Mumbai: Top paints maker, Asian Paints Ltd , said on Wednesday that it remained cautious on growth as rising raw material costs and interest rates hurt domestic demand, while political turmoil hit overseas operations.
On Tuesday, the firm posted a jump of 24% in June quarter net profit to Rs 250 crore. Its net sales grew to Rs 1,922 crore from Rs 1,491 crore in the same period a year ago.
“We remain cautiously optimistic about growth going ahead... High prices and subsequent margin pressures remain a concern,” P.M. Murthy, managing director said on a post-earnings conference call.
Indian paint makers such as Kansai Nerolac and Berger Paints are expecting a slowdown in growth in the current fiscal year, as rising interest rates dent demand growth and forces consumers to cut back purchases of homes, offices and cars.
The RBI raised interest rates by a higher-than-expected 50 basis points on Tuesday, its 11th rate increase since March 2010 stepping up its fight against persistently high inflation despite slowing growth.
Asian Paints also said it sees price pressures due to rising prices of titanium dioxide, a key raw material for paint makers. The company has raised prices by 8% over May, June and July.
“The recent hike in diesel costs will also hit freight costs more than expected,” Murthy said.
The company, which gets 18% of its sales from overseas and its industrial business, also expects its international operations to remain under pressure.
“There are challenges as far as the international business is concerned. Political uncertainity in Egypt and Emirates remain risks on the international front,” Murthy said.
Asian Paints gets about 5% of its overall sales from Egypt.
In India, the company also said it is planning to spend Rs 1,000 crore for its new plant near Pune, which will be operational by 2013, Murthy said.
It has earmarked a total capital expenditure of Rs 900 crore for the current financial year.
Shares of the company closed up 0.12% at Rs 3,143 in a weak Mumbai market.