Input cost inflation still a worry, may hike price, says Asian Paints

26 Jul 2022

Input cost inflation is likely to be around 1.5% to 2% in the quarter ended September after seeing an increase in the June quarter to 6% from 1% in the March quarter, the company told investors and analysts in a post-earnings conference call today.

The company is banking on cost efficiencies and calibrated price increases to maintain its profitability going forward. To combat ongoing price increases in key raw materials such as solvents Asian Paints has decided to take a 0.5% price increase from Aug 1.

The operating margin of the company expanded to 19.4% in Apr-Jun from 18.7% a year ago, the company disclosed.

Asian Paints’ managing director and chief executive officer Amit Syngle said that the on-year volume rise in Apr-Jun was 35%.

A strong volume increase and a 2% price hike in Apr-Jun contributed to the 54% jump in net sales to 86.1 bln rupees.

Sequentially, however, the volume increased by a lower rate of around 12%, data from the company’s investor presentation showed.

Further, the Apr-Jun revenue was up sequentially by only 9%, indicating that the 2% price hike was not enough to offset the 6% input cost inflation.

Volume in the June quarter rose on the back of higher contribution of business from tier-1 and tier-2 cities where the sales of premium emulsions, luxury products and waterproofing solutions were brisk.

The company said it saw a good increase in business-to-business category sales to the builder segment, construction companies, co-operating housing societies in cities, factory units and government’s infrastructure projects.

In its international business Asian Paint’s revenue was 7.1 bln rupees in Apr-Jun, up by 16% on the year. But the volume went up by only 6% and the company effected steep price increases to boost revenue.

The Asian markets of Nepal and Bangladesh contributed the most to the international business revenue growth.

But the company said that currently the key global units, especially in Sri Lanka, Bangladesh, Ethiopia and Egypt were facing multiple headwinds and the company expected them to be under strain for some time.

On the domestic front Asian Paints is only concerned about input cost inflation going forward and does not consider consumer demand to be a matter of concern.