Why did the profits of Kansai Nerolac fall so hard in the March 2022 quarter?
Answer
Answer
Kansai Nerolac, the Kolkata based paints company, reported 5.3% higher sales revenues for Q4FY22 at Rs1,537 crore. FY22 revenues were up 26% at Rs6,369 crore. While the demand for decorative paints was still robust, the demand for paints got hampered by the spike in prices making it unaffordable. Automotive demand, however, was strong.
Kansai Nerolac
Rs in Crore
Mar-22
Mar-21
YOY
Dec-21
QOQ
Total Income (Rs cr)
₹ 1,536.60
₹ 1,459.57
5.28%
₹ 1,810.35
-15.12%
Net Profit (Rs cr)
₹ 24.73
₹ 124.28
-80.10%
₹ 128.03
-80.68%
Diluted EPS (Rs)
₹ 0.46
₹ 2.31
₹ 2.38
Net Margins
1.61%
8.51%
7.07%
Net profit for Q4FY22 fell sharply by -80% at Rs24.73 crore due to a sharp spike in raw material costs and manpower costs. Key inputs for paints like crude oil, packaging material and chemical costs have gone up steeply. EBITDA fell 60% as steep paint prices constricted demand significantly. Net margins stood at just 1.61% in Q4FY22 quarter compared to 8.51% in Q4FY21. The redeeming feature is that the Rs60,000 crore per annum paints market is growing and leaves enough room for upsides.