Asian Paints (India) (APIL) held concall on 28 January 2009 to discuss the third quarter results, and future prospects of the company. Ashwin Dani, vice-chairman and managing director, APIL along with his colleagues has addressed the meet.
Highlights of the meet:
- The consolidated net sales of the company during the quarter ended December 2008 has increased by 12% to Rs 1321 crore. This increase was on the higher base of quarter ended December 2007. With the high inventory and the raw material costs the OPM has dipped to 8.3% from 15.8% in the corresponding previous quarter. The net profit slumped by 50% to Rs 59.02 crore as compared to Rs 118.87 crore, same period last year.
- Higher raw material prices adversely impacted domestic & international margins during the period.
- On a standalone basis the company posted a revenue growth of 10% to Rs 1006.40 crore during the quarter ended December 2008, whereas the net profit posted a fall of 53% to Rs 50.11 crore.
- Segment wise, Paints revenue for the company during the quarter under review grew by 12% to Rs 1013 crore whereas the chemicals business fell by 19% to Rs 34.39 crore.
- The company has generally 27 days of stocks in its hand and this quarter ended December 08, the inventory with the company is high of around 41 days. The dealers of the company will also maintain inventory for around 20 to 30 days.
- The rupee depreciation against the US$ had a negative impact on the imported prices of raw materials during the nine months ended December 2008.
- The industrial sales were impacted by the slow down in the auto industry but the international performance was good with the Middle East and South Asia growing up by 30% and 25% respectively.
- Emulsions on the standalone basis have improved but the distempers and the solvent based products have been hit hard.
- The company has a capex of Rs 400 crore (excluding the land cost of the plant) on the water based paint plant at Rohtak in Haryana. The project is running on schedule and Phase I, is expected to complete by the end of FY10. The capacity of the plant is around 1.50 lakh tones per annum. The total planted capacity of the company as on December 08 is around 4 lakh tones per annum and works around 125% of capacity utilization.
- The Company is in the process of acquiring land in the state of Maharashtra for setting up a new plant.
- During the first seven months of the fiscal, the company has increased the prices cumulatively by around 17% on the back of increase in the raw material prices and has decreased by 7% in the months of November and December to pass on the benefit of excise duty cut and fall in raw material prices. This drop in 7% of prices was the biggest drop in the decade.
- The 7% price cut is a blend of both solvent based paints and the water based paints. The prices of solvent based paints have reduced on the back of fall in prices of MTO – ( raw material).
- The consumption index of the company for the quarter ended December 08 was 125. The company expects to decrease this index to around 115 points in the next quarter.
- The raw materials front; the company imports 90% of the rutile (Tio2) and around 20-25% of the other raw materials are being imported. The company is maintaining quarterly contracts on the raw materials and has a close watch on the price movement.
- The company foresees the demand in Dubai to slow down and also expects some corrections in the international market for the next two quarters.
- The depreciation of rupee has helped the international growth of the company in value terms. In the INR terms, international business has grown by 30% on q-o-q basis and 27% for the nine months ended December 08.
- The company correlates paints business to the Indian GDP growth and expects 10-12% of volume growth if the GDP grew by 7-8%.
- Repainting constitutes 70% of the total demand for the company.
- The company expects that the slow down in real estate business will impact the paint industry in the coming quarters especially first two quarters of FY10.
- The advertisement cost of the company was flat in the quarter ended December 08.
- The company feels that the worst is over and expects to regain their margins in FY10.