Gross margins are likely to improve to the pre-pandemic levels of around 38-39 per cent by Q3, says MD & CEO
Berger Paints India Ltd is looking to take a 1.5-2 per cent price hike across product categories by early September to offset the increase in raw material costs.
The move, coupled with some softening in raw material cost, will help shore up the company’s EBITDA margins to close to 17 per cent from the current levels of around 15 per cent by Q3.
20% hike since July
The company has undertaken a total price hike of around 20 per cent in phases since July. Gross margins are likely to improve to the pre-pandemic levels of around 38-39 per cent by Q3, backed by a steady demand and increase in prices. The company’s gross margins had fallen by around 3 per cent in Q1, Abhijit Roy, MD & CEO, Berger Paints, told newspersons after the company’s 98th annual general meeting on Friday.
However, a further improvement will depend on competitive intensity and other macro-economic factors, including prices of raw materials, he pointed out. Post this hike in September, the company does not anticipate any further increase in prices if the cost trajectory of raw materials remains at the current levels. The overall impact of price hikes on the company, on a diluted basis, would be 0.3-0.4 per cent, said Roy.
The company expects decorative paints, protective and waterproofing segments to be the three key areas for growth during the current fiscal. “There is a very good opportunity in decorative segment. We are looking to expand the distributor dealership network. There is a lot of gap particularly in southern and western markets and we are looking to expand there,” he said.
Berger Paints is also eyeing acquisitions of small-medium sized paint and chemicals companies to grow its business. It would avoid large acquisitions which can potentially risk its financial position. The company has not identified any targets yet but it would look for companies which create synergy in either paints or waterproofing segment, he said.
“Acquisitions can also go wrong and our consideration is that if an acquisition doesn’t go well, we can digest it without causing any major problem for us,” Kuldip Singh Dhingra, Chairman, Berger Paints, said at the virtual press conference.
Published on August 26, 2022