Paint companies positive on demand pick up; June sales at 80% of last year

April was a complete washout for all paint companies, but there were some green shoots visible in May. As things stand this month, all companies are back to at least 80 percent of sales seen in June 2019.

Berger paints believes this could be on account of pent-up demand for the last two months, and other companies believe normalcy will return by Diwali. All paint companies are currently operating at nearly two-thirds of their optimum capacity. This is likely to ramp up in the near future.

Another interesting point is that demand is being driven by small-town and rural India. COVID-19 has impacted metro cities and urban India more than tier 2 and tier 3 cities. As a result, recovery outside the main cities has been faster. Even within the major cities,  Mumbai, Ahmedabad and Delhi are recovering slower than southern metros like Bengaluru and Hyderabad. For the paint industry, rural and tier 2 and tier 3 cities account for nearly half of total sales.

Finally, industry leaders like Asian Paints and Berger Paints are going all out to revive consumer confidence. Consumers’ possible aversion to painters entering their homes is being mitigated by running safety campaigns, PPE Kits being offered to painter community, and offering their own painting services. Raw material environment for the industry is largely benign, but the gains have been tempered by softness in the industrial and automotive pain segments.

For decorative paints, there are visible green shoots and Asian Paints summed it up, saying that even as consumers get more value conscious, people spending more time at home will consider decorating their walls soon.

This is what each of them said:

Demand in June is much better than May

Tier 2 & Tier 3 CIties doing much better than Metro

Western region is still affected by lockdown

Bangalore and Hyderabad doing better than Mumbai and Delhi

Metro and Tier 1 cities contribute 50-55 percent to revenue

Overall recovery in June at 80 percent of June last year

Small  portion of demand may have been lost

Expect maintenance demand to continue for the year

Difficult to say if FY21 volumes and value will be better than FY20

Capacity utilization at 60-70 percent, improving by the day

Have given PPE Kits to painters to assuage concerns of customers

Current quarter input prices lower than those a year ago

Rural markets are doing better than pre-COVID Levels

Company's dependence on metros is relatively lower

Saw 45 percent decline in March volumes

Decorative segment to see year-on-year growth in June

Auto and industrial segments still weak, account for 8 percent of revenues

Important to see if June demand sustains, may be an element of pent up buying

Have pushed back non-essential capex

Pune plant is almost complete

Lucknow plant construction to begin in November

90 percent of paint shops have re-opened

Expect to reach normalcy in decorative paints soon

Rural demand better than urban

Tier 2 and tier 3 cities showing strong traction

March saw 80-90 percent decline in auto paint business, April was a washout

Auto sector is still a problem, expect some green shoots in Q2

Have postponed plant Vizag project by one year

Capacity currently is 5.5 lakh tonnes, utilization at 63 percent

Crude price has fallen, but crude oil derivatives have not gotten cheaper

Will be a challenge to hold on to these margins

Volume decline in fourth quarter in line with revenue decline of 17 percent

April was a washout, June witnessing 80 percent recovery in sales

See larger demand coming from smaller towns

Metros currently locked down, so revenue impacted

Utilization of plants is at 50-55 percent

35 percent of revenue comes from industrial business, market leader in key segments

Company is the fourth-largest player in decorative paints

Target is to get back lost market share