A steady quarter for Asian Paints

Bavadharini KS | Updated on January 23, 2018 Published on January 23, 2018

Asian Paints, one of the largest paint makers, is on the path to recovery post the implementation of GST in July 2017. Though revenue has remained flat for the December quarter 2017, on a (GST) comparable basis, the company reported revenue growth of about 11 per cent year-on-year to Rs 4,268 crore. Profit for the same period grew about 16 per cent year-on-year to Rs 567 crore.

The key segment of the company – decorative paints -- has registered single digit volume growth as demand conditions for the paint industry have not reached pre-GST levels. On the industrial front, automotive coatings witnessed good growth in the auto OEM, auto refinish and general industrial business segment. The company also reported good growth in powder coatings, leading to an overall good performance in industrial business. Overall, paint demand in the North and East has been good for the company, whereas in South it has not been good due to an extended monsoon.

The company is the largest player in the decorative segment which contributes 83 per cent of its revenue, while industrial coatings and home improvement business contributes 2 per cent each; the rest of the revenue, about 13 per cent, is contributed from the international business. Operating margins improved to 22 per cent in the December quarter, slightly higher than 21 per cent of the same period last year.

Raw material costs have increased nearly 14 per cent year-on-year for the quarter ended in December 2017, due mainly to an increase in the price of crude and titanium-di-oxide, key raw materials for the paint companies. The company has not taken any price hike in the December quarter although with the increase in raw material prices, the company might take price revisions going forward.

Considering the dependency on raw materials, the company is strongly moving towards water-based solvents, which would reduce the cost of raw materials such as crude or titanium-di-oxide to a greater extent in the coming years. For FY19, the company has outlined capex of Rs 1,000 crore for setting up two new plants, which will produce entirely water-based paints.

Published on January 23, 2018

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