Analyst Presentation Nov 02

8/2/2019 Analyst Presentation Nov 02

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Asian Paints (India) LimitedAsian Paints (India) Limited

Investor & Analyst conferenceInvestor & Analyst conference

Ashwin DaniAshwin Dani

Vice Chairman & Managing DirectorVice Chairman & Managing Director

November 26, 2002November 26, 2002


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Forbes magazine, USA in its annual surveyBest under a Billion ranked Asian Paints

amongst the 200 Best Small Companies in the

World in 2002

Recognitions


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Structure of the presentation

A] Asian Paints group performance : H1-FY03

B] M&A - The growth strategy & our experience

C] International operations - The strategy ahead

D] Outlook


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D] Outlook


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Asian Paints (India) Ltd - H1-FY 2003

(Rs. million)

1H FY 03 1H FY 02 Growth

Net Sales 7145.13 6194.05 15.4 %

OPBDIT 1196.87 908.48 32.5 %Non-Operating income 117.74 97.91 12.8 %

Other income 92.60 48.49 91.0 %

PBDIT 1407.21 1054.88 33.4 %Interest 49.00 100.07 -51.0 %

Depreciation 228.86 176.20 29.9 %

PBT 1129.35 778.61 45.0 %

Prov. for Current Tax 425.77 255.80 66.4 %

Prov. for deferred tax 2.20 28.80 -92.4 %

Net Profit 701.38 494.01 42.0 %


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Unaudited abridged balance sheet of Asian Paints(India) Limited - H1-FY03

FUNDS EMPLOYED (in mn)

Shareholders Funds:

Share capital 641.86

Resv & Surp 4165.98

Loans:Secured 754.05

Unsecured 795.74

TOTAL 6357.63

APPLN OF FUNDS (in mn)

Fixed assets:

Gross block 6068.95

Less : Depr 2368.46

CWIP 34.95

3735.44Investments 628.77

NCA 2570.18

Misc Exp 36.83(to the extent not written off)

Deferred tax liab(Net) (613.59)

TOTAL 6357.63

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Explanation of P & L statement : H1-FY03

Other income has increased by 91 % due to:

Royalty income & profit on sale of short term-

investments Interest cost is lower by 51 % due to

Lower working capital requirements

Lower interest rates Part repayment of long term debt

Provision for Current Tax higher due to:

Lower IT depreciation as compared to book depreciation

Software expenditure amortised in books was claimed100% in IT Return in year of actual expenditure

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Margin Expansion : 1H FY03

1H FY03 1H FY02

EBITDA/Net Sales 20.02 % 17.30 %

RM /Net Sales 55.98 % 57.57 %

PBT/ Net Sales 16.07 % 12.77 %

PAT/ Net Sales 9.98 % 8.10 %

Interest cover 28.7 10.5(PBDIT/ Interest)

Note: Net Sales is excluding lease rentals & Processing charges

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Free cash flow story continues

Acquisns

internally

funded

Lowerinterestcosts

Free Cash

NCD

instalment

pmt.

Assets

getting

sweated

more

Highercapital

product-

ivity

LowerCapex

Higher

Cash Flow

from ops

Economies

of scale

R& DEffic-iency

Net

Profit

growth

Salevolume

growthSourcingEffic-iency

Fall ininventory

levels

Working

capitalreduction

Highercreditors

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Pricing strategy

R & D

efficiencies

R & D

efficiencies Margin

expansion

despiteinput

price

increase

Margin

expansion

despite

input

price

increase

Price

increase (1.25%)

Price

increase (1.25%)

Higher average

selling price

Higher average

selling priceGrowth in premium

products maintained

Growth in premium

products maintainedImproved

product mix

Improved

product mix

Firmer RM

prices (6-8%)

Firmer RM

prices (6-8%)

Improved realisations from chemicals businessImproved realisations from chemicals business

Sourcingefficiencies

Sourcing

efficiencies

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Segment Information- H1-FY03

Value : 15.2 % Volume: 16.0 %

Volume: 27.7 %Value : 30.7 %

Paints Business

Others (Chemicals) Business

Net Sales %

89

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PBIT (%)

92

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Paints Chemicals

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Paints Business

Product categories

All categories posted good growth, viz. Enamels,Interior wall finishes, Exterior finishes & Wood finishes

Exterior segment recorded the highest growth ~ 35 %

New products growth more than 35% ACE, Asian Wall Putty doing well, Elastomeric Exterior paint establishing itself

Colour Worlds

Total installations 2850 ColourWorld dealers constitute 50% sales of decorative paints


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Others (Chemicals business)

Chemical business registers good margin expansion

due to better realisations Realisations for Phthalic Anhydride increased to Rs.

