The paint industry anticipates a vibrant Q3 amidst changing market dynamics.
Amid the soft second quarter two of financial year 2024 (Q2FY23) performance in the paint segment, the players are expecting a positive change in the upcoming quarter three of financial year 2024 (Q3FY24) results fueled by festive season demand.
While the market conditions have been sluggish during Q2, the demand picked up during the December quarter due to the festive and peak wedding season.
“Apart from this, increased demand is witnessed during a year when Diwali falls in November due to longish available painting time post-monsoon and pre-Diwali period,” Shalimar Paints’ Director- Sales & Marketing, Kuldip Raina said.
Asian Paints’s MD & CEO, Amit Syngle stated that Q3 is something the company is looking at, in terms of the growth during the earning call of Q2 results.
“The exit of September was strong and therefore we are looking at a good 40 days of October and the first ten days of November, being very, very strong, which is happening because of the overall festive demand,” Syngle said.
The company also expects to capitalise during the wedding season (November and December).
Claiming the above, “Typically there is a lot of painting which happens around wedding time,” Syngle highlighted.
Another player present in the paint segment is Nippon Paint, also has a positive influence on the Q3 results.
“We foresee a positive influence in the December quarter, propelled by the continuing festive season and year-end, which is expected to stimulate heightened consumer spending and enhance revenue,” said Mark Titus, AVP- Marketing, Nippon Paint India.
With around 20 per cent market share, Berger Paints also witnessed a good October as far as the Diwali belt is concerned, Abhijit Roy, MD & CEO, Berger Paints stated during an earning call.
Impact of Extended Monsoon on Sales
During Q2, Asian Paints reported a flat value growth which was about 1.1 per cent. Similarly, the gap between the volume and value growth of Berger Paints was significant, though the company maintained a double-digit volume growth for the quarter, the value growth was much lower.
Due to the erratic and sporadic rainfall in Q2, Syngle asserted, “We saw a shift towards possibly a longer festival season and therefore what we are seeing that right from 15 September onwards.”
The extended monsoon resulted in a low off-take of exterior and interior premium emulsion and it was more of the sale of economic category in economy emulsion, primers, distemper and pati. As a result, the value change growth was relatively low.
“We also sold much less first quality enamels in this quarter, which is a high ASP product and therefore the value field looks a little bit slower than normal. So that is the explanation for the volume value differential,” Roy explained.
Additionally, the differences which have been seen in the second quarter are the rural and urban centres have been behaving slightly differently.
“We have seen that there is a change from Q1 to Q2. Today, the urban centres have done better than the rural centres and that somewhere is a difference that is causing some of the dip in terms of demand,” Syngle underlined.
Geopolitical Factors and Industry Impact
The kind of deflation that the industry has seen in Q1 and Q2, is something in which the company doesn’t see any deflation. “In fact, we see going forward, there will be some inflation,” Syngle said.
With the expected inflation, Asian Paints at the time of the Q2 meeting was not looking at the price increase. However, it might have to look at prices in terms of what it might have to do depending on how the inflation takes place going forward.
“There is some balancing which is happening with the material prices going up and this is a trend which I see in Q3 and Q4 going forward,” Syngle added.
The larger geopolitical situation has put pressure on crude which will lead to the industry seeing increasing the prices. From the point of view of the fluctuation in the currency, the impact might reflect on the Q3 results of the companies.
“We don’t know which way it is going. As a result, what we are looking at is that possibly in the coming quarter, you will definitely see some upswing in terms of material prices, especially where crude derivatives and solvents are concerned,” Syngle said.
Diwali Period Affects Paint Sales
In general, an extended Diwali period has a positive impact on the sector for approximately 45-60 days, starting from the second half of September.
“What we have seen in general is that whenever there is a longer Diwali, definitely we find that the longer Diwali helps the period of about 45-60 days, which are there starting from the second fortnight of September onwards. And therefore, you get a larger play because please remember that monsoons do continue in larger parts of the country till September end,” Syngle asserted.
In a short period of Diwali, it gets affected because the season will not typically start from the beginning of September. The extended Diwali helps in terms of really a larger demand and therefore the respective quarter gets affected, Syngle added.
