Asian Paints has recorded weak performance for the June quarter due to the impact of GST and increased cost of raw materials.

In the first quarter, the company’s revenue recorded a growth of about 5 per cent to ₹4,228 crore, year-on-year.

Decorative Paints, the company’s key segment (contributes 81 per cent of revenue), registered a low single-digit volume growth due to restocking on account of GST.

However, the company’s continued focus on new products helped sales growth.

On the industrial front, the automotive and industrial coatings and liquid paints segment, saw a good demand growth.

Operating profit margins declined to 18 per cent in the June quarter 2017, lower than the 22 per cent of the same period last year.

Higher prices of key raw materials such as titanium dioxide have put pressure on margins.

Most of the raw materials, derivatives of crude, have witnessed steady increase in price over the previous year on higher prices of crude oil.

The price hike of 2.68 per cent in May following the 3 per cent hike in March 2017 has not helped margin much.

The profit declined 20 per cent year-on-year to ₹441 crore during the June quarter.

The implementation of GST should aid demand growth for the company in the long run, as the industry consolidates and unorganised players too, come under the tax net.

In the near term, though, the increase in raw materials costs can hurt margins, price hikes in the decorative segment can cushion the fall to some extent.

The company is confident that for any increase in input costs following higher price of the crude-based raw materials, the company may take a price hike to guard its margins at least partially, if not completely.

Given that the company is using water-based solvents, going ahead, its input costs may come down, and boost margins.