Subscribe to enjoy similar stories. A softening of crude oil prices is usually good news for paint companies. The industry’s margin prospects tend to get a leg-up as prices of key input chemicals titanium dioxide and crude-based monomers ease in tandem with oil prices, although the impact on earnings comes with a lag.
The price of Brent crude hit a three-year low of $68 a barrel earlier this month and is now about $74 a barrel. Still, this time around, the picture is unlikely to be as rosy as it was earlier. That’s because incumbent paint makers may be tempted to pass on most of the benefits of easing costs to beat the competition and protect their market share.
Companies may choose to deploy crude-led additional cost savings for higher dealer discounts and/or reduce prices. For instance, Asian Paints Ltd has hiked prices at a faster rate than crude oil and has retained the partial benefits of a correction in commodity prices, said ICICI Securities Ltd in a report dated 18 September. “In a normal scenario, we believe a similar trend would have followed in H2FY25-H1FY26, too, if crude oil prices remain lower.
However, Asian Paints is likely to pass on most benefits now due to a steep increase in competitive pressures," added the report. Also read: Kajaria Ceramics had a bumper start to the year. Now it needs demand to catch up Asian Paints is the market leader in decorative paints and the industry’s trendsetter for pricing decisions.
Interestingly, after lowering prices in recent quarters, paint companies raised prices by 1-2% in July. But it should be noted here that new entrant Grasim Industries’s Birla Opus has priced its decorative paint products lower than competitors. So incumbents may want to bridge this gap,
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