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.
Economic Environment – Q2 & H1FY15
Financial Performance – Q2 & H1FY15
Business Review – Q2 & H1 FY15
Risks and Outlook
Agenda
Group Overview
No. 1Paint Company
in India
Servicing
Consumers in over
65 Countries
3rd
Largest Paint
Company in Asia
Over
USD 2 Billion
Group revenue
Operations in
17countries
47 Years of Market
Leadership in India
23Paint
Manufacturing
Plants
Forbes Asia’s Fab
50Company; Four
times in a row
3Times nearest
Competitor in India
13th
Largest Coating
Company
In the World
7000+
Employees
worldwide
Part of NSE Nifty
50
Asian Paints Group Today…
Global standing…
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0 13.3 12.8
11.2
9.3
4.3 4.1 4.1 4.0
3.1 3.1
2.3 2.3 2.1 2.1 2.0 1.9 1.7 1.4 1.3 1.1
In B
illio
n U
SD
* Coating World 2014 Rankings
3rd largest in Asia
13th largest in the World
Worldwide Operations…
JamaicaBarbados
Trinidad & Tobago
Egypt
Oman
BahrainUAE
Nepal
India
Sri Lanka
Bangladesh
Singapore
Solomon IslandsVanuatu
FijiSamoa
Tonga
Total Installed Global Capacity of more than 1.26 Million KL
Aspiration…
“To be the fore runner of inspiring décor and to actively
empower customers to create their dream homes”
• 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)
Stand for…
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
• 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
Signature Stores in Metros Colour Idea Stores
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 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
Decorative - India, 81%
Industrial - India, 5%
International operations, 13%
Home Improvement -
India, 1%
Chemicals -India, 1%
Business Portfolio…
• Decorative Coatings – India
• Industrial Coatings – India
• PPG Asian Paints
• Asian Paints PPG
• 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
• Presence in 16 countries spread over 4 regions
– Middle East
– Caribbean
– South Pacific Islands
– Asia (Includes Sri Lanka, Bangladesh, Nepal and Singapore)
• 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
Caribbean, 13%
Middle East, 50%
Asia, 29%
South Pacific, 8%
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…
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2003-04 2013-14
2,218
12,715
Consolidated Net Sales and Operating Income ( Rs. Cr)
CAGR 19.1%
0
200
400
600
800
1,000
1,200
1,400
2003-04 2013-14
145
1,219
Net Profit (Rs. Cr)
CAGR 23.7%
Sustained value creation...
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2003-04 2013-14
2,914
52,420
Market Cap (Rs. Cr)
CAGR 33.51%
0%
10%
20%
30%
40%
50%
60%
70%
80%
20
04
-05
20
05
-06
20
06
-07
20
07
-08
20
08
-09
20
09
-10
20
10
-11
20
11
-12
20
12
-13
20
13
-14
60%
73%
52% 51%54%
39%
46% 47% 49% 51%
Dividend Payout Ratio
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 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
• “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
Economic Environment – Q2 & H1FY15
Financial Performance – Q2 & H1FY15
Business Review – Q2 & H1FY15
Risks and Outlook
Presentation structure
Group Overview
Economic Environment
• The Apr-Sept 2014 period witnessed slowdown in growth across advancedeconomies
– 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 growthof mere 1.1%
• The domestic economy recovery would be more gradual than expectedthough some improvement in fundamentals witnessed
– GDP growth of 5.7% in Q1FY15 as compared to 4.6% in Q4FY14 was positivebut the latest indicators (0.4% IIP growth in Aug & Sept) highlight that full-fledged 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 withadequate supplies
– Crude is at 4 months low, trading below $85 a barrel
Economic Environment – Q2 & H1FY15
Financial Performance – Q2 & H1FY15
Business Review – Q2 & H1FY15
Risks and Outlook
Presentation structure
Group Overview
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
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%
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 Income from Operations
6.7%
16.1%
19.9%
7.5%
12.6% 12.9%
18.2%
12.2%
22.2%
16.3%
18.2% 18.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Q1FY13
Q2FY13
Q3FY13
Q4FY13
12MFY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
12MFY14
Q1FY15
Q2FY15
Economic Environment – Q2 & H1FY15
Financial Performance – Q2 & H1FY15
Business Review – Q2 & H1FY15
Risks and Outlook
Presentation structure
Group Overview
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 30th Sept 2014. (1st May’14 : 1.0% &
1st 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 1st 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
Economic Environment – Q2 & H1FY15
Financial Performance – Q2 & H1FY15
Business Review – Q2 & H1FY15
Risks and Outlook
Presentation structure
Group Overview
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
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
% 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
Standalone Consolidated ConsolidatedStandalone