Informist, Saturday, Nov. 9, 2024

By Sunil Raghu

AHMEDABAD – Faced with weak consumer sentiment and persistent rains, floods in some parts of the country that affected demand for paints, the net profit of Asian Paints Ltd. fell sharply in the quarter ended September. This was the second consecutive quarter the company registered a year-on-year fall in bottom line. This was also the third quarter in a row that the country's largest paints maker saw its revenue decline year on year. Further, pricing pressure led to relatively weaker operating margin of 15.5% compared to 20.3% a year ago.

The company's consolidated net profit for Jul-Sept fell 42.4% on year to INR 6.95 billion. It was below analysts' estimate of INR 10.99 billion. The consolidated revenue from operations was INR 80.28 billion, down 5.3% on year. This was also below the Street's estimate of INR 86.63 billion. The company's consolidated operating profit for Jul-Sept was down 28% on year at INR 12.4 billion.

Asian Paints had clocked a net profit of INR 11.7 billion on net sales of INR 89.7 billion in Apr-Jun and a net profit of INR 12.05 billion on net sales of INR 84.79 billion in the September quarter of last year. Sequentially, the company's consolidated net profit was down 40.6% and revenue from operations lower by 10.5% on year.

The company, in a statement released along with its Jul-Sept earnings, said that the revenue was affected by price cuts taken last year, shift in mix, and increased rebates. Though the paint making and home decor major did hike prices of products by 1% in Jul-Sept, it expects the impact to be reflected in Oct-Mar.

The consolidated earnings before interest, tax, and depreciation for Jul-Sept fell 27.8% to INR 12.40 billion, from INR 17.16 billion in the previous year.

Asian Paints said that while volumes of the domestic decorative paints segment declined marginally, overall domestic coatings revenue fell by 5.5% for the quarter ended September. The international business portfolio registered a marginal decline in revenue for the quarter. However, it clocked 8.7% growth in constant currency terms, despite unfavourable market conditions in certain key markets like Ethiopia and Bangladesh, the company said.

The company's total expenditure increased 1% on year to INR 70.93 billion. Finance costs were up 23.8% on year at INR 630.1 million, while depreciation rose 15.9% on year to INR 2.42 billion. Tax expenses fell 36.6% to INR 2.65 billion, from INR 4.19 billion a year ago. Other income was higher by 5.1% on year at INR 1.74 billion.

During the quarter, company bore an exceptional cost of INR 1.8 billion, representing impairment provision of INR 1.24 billion recognised as 'Goodwill on Consolidation' of The White Teak Co., and a foreign exchange loss of INR 561 million pertaining to its subsidiary in Ethiopia.

Asian Paints Managing Director and Chief Executive Officer Amit Syngle was quoted as saying in a press release that they expect margins to recover in the coming quarters on anticipated softening in material prices and price increases implemented in the last few months. The company board has announced an interim dividend of INR 4.25 per share.

On Friday, shares of Asian Paints ended 2.6% lower at INR 2,769.45 on the National Stock Exchange. End

Edited by Ashish Shirke

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