Asian Paints Q2 profit slumps 29% as input costs soar, inflation bites

Asian Paints Ltd earnings were muted in the second quarter ended September 30 as steep inflation in raw material prices impacted gross margins across all businesses.

The company on Thursday reported a 29% decline in consolidated net profit at ₹605 crore as against profit of ₹852 crore in the corresponding period of last fiscal.

“Steep inflation seen in raw material prices, since the beginning of this calendar year, has been phenomenal and has impacted gross margins across all businesses in the quarter,” Asian Paints MD and CEO Amit Syngle said.

Following the declaration of results, Asian Paints stock fell nearly 5% to settle at ₹3,015 on NSE. So far this year, the shares have gained by a meagre 8.63% as against near-30% rally in the Nifty index.

However, revenue revenue from operations in the second quarter rose 33% to ₹7,096 crore from ₹5,350 crore a year ago.

Cost of raw materials during the quarter soared by 72% to ₹4,570 crore as against ₹2,646 crore in the same period last year. Meanwhile total expenses of the company stood at ₹6,418 crore in the reporting period.

Profit before depreciation, interest, tax and other income (PBDIT) decreased by 28.5% to ₹904 crore from ₹1,265 crore.

The company has taken a series of price increases and would look at further price increase to mitigate the impact of this persistently high inflation, he said adding that the company is confident that it should be able to turn this around strongly in the coming quarter.

The board has also approved the payment of interim dividend of ₹3.65 per equity share for the financial year ending 31 March, 2022.

Syngle said the domestic decorative business continued to “move ahead on its high growth trajectory with an unprecedented 34 per cent volume growth in the quarter and a strong compounded growth rates over the last two years”.

The industrial coatings business also registered strong double-digit revenue growth, led by robust demand for protective coatings and uptick in the automotive sector. The home improvement business continued to scale up in a significant manner, registering its highest quarterly revenues, aided by strong alignment with the projects business, he added.

“Performance in the international business was a mixed bag with good growth in the South Asian markets, while markets in the Middle East and Africa were sluggish with challenges around Covid-19 and forex (foreign exchange) availability,” Syngle said.

The company has also approved the appointment of Milind Sarwate as an additional and independent director of the company for a period of five years with effect from 21 October.

Milind is the Founder and CEO of Increate Value Advisors LLP. He provides advice and mentorship in business and social value creation, governance, and capability-building, leveraging his 38 years of experience including long stints as CFO and CHRO in Marico and Godrej.

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