Berger Paints expects gross margins to improve to around 38-39 per cent in the third quarter amid a softening of raw material prices.
The company is bullish about its growth prospects in the decorative segment in India while remaining cautious about European operations. The standalone gross margin of the paint maker has fallen to 35.3 per cent during Q1FY23 from around 38.3 percent in Q4FY22 even as price increases to an extent have countered the inflationary trend in raw materials. “We see our margin moving upwards to about 38-39 per cent.
Whether it grows more would depend on two factors — competitive intensity and raw material prices,” said Abhijit Roy, MD and CEO of Berger Paints, on Friday after the company’s 98th AGM. “Raw material prices have cooled down a bit and if this remains at this level, in the third quarter it should go back to the levels that we have indicated,” said Roy.
The company, however, has planned a marginal price increase in September to counter the high input costs. “The total impact of price increase is about 0.3-0.4 per cent, and is not very significant,” Roy said. Roy said the company had recently got approval from the Bengal government for an additional 10 acres of land at Panagarh for an upcoming plant.
“We had initially applied for 20 acres and then subsequently applied for 10 acres, which the government has granted. We are waiting for some more permissions,” he said. “We see three very big growth opportunities ahead of us — one in the decorative segment, one in the protective coating and general industrial segment and in the waterproofing segment, which is a nascent category in India. With these three growth engines, we are reasonably confident that our growth will continue, both in terms of revenue and operating profit,” he said.
“Globally there are concerns, but in India, we continue to be quite bullish on the paint industry in the next 20 years, particularly on the decorative side,” said Kuldip Singh Dhingra, chairman of Berger Paints. The company has set a target of a turnover of Rs 10,000 crore a year ahead of its centenary year.
