iifl conference presentation - feb 2012
TRANSCRIPT
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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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Presentation structure
Performance : Q3 & 9M FY 2011-12
Review of Business Units
Outlook and Risks
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Review of Business Units
Decorative Business - India
Industrial Operations - India
International Operations
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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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Review of Business Units
Decorative Business - India
Industrial Operations - India
International Operations
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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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Review of Business Units
Decorative Business - India
Industrial Operations - India
International Operations
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International Operations
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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Presentation structure
Performance : Q3 & 9M FY 2011-12
Review of Business Units
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