Trinity India - 2016 - WordPress.com · Beautiful Homes Guide Water Proofing and Wallpaper business...

B&K Securities ConferenceTrinity India - 2016

Mumbai

June 2, 2016

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 – Q4 & 12M FY16

Financial Performance – Q4 & 12M FY16

Business Review – Q4 & 12M FY16

Risks and Outlook

Agenda

Group Overview

No. 1Paint Company

in India

Servicing

Consumers in over

65 Countries

Part of

30 share

BSE

S&P SENSEX

Over

USD 2 Billion

Group revenue

Operations in

19countries

49 Years of Market

Leadership in India

26Paint

Manufacturing

Plants

Forbes Asia’s Fab

50Company; Four

times in a row

3Times nearest

Competitor in India

2rd Largest Paint

Company in Asia

11th Largest Coating

Company In the World

7000+

Employees

worldwide

Part of NSE Nifty

50

Asian Paints Group Today…

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

14.3

11.6

10.0

6.4

4.5 4.4 4.4

3.6 3.1

2.9 2.3 2.3 2.1 2.1 2.0

1.7 1.7 1.5 1.0 1.0

In B

illio

n U

SDGlobal Standing…

* Coatings World – 2015 Top companies report

2nd largest in Asia

11th largest in the World

Worldwide Operations…

JamaicaBarbados

Trinidad & Tobago

Egypt

Oman

BahrainUAE

Nepal

India

Sri Lanka

Bangladesh

Singapore

Solomon IslandsVanuatu

FijiSamoa

Tonga

EthiopiaIndonesia

Strong Brands…

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

Adhesives

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 40,000 dealers

Signature Stores in Metros Colour Ideas Stores AP Homes

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).

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

Changing with times

Business Portfolio

• Decorative Coatings – India

• Industrial Coatings – India

• PPG Asian Paints

• Asian Paints PPG

• International Operations

• Home Improvement Business – India

• Sleek

• Ess Ess

• Chemical Business

• Adhesives

FY 2015- 2016

80%

2%4% 13.6%

Decorative - India Home Improvement - India

Industrial - India International Operations

Decorative Coatings - India

Largest business unit of the company

Primarily operates in four segments

Interior Wall finishes

Exterior Wall finishes

Metal Finishes (Enamels)

Wood Finishes

Introduced new categories like water-proofing, wallpapers & adhesives

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 USA

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 Coatings)

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 14% to the group turnover

Began by establishing presence in Fiji in 1978

Presence in 19 countries spread over 5 regions

Focus on establishing presence and growing in high growth emerging markets

Looking for expansion in key markets of Africa and South East Asia

Acquired 51% stake in Kadisco Chemical Industry PLC, Ethiopia in Feb 2015

Setting up paint manufacturing facility at Indonesia

Caribbean : Jamaica, Barbados and Trinidad & Tobago

Middle East : UAE, Bahrain, Oman & Egypt

Asia : Nepal, Sri Lanka, Bangladesh, Singapore & Indonesia

South Pacific : Fiji, Tonga, Solomon Islands, Vanuatu & Samoa

Africa : Ethiopia

11.0%

54.7%

27.9%

6.4%

Caribbean

Middle East & Africa

Asia

South Pacific

2015-2016Net Sales Break-Up

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 business segment in India and has high quality

products in this segment

Chemicals

Asian Paints manufactures Phthalic Anhydride (PAN) and Pentaerythritol (Penta)

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

16,000

2005-2006 2015-2016

3,021

15,534

Consolidated Net Sales and Operating Income ( ` Crores)

CAGR 17.8%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2005-2006 2015-2016

212

1,726

Net Profit (` Crores)

CAGR 23.3%

Sustained value creation...

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2005-2006 2015-2016

6,178

83,326

Market Cap (` Crores)

CAGR 29.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

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

20

14

-15

20

15

-16

73%

52% 51%54%

39%

46% 47% 49% 51% 53% 54%

Dividend Payout Ratio

Recent Accolades… Rated as the 5th most valuable Brand in India – Sept 2015 (Compiled by marketing and brand

consultancy Millward Brown and WPP Group)

Included in Forbes India’s List of “Super 50 companies in Inida’ in 2016

Felicitated as one of the ‘MOST IMPACTFUL COMPANIES OF THE DECADE’ by CNBC Awaaz in Jan

2015

Included in Forbes Magazine's - Asia's Fab 50 List of cos 4 years in a row from 2011

