iifl conference presentation - feb 2012

7/31/2019 IIFL Conference Presentation - Feb 2012

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IIFL Enterprising IndiaInvestor Conference 2012

Mumbai

February 16, 2012


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Disclaimer

This presentation may contain statements which reflect Managements

current views and estimates and could be construed as forward looking

statements. The future involves certain risks and uncertainties that

could cause actual results to differ materially from the current views

being expressed. Potential risks and uncertainties include such factors

as general economic conditions, foreign exchange fluctuations,

competitive product and pricing pressures and regulatory

developments.

Responses can only be given to questions which are not price

sensitive.


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The Asian Paints Group Today

Indias largest paint company for over four decades

Operates in 17 countries with 24 paint manufacturing facilities

Group revenue of INR 7706 Crores (77.06 Billion) in FY 11


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Business Operations Consolidated

Paints India

Decorative Coatings India

Industrial Coatings India

APL Industrial

APPG

APICL

Chemicals India

International Operations * 50% of APPG considered since it is a 50:50 JV with PPG Inc.

Sales Contribution FY 2010-11

81%

1%

5%

13%

APL - Paints

Chemicals

APPG* + APICL

International


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Decorative Coatings - India

Strong presence throughout the country across all product segments

Introduced many innovative concept in the Indian paint industry like Small packs

Exterior segment

Home Solutions (painting solution service)

Colour Next (prediction of Colour Trends through in-depth research)

Special Effects / Textured paints

Signature Store

Colour Ideas

Samplers


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Industrial Coatings - India

Asian Paints participates in the Industrial Coatings segment

directly, through a 50:50 JV with PPG Inc. of US as well as through

a 100% subsidiary

The Auto segment is catered through our JV (APPG)

Second largest supplier to the auto segment in India

Now, the largest player in auto refinish segment, post acquisition of ICI Indias 2k

auto refinish business in 2007 Commissioned a 3,200 KL / year plant in Chennai, Tamil Nadu in 2008

Operates in the protective coatings, floor coatings, road marking paints and

powder coatings segment through a 100% subsidiary


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Industrial Coatings - India

Asian Paints and PPG to expand their existing non-decorative coatings

presence in India jointly through their current 50-50 joint venture

relationship (APPG), and also by establishing a second 50-50 jointventure

Industrial businesses of both Asian Paints and PPG will be part of this second JV and

Asian Paints and APICL plants will toll manufacture for them

Asian Paints to take the lead in the second venture and PPG to take the

lead in the existing APPG JV

The arrangement is subject to regularity approvals and is expected to be

completed by June 2012


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Chemicals

Asian Paints also manufactures Phthalic Anhydride (PAN) and

Pentaerythritol

PAN is manufactured in Gujarat and Penta in Tamil Nadu

More than 50% consumed internally

Chemicals business contributes about 1% to the groups consolidated

revenue

Its contribution to the groups revenue has been continuously decreasing


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International Operations

Contributes 13% to the group

turnover

Began by establishing presence

in Fiji in 1978

Presence in 16 countries spread

over 4 regions

Middle East

Caribbean South Pacific Islands

Asia* Asia includes Sri Lanka, Nepal, Bangladesh and Singapore operations

% sales contribution of each region FY 2011

52.2%

24.3%

15.9%

7.6%

Middle East

Asia

Caribbean

South Pacific


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Macro Environment


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Macro Environment Volatile global environment has resulted in sharp movements in currencies, making forex

management a challenge for corporates

INR depreciated by more than 19% in the current financial year till Dec 2011

Conversely, INR rose by more than 8% in the month of Jan 2012

Domestic macro indicators giving mixed signals, Inflation finally coming down

WPI dropped to 7.47% in Dec-11 after staying above 9% for most part of the year

Food Inflation declined to (-3.1%) in the month of December-11

Many industries facing slowdown, however IIP for November came in at 5.9% after a negative

4.7% in Oct 11

RBI maintained key policy rates during the last monetary review leading to expectation of

easing policy going into the new year

Cooling off being witnessed in global economy, Euro zone uncertainty continues Global Commodity prices have started stabilizing

Crude has remained stable during the financial year at above USD 100 levels


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Presentation structure

Performance: Q3 & 9M FY 2011-12

Review of Business Units

Outlook and Risks


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Sales Performance Q3 FY 2011-12

Standalone

Net Sales at Rs. 2109.5 crores; grew by 20.3% during the quarter

Sales growth is to be seen in the light of last year (Q3-FY11) which was 37% more than

that of the earlier year (Q3-FY10) and that itself was 27% higher than that of the yearbefore that (Q3FY-09).

