Top four paint companies raise the prices to mitigate adverse effect of rising prices of crude oil

Excerpt: The top four paint manufacturers - Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel - have seen a rise in raw material costs in the March quarter.

The top four paint manufacturers - Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel - have seen a rise in raw material costs in the March quarter. The four companies together control over 50 per cent of the domestic paints industry.

Crude prices according to government data is on an upward trend with the average price at $56.43 per barrel in 2017-18 compared with $47.56 in the year-ago period. The exchange rate has also remained volatile. While Berger Paints and Kansai Nerolac has seen a 31.7 per cent and 29 per cent rise in standalone raw material cost during the fourth quarter of 2017-18, Asian Paints and Akzo Nobel have seen an increase of 8.79 per cent and 19.91 per cent, respectively.

To mitigate part of the impact and to protect the margins, paint firms have taken two rounds of price hike in 2018 - in March and May - with a combined rise close to 4 per cent already. The paints industry uses crude oil derivatives such as titanium dioxide and monomers as raw materials, part of which is imported into the country.

"Material prices continued to witness an upward trend, thereby exerting pressure on margins which were to an extent mitigated by the price increase taken," said KBS Anand, managing director and CEO of Asian Paints.

The hike is mostly on the decorative paints segment as industrial paint pricing is mostly on a negotiated basis. Decorative paints contribute to over 70 per cent of the industry turnover. The industry is not discounting another round of price hike from being considered depending upon the trend in material costs.

"The paints industry has already taken a couple of price hikes this year (2018) to mitigate some of adverse effect of the raw material costs. As of now, raw material prices are stable. We have to closely watch the volatility in crude prices and exchange rate and take further call on price," said Abhijit Roy, managing director of Berger Paints.

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