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Asian Paints Net Sales Rise by 9.9 %; Net Profits Flat

Published on 2003-07-24. Author : SpecialChem

Mumbai July 23, 2003 -- Asian Paints (India) Limited today announced their results for the first quarter ended June 30, 2003. For the quarter ended June 30, 2003, Net Sales and operating income for the company has increased by 9.9 % from 3448.18 million to Rs. 3788.56 million. Other income for the quarter grew by 54.6 % from Rs. 28.44 million to Rs. 43.96 million. Profit before Depreciation, Interest and Tax (PBDIT) declined by 4.4 % from Rs. 603.84 million to Rs. 577.04 million. Net Profit for the company has remained nearly flat from Rs. 288.30 million to Rs. 287.91 million for the quarter ended June 30, 2003.

Despite the sluggish demand environment, Asian Paints registered good volume growth as all product categories posted growth." said Mr. Ashwin Dani, Vice-Chairman & Managing Director, Asian Paints (India) Limited. " The company posted lower profits during the quarter primarily due to lower contribut ion from the chemical business.

Looking ahead, the company is opt imistic about its performance in the remaining financial year, as the economy is showing signs of improvement and a good monsoon is expected." he added.

Explanation of the performance of the company

Net Sales increased by 9.9 % primarily due to the good growth achieved by the company in most product categories. The exterior segment continues to perform well and new products for the company have registered impressive growth rates.

Profitability for the quarter was affected due to the high base of the corresponding quarter of the previous financial year, lower contributions from Chemicals business and increased material costs in the paints business.

For the corresponding quarter of the previous financial year ended June 30, 2002, Net Sales grew by 16 %. PBDIT increased by 32% and PBDIT margins expanded by around 2.1 % for the quarter, which is significant. Further for the quarter ended June 30, 2002, PBT increased by 47 % and Net Profit by 36 %. Also on a comparative basis for the past five financial years, the first quarter of the previous financial year had a larger contribution to the full year's performance of the company. For the current year, we are optimistic of an improved performance as the economy is showing signs of improvement.

As indicated in the annual report for the last financial year, the company has adopted a cautious outlook towards the chemical business for the current financial year. It also stated that falling import duties will put pressure on margins and thus anticipated a fall in profitability from those exceptional levels for the chemicals business. However, the company is still expecting an improved performance for the chemical business in the remaining part of the financial year.

As anticipated the paints business has witnessed increased material cost for the quarter. To partly offset the increase in raw material prices which was around 9% for the quarter, a price increase of 3 % was announced in the middle of May'03. Thus for the past three quarters (Q3-FY2003, Q4-FY2003, & Q1-FY2004) raw material prices have increased by around 6% in each quarter. The company now expects raw material prices to soften in the remaining financial year.

Segment Information

For the quarter ended June 30, 2003, paint revenues of the company grew by 11.3% from Rs. 3188.60 million to Rs. 3548.34 million. Chemical revenues declined by 5.2 % from Rs. 279.47 million to Rs. 265.07 million for the quarter ended June 30, 2003.

International Business Unit

For the recently acquired units, viz. Berger International Limited, Singapore & SCIB Chemical, Egypt, Asian Paints has concluded examination of the cost structures of these two companies and their subsidiaries. Due to implementation of some initiatives by Asian Paints, certain economies have been achieved. The company is also in the process of helping the acquired units understand the business culture of Asian Paints. Depending on each other's strengths, group policies and strategies are being laid down for improved performance.

Asian Paints (India) Ltd is India's largest paint company with a turnover of Rs 18.84 billion (around US$ 390 million) in 2002-03. After the acquisition of Berger International Limited, Singapore, Asian Paints ranks among the Top Ten decorative coatings companies in the world. It has joint ventures in 22 overseas countries. It has 28 paint manufacturing facilities spread across the world with a combined paint-manufacturing capacity of around 330 million litres annually. It is the market leader in ten countries including India.

Source: Asian Paints

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