The Industrial business of APL was transferred to AP Coatings Ltd (A 100% subsidiary

of APL) w.e.f. 1st June 2011

Consolidated

Net Sales at Rs. 2560.53 crores; grew by 22% during the quarter

Standalone Sales & operating Income

28.0%

6.0%

37.3%

24.0% 23.4%

28.9%

20.3%

25.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1st QtrFY11

2nd QtrFY11

3rd QtrFY11

4th QtrFY11

12MFY 11

1st QtrFY12

2nd QtrFY12

3rd QtrFY12

Grrateoverthesam

eperiodofLY


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Profit performance Q3 FY 2011-12

Standalone:

PAT at Rs. 250.5 crores; grew by 21.2%

EBIT at Rs. 363.4 crores; grew by 21.7% Margins maintained at last year levels despite pressure on the cost front

Consolidated:

PAT after Minority Interest at Rs. 256.86 crores; growth by 16.6 %

EBIT at Rs. 389.21 crores; growth by 16%

Standalone Paint Segment EBIT Margins

19.9%

17.3%16.0%

18.0%18.9% 18.5%

20.2%16.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1st QtrFY11 2nd QtrFY11 3rd QtrFY11 4th QtrFY11 12MFY 11 1st QtrFY12 2nd QtrFY12 3rd QtrFY12


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Sales Performance 9M FY 2011-12

Standalone

Net Sales at Rs. 5875.2 crores; grew by 24.6% during the period

Consolidated

Net Sales at Rs. 7071.68 crores; grew by 23.2% during the period

International Operations continue to be impacted by political events and

macro economic uncertainty

Net Sales at Rs. 861.75 crores compared to Rs. 765.8 crores in previous year


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Profit Performance 9M FY 2011-12

Standalone

PAT at Rs. 713.8 crores; grew by 18.2%

EBIT at Rs. 1034.2 crores; grew by 17.1%

Consolidated

PAT after Minority Interest at Rs. 729.25 crores; grew by 11%

EBIT at Rs. 1104.97 crores; grew by 10.3%

Profitability impacted due to:

Significant increase in RM prices compared to previous year

Price increase does not fully recover increase

Unexpected depreciation of Rupee against the USD

Impact of Rs. 30 crores for 9M-FY12 (Rs. 15 crores in Q3-FY12)


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Performance : Q3 & 9M FY 2011-12


Outlook and Risks


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Decorative Business - India

Industrial Operations - India



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Decoratives Business - India Demand Conditions

Good demand for decorative coatings across the country

Growth in smaller towns continue to be faster than the larger cities

Interior and exterior emulsions continue to lead growth

Inflationary Impact

Material inflation significantly high compared to previous year

Consumption average for 9M FY12 stood at 117.44 as against base of 100 of previous year

Cumulative price increase of 10.53% during the year

Price increase of 2.17% w.e.f. 1st

December, 2011 Overall availability of Titanium Dioxide was comfortable although high prices

remain a concern

Prices have leveled off for the time being

The high price of crude did not allow the prices of various raw materials to soften

121.59116.99114.05

Q3Q2Q1

Consumption Average


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Decoratives Business - India

Retailing Initiatives

The total number of Colour Worlds have crossed 20,500

Delhi signature store opened in September to excellent response

Tremendous response to the Happy Painting Guide campaign

Colour Idea stores continue to receive a very good response

28 Colour Ideas stores in operation

Expansion Plans

Khandala project construction progressing well

Phase I 3,00,000 KL to be commissioned in Q4 of FY 2012-13

Rohtak Phase-II expansion initiated Phase II capacity addition of 50,000 KL by Q1 of FY 2012-13

