Paint prices to go up by 7.5 percent from Sept 1 on higher taxes, feeble economy

By Steve UMIDHA

Paint prices will from next week soar further due to high cost of production, with manufacturers like Crown Paints Kenya confirming that charges on its premium products will increase by up to 7.5 percent effective September 1.

This is due to a 15 percent rise in excise duty just imposed on imported paints, varnishes and lacquers, which are key ingredients and raw materials used in paint manufacturing.

Coupled with high fuel prices, weakening value of the Shilling against the US dollar, and a generally feeble economy, paint firms say they will not be able to sustain the current prices and have no alternative but to pass on the additional mark-ups to the consumer.

“Despite our best efforts to absorb these additional costs, the sustained increase in raw material prices has made it necessary for us to adjust our product pricing,” said Crown Paints’ head of sales Mohammed Mateen in a letter to its customers.

Further stating that, “Regrettably, we find ourselves in the position of having to implement a price increase on our paint products, effective September 1, 2023. There will be a 7.5 percent increase in the prices of our premium paint products and 5 percent increase in the prices of our economy paint products.”

It is the second time in less than a month the NSE – listed paint maker has announced intentions to hike prices of its products.

“The sustained increase in excise duty, fuel prices, and raw material costs has put considerable strain on our operations, making it necessary for us to review our pricing structure. Effective 15/08/2023, we will be adjusting the prices of some of our products to reflect the current economic landscape,” said the firm’s Rakesh Biswas, head Product Management Group two weeks ago.

Paint prices had already risen 10 percent last year on similar concerns.

The firm increased the price of its products by up to eight percent in April last year in the wake of a rise in the cost of shipping raw materials, after the cost of importing raw materials more than doubled at the time to Sh567,800 per tonne from Sh227,140 before the outbreak of the Covid-19 pandemic.

Another paint maker, Neuce Kenya, although a small player in the local market and dependent heavily on imports, was one of the first companies to increase prices after feeling the long-term effects of an economic vagueness, with the sinking value of the Shilling against global currencies and high fuel a growing concern.

“Apart from the forex, other major factors such as price variance in raw materials, fuel cost, clearing goods, NSSF and other costs have seen a similar upward spiral. Due to these reasons, we will not be able to sustain the current prices and we have no alternative but to further review the prices,” read in part a June statement from the firm’s managing director Nelson Fiuza to its customers.

One of the primary factors influencing paint prices, according to local players, is the cost of raw materials. Paint production ordinarily, requires various chemicals, pigments, solvents, and additives, the prices of which can fluctuate based on global market conditions.

If there’s a shortage of specific raw materials or if their prices increase, it can lead to higher production costs for paint manufacturers, which may be passed on to consumers.

While he expected the changes to take effect sometime after July, Crown Paints Chief executive in a previous interview said he does not expect prices to dent demand, or lead consumers to buy cheaper products or delay renovation projects, adding that cost pressures were most likely to stabilize in the months ahead.

“Inflation has seen most people’s purchasing power reduced in the last months, and while the demand has been down, we haven’t decided on that just yet (review in prices). We are hopeful that in the second half of the year we will achieve a double-digit growth,” offered Mr. Rao in a telephone interview early this month.

In march last year, paint firms lost a bid to block new taxes on raw materials. In their petition, the manufacturers including Basco Products (K) Limited, Crown Paints Kenya limited, Nasib Industrial Products Limited, Maroo Polymers Limited, Galaxy Paints and Coatings Limited, and Super Manufacturers Limited described the tax measures as unlawful, unconstitutional, null and void as they impose an unfair tax burden on them and their customers.

They were opposed to the 10 percent excise duty rate introduced in 2021 in the Finance Act 2021 as the government mobilized tax revenues to finance the 2021/22 budget of Sh3.6 trillion. Their main contention was that the amendments were not subjected to public participation.

But with the introduction of new taxes in the Finance Act 2023, manufacturers and not just paint companies are expected to increase their price margins as they contend with the high cost of doing business in the country.