35.50 /kg in Apr-Sep02 from Rs. 33.0 /kg in Apr-Sep01


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Asian Paints Help Line

Still continues to perform well

High conversion rate for the company

Has helped the corporate brand tremendously

Getting closer to the consumer

Asian Paints Home Solutions

Launched in six main cities

2300 sites painted by APHS in FY03 till Oct 02

Response has been good and consistent across cities

Close linkages with applicators is helping to enhance the

knowledge base on paint application practices

Direct marketing by Project Sales aiding growth in

exterior segment

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Brand Rejuvenation New look for the Asian Paints brand & packaging:

Transition to a corporate centric Brand Portfolio, to make AsianPaints among the more salient brands

To contemporise the brand Asian Paints & the packaging

New advertising campaign:

Increased interest in home dcor - a definitive social trend

More involved urban home makers; smaller towns alsocatching up

Homes are high involvement but painting is not Homes involves a lot of emotions

Have been successful in appropriating the emotions relating tocreation of home dcor

Getting closer to the consumer

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International operations

All international operations have performed

better as compared to H1 of the previous year Pacific units have shown good growth

Turnaround in Sri Lanka and Oman

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Impact of Consolidation in H1-FY03

Net Sales would increase by around Rs. 450million

After writing off goodwill and considering

minority interest, Net Profit on consolidation will have no significant

impact on net profit of Asian Paints (India) limited

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D] Outlook

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Growth strategy and M&A

To increase sales growth rate of the group beyondpast levels

Thus emphasis on organic growth shall continueby means of:

Market expansion e.g. exteriors segment Market share gains, especially from unorganised

sector

In addition, inorganic growth, by way ofacquisitions, shall also be explored.

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M&A - International

To enter the high-growth emerging markets

Adopt a regional hub approach to internationaloperations

Apply the emerging market business model:

Introduce new products suited to local needs

Introduce new technology, accordingly Focus to improve all areas of operations, especially

supply chain

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M&A - The opportunities

No single MNC is present across emerging markets

Asian Paints believes there is plenty of scope toachieve significant presence in targeted countries

Plenty niches/segments available for Asian Paints in

these markets

Vast potential exists for Asian Paints, as most paint

companies in these markets operate sub-optimallyviz., in Supply chain, manufacturing, technology &marketing

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M&A - The domestic front

Valuations will be the major factor for acquisitionsin India

Acquisitions like Hawcoplast Chemicals will bedone if there is substantial market share to gainin fast-growing segments

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M&A - Funding

Primarily through internal accruals

Debt:Equity ratio will be lower than 1

Debt:Equity ratio is 0.23:1 for FY02

Dividend payout ratio to be largely maintained

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Rationalised products

Introduced new products

Improved supply chain management

Restructured debt

Introduced Colour Worlds

Other marketing initiatives

For Apr-Sep02 , the unit has performed well

Acquired Delmege Paint in Oct99 for INR 35 mn

M&A - The Asian Paints experience in Sri Lanka

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Acquired Hawcoplast Chemicals in Nov01 for Rs. 220 mn

Gained significant market share gain and emerged amongtop 3 in the fast growing powder coatings segment

Integration process completed within six months of theacquisition

Asian Paints was able to leverage the advantages of thisacquisition by increasing its sale to OEMs

Integration of Hawcoplast experienced manpower & Asian

Paints was smooth

Good performance by Asian Paints Industrial coatings in

the H1-FY03

M&A - The Asian Paints experience in India

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Egypt

Acquisition of SCIB Chemical for Rs. 245 million for60 % stake

5th largest paint company in Egypt

Sales of LE 52 mn (USD 11 mn) in 2001

Opportunities

Size of Egyptian paint market ~ USD 150 mn

Egyptian market is in a growth phase

No committed MNC in market & leader continuouslylosing market share

SCIB enjoys good brand equity, is considered a dynamic& innovative company

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Berger International Ltd.