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




Risks and Outlook

Presentation structure

Group Overview

Economic Environment Challenging business environment with domestic economic activity showing signs of

modest improvement

GDP growth in FY 16 inched up to 7.6% against 7.2% in FY 15

Remains one of the fastest growing major economy during the year

Weak monsoons had an adverse impact on the rural economy

Managed to restore macroeconomic stability during the year

Inflation under control on the back of sharp drop in crude and other commodities

Deficits within targets

Implementation of reforms such as liberalizing FDI and pursuing the ease of doing business agenda has led to significantly higher foreign investments

Rupee, however, depreciated significantly during the year limiting the gains from lower crude prices




Risks and Outlook


Group Overview

Financials - Q4 & 12M FY16

27

Consolidated (Rs. Crores) Q4 FY16 Q4 FY15 Gr(%) 12M FY16 12M FY15 Gr(%)

Income from Operations 3,971.3 3,535.0 12.3% 15,534.1 14,182.8 9.5%

PBDIT 703.7 559.9 25.7% 2,808.6 2,235.4 25.6%

PBDIT(%) 17.7% 15.8% 18.1% 15.8%

PAT after Minority Interest 408.7 341.0 19.9% 1,726.2 1,395.2 23.7%

Standalone (Rs. Crores) Q4 FY16 Q4 FY15 Gr(%) 12M FY16 12M FY15 Gr(%)

Income from Operations 3,219.1 2,887.0 11.5% 12,645.9 11,648.8 8.6%

PBDIT 620.2 500.7 23.9% 2,479.6 2,010.5 23.3%

PBDIT(%) 19.3% 17.3% 19.6% 17.3%

PAT 387.0 339.8 13.9% 1,597.4 1,327.4 20.3%

Gro

wth

ove

r La

st Y

ear

Standalone Revenue Growth Trend

28

6.7%

16.1%

19.9%

7.5%

12.6% 12.9%

18.2%

12.2%

22.2%

16.3%

18.2% 18.3%

6.4% 6.0%

11.8%

7.2%

2.3%

13.2%

11.5%

8.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Q1 FY13

Q2 FY13

Q3 FY13

Q4 FY13

12M FY13

Q1 FY14

Q2 FY14

Q3 FY14

Q4 FY14

12M FY14

Q1 FY15

Q2 FY15

Q3 FY15

Q4 FY15

12M FY15

Q1 FY16

Q2 FY16

Q3 FY16

Q4 FY16

12M FY16

In FY 2015-16

Total Dividend of Rs. 7.50 per share (750%)

Final dividend of Rs. 5.30 per share

Interim dividend of Rs. 2.20 per share

Payout ratio of 54.2% for the year (on standalone financials)

In FY 2014-15

Total Dividend of Rs. 6.10 per share (610%)

Final dividend of Rs. 4.30 per share

Interim dividend of Rs. 1.80 per share

Payout ratio of 52.6% for the year (on standalone financials)

Dividend

29




Risks and Outlook


Group Overview

Business Review : Q4 & 12M FY16

DECORATIVES BUSINESS

Decorative Paints business in India registered double digit volume growth for Q4 as well as for the full year

Good growth in the second half of the year, aided by very strong secondary demand in the festival season

Profitability improved mainly driven by lower material costs during the year

Cumulative price decrease of 2% for FY16 against increase of 0.39% in FY15

Price decrease of 2% effective 26th Feb’16

Continued focus on network expansion and opening new ‘Colour Ideas’ store

Over 300 ‘Colour Ideas’ stores across the country



Several new products launched during the year

Major ones among them - “Royale Matt”, “PGE Advance” and “Tractor Star”

Introduced Adhesives in certain western markets of the country

Distribution arrangement with Henkel Adhesives Technologies, Germany. Will sell Loctite brand of adhesives under a co-branding initiative

SmartCare range of waterproofing products continues to grow well

“AP Homes” - Multi-category décor store inaugurated in Coimbatore

Integrated décor store across categories of paints, wall papers, kitchen, bath fittings, sanitary ware, furnishings, light fittings, etc



Rohtak (Haryana) plant capacity expansion from 200,000 KL/annum to 400,000 KL/annum successfully completed during the year

Comprehensive modernization program for Ankleshwar (Gujarat) and Kasna (UP) plant completed

Khandala plant subsidy income of Rs. 134.2 crores (Rs. 109.1 crores in FY15)

Land procurement process completed in Andhra Pradesh and Karnataka for setting up paint manufacturing facilities

Propose to set up 4,00,000 KL plant at Visakhapatnam in Andhra Pradesh with an investment of approximately Rs. 1750 crores

Propose to set up 6,00,000 KL plant at Mysuru in Karnataka with an investment of approximately Rs. 2300 crores

Both plants to come up in phases depending on future demand conditions


INDUSTRIAL BUSINESS (PPG-AP)

