Asian Paints may be looking at another round of price hike after Diwali expecting a further increase in the raw material index. Price of the single largest component in paints, titanium dioxide (TiO2), has risen around 30% in the last three months.
The company, which posted a decline in consolidated net profit of 20% at Rs 214.70 crore for the quarter ended September 2010, had raised prices in the June quarter of 2010 of about 7% in three tranches. For the September quarter, the company posted consolidated net sales of Rs 1,810.79 crore against Rs 1,723.93 crore in the year-ago period.
?The prolonged monsoon experienced in most parts of the country affected paint demand in the second quarter. We expect demand conditions to improve although the continued upward trend witnessed in raw material prices remain an area of concern. Hence, we are going to consider certain price hikes post Diwali season,? said PM Murty, managing director & CEO, Asian Paints. He added, ?Some of our subsidiaries abroad continue to face uncertain and challenging market conditions especially in the Caribbean and in the West Asia, however, South Asia and Egypt performed well.?
The raw material index in the first quarter of this fiscal stood at 106.5, with the base of 100 in FY10. Moreover, the other players in the Rs 16,000-crore paint industry such as Berger Paints, Kansai Nerolac, ICI and Shalimar Paints, had also hiked prices in the last quarter to maintain margins.
Asian Paints president-decoratives KSB Anand said, ?As far as the Indian operations are concerned, the increasing trend in the raw material prices are expected to continue due to supply-demand mismatch and could lead to margin contraction.? However, he did not divulge the volumes or the margin figure.
Murty reckons that while the growth in the non-auto industrial paints has picked up in the September quarter as compared to the June quarter, the demand is still not robust. ?Extended monsoons have resulted in the delay in various projects and maintainence demand,? added Murty. The paints maker for the financial year 2010-11 has earmarked a capital expenditure of Rs 250 crore.
The international operations of the company in the Carribean continued to face uncertain and challenging market conditions, while South Asia and Egypt performed well with the sales increasing about 28% for the first half of FY11. However, the net sales value for the September quarter shows a decline of 2.9% over the corresponding period last year.