Berger Paints India Ltd, the nation’s second-largest paint manufacturer, remains confident in maintaining profit margin stability amidst the recent upswing in crude oil prices. The company’s senior executive shared insights into its strategy.
The production of paints relies heavily on crude oil-based derivatives, which serve as essential raw materials.
Berger Paints assured that it has already factored in the current challenges through prior price adjustments and does not intend to impose additional price hikes during the upcoming festive season in an effort to bolster sales.
Nevertheless, should crude oil prices sustain their elevated levels for an extended period, the company acknowledges the potential for reduced profits compared to the first quarter of this year.
Berger Paints Managing Director & CEO Abhijit Roy stated, “If prices continue at this level, as we expect, we anticipate no immediate or substantial impact moving forward, except for the possibility of profitability being slightly lower than in the first quarter.”
Brent crude, a key benchmark for India, temporarily soared from USD 75 in July to nearly USD 98 per barrel, currently holding steady around USD 93.3 per barrel.
Roy emphasized that there is ample finished stock in their system to support operations until November. The true impact is forecasted to materialize in December, albeit expected to remain relatively minor throughout the third quarter.
Roy expressed concern that if crude oil persists above the USD 100 threshold for an extended duration, it could exert pressure on the company’s financial performance.
Despite these challenges, Berger Paints anticipates a robust third quarter (September to December) due to the extended gap between the monsoon season and the delayed festive season.
Berger Paints enjoyed double-digit volume growth in the first quarter ending in June and aims to sustain this positive momentum. In Q1FY24, the company reported a consolidated revenue increase of 9.8 percent YoY, reaching Rs 3,030 crore.
This growth was driven by a substantial YoY volume surge of 12.7 percent. During Q1FY24, the company expanded its presence by adding over 1,500 new retail touchpoints and deploying more than 1,300 color bank machines.
This expansion contributed to a rise in market share from 19.3 percent in March ’23 to 20.2 percent in the June quarter.
Berger Paints has set its sights on maintaining EBITDA margins within the range of 16 percent to 18 percent, as disclosed during the first-quarter earnings conference call.
Analysts have observed that the Indian paint sector may face heightened competition with the entry of new players such as Grasim, Astral, Pidilite, and JK Cement into the market in FY23.
About Berger Paints:
Berger Paints Ltd, an Indian multinational paint corporation headquartered in Kolkata, boasts an extensive manufacturing network comprising 16 units within India, with an additional 2 located in Nepal, and 1 each in Poland and Russia. Notable Indian manufacturing locations include Howrah, Rishra, Arinso, Taloja, Naltoli, Goa, Devla, Hindupur, Jejuri, Jammu, Puducherry, and Udyognagar.
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