Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Berger Paints India Ltd (BOM:509480, Financial) achieved the highest gross margin in the last 10 quarters, with 40.4% in standalone and 41.7% in consolidated results.
- The company recorded a double-digit volume growth in premium and luxury products, indicating a strong market demand for higher-end offerings.
- Berger Paints India Ltd (BOM:509480) continued aggressive network expansion, adding 2,200 retail touchpoints and installing over 2,000 color bank machines.
- The company maintained a strong net positive position at the end of the quarter, showcasing financial stability.
- The protective and infrastructure business recorded good growth, contributing positively to the company's overall performance.
Negative Points
- The company's top line remained almost flat year-on-year, impacted by extended monsoon and flooding in key markets.
- Operating margin was lower due to higher manpower costs for urban initiatives and increased advertisement spending.
- The decorative business recorded only single-digit volume growth, affected by adverse weather conditions.
- Consolidated performance in Poland suffered due to one-off costs, impacting profitability.
- The company's subsidiary in Nepal experienced de-growth in both top line and profitability due to a credit crunch in the economy.
Q & A Highlights
Q: What is Berger Paints' strategy regarding the potential sale of a major MNC player in the paint industry, and how does the company plan to maintain its high gross margins amidst rising competition?
A: Abhijit Roy, CEO, stated that Berger Paints is waiting for clarity on the MNC's intentions before deciding on any strategic moves. Regarding competition, he emphasized that the paint industry has always been competitive, and Berger Paints plans to maintain and potentially improve its margins by launching more differentiated products.
Q: Can you elaborate on the urban initiatives and the rationale behind them?
A: Abhijit Roy explained that Berger Paints has a weaker presence in key metros, with only about a 10% market share. The company is focusing on increasing its presence in these urban markets, which have significant potential. The strategy involves setting up own stores and franchise stores to improve brand visibility and penetration.
Q: How is the demand environment shaping up post-monsoon, and what are the expectations for volume growth in the coming quarters?
A: Abhijit Roy indicated that demand is expected to improve in Q3 and Q4. The company anticipates a volume growth rate of 7-10% in Q3 and double-digit growth in Q4. The value growth is also expected to improve as the impact of previous price decreases wanes.
Q: What impact does the potential exit of Axo have on the competitive landscape, and how does Berger Paints view this development?
A: Abhijit Roy mentioned that the fear of increased competition is somewhat exaggerated. While competition has intensified, the exit of one player and the entry of another maintains the status quo of four major players in the market. He views this as healthy competition that keeps the company on its toes.
Q: What are the specific targets for the urban initiative, and how will it impact employee costs?
A: Berger Paints aims to increase its market share in urban areas from 10% to 12.5% in the short term and to 15% in 2.5 to 3 years. The company has added manpower for these initiatives, and while exact costs are difficult to quantify, more investment in manpower is expected as the initiative progresses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
