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Berger sees volume dip in FY12 on rising prices, interest rates

Berger sees volume dip in FY12 on rising prices, interest rates
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First Published: Wed, Jun 29 2011. 02 22 PM IST
Updated: Wed, Jun 29 2011. 02 22 PM IST
Mumbai: Berger Paints India Ltd expects demand for paints to ease slightly in the current fiscal year as rising interest rates and a surge in paint prices dent consumer sentiment.
The Indian paint industry, which largely caters to the housing and automobile industry, has been hit as consumers defer their purchases in a high inflation and high interest environment.
“We are anticipating a slight dampening of demand. Volume-wise about 5% deduction could be there,” Subir Bose, managing director, told Reuters on Wednesday.
“Paint prices have increased by 15% and that in itself dampens demand to a certain extent and then interest rates have gone up so much and all along there is hardening of the interest regime,” he said.
The Reserve Bank of India (RBI) has raised its policy rate by a total of 250 basis points in nine moves since March 2010.
Berger Paints gets 80% of its revenue from the decorative segment, which largely caters to housing, and the remaining from industrial, with a minimum exposure to the automotive segment which is seeing a slowdown.
Its rival Kansai Nerolac, India’s No.2 paints maker, expects revenue growth to slow to 15% in the current fiscal year from 25% last year as demand from the automobile industry is likely to moderate.
However, the company does not anticipate a value shrinkage as it has been taking necessary price hikes. It expects value growth to remain at over 20% in this fiscal, Bose said.
Berger, which raised prices by 6.8% in the June quarter, expects to hike prices by a further 2 percentage points in coming weeks.
While input prices have risen in the past few months, the trend is not expected to continue.
“In the coming months, we can expect raw material prices to remain steady or taper off slightly,” Bose said.
Expansion
Berger has earmarked Rs100 crore for capital expenditure in the current fiscal year. This would be deployed at the company’s new unit in Andhra Pradesh, apart from expenditure at existing plants.
The company’s new facility, being built at an investment of Rs150 crore, would double its capacity to 500,000 tonnes.
Berger is also planning to spend Rs250 million on each of its plants in Goa and West Bengal to install additional capacity, which should be ready by September, Bose said.
The paints maker is also planning to open 50 retail stores in southern India this fiscal year on a franchisee basis.
At 1.15 pm, shares of the company traded up 1.1% at Rs101.45 in a firm Mumbai market.
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First Published: Wed, Jun 29 2011. 02 22 PM IST