Plan to do up your home? Get ready to pay a little more – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/indl-goods/svs/construction/plan-to-do-up-your-home-get-ready-to-pay-a-little-more/articleshow/90138244.cms

SynopsisFancy bathware makers have lost more value than many others since oil surged past triple digits a couple of weeks ago. To offset the impact of rising input costs, they are raising prices.

The crude surge is singeing industries that, ostensibly, don’t have much to do with energy prices, Take ceramics, for instance.

Fancy bathware makers have lost more value than many others since oil surged past triple digits a couple of weeks ago. To offset the impact of rising input costs, they are raising prices.

Shares of KajariaNitco, or Somany have plunged more than a fifth in the past month, while Asian Granito declined 14%. By contrast, the Nifty fell 6%.

Most of these companies have either had to raise prices by ₹20-25 per cubic metre or told their dealers to expect an imminent increase in rates after the oil surge.

Plan to Do Up Your Home? Get Ready to Pay a Little More

Kajaria, in a letter to dealers, said the prices would be increased from April 1, due to an increase in gas and coal prices.

“Due to the current war, there has been a substantial increase in gas price, coal price, and transportation cost. This has increased the cost of all product categories. This situation will compel us to take a substantial price increase.” Kajaria Ceramics said in a letter to dealers.

According to Prism Johnson, there is a strong probability that gas prices may increase substantially in the immediate future, “resulting in a price increase in all product categories.”

Brent crude has rallied 27% in the past one month to $117 barrel while spot gas price surged 29%. Rising gas prices will hurt the gross margins of all tile companies, but analysts believe most of the gas cost inflation will be broadly passed on to the customer.

“Given the recent rally in crude, we estimate Ras gas prices to rise in March 2020 quarter and a sharp spike in June 2022 quarter, assuming current crude sustains for next three months,” said Achal Lohade, analyst, JM Financial. “Given it will impact the entire industry and would be passed on, albeit with a lag, though such price hike in tiles could have a modest impact on volume as demand is not completely inelastic.”

In a letter to dealers, Asian Granito said that there is a chance of increasing natural gas prices by approximately 30-40% due to the war. “This increase in cost forces us to increase our price of all products across all verticals; hence our price hike will be effective from the day of increase in input cost,” it said.

Exxaro Tiles, in a note to dealers, said, “In these uncertain days of the war, prices shall be increased due to global demand and supply of crude oil. We have to go with this price rise too.”

Kajaria and Somany posted gross margin contraction of 140 bps and 180 bps quarter-on-quarter respectively in December quarter mainly because of raw material costs inflation and a sharp rise in gas cost, which led to a contraction in Ebitda margins by 130 bps and 150 bps.

(Originally published on Mar 11, 2022, 05:53 AM IST)

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