TREND: Rising mercury may make June quarter a breeze for AC companies
Informist, Tuesday, May 23, 2023
By Neeshita Beura
MUMBAI – The peak summer season, which started in April, is expected to result in a surge in sales of air conditioners and room coolers, and this is likely to be reflected in industry players' revenue for the June quarter.
Historically, sales of white goods peak from March till June. In 2022, the industry witnessed record sales of 1.5 mln room air conditioners in April, said Shashi Arora, president and chief operating officer, cooling and purifications appliances group at Blue Star Ltd. The Mumbai-based company has a 13.5% market share in the air conditioner business in the country.
This Year, Unseasonal Rains In March Dampened The Demand For White Goods
This year, however, unseasonal rains in March dampened the demand for white goods. "In March, the Indian room AC industry witnessed a double-digit de-growth in both volume and value, as per a third-party industry report," Pradeep Bakshi, managing director and chief executive officer of Voltas Ltd, said in a statement.
Soaring temperatures across the country are now expected to lead to a revival in demand for white goods. "With the heat wave witnessed across states such as Gujarat, Uttar Pradesh, Punjab, Haryana, Maharashtra, Bihar, Jharkhand, West Bengal, and Odisha in the first fortnight of April, it is expected that air conditioner and room cooler sales would be high this year as well," Blue Star said.
The company, whose room air conditioner business grew more than 35% in the summer of 2022, expects to see record sales this summer season as well, given the tropical nature of the country, a harsh summer, and a higher density of concrete housing in urban areas.
In the company's Jan-Mar post-earnings call, Managing Director B. Thiagarajan said he expected the white goods market to grow at least 20% from January to June. It could even grow beyond 25%, given that temperatures in Delhi could shoot up from May 7 till Jun 15, according to forecasts. However, industry players are aware that any unexpected rain will impact the sale of air conditioners.
INPUT COSTS, A PAIN POINT
In 2022-23 (Apr-Mar), air conditioner makers were hit by high costs of raw material such as steel, copper and plastics. They believe the volatility will continue in the current fiscal year as well.
Blue Star attributed the volatility in commodity prices to "disruptions in the global supply chain of these commodities". Apart from that, an adverse foreign exchange rate – currently over 82 rupees a dollar – has impacted prices of imported raw materials. Ocean freight, too, was impacted due to COVID-19 restrictions in China and Russia's invasion of Ukraine.
Blue Star said it continues to maintain its profitability margins through total cost management and other cost-reducing initiatives. The company's revenue for the quarter ended March rose 16.4% on year to 26.24 bln rupees.
Voltas, another major player, said the consumer durables industry has witnessed multiple double-digit price hikes in the last two financial years. Regardless, the company ensured it didn't pass on the full extent of the hikes in raw material prices to consumers. It has also introduced various offers such as equated monthly instalment options to make purchases convenient for customers.
Voltas has a 21.9% share in the Indian air conditioner market. The company's revenue rose 10.9% on year to 29.57 bln rupees in Jan-Mar. However, its net profit for the period fell 21.2% on year to 1.44 bln rupees due to provisions made on delayed collection in the international project business, according to a press release shared by the company.
At 1224 IST, shares of Blue Star traded 0.1% lower at 1,411 rupees, while those of Voltas were up 0.1% at 811 rupees. End