Net sales grew by 3.8% to Rs. 1035.6 crores with PBIT of Rs. 93.1 crores in FY 16

Growth for the year led by Auto and Refinish segment

Falling raw material prices had a favorable impact

INDUSTRIAL BUSINESS (AP-PPG)

In FY16, Net Sales grew by 11.6% to Rs. 322.7 crores; PBIT at Rs. 7.1 crores

In particular, Road Marking segment witnessed good pick-up in demand during the year

Operating margins improved due to declining raw material prices

Note: Figures shown above are at 100%APL consolidated financials include 50% for both businesses


INTERNATIONAL BUSINESS

Business performed well amidst challenging market conditions in some key markets

Markets in Middle East – Oman, Bahrain and UAE, as well as Trinidad saw subdued economic conditions on account of the drop in oil prices

Good overall economic growth in Egypt after the sluggish environment of last few years

Bangladesh and Sri Lanka experienced stable political environment supporting the business conditions

Performance aided by the business in Ethiopia

Figures for the year not strictly comparable with last year as Ethiopian operations were acquired effective 9th Feb 2015

During the year APL, India invested Rs.143 crores in APIL, Mauritius. APIL has invested this amount in BIPL, Singapore to repay part of its debt

New state-of-the-art manufacturing facility inaugurated at Sohar in Oman with an annual capacity of 21,000 KL

Setting up of greenfield plant at Indonesia moving at a slower pace than expected due to the delay in getting all the regulatory approvals

INTERNATIONAL BUSINESS

Caribbean : Jamaica, Barbados and Trinidad & Tobago

Middle East & Africa: UAE, Bahrain, Oman, Egypt & Ethiopia

Asia : Nepal, Sri Lanka, Bangladesh, Singapore & Indonesia

South Pacific : Fiji, Tonga, Solomon Islands, Vanuatu & Samoa

Profit growth higher due to:

Inclusion of Ethiopia (12 Months in FY16 as compared to 2 Months in FY15)

36

Regions FY 2015-16 FY 2014-15 Gr % FY 2015-16 FY 2014-15 Gr %

Caribbean 231.0 213.4 8.3% 13.1 17.5 -25.2%

Middle East & Africa 1,150.3 905.1 27.1% 149.1 73.5 102.8%

Asia 587.5 558.5 5.2% 45.7 39.0 17.3%

South Pacific 135.1 126.6 6.8% 24.8 23.3 6.7%

IBU 2,081.1 1,781.2 16.8% 227.6 149.2 52.5%

Net Sales (Rs in crores) PBIT (Rs in crores)


54.7%27.9%

11.0%6.4%

Net Sales Break-up

Middle East & Africa Asia Caribbean South Pacific

Business Review: Q4 & 12M FY16 HOME IMPROVEMENT BUSINESS

SLEEK

Registered Net Sales of Rs. 134.7 crores in FY16; PBIT Loss of Rs. 19.0 crores during the year

Network expansion with addition of new distributors and dealers for the components business

Launched “Smart kitchen range” for easy installation and design

Pace of progress has been slower than that envisaged earlier, with weak consumer sentiment adding to the pressure

Have taken a provision for diminution in the value of the investment made in Sleek to the tune of Rs. 65.30 crores in Q3FY16 based on the assessment of the fair value of investment

Business Review: Q4 & 12M FY16 HOME IMPROVEMENT BUSINESS

ESS ESS

Registered Net Sales of Rs. 106.2 crores in FY16; PBIT Loss of Rs. 30.2 crores for the year after amortization charge of Rs. 5.9 crores

Launched Sanitary ware range under the brand name ‘Bathsense’ in certain markets of West Bengal

Good response to the Premium range of Bath fittings ‘Royale’ - introduced in January, 2016

Continue to work on expansion of network, and measures to improve servicing levels


Financial Performance – Q4 & 12M Y16


Risks and Outlook


Group Overview

Risks & Outlook

Overall economic outlook remains uncertain

Early forecasts for monsoon appear encouraging and could provide the much needed impetus to the rural economy

Implementation of the Seventh Pay Commission and OROP (one rank one pension) payouts could provide fillip to consumption demand

Volatility in crude prices could impact inflationary trend going forward

Global uncertainties and resulting volatility in the financial markets could impact the exchange rate movement

Nepal, which was marred by the severe impact of the earthquake in April 2015, is expected to see a rebound on the hope of post-earthquake reconstruction push in the country

Certain key markets like Egypt & Ethiopia, could face issues on availability of foreign exchange which might impact business conditions

