Asian Paints profit falls nearly 68% - but demand recovery in June could hold ray of hope

Asian Paints
  • Asian Paints reported around 67.4% fall in its consolidated net profit to ₹219.61 crore for the first quarter.
  • However, this is still better than what analysts had predicted. Edelweiss Securities had projected a 95% fall in profits.
  • This is the first time that Asian Paints has registered negative growth in the first quarter in at least 3 years.
India’s largest multinational paint company Asian Paints earnings reflect the lockdown pain, as expected, but some ray of hope lies in healthy business growth reported in June. Asian Paints reported around 67.4% fall in its consolidated net profit to ₹219.61 crore for the first quarter ended June 30.

The total revenue was down 43% year-on-year to ₹2,922.66 crore during the period, the company said. However, this is still better than what analysts had predicted. According to Edelweiss Securities, the revenue was projected to fall at least 53% and profit by 95%.

The company shares erased some losses post the earnings.

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“While the quarter ended in a negative territory, the business registered a healthy double digit volume growth in the month of June’20 to end the quarter on a promising note,” said Amit Syngle, managing director and CEO of Asian Paints.

Particular% Contribution to RevenueGrowth %
Paints98.20%-42.50%
Home Improvement1.80%-50.90%

This is the first time that Asian Paints has registered negative growth in the first quarter in at least 3 years. The quarter is usually full of business for paints companies around the country as people renovate homes during the traditional wedding season, and ahead of the incoming monsoons.

BI India

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The company witnessed a ‘complete washout’ in the month of April due to the extended Lockdown, it said. What remains to be seen is how much of this recovery seen in June will be sustainable going forward.

As paints are not listed as an essential service, in the past three months most of their manufacturing units were shut, and later after many were reluctant to allow painters in the house immediately due to the fear of the virus. However, “the Decorative business segment witnessed improving business conditions over the next two months,” the company said.

The halted production of automobiles, which form a big chunk of the company’s revenue, also impacted the company’s recovery.

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“The other business segments in India including the two industrial coatings businesses and both the segments in the Home Improvement category also witnessed improving trends in June ’20, albeit at a lower pace,” said Syngle.

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