JM Financial India Conference Mumbai November 11, 2014
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.
Agenda Group Overview Economic Environment Q2 & H1FY15 Financial Performance Q2 & H1FY15 Business Review Q2 & H1 FY15 Risks and Outlook
Asian Paints Group Today No. 1 Paint Company in India Over USD 2 Billion Group revenue 3 Times nearest Competitor in India 3rd Largest Paint Company in Asia 13 th Largest Coating Company In the World Operations in 17 countries 23 Paint Manufacturing Plants 47 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 7000+ Employees worldwide
In Billion USD Global standing 14.0 13.3 12.8 12.0 11.2 13 th largest in the World 10.0 9.3 8.0 6.0 3 rd largest in Asia 4.0 4.3 4.1 4.1 4.0 3.1 3.1 2.0-2.3 2.3 2.1 2.1 2.0 1.9 1.7 1.4 1.3 1.1 * Coating World 2014 Rankings
Worldwide Operations Jamaica Barbados Trinidad & Tobago Egypt Bahrain UAE Oman Nepal Bangladesh India Singapore Sri Lanka Solomon Islands Vanuatu Samoa Fiji Tonga Total Installed Global Capacity of more than 1.26 Million KL
Strong Brands...
Aspiration To be the fore runner of inspiring décor and to actively empower customers to create their dream homes
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)
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 Samplers Beautiful Homes Guide Water Proofing and Wallpaper business Ezycolour Service brand Home Solutions (Painting solution service) Colour Consultancy @ Home
Powerful Consumer Connect Signature Stores in Metros Colour Idea Stores 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 34,000+ dealers
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. Both these plants can be scaled up to 4,00,000 KL p.a. Planning to set up a new, fully-automated manufacturing facility 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
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 reengineering 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
Changing with times
Business Portfolio Decorative Coatings India Industrial Coatings India PPG Asian Paints Asian Paints PPG Industrial - India, 5% Home Improvement - India, 1% International operations, 13% Chemicals - India, 1% Decorative - India, 81% International Operations Home Improvement Business India Chemicals - India
Decorative Coatings - India Largest business unit of the company Primarily operates in four segments o Interior Wall finishes o Exterior Wall finishes o Enamels o Wood Finishes Introduced new categories like water-proofing & wallpaper Product for every price point and requirement
Industrial Coatings - India Asian Paints participates in the Industrial Coatings segment, through two 50:50 JVs with PPG Inc. of US 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) 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
International Operations Contributes about 13% to the group turnover Began by establishing presence in Fiji in 1978 Asia, 29% South Pacific, 8% Caribbean, 13% Presence in 16 countries spread over 4 regions Middle East Caribbean South Pacific Islands Asia (Includes Sri Lanka, Bangladesh, Nepal and Singapore) Middle East, 50% Focus on establishing presence and growing in high growth emerging markets Looking for expansion in key markets of Africa and South East Asia Signed Share Purchase Agreement and other definitive agreements in Oct 2014 to acquire 51% stake in Kadisco Chemical Industry PLC, Ethiopia. Received approval and a principal license in Sept 2014 from the regulatory authorities of Indonesia for setting up a greenfield paint manufacturing facility
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 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 & wash business segment in India and has high quality products in this segment
Chemicals Asian Paints manufactures Phthalic Anhydride (PAN) and Pentaerythritol PAN manufactured in Gujarat and Penta in Tamil Nadu More than 50% consumed internally Contributes about 1% to the group s consolidated revenue Contribution to the group s revenue has been continuously decreasing
Consistent performance Consolidated Net Sales and Operating Income ( Rs. Cr) Net Profit (Rs. Cr) 14,000 12,715 1,400 1,219 12,000 1,200 10,000 8,000 CAGR 19.1% 1,000 800 CAGR 23.7% 6,000 600 4,000 2,000 2,218 400 200 145 0 2003-04 2013-14 0 2003-04 2013-14
