around 14.7 per cent in Q1 from 16 per cent (apprx) in the preceding three-month period, the company’s MD Abhijit Roy said.

According to him, the impact of price hikes made during May is expected to yield results in the coming quarter.

“Margins are likely to improve from Q2 (July to September) onwards, when the impact of price rise comes into effect,” he told BusinessLine.

Published on August 06, 2017

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