UBS India Conference Mumbai

Transcription

1 UBS India Conference 2016 Mumbai November 17, 2016

2 Disclaimer This presentation may contain statements which reflect Management s 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.

3 Agenda Group Overview Economic Environment Q2 FY17 Financial Performance Q2 FY17 Business Review Q2 FY17 Risks and Outlook

4 Asian Paints Group Today No. 1 Paint Company in India Over USD 2 Billion Group revenue 3 Times nearest Competitor in India Part of 30 share BSE S&P SENSEX 4 th Largest Paint Company in Asia 14 th Largest Coating Company In the World Operations in 19 countries 26 Paint Manufacturing Plants 49 Years of Market Leadership in India Forbes Asia s Fab 50 Company; Four times in a row Part of NSE Nifty 50 Servicing Consumers in over 65 Countries Employees worldwide

5 In Billion USD Global Standing th largest in the World th largest in Asia * Coatings World 2016 Top companies report (July 2016) Sherwin Williams will be the largest coatings company with its announced acquisition of Valspar

6 Worldwide Operations Jamaica Barbados Trinidad & Tobago Egypt Ethiopia Bahrain UAE Oman Nepal Bangladesh India Singapore Indonesia Sri Lanka Solomon Islands Vanuatu Fiji Samoa Tonga

7 Strong Brands

8 Aspiration To be the fore runner of inspiring décor and to actively empower customers to create their dream homes

9 Stand for Belief in fostering the principles of trust and transparency Ability to adapt itself to the changing environment Dynamic professional management team focused towards delivering stakeholder value with highest levels of corporate governance Innovative strategies in the marketplace Efficient manufacturing and logistics Capabilities to effectively harness Information Technology to improve efficiency in operations (SAP, i2, etc.) Prudent management of financial resources Focus on Research and Development (dedicated group R & D centre in India at Turbhe near Mumbai)

10 Innovative Market place Strategies Small Packs Exterior Paint Segment Consumer and Dealer helpline Colour Next (Prediction of Colour trends through in-depth research Special effect and textured paints Signature Stores / Colour Ideas store / AP Homes Samplers Beautiful Homes Guide Water Proofing and Wallpaper business Ezycolour Service brand Home Solutions (Painting solution service) Colour Home Adhesives

11 Powerful Consumer Connect Signature Stores in Metros Colour Ideas Stores AP Homes Innovative retailing strategy showcasing latest product and solution offerings enabling consumers to get inspired, try and decide Strong presence in all product segments, servicing over 40,000 dealers

12 Robust Supply chain and IT State of the art Supply Chain system using cutting edge latest technology for efficient management and execution World Class, large manufacturing facilities with latest automation technologies Largest single location paint manufacturing capacities at Rohtak (Haryana) and Khandala, (Maharashtra). Planning to set up new, fully-automated paint manufacturing facility at Mysuru and Vizag in South India over the next 2-3 years Strong distribution and logistic network across geographies using modern material storage and handling technologies Dedicated in-house IT team adding value to business process in terms of higher productivity, lower costs, speed, consistency and standardization

13 Dedicated R&D Dedicated Research and Technology facility at Turbhe (Near Mumbai) with over 150 scientists Supports company strategy around Technology development, Sustainable new products, Green products, Value re-engineering for productivity improvement and cost optimization Our scientists had won the Roon award in 2013 one of the highest technical achievements in the coatings industry

14 Changing with times

15 Business Portfolio Decorative Coatings India Industrial Coatings India PPG Asian Paints 2% 4% 13% Asian Paints PPG 81% International Operations Home Improvement Business India Sleek Decorative - India Home Improvement - India Industrial - India International Operations Ess Ess FY

16 Decorative Coatings - India Largest business unit of the company Primarily operates in four segments Interior Wall finishes Exterior Wall finishes Metal Finishes (Enamels) Wood Finishes Introduced new categories like water-proofing, wallpapers & adhesives Product for every price point and requirement

