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Informist, Thursday, Jan. 23, 2025

 

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--Pidilite: Oct-Dec vinyl monomer consumption cost $884/tn vs $902/tn yr ago 
--CONTEXT: Pidilite mgmt comments in post-earnings analyst call 
--Pidilite: Some strain in demand in core consumer categories 
--Pidilite: In Oct-Dec, rural demand growth higher than urban demand 
--Pidilite: See input costs staying benign in March quarter 
--Pidilite: Organised real estate a key factor in our B2B segment growth 
--Pidilite: Bounce in sales related to festivals didn't come at all Oct-Dec 
--Pidilite: Growth momentum in B2B projects to continue 
--Pidilite:Barring black swan event, don't see consumer segment sales falling 
--Pidilite Ind: See Jan-Mar vinyl monomer cost in same range as Oct-Dec 
--Pidilite Ind: Current vinyl monomer consumption cost at around $884/tn

 

By Steffy Maria Paul

 

MUMBAI – Adhesives and sealants producer Pidilite Industries Ltd. expects its input costs to remain benign in the March quarter, the company's management said at a post-earnings analyst call on Thursday. The company said its consumption cost for vinyl acetate monomer, a key raw material, for the December quarter was $884 per tonne, down from $902 per tonne in the year-ago quarter. It was also lower than the consumption cost of $980 per tonne in the previous quarter. 

 

The company said that its current consumption cost for vinyl acetate monomer was also $884 per tonne and that it expects the price to stay in this range for the March quarter as well. Vinyl acetate monomer, used in the production of resins and polymers for paints and coatings, adhesives, and sealants, makes up for 20-25% of the company's raw material basket.  

 

The company's management said it saw softness in demand in both rural and urban areas during the quarter, causing strain in its core categories. However, demand in the rural areas continued to outpace its urban counterpart, Pidilite said. Nevertheless, the company remained optimistic about a likely pickup in demand from the June and the September quarters on account of positive takeaways from the Union Budget for 2025-26 (Apr-Mar) which will be announced on Feb. 1. 

 

The company's 'consumer and bazaar' segment, which manufactures and sells adhesives, sealants, art and craft materials, and construction and paint chemicals to retail consumers, saw an underlying volume growth of 7.3% during the quarter. To a question about whether the consumer slowdown is getting worse every quarter, Bharat Puri, the managing director, said, "Barring black swan events, we don't see the consumer bazaar (sales) falling." Modern trade and e-commerce play very little role in its consumer business, but the company has expanded a fair bit in this and currently 7-10% of its sales come from these channels, the management said.

 

The buoyancy which existed in the real estate sector six months back has slowed down on account of local factors, Puri said. A festival season-led bounce didn't come at all this year during the December quarter, he added.

 

The business-to-business segment of the company will continue its growth momentum, the company management said, and added that organised real estate clients are a part of this segment. The segment which covers the sale of adhesives, synthetic resins, and construction chemicals to large businesses reported an underlying volume growth of 21.7% during the December quarter.

 

The company said it expects its earnings before interest, tax, depreciation, and amortisation margin to remain in the range of 20-24% in the short term. However, it would keep an eye on the depreciation in the rupee and input costs, which are not expected to hurt the company, at least in the near term. "If we see our margins at the higher end, we will look at further sets of actions to stimulate growth in the first half of next year (2025-26)," the company added. The company's EBITDA margin for the quarter was 24.3%, lower than 25.1% in the year-ago quarter. 

 

Talking about taking price hikes, the company said it will pass on the impact of inflation, to the extent of 75%, to its consumers if it severely impacts the company. "Otherwise, we will tend to focus on trying to step up our underlying volume growth rather than trying to do pricing, which we believe that gets you short-term results, but a lot of medium-term pain," the company said. 

 

The company, which sells synthetic chemical products like adhesives, sealants, and waterproofing compounds to retail consumers as well as businesses, reported a consolidated net profit of INR 5.52 billion for the December quarter on revenues of 33.69 billion. Its net profit rose 8.2% on year and its sales rose 7.6% on year. The company reported an underlying volume growth of 9.7% during the quarter. 

 

On Thursday, shares of the company closed at INR 2,909.65 on the National Stock Exchange, up 5.6%.  End 

 

Edited by Akul Nishant Akhoury

 

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