Pidilite Industries expects to maintain profitability amid rising input costs with strategic price hikes

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

"Our first quarter was well in excess of the guidance at 26.3 per cent, while quarter two has come at 20.5 per cent, 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 maker of Fevicol adhesive raised prices by 4-5 per cent earlier this month and, if needed, will consider another 2-3 per cent increase in the March quarter, Vats said on a call. The company had increased prices by 12 per cent 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 per cent, while that for the first half of the fiscal year was 23.5 per cent.

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.