17 Industrial Coatings - India Asian Paints participates in the Industrial Coatings segment, through two 50:50 JVs with PPG Inc. of USA PPG Asian Paints (For Auto Coatings) The Auto segment is catered through our JV (PPG AP) Second largest supplier to the auto segment in India Now, the largest player in auto refinish segment, post acquisition of ICI India s 2k auto refinish business in 2007 Commissioned a 3,200 KL / year plant in Chennai, Tamil Nadu in 2008 Asian Paints PPG (For Non Auto Industrial Coatings) Protective coatings, floor coatings, road marking paints and powder coatings segment catered to by this JV Services customers in the sectors of Infrastructure, Oil & Gas, Power Plants, White Goods, etc.

18 International Operations Contributes about 13% to the group turnover Began by establishing presence in Fiji in 1978 Presence in 18 countries spread over 4 regions 27.9% 6.4% 11.0% 54.7% Caribbean Middle East & Africa Asia South Pacific Caribbean : Jamaica, Barbados and Trinidad & Tobago Middle East & Africa : UAE, Bahrain, Oman, Egypt & Ethiopia FY Net Sales Break-Up Asia : Nepal, Sri Lanka, Bangladesh, Singapore & Indonesia South Pacific : Fiji, Tonga, Solomon Islands, Vanuatu & Samoa Focus on establishing presence and growing in high growth emerging markets Looking for expansion in key markets of Africa and South East Asia Acquired 51% stake in Kadisco Chemical Industry PLC, Ethiopia in Feb 2015 Setting up paint manufacturing facility at Indonesia

19 Home Improvement Business - India In 2012, Asian Paints announced plans to consider opportunities in the area of Home Improvement and Décor Entered Kitchen space in India in Aug 13 by acquiring 51% stake in Sleek International Sleek is a major organized player in the modern kitchen solution space with pan India presence Engaged in the business of manufacturing, selling and distributing kitchens, kitchen components including wire baskets, cabinets, appliances, accessories etc. Retail network of more than 30 showrooms including shop-in-shops and 250+ dealers Launched Smart kitchen range for easy installation and design Entered the Bathroom fitting business in June 14 through acquisition of front end sales business (including brands, network and sales infrastructure) of ESS ESS Bathroom products Pvt Ltd ESS ESS is a prominent player in the bath business segment in India and has high quality products in this segment Launched Sanitary ware range Bathsense & premium range of Bath fittings Royale

20 Chemicals Asian Paints manufactures Phthalic Anhydride (PAN) and Pentaerythritol (Penta) PAN manufactured in Gujarat and Penta in Tamil Nadu More than 50% consumed internally Contribution to the group s revenue has been continuously decreasing

21 Consistent performance 16,000 14,000 12,000 10,000 Consolidated Net Sales and Operating Income ( ` Crores) 8,000 6,000 4,000 2,000 CAGR 17.8% 3,021 15,534 1,800 1,600 1,400 1,200 1, Net Profit (` Crores) CAGR 23.3% 212 1,

22 Sustained value creation... Market Cap (` Crores) Dividend Payout Ratio 10,000 9,000 8,000 7,000 6,000 5,000 CAGR 29.7% 6,178 83,326 80% 70% 60% 50% 40% 30% 73% 52% 51% 54% 39% 46% 47% 49% 51% 53% 54% 4,000 3,000 2,000 1,000 20% 10% 0%

23 Recent Accolades Rated as the 5th Most valuable Brand in India Sept 2015 (Compiled by marketing and brand consultancy Millward Brown and WPP Group) Included in Forbes India s List of Super 50 companies in India in 2016 Felicitated as one of the MOST IMPACTFUL COMPANIES OF THE DECADE by CNBC Awaaz in Jan 2015 Included in Forbes Magazine's Asia's Fab 50 List of cos 4 years in a row from 2011 Ranked as the 4th Most Admired Company in the FMCG Sector by Fortune India Aug 2014 Presented with the Asian Centre for Corporate Governance & Sustainability Award for the Best Governed Company in 2011 Asian Paints receives the Best Audit Committee Award from the Asian Centre for Corporate Governance & Sustainability in 2011

