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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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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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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
11
PBIT (%)
92
8
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
Segment Information- H1-FY03
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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
Segment Information- H1-FY03
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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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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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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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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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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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f
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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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Shareholding pattern
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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Shareholding pattern
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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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Berger International Limited
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Berger International Limited
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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Structure of the presentation
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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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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...