Asian Paints Limited reported a notable revenue and profit decline for the quarter ending September 30, 2024. The company attributed its performance to weak consumer demand, adverse weather, and challenges in international markets. Despite these challenges, Asian Paints approved an interim dividend of ₹4.25 per share, underscoring confidence in its long-term outlook.

Q2 Revenue Decline and Profit Impact

For Q2 FY25, Asian Paints recorded consolidated net sales of ₹8,003 crores, a 5.3% decrease from the ₹8,451.9 crores registered in Q2 FY24. In its standalone business, the revenue dip was even sharper at 6.5%, with sales amounting to ₹6,841 crores. Profit before depreciation, interest, tax, other income, and exceptional items (PBDIT) fell by 27.8%, largely impacted by reduced consumer sentiment and an extended monsoon season that disrupted consumption in key regions​(7308ce45-fe3a-4726-81c5…).

Interim Dividend Amid Financial Adjustments

In light of Q2’s performance, Asian Paints declared an interim dividend of ₹4.25 per share. This decision sets a record date of November 19, 2024, and payments to shareholders are slated to begin on November 28. This interim dividend comes as part of a strategy to sustain investor confidence amidst ongoing economic challenges.

Factors Affecting Domestic and International Performance

Asian Paints’ domestic decorative business faced a 6.7% revenue drop, reflecting weaker consumer demand and shifting sales patterns. According to CEO Amit Syngle, prolonged rains and flooding significantly contributed to the demand slowdown, while price adjustments implemented in the previous year also played a role in affecting margins. These adjustments are anticipated to yield more positive results in the second half of the fiscal year.

The company’s international segment reported a slight decline in Q2 revenues, mainly attributed to economic and currency pressures in markets like Ethiopia and Bangladesh. However, adjusted for currency fluctuations, international revenue saw a constant currency growth of 8.7%. Syngle expressed optimism about margin recovery, anticipating relief from easing raw material prices in the coming quarters​.

Key Segmental Highlights

Asian Paints’ industrial segment demonstrated resilience with moderate growth in areas such as general industrial and protective coatings. However, the home decor sector, encompassing Beautiful Homes stores, did not meet expectations. Although the sector expanded its footprint through these stores, Asian Paints recorded an impairment loss in its White Teak and Weatherseal investments, reflecting a prudent assessment of the investments’ current market value.

In its industrial business, the joint venture Asian Paints PPG Private Limited (APPPG) reported a 6% increase in sales to ₹265.5 crores, while PPG Asian Paints (PPGAP) recorded a 5.9% rise to ₹524.4 crores. However, the profits in these segments witnessed contrasting performances, with APPPG experiencing a decline due to various operational factors.

Financial Outlook and Strategic Directions

For the first half of FY25, Asian Paints’ net sales stood at ₹16,946.3 crores, reflecting a 3.7% year-over-year decline. The consolidated PBDIT margin contracted to 17.3%, compared to 21.8% in the previous year, underlining challenges such as increased material costs and operating expenses. Looking ahead, the company plans to leverage its robust supply chain, diversified product lines, and brand strength to navigate economic pressures and recover margins.

In a statement, Syngle expressed confidence in the company’s strategic direction, highlighting Asian Paints’ ongoing investments in expanding its home decor portfolio and enhancing synergies across its Beautiful Homes store network to meet evolving consumer demands.

Expert Analysis

Analysts noted that Asian Paints’ efforts to address evolving market conditions, including price adjustments and strategic investments, could yield long-term benefits. However, they underscored the need for sustained consumer demand in the domestic market, which remains central to the company’s revenue growth. The company’s emphasis on optimizing its home decor portfolio aligns with its strategy to expand beyond paints, potentially boosting revenue diversification in the future.

  Amit Syngle, APPPG, Asian Paints, Beautiful Homes, Dalal Street, Deloitte Haskins & Sells LLP, Mumbai, NSE Limited, PPGAP, SSE Limited, Weatherseal, White Teak