Paint firms pass on cost hikes to customers, buoyed by festive sales

Paint companies operating in the decorative segment expect to have a good quarter during this festive season, despite input cost hikes they have suffered on account of the increase in crude prices and rupee depreciation. This is because most of the paint companies have successfully passed on their increased cost to customers through price hikes. “Most of the major companies have increased prices in recent times,” Abhijit Roy , president, Indian Paint Association told media. While market leader Asian Paints effected a 2.35 % price increase in October, Berger increased prices by 2.2 % . It is planning another round of price hikes in December, company officials said. “The festive season, beginning with Durga Puja, was good and we expect good Diwali sales too in the decorative segment,” he said. In an investor call post its second quarter results, Asian Paints management said that volume growth was higher than the value growth during the quarter despite the price increases. The management also pointed out that despite inflationary pressures, it was not easy to raise prices in the industrial paints category as there were negotiations involved with the ‘big boys of the industry.’ Decorative paints account for bulk of sales for the Indian paint industry with sales spiking during the festive season. Industrial paint sales are linked with factors like economic growth and there has been a demand slowdown during the second quarter, industry officials said. He said that the paint industry has been affected by the hike in crude prices as many of its inputs were crude- derivatives. Rupee depreciation, too, compressed margins, Mr. Roy said. Abneesh Roy, research analyst and senior vice president - institutional equities - research, Edelweiss Securities said that the softening of crude prices would be positive for paint companies like Asian Paints and Berger.