Margins to be better in Q3 due to lower ad spends: Berger Paints

In an interview to CNBC-TV18, Abhijit Roy, MD & CEO of Berger Paints India said margins have been robust due to benign raw material costs.He further said that decorative segment volumes grew in double digits. However, industrial division has underperformed, he added.Berger Paints enjoy 18.7 percent market share in decorative segment and have gained 0.4-0.5 percent share, said Roy.Hence, margins should be better in Q3 due to lower ad spends, he said.Below is the verbatim transcript of Abhijit Roy’s interview to Latha Venkatesh & Sonia Shenoy.Sonia: It has been a pretty healthy growth for most of the companies this quarter around? What has led to that and what could the volume outlook be for the full year FY17?A: As everyone has reported already and we were the last in the paint sector amongst the major ones who were reporting results, the profit has been fairly good for all. Largely on the back of benign raw material prices as you were just reporting that oil prices have remained more or less stable or going down rather, so from that perspective the profit margin has been fairly robust for most companies. On the sales front things have started looking up from September onwards, mid September onwards, so October was reasonably good and I think going forward we are optimistic that November-December should be equally good if not better. Latha: What is the volume you did?A: We had a double digit volume growth in decorative. Unfortunately, in industrial side we had a very flat growth. Protective coatings, which is our mainstay in industrial, hasn’t still picked up. The infrastructure sector is really not booming. Other than that I think all other sectors are reasonably doing well. Latha: What is the decorative versus industrial split?A: About 80 percent is decorative and 20 percent is industrial. Sonia: Some channel checks indicate that you guys have gained market share from some of your peers like Kansai Nerolac Paints and Akzo Nobel India. Is that true and what is the current market share now compared to what it is about six-eight months ago?A: In decorative, we might be and that should be the case going by the results that have been declared so far. We are reasonably sure that we would have gained little bit of market share in the decorative sphere. Currently, the gain wouldn’t be very significant, probably around 0.4-0.5 percent in terms of market share. Sonia: What is the market share in the decorative segment now?A: Around 18.7, so that is where we are. Latha: What about margins. Have we seen the best? After all there has been a bit of firming up of crude prices in the past?A: I think the third quarter will be slightly better than the second quarter for us on the back of two things. One, the volumes are likely to be slightly more in the third quarter because October being present in third quarter. Second, Diwali being earlier this year we have preponed bit of our advertisement expenses into the second quarter. So, in third quarter we will have less of an expense in the advertisement and promotion front. Therefore, the margins are likely to go up a little bit.