Asian Paints Q2 Results: PAT slumps 28% YoY, misses estimate; co to pay Rs 3.65 dividend

MUMBAI: Asian Paints today reported a 28 per cent year-on-year decline in consolidated net profit for the quarter ended September to Rs 595.96 crore, which was sharply below analysts’ estimate.

The company’s bottomline performance missed expectations of all eight brokerages polled by ETMarkets.com.

The paint manufacturer’s consolidated revenues in the quarter grew by 32.6 per cent on-year to Rs 7,096 crore, which was sharply above Street’s estimate.

The company’s board also approved an interim dividend of Rs 3.65 per share at its meeting held earlier today.

The decline in the company’s bottomline was largely due to a sharp spike in expenses during the quarter. Asian Paints’ total expenses jumped 49 per cent on-year to Rs 6,418.2 crore led by a 73 per cent rise in the cost of raw materials.

The decline in bottomline came despite a 25 per cent on-year fall in tax expenses and 67 per cent jump in other income during the reported quarter.

“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,” said Amit Syngle, managing director and chief executive officer at Asian Paints in a press statement.

Syngle said that the company will look at further price increases going ahead to mitigate the impact of “this persistently high inflation”. He said the company is confident of turning around the situation in the coming quarter.

The impact of the surge in input cost was felt in the company’s operating performance as consolidated operating profit sank 28.5 per cent year-on-year to Rs 904.4 crore. The country’s largest paintmaker saw its consolidated operating margins shrink 1,080 basis points on-year to 12.8 per cent.

However, the comfort for Asian Paints came in the form of strong demand as the reopening of the economy and restart of construction activity boosted volumes. “The domestic decorative business continued to move ahead on its high growth trajectory with an unprecedented 34% volume growth in the quarter and a strong compounded growth rates over the last 2 years,” Syngle said.

Shares of Asian Paints reacted negatively to the results as they sank 5.6 per cent to Rs 2,991.8 on the National Stock Exchange.