Asian Paints Q3 net profit declines 18% as higher costs weigh

Asian Paints Ltd on Thursday reported an 18% decline in its consolidated profit after tax for the third quarter ended December 2021, dragged down by higher raw material costs.

Profit fell to Rs 1,016 crore from Rs 1,238 crore during the same period a year ago. On a sequential basis though, the profit was up 70% from Rs 596 crore. 

The company reported a 25.6% rise in its consolidated revenue to Rs 8,527 crore. Asian Paints attributed this increase to the fact that it gained market share from competitors in the unorganised market, price increases, upstocking by dealers and some traction in its ancillary businesses of wood finish and waterproofing.

The company’s total expenses rose to Rs 7,220 crore from Rs 5,214 crore a year earlier. Its material costs—the biggest expense item—jumped to Rs 4,084 crore from Rs 2,889 crore.

Other Highlights:

1) Standalone revenue from operations increased by 27.6% in Q3.

2) Standalone net profit fell 14.1% from a year earlier.

3) For the nine months ended December 31, standalone revenue increased 43.5% to Rs 18,428.89 crore.

4) For the nine months ended December 31, consolidated revenue increased 40.8% to Rs 21,208.61 crore.

Management commentary:

Asian Paints said its domestic decorative business registered yet another strong double-digit growth performance for the fifth quarter in a row, with a 18% volume growth, on a strong base of the previous year.

The company said its industrial coatings business also registered a robust double-digit revenue growth especially in the protective coatings segment. 

However, the automotive coatings business was impacted by the challenges facing the automotive sector. 

The company said that its home improvement business continued its streak of healthy growth and registered “another solid performance, with a steady expansion trajectory” across the country.

Asian Paints said its international business registered a 9% value growth and was impacted by sluggish market conditions in most of the units in the Middle East and specific challenges like civil unrest in Ethiopia and forex crisis in Sri Lanka. 

“The steep and unprecedented inflationary trend in raw material prices continued to impact the gross margins across businesses this quarter. Substantial price increases have been taken in November and December to mitigate this inflation impact, improving the margins on a sequential basis,” said Amit Syngle, Managing Director and CEO. 

“We continue to work strongly in enhancing the value proposition for our customers across all business segments and thereby deliver sustained value creation for all our stakeholders,” he added.