Jul 26, 2013, 02.20 PM | Source: CNBC-TV18

Aim to maintain 12.5% margins ahead: Kansai Nerolac

In an interview to CNBC-TV18, HM Bharuka, MD, Kansai Nerolac says that for decorative business, the company will grow at a double digit rate and the company shoule be able to maintain its margins in the range of 12.5 percent.

HM Bharuka, managing director, Kansai Nerolac  says the paint company's volumes will continue to be flattish in the days to come given the stress in both auto and general industry.

He expects its decorative business to grow at double digit and the company should be able to maintain its margins around 12.5 percent, he said in an interview to CNBC-TV18

The company reported 3.79 percent decline in net profit at Rs 60.9 crore. The company's net sales rose to Rs 789.8 crore fro Q1, compared to Rs 720.8 crore yea-on year (YoY).

Below is the edited transcript of Bharuka's interview to CNBC-TV18.

Q: You have delivered close to about 10 percent revenue growth in the quarter gone by. What is the outlook for the entire year?

A: We expect growth in decorative business to continue. However, the auto and the general industrial business is definitely under stress so the top-line for the industrial business would be under pressure going forward as well. However, decorative business would continue to grow.

Q: But bulk of your business comes from industrial paints doesn’t it?

A: Yes, about 45 percent of our business comes from industrial paint and that is where I think the top-line growth for us would be lower than the growth for the entire industry.

Q: What is the growth for that? Will it be a contraction? Will it be even less than last year?

A: If one looks at the auto companies for Q1 they have announced degrowth of about 3.5 percent and in that, passenger cars have degrown by 10 percent and atleast for next three-six months I don't expect a growth there. However, with good monsoon we expect it to revive. So, we still expect degrowth in the auto segment about 3-4 percent. However, top-line would still grow because there is a price increase and the value growth will still come. However, volume would be flattish.

Q: Any guidance on the volume growth for the two segments?

A: For decorative, we will still have a double digit growth, for industrial on the volume growth it would be flattish and value growth could be still about double digit coming forward.

Q: What was the increase in raw material prices and depreciation that you suffered, how much could you pass on?

A: If one looks on a quarter-on-quarter basis, the contribution actually has improved compared to the previous quarter. Even on the year-on-year basis, there is improvement. So, even though there was depreciation in rupee, I think there is some reduction in the raw material prices which has off set the depreciation impact. So, going forward, we expect this won't increase much. So, we won't see further reduction on the contribution margin. However overheads are rising, the power cost is rising and that is what is affecting the net profit.

Q: 12.5 percent margin is tough you think?

A: We may be able to achieve 12.5 percent margin. There is definitely improvement on the raw material prices, so we would still be able to maintain the overall margin.

READ MORE ON  HM Bharuka, Kansai Nerolac, Q1, numbers
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