Zinc oxide, one of the raw materials used in production of paints, was offered at lower rates compared to pre-COVID levels as zinc dross prices across June remain subdued. Leading paints company, Asian Paints, attributed its profitability in June ending quarter to softer raw material prices.
Asian Paints reported revenues at Rs24.46bn in June quarter down by 44pc while net profit fell by 61.4pc to Rs2.51bn from the year prior.
Paint companies consume approximately 40pc of the zinc oxide produced. As the demand from rubber/tyre companies remained slightly low during the lockdown, many oxide manufacturers directed their customer base to paint companies and some to pharma sectors.
Lower prices were offered to attract new consumers, oxide manufacturers told Davis Index during the lockdown period. This was possible as zinc dross, an essential raw material for production of zinc oxide was also offered at lower rates in Q1 ending June.
However, prices have started to climb for dross on the back of LME gains of approximately $215/mt at $2,202 on July 24 from June 1. However, domestic demand remains on the lower side though it is higher compared to June, , said market participants.
The paint business segment witnessed significant improvement in May and June as soon as restrictions were eased, said Asian Paints in their filing regarding June quarterly results. Paints for home category improved in June end although at a lower pace.
Favourable market conditions in Middle East and Africa supported demand while in Nepal and Bangladesh demand was hit owing to COVID-19 extended lockdown.
Asian Paints has over 26 paint manufacturing facilities in 15 countries with 60 countries as consumers.
($1= Rs 74.84)