Berger Paints misses Q2 profit estimates as raw material inflation squeezes margins
Mumbai: Berger Paints India Ltd missed September-quarter profit estimates as a sharp rise in raw material costs outpaced price increases, squeezing margins at the country's second-largest paintmaker even as revenue grew in double digits. The company expects further price hikes and cost-saving measures to help restore profitability in the coming quarters.
The Kolkata-based paintmaker's consolidated net profit, attributable to owners, rose 5% year-on-year to ₹216.88 crore in the quarter ended 30 September, according to its stock exchange filing. The figure was well below the Bloomberg consensus estimate of ₹273.87 crore, based on 15 analyst estimates.
"The raw material prices really went up substantially more than what we could get by the price increases," chief financial officer Kaushik Ghosh said during the earnings call, adding that the company had also withdrawn some rebates on select product categories to protect margins.
CEO Abhijit Roy said the company had partially passed on the higher costs and implemented additional price increases in October, with further hikes planned for November.
Berger is also banking on festive-season demand to support growth in the second half of the financial year. Extended rainfall in eastern markets and a shift in Diwali-related purchases to the December quarter moderated decorative volumes during the September quarter, even as price increases supported value growth.
"October was the month when we had the highest sales growth in the last possibly 25 to 30 months, so therefore the festive season looks good. We should be able to carry on growing in this quarter," Roy said.
The company's decorative business recorded 10% value growth, driven by price increases of about 8%, while volume growth moderated. A conscious shift towards a better product mix also affected volumes, as the company saw degrowth in price-sensitive categories such as putty, textures and enamel. Differentiated products, waterproofing and wood coatings performed better.
The industrial business, meanwhile, delivered high double-digit volume and value growth across segments despite steep price increases. Automotive coatings also benefited from strong demand in the two-wheeler segment.
Berger expects its operating margin to move closer to its guided range of 15-17% in the second half, supported by calibrated price increases across business lines, cost efficiencies and operating leverage.
"We are quite confident that we will be quite close to that 15% to 17% band that we have indicated in Q3 and possibly also in Q4 as well, given the type of initiatives that we are taking and the price increases both in decorative and industrial which are coming up now," Roy said.
Competition in the decorative paints market, however, remains intense. Roy said the new entrant had raised its prices to bring them in line with the industry but was returning a significant part of the increase to dealers through higher rebates.
Berger's market share among the six listed paintmakers stood at about 20.2% at the end of the first half, marginally lower than 20.3% earlier, according to Roy.
"We are hoping that we should be able to maintain comfortably where we are at the current moment," he said, adding that the company was not expecting significant market-share gains amid intense competition.
The company also expects to benefit from an urban-market expansion initiative, which it plans to scale up from April next year after testing its strategy in select cities. It is also planning investments in new factories in West Bengal, and Odisha to cater to future demand.
“We have been able to pass on partially the price increase, and some more price increases we have got in the month of October,” Roy, managing director and chief executive of Berger Paints, said during the company's post-earnings conference call. “Some we are planning to get in November as well, hoping that we will be recovering almost 90% of the increase that we want at the end of November. We will have to push through till December to get the balance 10% that will be left over.”
Revenue from operations grew 13.2% year-on-year to ₹3,200.37 crore but also missed the Bloomberg estimate of ₹3,216.84 crore, based on 16 analyst estimates. Earnings before interest, tax, depreciation and amortization (Ebitda) increased 5.2% to ₹370.7 crore from ₹352.3 crore.
The pressure was more pronounced on gross margins, which declined to 39.31% from 41.57% a year earlier, as raw material inflation outpaced the benefit of price increases. The company also incurred an additional ₹22 crore in advertising and promotional expenditure for its new corporate campaign, 'Rang Bana Rahe'.
"Gross margins were impacted by double-digit raw material inflation, as has happened with the entire industry, liquidation of high-cost inventory, and delayed price increases in the industrial segment, with pressure further intensifying during the quarter," Roy said.
Raw material prices rose sharply by 25% during the quarter, leaving the company struggling to fully pass the increase on to customers. While Berger had undertaken price increases across its decorative and industrial businesses, the benefit was insufficient to offset the higher input costs.
The company expects the pace of margin recovery to depend on crude-linked raw material prices, which have softened marginally after reaching their highest levels in the June quarter. Roy said the company would be able to recover almost all the cost increases if crude prices remained at current levels.
Berger's larger rival Asian Paints reported a 7.5% year-on-year increase in consolidated net profit attributable to owners to ₹1,067.63 crore in the September quarter, from ₹993.59 crore a year earlier. Revenue from operations grew 16.9% to ₹9,976.51 crore.
Both paintmakers have flagged raw material inflation and the challenge of passing on higher costs through price increases without affecting demand. Further price hikes across the industry could also test consumer appetite, particularly as dealers build inventory ahead of anticipated increases.
Dipali Banka is a Mumbai-based journalist who treats corporate reporting less like a beat and more like a puzzle to be solved. This invariably means she has to read through annual reports and speak with leaders and analysts. She tracks policies, deals, and the pulse of industries spanning metals, mining, paints, and cement, alongside aviation. She started out as an intern at The Statesman and then completed her postgraduate diploma in journalism from Asian College of Journalism, Chennai, in 2025. Relentlessly curious at heart, Dipali is driven by the simple urge to understand how things work and who they impact. Armed with an enduring fascination for steel and aeroplanes, she moves through the churn of daily news with focus, turning complexity into clarity without losing the story. She is particularly committed to shaping numbers into objective narratives, having little appetite for vagueness that gets in her way.<br><br>Outside the newsroom, Dipali is an unapologetically loud presence who values long conversations and longer walks to unwind. She devours books of all kinds and can often be found indulging in the lyrical sway of contemporary ghazals. She ardently believes that her relationship with her bylines is more sacred than it would ever be with anyone across the human race.
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