Asian Paints has hiked its prices by 4-5 percent close on the heels of a record 7-10 percent increase, dealers of the company told Moneycontrol.
“The company has increased the price by 10 percent from December but, due to various schemes, the effective rise would be only 4-5 percent,” said one of the dealers.
The company confirmed the move but refused to disclose the quantum of price hikes taken.
Paint companies such as Asian Paints and Berger Paints India had increased prices effective from November in their highest-ever increase to offset the impact of rising inputs costs because of input cost inflation.
Brokerages had reported that Asian Paints had increased prices of its products by 7-9 percent in November, while Berger Paints had raised the prices in high single digits. Asian Paints has taken an overall hike of 19 percent this financial year so far, according to Edelweiss.
Read: Asian Paints, Berger Paints hike prices in highest-ever increase
While another paint company, Akzo Nobel India, had taken a cumulative price hike of 14 percent in the first half of FY21 and might raise the prices further going ahead, said ICICI Securities said in a note.
Other paint companies might follow suit and increase prices further, said Edelweiss, after the market leader Asian Paints’ move.
Margins under pressure
Paint companies have been battling high inputs costs for more than a year now, which has impacted their margins.
In the second quarter of the financial year 2022, Asian Paints had a 34 percent volume growth on a base of 11 percent but the EBITDA and gross margins dipped 900-1,000 basis points each. Asian Paints’ profitability had been significantly impacted by the steep material inflation leading to PBT (profit before tax) losses, according to CEO and Managing Director Amit Syngle.
While addressing investors after reporting the second-quarter results earlier this month, Syngle had said that steep inflation seen in raw material prices, since the beginning of this calendar year, has been phenomenal and has impacted gross margins across all businesses in the quarter.
“The Q2 PBT loss was at Rs 17 crore and H1 (first half of FY22 PBT loss at Rs 28 crore),” he said.
The price hikes, however, are expected to ease the pressure on the company’s margins in the quarter ahead. “Asian Paints has a clear strategy of being proactive in price hikes to expand margins on quarter-on-quarter basis unlike in Q2FY22 when its margins were at a multi-year low,” said Abneesh Roy, Executive Director, Edelweiss Securities.
“We continue to expect that in Q4FY22, Asian Paints will be back to 18-20 percent EBITDA margin, Q3FY22 is also likely to be much better than Q2FY22,” he said.
He, however, warned that the company’s volume growth might be impacted if it does not offer rebates.
Inflationary push
Most consumer goods companies have witnessed unprecedented rise in raw material costs in the past year. “We have never seen such inflation levels like this, going from 20-22 percent. And it is all across, not only in crude but also in titanium, monomers, additives, and in a lot of other raw materials,” Syngle told the investors.
According to analysts, edible oil prices have climbed 35-50 percent year-on-year (YoY), while that of crude derivatives, a key material for paint companies, has jumped 30 percent. Crude derivatives, according to analysts, contribute 55 percent of raw material costs of paint companies.
The quarter ahead might not offer much of a relief, though. “We will have to live with inflation for some time. There doesn’t seem to be any reprieve now. We are just hoping that we should not see another bout of the increase going ahead,” Syngle said.
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