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Informist, Wednesday, Jul 17, 2024

 

--Asian Paints: Apr-Jun consol net profit 11.70 bln rupees vs 15.50 bln

--Analysts saw Asian Paints Apr-Jun consol PAT 14.07 bln rupees

--Asian Paints: Apr-Jun consol revenue 89.70 bln rupees vs 91.82 bln

--Asian Paints: India Apr-Jun decorative paints volume growth 7%

--Asian Paints: India Apr-Jun decorative paints revenue down 3%

--Asian Paints: Subdued demand impacted India consumption in Apr-Jun

--Asian Paints: Price cuts taken in Jan-Mar affected Apr-Jun revenue

--Asian Paints: Shift in pdt mix affected decorative revenue Apr-Jun

--Asian Paints: Demand conditions tough for industry Apr-Jun

--Asian Paints: Apr-Jun standalone EBITDA margin 20.3%, down 440 bps

--Asian Paints: Apr-Jun consol EBITDA margin 18.9% vs 23.2% year ago

--Asian Paints: Apr-Jun overseas sales 6.79 bln rupees, down 2.3%

--Asian Paints: Apr-Jun consol EBITDA 16.94 bln rupees, down 20% YoY

--Asian Paints: Raw material price rise hit decorative EBITDA Apr-Jun

--Asian Paints: Supply chain challenges hit decorative EBITDA Apr-Jun

--Asian Paints: Apr-Jun industrial segment revenue up 5.8%

--Asian Paints: See demand improving on better rural sentiment

--Asian Paints: Economy emulsions did not do well Apr-Jun

--Asian Paints: Apr-Jun retail pdt mix led by waterproofing, distemper

--Asian Paints: India B2B business did better than retail in Apr-Jun

--Asian Paints: Expanded distribution, retail store count now 165,000

--Asian Paints: Apr-Jun overseas sales up 1.8% in constant currency

--Asian Paints: Egypt, Bangladesh sales hit by currency devaluation

--Asian Paints: Apr-Jun gross margin 42.9% vs 43.4% year ago

--Asian Paints: Product mix, not competition, affected Apr-Jun sales

--Asian Paints: Input cost inflation may lead us to take price hikes

--Asian Paints: Construction business sales a bit slow in last 6 mos 

--Asian Paints: Price cuts of 4% in Jan-Mar hit Apr-Jun retail revenue 

--Asian Paints: Did not take any price cuts for retail pdts Apr-Jun 

--Asian Paints: Economy pdts did much better than premium Apr-Jun

 

By Rajesh Gajra

 

MUMBAI – The surprise element in the June quarter earnings of Asian Paints, the country's largest paints maker, was the extent of the hit on domestic retail revenue despite a fair amount of volume growth. In the domestic decorative paints segment, catering largely to retail customers, the company's volume increased 7% on year, but the revenue declined 3%.

 

The Street was banking on the management's aim of double-digit volume growth and this was a key reason why the actual sales and net profit numbers came in below the Street's estimates. Demand conditions were more subdued than expected. The impact of the recently held General Elections was anticipated, but the negative impact on volumes from heatwaves was not foreseen.

 

Asian Paints' consolidated net profit for Apr-Jun fell 24.5% on year to 11.7 bln rupees, while revenue from operations declined 2.3% to 89.7 rupees. The consolidated earnings before interest, tax, depreciation and amortisation was down 20% on year at 16.94 bln rupees, while the EBITDA margin contracted to 18.9% from 23.2%. 

 

The company did not effect any price cuts in the June quarter, Managing Director and Chief Executive Officer Amit Syngle told analysts in a conference call following the announcement of the earnings today. Syngle said that the 4% price cuts in retail products in the March quarter was one of two main reasons behind the revenue decline in the June quarter. The other factor, he said, was the mix of products with economy emulsions not doing well but waterproofing, distemper and wood finishing products faring well. Syngle indicated that premium segment products also did not fare well and in fact lagged economy products, barring emulsions, in terms of volume growth.

 

The Asian Paints MD, however, ruled out the effect of competition on the June quarter performance. Recently, Grasim Industries started manufacturing paints and is attempting to garner market share. Syngle said his company was continuing to expand its distribution footprint and the company currently had 165,000 retail touchpoints.

 

The company fared better in the domestic industry segment than in the domestic decoratives segment, Syngle said. The industry segment revenue for Apr-Jun was up 5.8% on year. In response to a question from an analyst in the call, Syngle said sales in the construction business were a bit slow in the last six months.

 

Asian Paints primarily sells coatings in the industrial segment, and operates through two 50-50 joint ventures with US-based PPG, one of the largest automotive coatings manufacturers in the world. Joint venture PPG Asian Paints caters to the Indian automotive coatings market, while the other joint venture, Asian Paints PPG, services the industrial powder, industrial containers and light industrial coatings markets in India.

 

In the June quarter, sales of Asian Paints PPG were flat at 2.93 bln rupees, while PPG Asian Paints' revenue rose nearly 10% to 5.17 bln rupees. The company said PPG Asian Paints fared well on the back of strong sales by Indian auto companies.

 

The overseas sales of Asian Paints presented a mixed picture. Revenue was down 2.3% at 6.79 bln rupees, but in constant currency terms, the revenue was up 1.8%. Syngle said the Ethiopian market saw good sales, while revenue from the Egypt and Bangladesh markets was hit due to currency devaluation.

 

Topline blues aside, Asian Paints also had to grapple with new challenges affecting profitability. Syngle said raw material price inflation and supply chain issues hit the operating profit in the domestic decoratives business. In Apr-Jun, while the company's EBITDA margin contracted to 18.9% from 23.2%, the gross margin came down to 42.9% from 43.4% a year ago.

 

Syngle said material inflation was a cause of concern. Any further increase in input costs due to inflation would lead to price hikes factoring in both the need to grow revenue and protect margins, and volume growth, he said. Earlier this month, Asian Paints had announced it was hiking retail prices by 1%. The company neither hiked prices nor cut them in the June quarter, however.

 

On Tuesday, shares of Asian Paints ended 0.6% higher at 2,974.45 rupees on the National Stock Exchange. Today, the equity market was shut on account of Muharram.  End

 

Edited by Avishek Dutta

 

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