Price hikes to help Pidilite meet profitability guidance

Mumbai: Pidilite Industries expects to maintain profitability within its guided range of 20-24%, as price hikes help cushion the impact of rising input costs, managing director Sudhanshu Vats said.

The maker of Fevicol adhesive raised prices by 4-5% earlier this month and, if needed, will consider another 2-3% increase in the March quarter, Vats said on a call.

The company had increased prices by 12% in the June quarter, and followed it up with small hikes in the three months till end-September.


Pidilite’s consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) margins for the September quarter stood at 20.5%, while that for the first half of the fiscal year was 23.5%.

“Our first quarter was well in excess of the guidance at 26.3%, while quarter two has come at 20.5%, so there is considerable fluctuation in the Ebitda margin,” Vats said.

He cited the example of vinyl acetate monomer (VAM), a key raw material used for making adhesives, such as Fevicol. After the onset of the West Asia crisis, prices of the chemical surged to $2,000 per tonne from $800-900 earlier. Prices then saw a sharp cooling off, coming down to $900-1,000 per tonne at the start of the September quarter, only to see a sharp rise again towards the end of the quarter.

The cost of VAM in the June quarter was around $1,350 per tonne, and it rose to $1,600 per tonne in the September quarter. “This compares to $880 (in the previous year). So it is almost 2X. But despite that, we’ve managed within our corridor,” Vats said.

Given the uncertain and volatile times, the company’s management of pricing will be more dynamic, Vats said.

Pidilite reported its earnings for the September quarter earlier this week. Its consolidated profit rose 7% year-on-year, while sales were up more than 21%.