Asian Paints Q4 Results: Profit Meets Estimates But Rising Input Costs Squeeze Margin

Asian Paints Ltd.’s quarterly profit met estimates, but margin shrank as a surge in raw material costs offset benefits from price hikes.

Consolidated net profit of India’s largest paintmaker stood at Rs 874.1 crore in the three months through March against Rs 868.9 crore a year ago, according to its exchange filing. That compares with the Rs 897.8-crore consensus estimate of analysts tracked by Bloomberg.

The bottom line was impacted by exceptional items during the period.

These include a Rs 53.4-crore loss relating to pending subsidy from state governments, a loss of Rs 48.5 crore from Sri Lanka business due to currency devaluation and an impairment loss of Rs 13.5 crore on ‘goodwill on consolidation’ recognised on acquisition of Causeway Paints.

For the full fiscal, the company saw a 3.8% decline in net profit to Rs 3,084.81 crore.

Asian Paints Q4 FY22 Highlights (YoY)

• Revenue rose 19% to Rs 7,892.7 crore, against the Rs 7,809.6-crore forecast.

• Operating profit rose 9% to Rs 1,443.3 crore compared with the Rs 1,339-crore estimate.

• Margin contracted to 18.3% from 19.8%, against the projected 17.7%.

• Cost of materials consumed jumped 21.5% to Rs 4,173.5 crore.

Sequentially, the company’s gross margin improved 195 basis points and operating margin expanded 20 basis points, according to the filing. This reflects the full impact of price hikes taken in previous quarters. Asian Paints has hiked prices by 23% during the full financial year.

“We continued to improve our operating margin on a sequential basis which was a result of some calibrated price increases, driving the premium and luxury product growths, coupled with some strong work on driving operational efficiencies across businesses,” said Amit Syngle, managing director and chief executive officer at Asian Paints.

The domestic decorative business registered 8% volume growth on a high base of 48%. The industrial coatings business, according to the company, closed the quarter with another round of “double-digit” revenue growth.

Segment-wise, paints registered 18.5% year-on-year revenue growth in Q4 but its margin contracted 239 basis points. For home decor, revenue grew 25% and margin expanded 715 basis points, the company said.

Its international business delivered double-digit revenue growth for the quarter despite severe challenges in key markets, Syngle said.

Shares of Asian Paints were trading 2.84% higher after the results were announced, compared with a 0.43% gain in the S&P BSE Sensex.