Asian Paints has reported its Q2FY25 financial performance, showing a significant decline in profits and revenues as compared to the previous fiscal year. The company posted a consolidated net profit of Rs 694.6 crore for the quarter ending September 2024, marking a year-on-year (YoY) decrease of 42.4% from Rs 1,205.4 crore recorded in the same quarter last year.
Overview of Contents
Asian Paints Q2 Results
Asian Paints saw its consolidated net sales decline by 5.3%, dropping from Rs 8,451.9 crore in Q2 FY24 to Rs 8,003 crore in Q2 FY25. This revenue figure also missed the market expectations of Rs 8,581 crore. CEO Amit Syngle highlighted weak consumer demand and unfavorable weather, including persistent rains and flooding, as key contributors to the company’s performance challenges. These adverse conditions affected the company’s domestic decorative coatings segment, which saw a slight volume decline of 0.5% and a revenue dip of 6.7%.
EBITDA and Margin Analysis
The company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) fell by 27.8% YoY, reaching Rs 1,239.5 crore, down from Rs 1,716.2 crore in the same quarter of the previous year. EBITDA margins also contracted, dropping 480 basis points (bps) to 15.5% from 20.3% in Q2 FY24. Syngle attributed this margin compression to multiple factors, including last year’s price cuts, higher input costs, and increased selling expenses. He expressed optimism that recent price hikes may aid margin recovery in the second half of the fiscal year.
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Factors Influencing Revenue and Margin
Syngle elaborated on several factors impacting revenue and margin performance:
- Last Year’s Price Cuts: Price reductions from the previous fiscal year continued to impact revenue.
- Adverse Weather Conditions: Extended rainfall and floods across regions in India affected sales volumes.
- Increased Selling Expenses: Additional costs incurred in the quarter affected margins.
- Price Increases in Q2FY25: These adjustments are expected to bolster financial performance in the coming quarters.
Interim Dividend Announcement
Despite the decline in profit, Asian Paints announced an interim dividend of Rs 4.25 per share for FY25. The record date for dividend eligibility is set for November 19, 2024, and the dividend will be paid on or after November 28, 2024.
Outlook for the Upcoming Quarters
Syngle expressed cautious optimism for the future, anticipating a potential improvement in margins supported by lower raw material costs and recent price adjustments. Despite the current demand challenges, Asian Paints aims to leverage its strong brand presence and extensive distribution network to stimulate growth in the coming months.
Conclusion
Asian Paints’ Q2FY25 results underline the paint industry’s current challenges, including subdued demand and rising operational costs. However, with strategic price adjustments and expected cost reductions, the company remains hopeful for a recovery in profitability.