There is some respite for investors in Pidilite Industries Ltd., which has been battling severe cost inflation for some time now. The company has registered tremendous growth in sales in the September quarter. On a standalone basis, its revenue grew 36% year-over-year (year-over-year) with underlying sales volume and a compounded growth of 25%. This was driven by a 25% increase in sales volume and a mix of key consumer and market (C&B) and 20% growth in sales volume and a mix of B2B, management said.
The consumer demand environment in the business improved significantly due to faster vaccinations, lower COVID infections and increased mobility. Management stated that the growth was widespread in areas as well as in urban and rural areas. C&B registered growth in all categories like Adhesives, Construction Chemicals and DIY portfolio. Management said domestic subsidiaries in the C&B business returned to double-digit growth led by higher sales in premium products. Subsidiaries in the B2B business have gradually improved due to improvement in real estate and construction related activities.
As far as international subsidiaries of Pidilite are concerned, they saw modest revenue growth in Asia due to lockdown restrictions in several countries. The US sector saw a decline based on the previous year’s high. During the last year, sales were higher due to the reduction in demand as well as the benefits extended by the government to consumers during Covid, it added.
Going forward, Pidilite management remains cautiously optimistic on the continuation of strong demand conditions.
Responding to earnings, the company’s shares rose over 4% intraday on the NSE on Thursday.
While a better demand environment provides comfort, the battle for cost inflation is yet to be won. Investors should note that 60% of the company’s raw material costs come from vinyl acetate monomer (VAM), a major raw material that is a derivative of crude oil, and Pidilite meets its VAM requirement largely through imports. completes.
The unprecedented rise and volatility in input costs has been a major challenge. Management said that in this environment, a sharp focus on operational efficiencies along with modest price increases has helped us navigate an uncertain environment. However, margin recovery will take a long time, especially in the B2B segment due to moderation in commodity inflation. It is to be noted that margins of its international subsidiaries were also affected due to input cost inflation. It’s no surprise that its consolidated gross margin declined 1,050 basis points to 45.4% in the September quarter. One basis point is one hundredth of a percentile.
In the meantime, the company’s management is taking calibrated pricing actions and continues to focus on cost and operational efficiencies to protect margins.
Never miss a story! Stay connected and informed with Mint.
download
Our App Now!!
,