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Last Updated : Feb 02, 2017 02:57 PM IST | Source: CNBC-TV18

Retail industry sprung back in December, says Akzo Nobel

In an interview to CNBC-TV18, Jayakumar Krishnaswamy, MD of Akzo Nobel India spoke about the results and his outlook on the company.

In an interview to CNBC-TV18, Jayakumar Krishnaswamy, MD of Akzo Nobel India spoke about the results and his outlook on the company.

Below is the verbatim transcript of Jayakumar Krishnaswamy’s interview to Ekta Batra & Prashant Nair.

Ekta: Your total income was up 2 percent odd this quarter. Could you begin by telling us what the break up would be in terms of your decorative as well as industrial segment in terms of value, volume growth and impact of demonetisation?


A: The year started from April, we were on the upward swing and during the month of November post demonetisation the entire industry has got a bit of an impact and that is how H1 of 2016 had a revenue growth of close to 6-7 percent and for this quarter alone it reduced to about 2 percent.

However, both decorative and industrial paints business had a negative impact, more so in the decorative paints and also in vehicle refinish sector of the industrial paints, both have large component of painters, contractors and retail market and hence both the sectors had a negative impact. Overall the other side of industrial paint business which is protective, marine, powder quoting, speciality quoting did do well in the quarter and that's how in the combined portfolio we could come up with revenue growth of close to 2 percent.

Ekta: You are directly linked to what is happening in the real estate space with your decorative paint segment specifically for that have you seen a recovery coming into Q4 versus Q3?

A: The unsold property and the entire real estate sector have got an impact and the retail segment as well as project segment. The project segment did get impacted due to entire demonetisation and slowdown in real estate sector but for our company we are pretty strong in the premium segment and in the quarter gone by we did grow very well in the premium segment to the extent of over 7 percent. However, largely the growth got impacted due to the drop in off take in the project segment and vehicle refinish segment.

The premium segment for us did grow well. The retail industry sprung back in the month of December and the way we are positioned and the kind of product portfolio which we have, we did see good recovery in the premium segment as the year ended in 2016. 

Prashant: How is the pricing scenario looking like?

A: In the last two years with international crude prices going down and a time came early last year where we had to pass on the benefits both in the industrial side as well as decorative side to our customers and consumers, but as the crude is getting fixed up to USD 54-55/USD and overall global commodity prices in the form of Titanium dioxide (TiO2) which is a principal raw material for quoting sector, is going up across the world and I see cost pressure coming back into the industry in the coming six-nine months but our company has got strong value creation and cost effective programmes which were running across the verticals of Akzo Nobel and we have to find a way to compensate for the price rise but in 2017 we see cost pressures coming back in this industry unlike '15-16.

Ekta: What would that mean for your margins? Do you have a fair idea in terms of what margins could look like in 2017?

A: As I said earlier, we have robust operation excellence and cost control programmes deployed in the organisation and our primary aim is to find a way to nullify the impact but this game is about increasing operational efficiency when the cost pressure is coming and our teams are poised to make much more efficiency improvement in the organisation.

Ekta: You had lower employee cost by around 6 percent, other expenses were down around 5 percent. Are you starting that kind of operational efficiency already? Is this kind of a cut sustainable or are we going to see more of it?

A: One of our principal strategies for Akzo Nobel is to get organic growth and operational excellence. In the last 24-36 months we have relooked at our operations, identified waste, identified non value-added activities and systematically gone about eliminating waste in the system and that is one of the reason why our margins have gone up and efficiency of employees have gone up and hence the employee cost as well as other operational costs have come down in the last 24 months. We will continue with the same programme going forward with renewed vigour because we cannot let go of all the gains which we have achieved and our teams are nicely poised to drive this agenda even more effective in the coming year.

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First Published on Feb 2, 2017 01:46 pm
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