24 Presentation structure Group Overview Economic Environment Q2 FY17 Financial Performance Q2 FY17 Business Review Q2 FY17 Risks and Outlook

25 Economic Environment The domestic economy maintained its growth trajectory of near 7% GDP growth. However, the expected pick-up has not materialized and the demand environment remains challenging India s GDP advanced 7.1% yoy in the first quarter of FY17; slowing from a 7.9% expansion in the last quarter of FY16 On the positive side, rainfall in the monsoon season, though lower than forecasts, was only 3% below normal and had a good spatial distribution Growth prospects for the global economy continues to be weak Apprehensions around Brexit, Fed tightening continue to cast uncertainties in the global financial markets

26 Presentation structure Group Overview Economic Environment Q2 & FY17 Financial Performance Q2 FY17 Business Review Q2 FY17 Risks and Outlook

27 NEW ACCOUNTING STANDARDS (IND AS) We have adopted the Indian Accounting Standards ( IND AS ) with effect from 1st April, Accordingly, the Standalone and Consolidated results for the quarter ended 30th June, 2016 are in compliance with IND AS and other accounting principles generally accepted in India and the results for the comparative quarters and previous year have been prepared to comply with IND AS. Some key changes on account of this are as follows: Incentive to dealers by way of cash discounts and sales promotion expense have been deducted from Sales against being reported as part of Expenses under the Previous GAAP. Excise duty which was earlier being deducted from Sales is now presented as an Expense. No impact of the above 2 changes on the profits. Acquired Goodwill, resulting from acquisition of Sleek and Ess Ess business will not be amortized but will be tested for impairment on an annual basis. Certain other intangible assets are considered to have indefinite useful life under IND-AS and hence will not be amortized but tested for impairment on annual basis.

28 NEW ACCOUNTING STANDARDS (IND AS) Continued All investments (Excluding Subsidiaries/JV s and other equity investments) are carried at fair value as required under IND-AS. Gain / Loss resulting from change in fair valuation between the reporting dates will be recorded in the P&L. At the same time, Gain / Loss on equity investments (Excluding Subsidiaries/JV s) resulting from change in fair valuation between the reporting dates will be recorded in the OCI statement. All assets of an acquired entity will have to be reported at fair valuation. Accordingly, fixed assets of Kadisco, Ethiopia, acquired in Feb 2015, now recorded at fair value as at the date of acquisition (as against book value as per earlier standards) and depreciation charged on such increased value. Under IND-AS, PPG-AP to be treated as an associate company wherein only APL s share of Profit after Tax of PPG-AP consolidated as against proportionate consolidation of every line item of P&L. At the same time, AP-PPG to be consolidated as a subsidiary of APL in the consolidated financials.

29 29 Financials Q2 FY17 results

30 Growth over Last Year Standalone Revenue Growth Trend The 10.2% growth in Q2FY17 & Q1FY17 is as per the new Indian Accounting Standards (IND AS) which was adopted wef 1 st April 2016 ; hence it not comparable with the numbers for the previous quarters 30

31 Dividend The Board of Directors at its meeting held on 25th October 2016, recommended payment of interim dividend of ` 2.65 per share (265%) In FY Total Dividend of ` 7.50 per share (750%) Final dividend of ` 5.30 per share Interim dividend of ` 2.20 per share Payout ratio of 54.1% for the year (on standalone financials) In FY Total Dividend of ` 6.10 per share (610%) Final dividend of ` 4.30 per share Interim dividend of ` 1.80 per share Payout ratio of 52.6% for the year (on standalone financials) 31

32 Presentation structure Group Overview Economic Environment Q2 FY17 Financial Performance Q2 FY17 Business Review Q2 FY17 Risks and Outlook

