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Paint prices likely to go up 2-3%

Abhishek Law Kolkata | Updated on April 29, 2018 Published on April 29, 2018

To offset rise in raw material cost

Paint prices are expected to move up by another 2-3 per cent beginning May primarily on account of rising input cost and crude oil prices. This will be the second price hike this year, the first being in March.

Market leader Asian Paints and Berger (the Number Two player) both have confirmed that there will be a 2 per cent increase from May 1. Industry sources say other players are expected to follow suit soon.

“There will be a 2 per cent price hike across the portfolio from May 1. This is primarily to offset the rise in raw material prices,” Abhijit Roy, MD and CEO, Berger Paints India, told BusinessLine.

Kansai Nerolac remained unavailable for comments.

In March this year, paint majors had hiked prices by 1.5 per cent citing cost pressures.

“Overall, there has been a 5 per cent rise in cost of raw materials across categories. This translates into a near 3 per cent impact on profitability or sales. In order to offset this, price hikes are likely in the range of 3 per cent this time,” said Roy, who is also the President of the Indian Paints’ Association.

Rising input cost

According to market sources, there has been an increase in titanium dioxide (TiO2) and other raw material prices. Weakening of the rupee has only added to the paint-makers’ woes.

Although there has been some stability over the last two to three months, TiO2 prices are much higher than what they were last year, sources said.

“TiO2 prices have moved up steadily. Plus there is increased consumption in European and the US markets with the economy showing signs of recovery,” said KBS Anand, MD and CEO, Asian Paints.

The other factor is an increase in the cost of raw materials (solvents and resins) from China. Any raw material being supplied from China has seen an upward revision of prices primarily on account of capacities being shut down there because of environmental concerns.

Similarly, monomer prices are moving up. Monomers are crude oil derivatives. And over the last few weeks, crude prices are on the upswing.

This, in turn, will have a spin-off effect on the monomer prices (may be a few weeks down the line).

Margin pressure

Incidentally, industry sources point out that paint makers have not hiked prices post the roll-out of GST. But, before that, they effected a slew of price increases, in 2017, mainly to protect margin erosion.

A near 5-6 per cent price rise – in two phases (March and May 2017) – saw most paint makers’ margins improve for two consecutive quarters last fiscal – namely in the July to September period (Q2 FY18) and in the October to December one (Q3FY18).

In Q1 FY18, margins had declined on a sequential basis.

Published on April 29, 2018
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