Asian Paints Share Q2 Results

5paisa Research Team 5paisa Research Team 8th August 2022 - 06:53 pm

You can be sure that there is pressure on margins when a marquee company like Asian Paints reports pressure on profits. In fact, for the Sep-21 quarter, Asian Paints has reported pressure on operating and net profits, largely due to a spike in raw material costs. Apart from the steep increase in Brent crude prices, supply chain constraints were also responsible. Here is a quick story of the Asian Paints Q2 results.

India’s largest paints company, Asian Paints, reported 32.6% growth in total revenues for the Sep-21 quarter at Rs.7,096 crore. Asian paints broadly operates in two segments viz. the paints segments and the home improvement solutions, which is much smaller. In both the segments, the sales growth remained robust, largely on the back of festival demand. Here is a quick snapshot of the financials of Asian Paints.

Asian Paints Q2 results

Rs in Crore	Sep-21	Sep-20	YoY	Jun-21	QOQ
Total Income (Rs cr)	₹ 7,096.01	₹ 5,350.23	32.63%	₹ 5,585.36	27.05%
Operating Profit (Rs cr)	₹ 701.70	₹ 1,071.62	-34.52%	₹ 712.97	-1.58%
Net Profit (Rs cr)	₹ 595.96	₹ 830.37	-28.23%	₹ 568.50	4.83%
Diluted EPS (Rs)	₹ 6.21	₹ 8.66		₹ 5.93
OPM	9.89%	20.03%		12.76%
Net Margins	8.40%	15.52%		10.18%

Let us turn to the operating profits of the company. On a YoY basis, the operating profits were down -35% at Rs.702 crore. This operating profits is before interest and after depreciation but excludes other income from the revenue calculation. The main pressure point on operating profits came from the spike in raw material costs.

The spike is quite obvious. On a YoY basis, the raw material costs were up nearly 73% in the Sep-21 quarter and almost accounted for 5% of sales. Even an attempt at inventory efficiency gains did not help much in the final analysis. As a result, operating margins almost halved on a YoY basis as high crude prices and supply chain constraints took its tool.

Check - Asian Paints - Quarterly Results

Net profits in the quarter fell by -28% YoY at Rs.596 crore largely due to the operating profit pressures getting transmitted to the bottom line. Of course, the interest costs are quite low for Asian Paints and they don’t make a material difference in the overall scheme of things.

Paints are crude oil intensive and with Brent crude crossing $85/bbl that was bound to be the big challenge. Net margins at 8.40% was sharply lower than 15.52% in Sep-20 quarter. Asian Paints announced an interim dividend of 365% on its par value.

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