Slowdown in auto, non auto pinches Kansai Nerolac Paints

Below is an edited transcript of his interview. for more.

Q: Going ahead, will you be able to maintain margins in Q3 and Q4 like you did in Q2. What are you anticipating in terms of volume growth?

A: The second quarter was not as good as the first quarter. We are expecting Q3 to be more than Q2 especially in case of industrial paints which is driven by automotives. The concern is on the automotive side. As far as decorative is concerned, we expect growth to continue, however, it would be moderate as compared to what it was in Q1 and Q2.

Q: What would you mean by moderation? What kind of a growth rate are you expecting?

A: In the first quarter, the industry growth in decorative was about 20% and second quarter it came down to about 13-14%. According to us, Q3 and Q4 should be about 10%. From that perspective it has moderated. However, it is still at double-digit growth.

Q: Your auto segment is facing some pressure because of a slowdown there. This time around the non-auto industrial paint segment has actually done better than what the street was expecting. Do you see that outperformance continuing or are you seeing a sign of slowdown even there as well. Would you expect the volume growth in the non-auto industrial segment to hold up?

A: The non-auto industrial segment has also gone down according to me because the infrastructure is not doing well so non auto has also been affected. You are seeing value growth because the product mix is better and there is a price increase.

Q: Titanium Dioxide has been a bit of a problem. Do you expect it to soften or will that continue to haunt margins?

A: The whole raw material segment for the industry has been going up. Titanium Dioxide has been going up exceptionally as well. We feel that going forward it should go down. Unfortunately, for the industry the rupee depreciation has complicated the problem.

Q: Given that we cannot wish away the rupee deprecation just yet, do you think margins will be tough to maintain in Q3 and Q4? What kind of margins will you expect?

A: Margin would be under presser in Q3 and Q4. In Q2, margins for us were slightly better because of the inventory which we are carrying but the effect of the cost increase would be there in the third and fourth quarter.

Q: Would you go towards 12%?

A: It is difficult to say. It depends on the volume but certainly it would be under pressure.