A labourer pours pink paint into a plastic jar. (Photographer: Dhiraj Singh/Bloomberg)

Q2 Results: Raw Material Price Spike Weighs On Asian Paints’ Earnings

Asian Paints Ltd.’s net profit fell short of analyst estimates due to rising cost of raw materials.

The paintmaker’s net profit fell 14.4 percent to Rs 493 crore year-on-year, according to its exchange filing. That compares with the Rs 578-crore estimate by analysts tracked by Bloomberg. Revenue rose 8.76 percent on a yearly basis to Rs 4,639 crore for the July-September period.

The company’s operational performance missed analysts’ forecasts. The operating income, or the earnings before interest, tax, depreciation and amortisation, fell 3.2 percent to Rs 784 crore from last year.

Angel Broking’s Mayuresh Joshi said the rise in cost of raw materials—crude oil, titanium dioxide and zinc oxide in particular—along with the depreciating rupee, has had a “trickle-down effect” on the company’s EBITDA and margin. Asian Paints’ operating margin contracted 210 basis points to clock 16.9 percent this quarter on a yearly basis.

Revenue from the company’s mainstay paints unit was Rs 4,537.06 crore, followed by the home improvement segment.

The decorative business segment in India registered a low double-digit volume growth. Raw material prices continued to move up further which has led us to take a price increase from Oct. 2018.
KBS Anand, Managing Director and CEO, Asian Paints Ltd.

Anand said in a statement that the business conditions in international operations continued to remain challenging since issues like unavailability of foreign exchange, high inflation and difficult economic conditions impacted the company’s performance in the quarter ended September.

Other Highlights

  • Raw material cost rose 30.25 percent to Rs 2,610.28 crore.
  • Home improvement business grew 20.18 percent to Rs 101.99 crore year-on-year.
  • The board approved the payment of an interim dividend of Rs 2.85 per share.

The company’s shares fell 2.8 percent to Rs 1,200.40 apiece ahead of the earnings announcement. The stock rose 2.6 percent in the past one year compared with a 6.6 percent advance in the S&P BSE Sensex.