Decoratives biz to see better volumes in H2: Kansai Nerolac

Second half volume growth for Kansai Nerolac's decorative paints business is likely to exceed first half numbers says, MD HM Bharuka. However, for the automotive segment it depends on GST rates as people might postpone buying in case rates are lower than current, he adds.

Volumes in the general and industrial and performance coating segments have also been weak, he says while clarifying this is due to conscious efforts to curtail liquidity constraints as the segment faces longer payment periods. 

While margins expanded during the second quarter due to raw material contracting at lower rates, it may face some pressure in the coming quarters as input costs are now inching higher.Below is the verbatim transcript of HM Bharuka's interview to Sonia Shenoy & Anuj Singhal on CNBC-TV18.Sonia: Your margin growth has been very good this time to about 17.50 percent versus 14 percent earlier. What led to such a good expansion and how do see raw material prices pan out for the second half?A: Profit margin has expanded and thankfully it is because of the reduction in the raw material cost. Now the raw material cost is of course two reasons one is the falling crude oil prices benefit vis-a-vis last year you have got that, so that benefit has come. You also recall, we had reduced the prices to our customers. However, we had some contract with the raw material prices and that is why the benefit continued.Raw material price have started going up, so I am not sure how much we would be able to retain going forward. As I said on two accounts one is price reduction which we have given to customers, secondly, the benefit of contract and the inventory will go away and thirdly prices have started rising. So, all this three perhaps may have a impact on the profitability going forward. So, we need to keep our fingers crossed.Anuj: What about volume growth if you could through some more light on that and your market share as well?A: Volume growth has been decent both in case of decorative and auto our volume growth has been double digit. Only in case of general industrial and performance coating the performance has not been up to our expectation. Reason is we have also tightened slightly from our side because all this so called long-term project money is not coming in and liquidity is very tight. We are stuck with funds with these customers, so we have to be very careful. It was a conscious decision to curtail our billing on the performance coating division. Leaving that aside I think auto as well as decorative both the divisions have done extremely well for us. Sonia: What is the outlook for the second half of the year? A: I think second half would be better as far as decorative is concerned compared to the first half because we are definitely seeing a traction coming in and with the good monsoon, good harvest and 7th Pay commission we expect decorative to do well. As far as auto is concerned yes expectations are there it will also do well but it all depends upon goods and service tax (GST). There is a worry if the GST rates are lower than what is been paid today then people may postpone the buying. So, to that extent we may get affected but we have to just wait and watch.