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Sustained value creation... Market Cap (Rs. Cr) Dividend Payout Ratio 52,420 80% 73% 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 CAGR 33.51% 2,914 70% 60% 50% 40% 30% 20% 10% 0% 60% 52% 51% 54% 46% 47% 49% 51% 39% 0 2003-04 2013-14
Recent Accolades Included in Forbes Magazine's - Asia's Fab 50 List of cos 4 years in a row from 2011 Rated as the 6th most valuable Brands in India Aug 2014 (Compiled by marketing and brand consultancy Millward Brown and WPP Group) Ranked as the 4 th 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 Sword of Honour" by the British Safety Council for all the paint plants in India, considered as the pinnacle of achievement in safety across the world
Presentation structure Group Overview Economic Environment Q2 & H1FY15 Financial Performance Q2 & H1FY15 Business Review Q2 & H1FY15 Risks and Outlook
Economic Environment The Apr-Sept 2014 period witnessed slowdown in growth across advanced economies Concerns on Eurozone deepened with the 3 core economies (Germany, France & Italy) shrinking in the first 6 months Japanese economy too shrunk by 1% in the same period US by far was the most resilient although with the first 6 months GDP growth of mere 1.1% The domestic economy recovery would be more gradual than expected though some improvement in fundamentals witnessed GDP growth of 5.7% in Q1FY15 as compared to 4.6% in Q4FY14 was positive but the latest indicators (0.4% IIP growth in Aug & Sept) highlight that fullfledged recovery would take more time The Rupee was relatively stable unlike other Emerging market currencies, trading in the range of Rs. 60-62 to a dollar Raw material prices have been benign on back of slow global demand with adequate supplies Crude is at 4 months low, trading below $85 a barrel
Presentation structure Group Overview Economic Environment Q2 & H1FY15 Financial Performance Q2 & H1FY15 Business Review Q2 & H1FY15 Risks and Outlook
Corporate Highlights : Q2 & H1 FY15 Consolidated Income from operations for the quarter increased by 16.6% Consolidated Net Profit after Minority Interest for the quarter increased by 6.3% Standalone Income from operations for the quarter increased by 18.3% Net Profit on a Standalone basis for the quarter increased by 4.9 % The Board of Directors at its Board Meeting held on Sept 17, 2014 recommended payment of an interim dividend of Rs. 1.80 per share (180%) Received approval and a principal license in Sept 2014 from the Regulatory authorities of Indonesia for setting up a greenfield paint manufacturing facility Signed Share Purchase Agreement and other definitive agreements in Oct 2014 to acquire 51% stake in Kadisco Chemical Industry PLC, Ethiopia.
Financials : Q2 & H1 FY15 Consolidated (Rs. Crs) Q2 FY15 Q2 FY14 Gr (%) H1 FY15 H1 FY14 Gr (%) Income from Operations 3633.0 3114.7 16.6% 6995.2 5955.8 17.5% PBDIT 536.2 510.8 5.0% 1092.7 975.5 12.0% PBDIT % 14.8% 16.4% 15.6% 16.4% PAT after Minority Interest 347.3 326.8 6.3% 686.0 602.0 13.9% Standalone (Rs. Crs) Q2 FY15 Q2 FY14 Gr (%) H1 FY15 H1 FY14 Gr (%) Income from Operations 2995.7 2532.0 18.3% 5736.5 4851.7 18.2% PBDIT 481.1 456.4 5.4% 970.6 875.6 10.9% PBDIT % 16.1% 18.0% 16.9% 18.0% PAT 325.7 310.6 4.9% 634.5 594.5 6.7%
Standalone Income from Operations 25.0% 22.2% 20.0% 16.1% 19.9% 18.2% 16.3% 18.2% 18.3% 15.0% 12.6% 12.9% 12.2% 10.0% 6.7% 7.5% 5.0% 0.0% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 12M FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 12M FY14 Q1 FY15 Q2 FY15
Presentation structure Group Overview Economic Environment Q2 & H1FY15 Financial Performance Q2 & H1FY15 Business Review Q2 & H1FY15 Risks and Outlook
Business Review DECORATIVES BUSINESS Double digit volume witnessed across geographies Continued focus on expanding Colour World and Colour Ideas Network Waterproofing range of products continues to witness good acceptance in the market Cumulative price increase of 2.20% affected upto 30 th Sept 2014. (1 st May 14 : 1.0% & 1 st Jun 14 : 1.2%) Capex plan for FY15 at the standalone company level of around Rs. 500 crores Rohtak plant expansion work in progress Scouting for land in Southern India to set up a new, fully-automated paint manufacturing facility in the next 2-3 years