Capital expenditure of Rs. 150 crores


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Industrial Operations

Business Environment

Industrial business, including Auto, continued to face challenging conditions

High pressure on margins due to increasing material cost

Industrial Paints Business

Figures are not comparable as industrial business including powder coating was transferred

to AP Coatings w.e.f 1st June,2011

Demand for project and maintenance was buoyant in Q3

Powder Business

Impacted due to slowdown in manufacturing industry

Demand seems to remain subdued and challenging for the rest of the year as well

Asian PPG Industries (50:50 JV for Automotive Coatings)

Sales growth of 17% to Rs. 252.8 crores for the Nine Months period ending Dec 2011


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Industrial Operations

Proposed Joint Venture with PPG

On Jan 24, 2011, Asian Paints had announced about its proposed new 50:50 JV with

PPG for its industrial business in India

The composite scheme for Merger and Demerger was filed with the Honble High

Court in Sept-11.

However, as PPG Industries Inc. USA is restructuring its operations in India, the

scheme has been withdrawn

Revised composite scheme for Merger and Demerger, encompassing all businesses

of companies as originally envisaged, will be filed shortly with the Honble High Court

of Mumbai

The entire process is expected to be completed by June 2012


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Penta Plant

In Dec 2011, Due to the severe cyclonic storm 'Thane' in Tamil Nadu, some

equipment and materials at the Company's Penterythritol Plant at Cuddalore in TamilNadu had been damaged

As a result of it, the plant was temporarily shut down for some days and has now been

restarted

The repair and reconstruction work to set right the damage caused at the plant is in

progress and the same is not expected to hamper production

All Assets have been fully insured by us


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Oman, Nepal, and Sri Lanka have registered goodgrowth

Markets in Middle East have still not bounced back

from the political unrest and recessionary

conditions

Inflationary pressures continue to impact the

profitability of international operations too

R eg ions 2012 2011 +/- L Y

C aribbean 134.10 122.76 9%Middle E ast 438.21 406.39 8%

Asia 237.33 190.04 25%

S outh P acific 66.61 56.94 17%

Total 876.25 776.14 13%

Net S ales ( Rs C r)

Regions 2012 2011 +/- L Y

C aribbean 8.05 11.42 -30%

Middle E ast 49.92 57.25 -13%

Asia 13.18 17.79 -26%

S outh P ac ific 8.33 11.73 -29%

Total 79.47 98.18 -19%

PBIT (Rs Cr)


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Performance : Q3 & 9M FY 2011-12


Outlook and Risks


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Outlook and Risks

Two Key Events to shape the outlook for the next year

State Elections

Annual Budget

Elections in multiple states during the 4th Quarter

Would impact the policies of the Central government going forward.

Good show by the ruling party might impact policies on Oil prices, Coal prices and FDI

Inflation showing signs of easing, expected to come down further

Annual Budget would be a closely watched affair after the recent concerns on policy paralysis

and growth

Rural Demand expected to stay robust

Introduction of Food security Bill expected to route spending to consumer goods


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Outlook and Risks

Overall fall in GDP growth rate might impact demand in India

Weak consumer sentiments may lead to slowdown in discretionary spending in urban areas

Slackening of demand being seen across many industries

Raw material inflation is a global phenomena and continues to be a cause of concern

Lot of volatility due to supply-demand equations; some materials like Rutile continue to rise; some

crude derivatives show softening

Depreciation of the Rupee has impacted adversely; else softening may have been more

beneficial

Availability of Ti02 has eased but high prices remain a concern

Internationally, World Bank has slashed Global growth outlook to 2.5% for 2012 leading to

concerns of slowing growth Political uncertainty might add to the already recessionary conditions being witnessed in the Middle East

market


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Thank you...


