Berger Paints India Ltd, the country's second-largest paint manufacturer, does not foresee any significant impact on its profit margins despite the recent surge in crude oil prices, according to a senior company official.
Production of paint heavily depends on crude-based derivatives which are used as raw materials.
Berger said the current pain is mostly covered with its previous price increases and is not considering any further hikes in the festive season to push sales.
However, if crude oil prices continue to remain elevated for a longer duration, the company anticipates a potential dip in profits compared to the first quarter levels.
"If the prices remain at this level, which we expect, we see no immediate or significant impact going forward, except that profitability may be lower than in Quarter 1," Berger Paints Managing Director & CEO Abhijit Roy told PTI.
Brent crude, a benchmark for India, has at one point of time surged to nearly USD 98 per barrel from USD 75 in July. It is currently trading around USD 93.3 per barrel.
Roy pointed out that there is sufficient finished stock in the system to sustain operations until November. The real impact is expected to be felt in December, which, however, will likely be relatively small until the third quarter.
Roy expressed concern that if crude oil continues to hover above USD 100 for an extended period, it could start to exert pressure on the company's financials.
Despite these challenges, the paints maker is banking on a robust third quarter (September to December) due to the extended gap between the monsoon season and the delayed festive season.
Berger Paints witnessed double-digit volume growth in the first quarter ending June and is aiming at retaining this growth momentum. During Q1FY24, the consolidated revenue of Berger rose 9.8 per cent YoY, totalling Rs 3,030 crore.
This growth was propelled by a robust YoY volume increase of 12.7 per cent. During Q1FY24, the company expanded its footprint, adding over 1,500 new retail touchpoints and deploying more than 1,300 colour bank machines.
This expansion contributed to an increase in market share from 19.3 per cent in March '23 to 20.2 per cent in the June quarter.
Berger Paints aims to maintain EBITDA margins within the range of 16 per cent to 18 per cent, management informed in the first-quarter earnings conference call.
Analysts have noted that the Indian paints sector may face intensified competition with the entry of new players such as Grasim, Astral, Pidilite, and JK Cement into the market in FY23.
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