If Asian Paints’ FY20 fourth quarter performance is any indication, lockdown though implemented hardly for one week in March has impacted the decorative paints industry adversely. Its also true that had there been no lockdown, Q4 would have been the best quarter for the industry in 2019-20.
“Loss of sales due to the lockdown in March’20 impacted the Decorative business segment in an otherwise strong quarter with double digit volume growth in the first two months of the quarter. Even with the loss of sales, the Decorative business segment in a tough year has registered double digit volume growth for the year and strong profit numbers,” said Amit Syngle, Managing Director & CEO, Asian Paints Limited.
On the positive side, there may be some good news from Asian Paints for its customers as the company is planning to pass on the benefit of lower raw material cost to the final consumers. Paints industry is a raw material heavy industry and fortunately for the industry raw material cost has remained benign all these days due to declining crude oil prices. Softer raw material costs have helped the paint manufacturers to control production costs despite the depreciation in rupee value. According to the company, even after taking into account the rupee depreciation, raw material costs will be lower in 1QFY21 compared to 4QFY20.
There was no price reduction in 4QFY20, but 1% reduction in prices was seen in the decorative segment for FY20. However, the company is waiting for the demand situation for the decorative paints to normalise before cutting down the price.
Also, the company will not have any material impact of the current clash between India and China at the borders. Asian Paints currently imports 8-10% of total raw material requirements from China, and it has already created back-up plans by tying up with alternate vendors in case situation at border escalates.