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Annexure


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Consolidated P&L Q3 FY2011-12

(Rs in Crores)

3M 11-12 3M 10-11 G r %

S ales & Op Inc ome 2,560.53 2,099.60 22.0%

Material C ost 1,551.35 1,253.46 23.8%

E mployee C osts 131.76 111.52 18.2%

Other E xpenses 480.06 389.71 23.2%Depreciation 30.68 28.64 7.1%

P rofit from O perations before O ther

Inc ome and Interes t 366.68 316.27 15.9%

Other Income 22.54 19.37 16.4%

P B IT 389.21 335.64 16.0%

Interes t 9.03 5.85 54.4%

P B T 380.18 329.79 15.3%

C urr. & Def. T ax 113.76 97.42 16.8%

P AT before Minority interes t 266.43 232.37 14.7%

Minority S hare 9.57 12.04 -20.5%

P AT to parent S hareholders 256.86 220.33 16.6%E P S 26.78 22.97 16.6%


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Standalone P&L Q3 FY2011-12

Q3 FY'12 Q3 FY'11 Gr %

Net Sales and Operating Income 2,109.5 1,754.2 20.3%

Material Cost 1,253.3 1,044.6 20.0%Employee Remuneration 83.2 73.8 12.8%Other Expenditure 410.2 334.8 22.5%

PBDIT 362.8 301.1 20.5%Depreciation 24.9 23.8 4.6%

Profit from operations before interest 337.9 277.3 21.9%Other Income 25.5 21.2 20.3%

PBIT 363.4 298.5 21.7%Interest 6.2 3.6 70.6%

PBT 357.2 294.9 21.1%

Curr.& Def. Tax 107.1 92.4 16.0%Excess/Short Provision Income Tax (0.4) (4.1)

PAT 250.5 206.6 21.3%EPS 26.1 21.5


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Consolidated P&L9M FY2011-12

(Rs in Crores)

9M 11-12 9M 10-11 G r %

S ales & Op Inc ome 7,071.68 5,740.61 23.2%

Material C ost 4,255.69 3,321.94 28.1%

E mployee C osts 390.53 339.03 15.2%

Other E xpenses 1,313.03 1,056.12 24.3%

Depreciation 89.75 83.97 6.9%

P rofit from O perations before Other

Income and Interest 1,022.66 939.56 8.8%

Other Income 82.31 62.67 31.3%P B IT 1,104.97 1,002.23 10.3%

Interest 24.37 14.63 66.6%

P B T 1,080.60 987.60 9.4%

C urr. & Def T ax 324.73 297.12 9.3%

P AT before Minority interes t 755.87 690.48 9.5%

Minority S hare 26.61 33.26 -20.0%

P AT to parent S hareholders 729.25 657.22 11.0%

E P S 76.03 68.52 11.0%


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Standalone P&L 9M FY2011-12

(` in Cr)9M FY'12 9M FY'11 Gr %

Net Sales and Operating Income 5,875.2 4,714.9 24.6%

Material Cost 3,494.0 2,700.4 29.4%Employee Remuneration 256.3 228.0 12.4%Other Expenditure 1,122.7 895.6 25.4%PBDIT 1,002.2 890.8 12.5%

Depreciation 74.0 70.5 5.0%

Profit from operations before interest 928.2 820.3 13.2%Other Income 105.9 62.9 68.3%PBIT 1,034.2 883.3 17.1%

Interest 17.1 8.0 114.7%

PBT 1,017.0 875.3 16.2%Curr.& Def. Tax 307.2 274.4 12.0%

Excess/Short Provision Income Tax (4.0) (2.8)

PAT 713.8 603.7 18.2%EPS 74.4 62.9


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Consolidated Sales breakup : 9M FY2011-12

*50% of Asian PPG Industries sales considered

**Figures are not comparable as the industrial business

including powder coating was transferred to AP Coatings

w.e.f. 1st June, 2011

9M-F Y '12 9M-F Y '11 G rowth

AP L - P aints 5,785.75 4,659.73 24%

C hemicals 89.48 55.11 62%AP P G * 252.82 215.67 17%

AP IC L /AP C O ** 188.61 53.42 253%

International 861.75 765.80 13%

G roup 7,071.68 5,740.61 23%


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Key Ratios

% to Sales & Op. Inc. 9M FY12 9M FY11 9M FY12 9M FY11

Material Cost/Net Sales 59.5% 57.3% 60.2% 57.9%

PBDIT/Net Sales 17.6% 18.7% 15.7% 17.8%PBT/Net Sales 17.3% 18.6% 15.3% 17.2%

PAT/Net Sales* 12.1% 12.8% 10.7% 12.0%

* For Consolidation results, PAT is before Minority Interest

Standalone Consolidated

iifl conference presentation - feb 2012

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