Kolkata, Aug 9: With its net profit dipping by over 10 percent in 2012-13′s first quarter compared to the year ago, mainly due to higher cost of raw materials imports triggered by the rupee’s falling value, paints and coats maker Akzo Nobel has adopted a three-pronged strategy including raw material and import substitutions to contain the pressures on its margins.
Speaking to mediapersons after the company’s annual general meeting here Thursday, managing director Amit Jain said: “We are looking at a combination of initiatives for mitigating this margin pressure. They lie in basically three areas.”
Firstly, the company was working on substituting a bunch of imported raw materials, specially in the areas of resins and latexes, with those which can be made indigenously at its global research centre in Bangalore.
“We have already made the first few. That is something that will allow us to mitigate the cost of the falling rupee,” Jain said.
Besides, the company was working on providing a richer mix of products which would have a better impact on the market.
“The third initiative is over the last couple of quarters, we have taken some very measured price increases, just enough to offset the raw material impact. We will see the benefit of that flowing in together,” he said.
In May, the company had hiked its prices. “Overall prices at the financial year level have gone up by seven percent”.
The company recently went for the merger of three Indian subsidiaries of the Netherlands-headquartered Akzo-Nobel NV with Akzo Nobel India. The subsidiaries are Akzo Nobel Coatings India, Akzo Nobel Car Refinishes India and Akzo Nobel Chemicals (India).
“In the first three months after the merger, we have seen apart from the obvious benefits some collateral benefits,” Jain said.
The company plans to invest up to Rs.150 crore over the next year in setting up an integrated 50-million litre greenfield site at Gwalior which is expected to be commissioned in the second quarter of calendar year 2013.
Jain said the management would be shortly proposing to the board an expansion on its powder coating facilities by co-locating manufacturing with the Gwalior facility.
“We will be looking at a further investment of Rs.50 crore on the powder coating plant,” he said.
In the first quarter of the 2012-13 fiscal, the company’s net sales have risen to Rs.549.77 crore from Rs.338.56 crore for the same period a year ago.
The company now has a 20 percent market share in the premium segment of decorative paints in India. “Most of our offerings are in the premium segment. We are now the number two player in this segment in India after Asian Paints”.
In automotive refinished paints, the company has been the joint number one along with Asian PPJ over the last three quarters, Jain said.