Berger Paints India Ltd is witnessing demand recovery at better than pre-Covid levels. Consequently, the country’s second largest paint-manufacturer is eyeing a double-digit volume growth and high single-digit value growth in Q2 (September quarter).

Decorative paints, which are driving the revival, account for over 80 per cent of the company’s turnover, while industrial, protective and automotive paints account for the remaining.

Upcountry markets — where Berger has a stronger presence over larger rival Asian Paints — and agricultural belts are amongst the best performing regions with a faster rebound; and some urban markets like Kolkata, Kochi, Delhi and Lucknow are “limping back”. But, bigger ones like Mumbai are more impacted.

According to Abhijit Roy, Managing Director and CEO, the company witnessed a near washout in Q1 (June quarter), a traditionally strong period with April accounting for nearly 45 per cent of quarter sales. Localised lockdowns took some sheen off July numbers. However, such “on-and-off” disruptions have now been factored-in.

“Going by current trends, there could be 10-13 per cent volume growth year-on-year for the September quarter (July – September); while value growth could be 3 percentage points lower than volume growth; say in the 7-10 per cent range,” he told BusinessLine .

There are, however, no payment delays either at the retail-end or in the automotive paints segment. Delays, if any, are there only from project sites where work has stopped.

Outlook and Margins

The outlook for the second half of FY21 (October – March) hinges on faster normalisation and “progressive improvement” in quarter-on-quarter demand. A late Diwali and delayed festival season are added advantages.

“Going by current trends, Q3 should be better than Q2, especially as festivals like Diwali are in November. And Q4 is expected to see more progressive improvement,” Roy said adding that if raw material prices remain benign, margins in FY21 could be “better than” previous year.

According to Roy, the company took time to liquidate carry forward stocks during Q1. Hence, the impact of softening of raw material prices and expansion of gross margins are expected in the July-September and October–December periods. Around 100-150 basis point expansion is expected. No immediate price revisions are on the cards.

Adjacencies, New Products

The company will re-launch a premium paint brand; while there will be a conscious push towards its “home painting services” as a “safer solution”. A portfolio of homecare and hygiene solutions is being prepared under the ‘Breathe Easy’ brand. The portfolio will include hand sanitizers, disinfectant sprays and so on.

Presence in adjacencies, like waterproofing solutions, will be strengthened as Berger looks to leverage its retail presence and emerge amongst the top players over a three-year-period. The company had, in October 2019, announced acquisition of STP Ltd, in order to strengthen segment offerings.

The ₹6,000 –8,000 crore water proofing segment is currently dominated by players like Asian Paints, Pidilite and different MNCs.

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