News Analysis

Kansai Nerolac Q4: Painting a steady growth

Bavadharini KS BL Research Bureau | Updated on January 11, 2018 Published on May 03, 2017

kansai

Strong growth in the decorative segment, cushioning of margins due to price hikes and boost from other income, have kept Kansai Nerolac Paints’ March quarter performance in good stead.

Post demonetisation the recovery in the decorative segment has been sharp, and the company’s 7 per cent growth YoY in total revenue was driven by a strong volume growth and healthy price realisation in the decorative segment.

Volumes in the decorative segment grew 16-17 per cent during the March quarter, over the same period last year. However, growth in industrial segment remained sluggish because of slow recovery from the after-effects of demonetisation.

The company is the largest player in the decorative segment which contributes 55 per cent of its revenue, while industrial segment contributes 45 per cent (chunk from automotive coatings).

At the operating level, the company’s margins were impacted due to rise in raw material prices. Titanium dioxide, a derivative of crude oil, for instance, witnessed a sharp price increase over the previous year.

Nonetheless, the company’s operating margins went up substantially by over 2 percentage points to 17.5 per cent YoY during the March quarter. The price hike taken by the company in the decorative segment of about 2.5 per cent in March has aided margins.

Thanks to the healthy operational performance and a sharp spike in other income, adjusted net profit for the company grew about 38 per cent YoY during the March quarter.

This excludes the one-time gain the company reported during the March quarter of FY16 fiscal on sale of its Perungudi’s fixed assets. If this is taken into account, the company’s reported profit delivered 81 per cent YoY fall during the latest March quarter.

Outlook

Kansai Nerolac is likely to witness a 7-8 per cent growth in revenue, going ahead. Strong volumes in the decorative segment should drive this growth. Industrial segment, on the other hand, could continue to witness a subdued performance in the coming quarters.

Though, increase in raw materials costs can hurt margins, price hikes in the decorative segment can cushion the fall to some extent. The company announced a price hike of 3 per cent in decorative segment in the month of May.

The company’s board has recently approved setting up of manufacturing unit in Andhra Pradesh with an outlay of Rs 304 crore having a capacity of 60,000 kilo litres.





Published on May 03, 2017

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.