Business Review INDUSTRIAL BUSINESS Automotive coatings JV (PPG-AP), saw good growth in the General Industrial segment led by strong growth in the 2-wheeler category The Refinish segment also did well driven by the economy range of products Industrial Coatings JV (AP-PPG), which had seen a decline in the previous year, saw good volume growth in the current year INTERNATIONAL BUSINESS Good growth witnessed in Bangladesh, Nepal and Oman Performance in Egypt continued to be weak given the subdued business sentiment in the country
Business Review HOME IMPROVEMENT BUSINESS SLEEK We continue to work on our plans for network expansion and streamlining of operations ESS ESS Bathroom Products Asian Paints had acquired the entire front end sales business including brands, network and sales infrastructure effective 1 st June 2014 The business performed as per expectations during the quarter Reported a turnover of Rs. 25.94 Crores in Q2 FY 15 (shown in segment reporting for standalone financials)
Dividend The Board of Directors at its Board Meeting held on Sept 17, 2014 had recommended the payment of an interim dividend of Rs. 1.80 per share (180%) Interim dividend of Rs. 1.10 per share (110%) was distributed in H1-FY2014 Total dividend of Rs. 5.30 per share (530%) was distributed in FY2014 Dividend Payout Ratio of 50.9% in FY2014
Presentation structure Group Overview Economic Environment Q2 & H1FY15 Financial Performance Q2 & H1FY15 Business Review Q2 & H1FY15 Risks and Outlook
Risks & Outlook Going forward, good festival season demand expected in Q3-FY2015 Downtrend in inflation and likely rate cuts could boost consumer sentiments Both Industrial Paint Businesses (Auto and Non-Auto) are expected to benefit from the pick-up in economic activity The International business expected to do well except for the continuing uncertainty in some units like Egypt
Thank you
Annexures Q2 & H1 FY15 Results
Consolidated P&L Q2 & H1 FY15 (Rs in crores) Q2-FY15 Q2-FY14 Gr % H1-FY15 H1-FY14 Gr % Total Income from operations 3,633.0 3,114.7 16.6% 6,995.2 5,955.8 17.5% Material Cost 2,046.9 1,766.5 15.9% 3,977.8 3,380.2 17.7% Employee Costs 233.5 185.9 25.7% 458.8 386.7 18.6% Other Expenses 816.3 651.6 25.3% 1,465.8 1,213.4 20.8% PBDIT 536.2 510.8 5.0% 1,092.7 975.4 12.0% Depreciation 66.9 60.3 11.0% 131.4 120.1 9.4% Profit from Operations 469.4 450.5 4.2% 961.3 855.3 12.4% Other Income 48.0 45.4 5.8% 95.3 73.1 30.4% PBIT 517.3 495.9 4.3% 1,056.6 928.4 13.8% Finance Costs 7.0 12.0 14.8 20.5 PBT before EOI 510.3 483.9 5.5% 1,041.8 907.9 14.8% Exceptional Item 0.0 - error 25.2 0.0 error PBT 510.3 483.9 5.5% 1,016.6 907.9 12.0% Curr. & Def Tax 154.0 144.9 6.3% 313.0 283.9 10.3% PAT before Minority interest 356.3 339.0 5.1% 703.6 624.0 12.8% Minority Share 9.0 12.2 17.6 21.9 PAT to parent Shareholders 347.3 326.8 6.3% 686.0 602.0 13.9%
Standalone P&L Q2 & H1 FY15 (Rs. In Crores) Q2-FY15 Q2-FY14 Gr % H1-FY15 H1-FY14 Gr % Total Income from Operations 2,995.7 2,532.0 18.3% 5,736.5 4,851.7 18.2% Material Cost 1,654.0 1,407.7 17.5% 3,210.2 2,702.5 18.8% Employee Remuneration 156.9 119.3 31.6% 307.5 254.6 20.8% Other Expenses 703.8 548.7 28.3% 1,248.2 1,019.0 22.5% PBDIT 481.1 456.4 5.4% 970.6 875.6 10.8% Depreciation 56.4 51.5 9.5% 111.1 104.5 6.3% Profit from Operations 424.7 404.9 4.9% 859.6 771.1 11.5% Other Income 50.5 47.8 5.6% 99.4 99.9 (.5%) PBIT 475.2 452.7 5.0% 959.0 871.1 10.1% Interest 6.4 6.1 4.9% 10.7 10.9 (1.9%) Profit before Exceptional item 468.8 446.6 5.0% 948.3 860.1 10.2% Exceptional Item - 25.2 0.0 PBT 468.8 446.6 5.0% 923.1 860.1 7.3% Taxation 143.1 136.0 5.2% 288.6 265.6 8.7% PAT 325.7 310.6 4.9% 634.5 594.5 6.7% EPS 3.39 3.24 6.61 6.20
Key Ratios Standalone Standalone Consolidated Consolidated % to Income from operations Q2, 14-15 Q2, 13-14 H1, 14-15 H1, 13-14 Q2, 14-15 Q2, 13-14 H1, 14-15 H1, 13-14 Material Cost 55.2% 55.6% 56.0% 55.7% 56.3% 56.7% 56.9% 56.8% PBDIT 16.1% 18.0% 16.9% 18.0% 14.8% 16.4% 15.6% 16.4% PBT After Exceptional Item 15.6% 17.6% 16.1% 17.7% 14.0% 15.5% 14.5% 15.2% PAT 10.9% 12.3% 11.1% 12.3% 9.8% 10.9% 10.1% 10.5% For Consolidated results, PAT is before Minority Interest