Asian Paints announced their financial results for the quarter ending June 30, 2023.

Q1 FY’24 Highlights

• Double‐digit volume and healthy value growth in Decorative Business (India)
  1. Consistent double‐digit volume growth trend on 4 yr CAGR basis
• Home Décor benefitted from high growth trajectory in fabrics, decorative lighting, UPVC windows & doors; focused on scaling up Kitchen & Bath
• Sustained double‐digit revenue growth trajectory in Industrial Business
• Macro uncertainties and forex tightness impacting key Asian markets in International Business
• Operating, sourcing and formulation efficiencies coupled with softening material prices resulted in improved operating margins:
  1. Q1 FY’24 Consolidated PBDIT Margin expands by 510bps to 23.2%
  2. Q1 FY’24 Standalone PBDIT Margin expands by 540bps to 24.7%

“Our Domestic Decorative business registered double digit volume growth and a relatively healthy value growth, coming on a high base of the previous year. Both the Auto OE and the General Industrial coating businesses achieved a strong double‐digit revenue growth, led by growth in the Protective & Powder Coatings segment. Our international business was supported by good deliveries from the Middle East region however, continued macro‐economic challenges and adverse forex conditions in Asian markets, resulted in an overall subdued growth for the international portfolio. On the Home Décor front, categories like fabrics, decorative lighting, UPVC doors & windows maintained their high growth trajectory. However, the Kitchen and Bath business segments were sluggish.

Overall, we have recorded significant improvement in margins, both sequentially as well as on year‐on‐year basis, aided by strong efforts on driving operational, formulation and sourcing efficiencies and supported by easing inflation in raw material prices. Looking ahead, we remain focused on pursuing growth and are confident about a robust festival season ahead,” said Amit Syngle, Managing Director & CEO of Asian Paints Limited.

Key Financial Highlights for the Quarter Ending June 30, 2023

• Consolidated Net Sales increased by 6.7% to ₹ 9,153.8 crores from ₹ 8,578.9 crores.
• Improvement in gross margins by 530 basis points in Q1 FY’24 as compared to Q1 FY’23.
• PBDIT [Profit before depreciation, interest, tax, other income, and exceptional items] (before share in profit of associates) increased by 36.3% to ₹ 2,121.3 crores from ₹ 1,556.0 crores.
• PBDIT Margin as % to Net Sales improved to 23.2% from 18.1% in the corresponding period of the previous year and 21.3% in Q4 FY'23.
• Profit before exceptional items and tax increased by 47.1% to ₹ 2,105.0 crores from ₹ 1,430.8 crores.
• Net Profit after minority interest increased by 52.5% to ₹ 1,550.4 crores from ₹ 1,016.9 crores.

Segment Highlights

International Business

Sales decreased by 1.4% to ₹ 695.1 crores from ₹ 705.2 crores on the back of economic uncertainty, forex crisis and liquidity issues in key markets of   Asia  and Africa. In constant currency terms, sales increased by 3.8%. PBT before exceptional items was ₹26.5 crores as against ₹ 37.9 crores in the corresponding period of previous year.

Home Décor Business

• Bath Fittings business: Sales decreased by 28.2% to ₹ 84.7 crores from ₹ 118.0 crores on the back of high base in the last year due to price increases. PBDIT loss was ₹ 0.8 crores against profit of ₹4.2 crores in the corresponding period of the previous year.
• Kitchen business: Sales decreased by 12.0% to ₹ 96.0 crores from ₹ 109.0 crores on the back of high base in the last year due to price increases. The business achieved PBDIT break‐even with PBDIT of ₹ 0.7 crores as against a loss of ₹ 4.0 crores in the corresponding period of previous year.
• White Teak and Weatherseal: Sales at White Teak increased by 28.4% to ₹ 26.0 crores. Sales at Weatherseal more than doubled to ₹ 9.8 crores. Both these recent acquisitions are gaining from synergies with the Asian Paints network.

Industrial Business

• APPPG: Sales increased by 21.6% to ₹ 294.2 crores from ₹ 242.0 crores. PBT was ₹ 39.2 crores as against ₹ 12.0 crores in the corresponding period of previous year.
• PPGAP: Sales increased by 13.3% to ₹ 471.9 crores from ₹ 416.4 crores. PBT was ₹ 82.0 crores as against ₹ 32.0 crores in the corresponding period of previous year.

On 23 June 2023, the Company has further acquired 11% stake of White Teak from its existing shareholders for a cash consideration of ₹ 53.8 crores. This is part of the staggered buyout plan and consequently, White Teak has become a subsidiary. In accordance with Ind AS 103 – Business Combination, the previously held 49% stake in White Teak is fair valued based on an Independent Valuer’s Report on the date of acquisition of 11% of equity share capital. Pursuant to this, fair valuation gain of ₹ 34.0 crores is recognized under ‘Other Income’ in the Consolidated Financial Results for the quarter ending June 30, 2023.

During the quarter, the Company revised its sick leave policy for certain classes of employees. Hitherto, such employees were allowed to accumulate sick leave upto a specified number of days. In lieu of accumulation of sick leave, the said classes of employees can avail sick leave as and when needed as per the revised policy of the Company. Consequent to the revision in leave policy, in accordance with Ind AS 19 - Employee Benefits, the Company has reversed provision for sick leave of ₹ 38.9 crores in standalone books and ₹ 40.7 crores in consolidated books. The same is recognized under employee benefits expense in the financial results.