Paint stocks loose sheen after weak Q2 results; Asian Paints falls 6%

Kansai Nerolac Paints hit a fresh 52-week low of Rs 367, down 6%, extending its 6% fall on Monday; while, Berger Paints India and Shalimar Paints were down 7% and 5%, respectively.

Shares of paint companies lost sheen, by falling up to 6% for the second day in a row after Asian Paints and Kansai Nerolac Paints reported a weak set of numbers for the quarter ended September 2018 (Q2FY19).

Asian Paints slipped 6% to Rs 1,132 on the BSE in early morning trade, after the company reported a 3.8% year on year (YoY) decline in its consolidated net profit at Rs 5.06 billion in Q2FY19, due to higher input costs and lower volume growth. The company’s consolidated revenue from operations grew 8.5% to Rs 46.39 billion on YoY basis. The stock has fallen 11% in past one week, as compared to 2.6% decline in the S&P BSE Sensex.

“The decorative paints business segment in India registered a low double-digit volume growth. Raw material prices continued to move up further, which has led us to take a price increase from October 2018,” said K.B.S. Anand, managing director and CEO of Asian Paints. The company has also seen a growth in automotive and industrial coatings.

“In international operations, business conditions continued to remain challenging with issues such as forex unavailability, high inflation and difficult economic conditions impacting performance. Both the segments in the home improvement category such as kitchen (Sleek) and Bath (Ess Ess) business performed well in the quarter,” Anand said.

Kansai Nerolac Paints hit a fresh 52-week low of Rs 367, down 6%, extending its Monday’s 6% fall; after the company posted a 15.6% YoY declined in its net profit at Rs 1.22 billion in Q2FY19. Net sales of the company, however, grew 10.7% YoY at Rs 12.86 billion during the quarter. EBIDTA (earnings before interest, tax, depreciation, and amortization) was Rs 1.95 billion down by 11.9% over the same quarter of the previous year.

The company said factors like GST rate changes in July leading to destocking by dealers, lingering monsoons over many parts of India and a delayed festival season affected demand for both decorative and industrial customers. The company expects the growth momentum to be good in decorative but subdued for industrial in the near future. It is hoped that the rupee and crude oil will stabilize at the current levels. Any adverse change will put further pressure on margins.

Berger Paints India (down 7% at Rs 261) and Shalimar Paints (down 5% at Rs 86.95) were other paint stocks down more than 4% for the second straight day. In comparison, the S&P BSE Sensex was trading 0.73% lower at 33,884 points at 09:37 am.