Region Countries Proportion

of total

sales value

Proportion of

total sales

volume

China &

S.E. Asia

China, Singapore,Thailand, Myanmar,

Malaysia32 %26 %

Middle East

& MaltaUAE, Bahrain, Malta 40 %27 %

Caribbean

IslandsJamaica, Barbados,Trinidad & Tobago

28 %47 %

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Financials of BIL for Last 3 Years

2001 2000 1999

Sales 115,034 130,945 133,173PBIT (3,662) 1,367 (9,162)

PBT (6,131) (732) (10,658)

PAT (9,417) (5,047) (11,303)

Gross Block 48,041 50,665 49,379

Net Block 23,683 28,863 30,270

Networth 14,040 23,956 32,487

Book Value/Share 0.14 0.23 0.31

Value in '000' of S $

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BIL financial performance : Jan-Jun02

Substantial improvement in H1-FY02

Write back of S$ 1.1 mn : Had write back not been done, thegroup would have incurred Net loss after tax S$ 1.273 mn (Netloss after tax of S$ 3.948 mn in previous period)

(S$ 000)

H1-FY2002 H1-FY2001

Turnover 53850 51850

Op.Profit Before Tax 1041 -3610Op.Profit after Tax 616 -4223

Less minority interests -250 275

Operating profit after taxafter minority int. 366 -3948

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Berger - The strengths

Berger has a strong brand in all these countries.

Access to the Berger brand and trademark in over 70countries (India not included)

Sound systems and policies in most countries

Excellent margins in the countries where they areleaders

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BILs operations are mostly in emerging markets which

synergises with the vision of Asian Paints

No overlap of BIL operations with Asian Paints

Economies of scale could be achieved especially in Middle

East as APIL already has operations in Oman & Egypt

Exports to neighboring countries

Berger - The synergies

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Governance of BIL

Total number Board members are six, with threeindependent directors

Induction of 2 new independent directors on the board

Chairman & CEO are from Asian Paints

Committees have been reconstituted for Audit,Remuneration & Appointment

All these committees are now headed by independent

directors Majority of the directors are independent on these

committees

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Systems instituted by APIL

Moving from operating in 10 countries to 22countries, International BU has institutedsystems in Mumbai for

Adequate controls in areas of Financial

reporting, Audit, Legal, secretarial & othercompliances

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D] Outlook

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FOOTPRINTS OF ASIAN PAINTS

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International markets

Growth Drivers

Egypt

Bangladesh Sri Lanka

Thailand

Malaysia

China

Singapore UAE

Myanmar

Malta

Market Leaders

Fiji

Solomon Islands

Vanuatu

Tonga

Barbados

Trinidad & Tobago

Jamaica Bahrain

Nepal

Focus for

Turnaround

Mauritius

Oman

Australia


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International markets - Statistics

* : Decorative market share

Country Popn Vol (MT) Value(In Per capita Market

in mn Total Mkt USD mn) paint usage ShareJamaica 2.73 9,500 35.9 3.474 76%*

Malaysia 22.83 94,500 147.4 4.140 4%*

Malta 0.40 824 1.89 2.079 13%*

Mauritius 1.21 3,843 7.75 3.184 6%

Myamnar 42.66 20,000 27.2 0.469 10%*

Nepal 26.11 5,097 5.25 0.195 34%

Oman 2.74 9,806 15.87 3.583 5%Singapore 4.24 67,500 152.3 15.918 3%

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I t ti l k t St ti ti


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International markets - Statistics

* : Decorative market share

Country Popn Vol (MT) Value(In Per capita Market

in mn Total Mkt USD mn) paint usage ShareSolomon Islands 0.50 198 0.93 0.396 70%

Sri Lanka 19.74 16,005 34.73 0.811 9%

Thailand 63.83 105,000 176.5 1.645 2%Tonga 0.11 280 0.67 2.619 62%

Trinidad & Tobago 1.14 5,000 19.59 4.392 36%*

UAE 2.45 63,000 85.6 25.740 10%Vanuatu 0.20 201 0.91 1.019 75%

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In these growth drivers Asian Paints would