33 DECORATIVES BUSINESS Business Review : Q2 FY17 Decorative Paints business in India registered low double digit volume growth in the second quarter Prolonged monsoon impacted retail paint demand in Western and Central India Favourable raw material prices aided profitability Witnessing some upward movement in input prices No Price revision done in Q1 & Q2 FY17 Cumulative price decrease of 2% for FY16 against increase of 0.39% in FY15 Price decrease of 2% effective 26 th Feb 16 Continued focus on network expansion and opening new Colour Ideas store 35,000+ Colour World machines and 300+ Colour Ideas stores across the country SmartCare range of waterproofing products continues to grow well Good response to AP Homes store in Coimbatore Integrated décor store across categories of paints, wall papers, kitchen, bath fittings, sanitary ware, furnishings, light fittings, etc

34 Business Review : Q2 FY17 INDUSTRIAL BUSINESS PPG-Asian Paints (PPG-AP) Witnessed good demand in the Auto OEM and General Industrial business segment Asian Paints PPG (AP-PPG) Industrial Liquid Paints segment continued to grow well Raw Material prices remained low as compared to previous year, aiding the profitability of both these industrial businesses Under IND-AS, PPG-AP to be treated as an associate company wherein only APL s share of Profit after Tax of PPG-AP consolidated as against proportionate consolidation of every line item of P&L. At the same time, AP-PPG to be consolidated as a subsidiary of APL in the consolidated financials.

35 Business Review : Q2 FY17 INTERNATIONAL BUSINESS The international business reported good numbers specifically aided by contribution from good pick- up in demand in Nepal, Fiji and certain units in the Middle East Moderate growth witnessed in Ethiopia, which continued to be impacted by foreign exchange shortfall Construction of the greenfield plant at Indonesia in progress HOME IMPROVEMENT BUSINESS Both the segments within the Home Improvement business the Kitchen business under Sleek and the Bath business under Ess Ess, registered good growth in the current quarter This was aided by expansion in network and enhanced product portfolio Continue to work on further streamlining the business model in both these businesses

36 Capex Total capex at APL Standalone level for FY17 estimated to be about ` 600 crores Includes some spends on the two new paint manufacturing facility to be built at Vizag (Andhra Pradesh) and Mysuru (Karnataka) Revision of the proposed paint manufacturing capacity of Vizag The total capacity will be 5,00,000 KL/annum (4,00,000 KL announced earlier) Investment outlay of ` 1785 crores (` 1750 crores announced earlier) No change in Mysuru plant plan 6,00,000 KL plant with an investment of approximately ` 2300 crores Both plants to come up in phases depending on future demand conditions

37 Presentation structure Group Overview Economic Environment Q2 FY17 Financial Performance Q2 FY17 Business Review Q2 FY17 Risks and Outlook

38 Risks & Outlook Demand conditions expected to improve in the coming quarters Uptick from the rural segment on the back of good monsoon a well as beneficial impact of the pay commission payouts Raw material prices have seen an upward trend in the last couple of quarters Need to monitor this trend very closely In the International markets, units like Egypt, Ethiopia & Trinidad continue to face challenges around foreign exchange availability and demand conditions

39 Thank you

40 STANDALONE Q2 & H1 FY ` In Crores 40

41 CONSOLIDATED Q2 & H1 FY ` In Crores 41

42 KEY RATIOS Standalone % to total Income from Operations Q2 FY 17 Q2 FY 16 H1 FY 17 H1 FY 16 Material Cost 60.1% 61.7% 58.9% 61.6% PBDIT 17.8% 16.7% 19.6% 18.1% PBT 18.0% 16.8% 19.7% 18.3% PAT 12.2% 11.5% 13.5% 12.6% Consolidated % to total Income from Operations Q2 FY 17 Q2 FY 16 H1 FY 17 H1 FY 16 Material Cost 60.4% 61.7% 59.2% 61.6% PBDIT 16.8% 15.8% 18.4% 17.1% PBT 16.6% 15.5% 18.1% 16.7% PAT * 11.7% 10.9% 12.6% 11.7% For Consolidated results, PAT is before Minority Interest 42