Shares of Berger Paints India Ltd rose on November 6 following the company’s Q2 earnings report, which, despite a 7.5% year-on-year decline in net profit, showcased resilience through strategic pricing and product mix adjustments. The paint manufacturer reported a net profit of ₹269.6 crore for the July-September quarter, down from ₹291.6 crore in the corresponding period last year.
Key Financial Highlights:
- Revenue Growth: Revenue from operations edged up by 0.3% year-on-year, reaching ₹2,774.6 crore compared to ₹2,767.3 crore in Q2 of the previous fiscal.
- Operating Performance: EBITDA for the quarter was ₹434.2 crore, an 8.3% dip from ₹473.7 crore in Q2 last year, with the EBITDA margin softening to 15.7% from 17.1%.
- Gross Margin: Despite pricing challenges, Berger Paints managed to expand its gross margin year-on-year, driven by a strategic shift toward premium and luxury segments and a decline in lower-end product segments.
Business and Operational Insights:
- Market Conditions: The extended monsoon and flooding impacted key regions, including Andhra Pradesh, Kerala, West Bengal, Gujarat, and Maharashtra, affecting single-digit volume growth in Q2. However, the sales momentum picked up towards the end of September.
- Strategic Adjustments: Berger Paints increased product prices and focused on a stronger product mix, with higher contributions from premium and luxury products. The protective and infrastructure segments showed solid growth during the quarter.
- Margin Management: Operating margins remained within the projected 15-17% range. Despite a YoY drop in EBITDA margin due to higher manpower costs, urban expansion initiatives, and elevated advertising expenses, Berger Paints saw sustained margin improvement in the industrial business (excluding automotive) due to falling raw material costs.
The company’s proactive approach to mitigate the volume-value gap, coupled with growth in high-end products, has contributed to positive investor sentiment. As of 10:00 am, Berger Paints shares were trading higher, reflecting investor confidence in the company’s long-term growth strategies despite near-term challenges.
