Asian Paints' March Quarter Earnings Drop Amid Competition, Slackening Demand

Increased competition, slackening demand, and a decline in domestic decorative paints sales dragged down Asian Paints Ltd.'s earnings for the March quarter. The company on Thursday reported a consolidated net profit of ₹6.92 billion, down nearly 45% year-on-year and significantly below analysts' consensus estimate of ₹10.62 billion.

The decline in net profit was steeper than in the past three quarters. Revenue for the quarter fell 4.3% year-on-year to ₹83.59 billion, also lower than analysts' estimate of ₹85.90 billion. Sequentially, net profit was down 37.7%, and revenue fell 2.3%.

"The weak demand conditions prevalent for the past few quarters continued to affect the paint industry even in the last quarter of the financial year," the company said in a press release, quoting Managing Director and Chief Executive Officer Amit Syngle. "The demand for decorative coatings was only marginally better than in the third quarter."

The company said that while the macroeconomic environment remains uncertain, "we are cautiously optimistic about a recovery in demand conditions and continue to work diligently on leveraging our brand strength and driving operational efficiencies to pursue growth."

Besides weak operating performance, a one-time cost of ₹1.83 billion related to impairment charges impacted Asian Paints' earnings. The company booked an impairment charge of ₹778 million on the White Teak brand, ₹215 million on Causeway Paints in Sri Lanka, and ₹837 million on two entities in Indonesia.

The company's domestic decorative paints business recorded volume growth of 1.8% year-on-year for the quarter, but revenue declined 5.2% year-on-year. Asian Paints cited high competition in the segment as one of the reasons for the fall in revenue.

The industrial business performed better, growing 6.1% year-on-year, driven by growth in the general industrial and automotive coatings segments. Overall, revenues from the coatings business in India declined 4.1% year-on-year. The home décor business faced multiple headwinds, leading to a muted performance for the quarter.

In the international business segment, the company faced several challenges affecting earnings. Key markets in West Asia and the rest of Asia performed well, but markets in Africa encountered macroeconomic difficulties. Revenue from the segment declined 1.5% year-on-year to nearly ₹8 billion, but rose 6% in constant currency terms. Currency devaluation in Ethiopia and Egypt also impacted global business.

In line with its operating performance, the company's earnings before interest, tax, depreciation, and amortisation (EBITDA) margin fell nearly 220 basis points year-on-year to 17.2%, while EBITDA dropped to ₹14.36 billion from ₹16.91 billion a year ago. The adverse mix and overall lower revenues impacted the operating margin for the quarter on a year-on-year basis.

For the financial year 2024-25, Asian Paints reported a consolidated net profit of ₹36.67 billion, down 32.8% year-on-year, while its revenue declined 4.5% year-on-year to ₹339.06 billion. The board of directors approved the payment of a final dividend of ₹20.55 per share.