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In these growth drivers, Asian Paints would

focus on

Enhancing shareholder value by

Rationalising product ranges

Complete the product portfolio

Further improving supply chain & working capital

management

Implementing cost structures for increased plant

efficiencies, better overhead management & increased

asset productivity

Using information technology to maximise efficiency

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In Market Leaders, Asian Paints would focus on

Enter new segments like wood finishes in BIL

units

Focus on cost efficiencies, supply chain etc

Gain market share from competition & maintainmargins

W ill focus to maintain ROCE in excess of 30% in

these m arkets

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In the markets of Australia, Oman &Mauritius, Asian Paints would focus toturnaround these units and run them

profitably

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5%

24%

71%

Paints - India

Chemicals - India

International

The new Asian Paints group

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Targets for Asian Paints International

Sales growth of at least 10% in next 2 years

Excess of 3% PAT margin by year 2004

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Shareholding pattern


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Asian Paints (India) Limited

Asian Paints (International)Ltd (100%)

Asian Paints (SP) HoldingsLtd (100%)

Asian Paints (Nepal) Ltd

(51 %)

Asian Paints (Mauritius) Ltd

(49%)

Berger International Limited

(50.1 %)

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g pAsian Paints (International) Ltd

Asian Paints (Qld) Ltd(90%)

Asian Paints (Tonga) Ltd(51%)

Asian Paints (ME) Ltd(49 %)

Asian Paints (Bgld) Ltd(51%)

Asian Paints (Vanuatu) Ltd(60%)

Asian Paints (SI) Ltd(75 %)

Asian Paints (Fiji) Ltd (51%)Asian Paints (Lanka) Ltd(87%)

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Singapore 100% Bahrain 100%

Malaysia 100% UAE 60%China 100% Malta 66.67%

Thailand 75%

Myanmar 60% Jamaica 51%

Trinidad & Tobago 70%

Barbados 100%

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High per capita paint usage in the region


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High per capita paint usage in the region

Asia

Japan 13

South Korea 14.7

Singapore 17.8Taiwan 20.2

Europe

Denmark 17.9Spain 17.9

Norway 16.4

Avg Europe 12

Africa

Algeria 7.15

South Africa 5.06

Tunisia 5.83

North America

USA 19

Canada 14.5

South America

Argentina 4.35

Brazil 5.8

Chile 5

OceaniaAustralia 10.78

New Zealand 8.421

Source : Coatings Agenda

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D] Outlook

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Paint Industry Attractiveness - India


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Paint Industry Attractiveness - India

Recent impetus given by Finance Minister to the HousingIndustry

Increased government focus on infrastructure development

Good growth recorded by Housing Finance & Cementsectors

More educated consumers & increased aspirations forbetter homes & lifestyles

With general industrial revival - emerging segment for highperformance Industrial Coatings

Last 13 years industry CAGR ~ 13.6%; Asian Paints salesCAGR ~ 16%

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Targets for Asian Paints (India) Ltd

Net Sales growth 10 - 12 % in 2002-03

Restraint in capex & small improvementsexpected in working capital

Maintain margins

ROCE (EBIT/CE) of at least 35 % for next 2 years

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Consolidated outlook - FY03


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Asian Paints (India) will perform well, both top-line &bottom-line

International operations will generate profit after

minority interest Only 2 months sale of BIL, will be considered

Less than one month sale of SCIB Chemical will be

considered Goodwill write off due to new acquisitions ~ Rs. 50

million

Asian PPG Industries will add to the bottom-line

Consolidated profits to have no significant

impact on APILs net profit

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Asian Paints will

Always remain a company committed toincreasing shareholder wealth

Always maintain its prudent policies of cash flowmanagement

Remain committed to shareholder transparencyand good corporate governance

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Our vision Asian Paints aims to become one of the top

five Decorative coatings companies world-wide by leveraging its expertise in the higher

growth emerging markets. Simultaneously,

the company intends to build long term value

in the industrial coatings business through

alliances with established global partners.

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End...

Analyst Presentation Nov 02

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