BENGALURU (Reuters) – India’s Kansai Nerolac Paints Ltd reported a weaker-than-expected rise in second quarter profit on Tuesday, hit by higher input costs and a demand squeeze due to unseasonal rains.
Consolidated net profit for the three months ended Sept. 30 jumped 23.4% to 1.14 billion Indian rupees ($13.79 million) from 920.1 million rupees, a year earlier, the Mumbai-based company said in an exchange filing.
However, it came in below analysts’ average estimate of 1.65 billion rupees, according to Refinitiv IBES data, as total expenses climbed 18% on higher raw material costs.
Quarterly revenue from operations surged 19.2% to 19.31 billion rupees on the back of price hikes.
Companies globally have seen their profits take a hit from higher commodity costs, but the recent dip in raw material prices raises prospects for the upcoming quarters.
The company has taken price hikes in both decorative and industrial divisions, and is in discussions with auto makers for more increases, said Anuj Jain, managing director of Kansai Nerolac. Still, “inflation challenges” persist, Jain said.
Quarterly gross margins contracted 32 basis points year-on-year to 28.6% and 132 bps sequentially, Prabhudas Lilladher noted.
“We expect margins to recover from the second half of fiscal year 2023 due to price hikes across portfolio and some price correction in raw material basket,” said Amnish Aggarwal, head of research at Prabhudas Lilladher.
In the December quarter, demand for decorative business, which includes interior and exterior wall paints as well as wood coatings, could be “subdued” due to an early Diwali, the Hindu festival of lights, and a longer-than-usual rainy season, MD Jain said.
Shares of Kansai Nerolac have lost nearly 18% so far this year.
(Reporting by Ashna Teresa Britto and Navamya Ganesh Acharya in Bengaluru; Editing by Dhanya Ann Thoppil)
