Kansai Nerolac Paints (500165) Q4 10/11 earnings summary

Executive summary

• FY11 gross sales rose 26.4% to Rs. 2,493 crore; net sales increased 25.3%, while profit after tax advanced to Rs. 205.98 crore.

• Robust decorative and industrial sales supported results, but raw-material inflation and limited industrial price pass-through weighed on bottom-line growth.

• Reported PBT included a Rs. 25.37 crore gain from the sale of the Nipa Chemicals investment; PBT before the exceptional gain was Rs. 263.77 crore.

Financial highlights

• Gross sales were Rs. 2,493.19 crore versus Rs. 1,971.71 crore in FY10; net sales were Rs. 2,138.73 crore versus Rs. 1,706.38 crore.

• PBT was Rs. 289.13 crore, up from Rs. 238.61 crore; PAT was Rs. 205.98 crore, versus Rs. 165.50 crore.

• Operating profit before interest, depreciation, tax and appropriation was Rs. 313.96 crore, compared with Rs. 284.07 crore in FY10.

• Other income increased to Rs. 23.46 crore in the accounts; management cited Rs. 48.83 crore including the investment-sale gain, versus Rs. 20.38 crore in FY10.

• Proposed dividend was Rs. 10 per share, or 100%, on the doubled share capital after the 1:1 bonus issue; FY10 dividend was Rs. 15 per share.

Outlook and guidance

• Near-term top-line and bottom-line growth outlook remained cautious amid cost pressures, market uncertainty, inflation and rising interest rates.

• Indian paints market was expected to grow 12–13% annually over the next five years; growth opportunities cited included infrastructure, consumer spending, demographics and GST.

• Planned responses included internal cost controls, value-oriented product launches, technology-enabled risk evaluation and capacity expansion at Jainpur and Hosur.