Thank you

42

STANDALONE Q4 FY 2015-16

Particulars Q4 FY 16 Q4 FY 15 Gr %

Total Income from Operations 3,219.1 2,887.0 11.5%

Material Cost 1,607.5 1,560.0 3.0%

Employee Remuneration 178.6 145.5 22.7%

Other Expenses 812.7 680.7 19.4%

PBDIT 620.2 500.7 23.9%

Depreciation 62.3 55.5 12.2%

Profit from operations 557.9 445.2 25.3%

Other Income 43.6 49.4 -11.7%

PBIT 601.5 494.6 21.6%

Finance Cost 10.3 8.6 19.8%

PBT before Exceptional Item 591.2 486.0 21.6%

Exceptional item 0.1 -11.6

PBT after Exceptional Item 591.2 497.6 18.8%

Curr. & Def. Tax 204.2 157.8 29.4%

PAT 387.0 339.8 13.9%

EPS 4.0 3.5

Rs. In Crores

43

CONSOLIDATED Q4 FY 2015-16

Particulars Q4 FY 16 Q4 FY 15 Gr %


Material Cost 2,027.0 1,941.9 4.4%

Employee cost 276.6 216.4 27.8%

Other Expenses 964.0 816.8 18.0%

PBDIT 703.7 559.9 25.7%


Proft from Operations 628.4 492.8 27.5%

Other Income 34.0 41.7 -18.4%

PBIT 662.4 534.4 24.0%

Finance Cost 14.8 10.2 44.9%

PBT before Exceptional Item 647.6 524.2 23.5%

Exceptional Item 0.0 2.4

PBT after Exceptional Item 647.6 521.8 24.1%

Curr. & Def Tax 225.4 169.8 32.7%

PAT before Minority interest 422.3 352.0 20.0%

Minority Share 13.5 11.0 22.7%

PAT to parent Shareholders 408.7 341.0 19.9%

EPS 4.3 3.6

Rs. In Crores

44

STANDALONE 12M FY 2015-16

Particulars 12M FY 16 12M FY 15 Gr %


Material Cost 6,529.6 6,439.9 1.4%

Employee Remuneration 664.2 606.9 9.4%

Other Expenses 2,972.6 2,591.5 14.7%

PBDIT 2,479.6 2,010.5 23.3%


Profit from operations 2,241.2 1,787.4 25.4%

Other Income 225.3 186.8 20.6%

PBIT 2,466.5 1,974.2 24.9%

Finance Cost 23.4 27.1 -13.7%

PBT before Exceptional Item 2,443.1 1,947.1 25.5%

Exceptional item 65.4 13.5

PBT after Exceptional Item 2,377.8 1,933.6 23.0%

Curr. & Def. Tax 780.3 606.2 28.7%

PAT 1,597.4 1,327.4 20.3%

EPS 16.7 13.8

Rs. In Crores

45

CONSOLIDATED 12M FY 2015-16

Particulars 12M FY 16 12M FY 15 Gr %


Material Cost 8,205.6 7,971.5 2.9%

Employee cost 1,017.8 907.1 12.2%

Other Expenses 3,502.1 3,068.8 14.1%

PBDIT 2,808.6 2,235.4 25.6%


Proft from Operations 2,520.6 1,969.5 28.0%

Other Income 200.7 169.7 18.3%

PBIT 2,721.4 2,139.2 27.2%

Finance Cost 40.5 34.8 16.5%

PBT before Exceptional Item 2,680.9 2,104.4 27.4%

Exceptional Item 52.5 27.6 90.2%

PBT after Exceptional Item 2,628.4 2,076.9 26.6%

Curr. & Def Tax 849.1 649.5 30.7%

PAT before Minority interest 1,779.3 1,427.3 24.7%

Minority Share 53.1 32.2 64.9%

PAT to parent Shareholders 1,726.2 1,395.2 23.7%

EPS 18.0 14.5

Rs. In Crores

KEY RATIOS

46

% to Income from Operations Q4 FY 16 Q4 FY 15 12M FY 16 12M FY 15

Material Cost 49.9% 54.0% 51.6% 55.3%

PBDIT 19.3% 17.3% 19.6% 17.3%

PBT After Exceptional Item 18.4% 17.2% 18.8% 16.6%

PAT 12.0% 11.8% 12.6% 11.4%

Standalone

% to Income from Operations Q4 FY 16 Q4 FY 15 12M FY 16 12M FY 15

Material Cost 51.0% 54.9% 52.8% 56.2%

PBDIT 17.7% 15.8% 18.1% 15.8%

PBT After Exceptional Item 16.3% 14.8% 16.9% 14.6%

PAT 10.6% 10.0% 11.5% 10.1%

Consolidated

For Consolidated results, PAT is before Minority Interest

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