Asian Paints Q1 net down 25% on weak demand, lower realisation

Asian Paints has reported that its June quarter net profit was down 25 per cent at ₹1,187 crore against ₹1,575 crore logged in the same period last year on the back of weak demand and lower realisations.

Income dipped three per cent to ₹9,126 crore (₹9,379 crore).

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PBDIT (profit before depreciation, interest, tax, other income and exceptional items) decreased 20 per cent to ₹1,694 crore (₹2,121 crore). PBDIT margin was down at 18.9 per cent from 23 per cent in the same period last year.

The company has doubled capacity at its Mysuru plant to 6 lakh kilolitre per annum.

The company has registered a volume growth of seven per cent in the decorative segment aided by recovery in rural markets. However, realisation declined by three per cent due to price cuts taken earlier in the year and a shift in product mix, said the company.

Unanticipated material price inflation coupled with supply chain challenges impacted profitability of the decorative business for the quarter, it added.

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The Industrial business did relatively better and grew 6 per cent due to value-backed growth in auto OEM (original equipment manufacturers) and powder coatings segment. The economy segment registered a good offtake aided by the launch of latex paint NeoBharat, which focuses on making further inroads in the ‘bottom of the pyramid’ segment.

Amit Syngle, Managing Director & CEO of Asian Paints, said demand conditions for the paint industry were tough, impacted by the severe heatwave and general elections in the quarter.

On the international front, geographies such as Ethiopia and Sri Lanka grew well in Q1 on the back of gradual recovery in these economies, however, key macroeconomic issues persisted in Nepal, Bangladesh and Egypt impacting the overall performance of the International business, he added.

In the near term, he expects demand to improve on the back of improving rural sentiment and monsoons picking up gradually.

The competition in the paint sector has become intense with the entry of Aditya Birla Group company Grasim Industries which has been offering big discounts to make space for itself in the market.

Selling under Birla Opus, the company expects the new business to turn profitable once it clocks ₹10,000 crore in gross revenue in three years of full-scale operations.

The company has plants in Panipat (Haryana), Ludhiana (Punjab), and Cheyyar (Tamil Nadu). Three more plants at Chamarajanagar (Karnataka), Mahad (Maharashtra) and Kharagpur (West Bengal) are expected to go on stream by end of this fiscal.