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Kansai Nerolac slips as profit rises on one-time tax gain

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Capital Market
Last Updated : Nov 01 2019 | 4:16 PM IST

Kansai Nerolac Paints reported 59.98% increase in net profit to Rs 190.77 crore on a 2.79% decline in net sales to Rs 1319.57 crore in Q2 September 2019 over Q2 September 2018.

The scrip is currently down 3.36% at Rs 536. So far during the day, it has traded in the range of Rs 535 and Rs 573.

The company has chosen to exercise the option of lower tax rate of 25.17% (inclusive of surcharge and cess) under section 115BAA of the Income Tax Act, 1961 as introduced by the Taxation Laws (Amendment) Ordinance 2019. The full impact of this change has been recognised in tax expense for the quarter and six months ended 30 September 2019. This has resulted in reversal of current tax and deferred tax expense of Rs 15.59 Crores and Rs 5.06 crore respectively. accrued in quarter ended 30 June 2019 and reversal of deferred tax expense of Rs 34.43 crore on account of remeasurement of deferred tax liability as at 31st March 2019.

During the current quarter, the company commenced commercial production at its new manufacturing unit at Goindwal Sahib near Amritsar in Punjab.

Commenting on the results, H. M. Bharuka, vice chairman and managing director, Kansai Nerolac Paints said, "Decorative segment has registered good volume and value growth in the given environment. This helped offset the continued and unprecedented slow-down in the automotive and other OEMs segments where the company has a significant exposure. The company's decorative sales were impacted due to factors like extended monsoon, floods in many key states and low off-take in Kashmir where KNP has a major presence. The company has been building traction in the niche business areas that the company is focusing on. Company was able to maintain growth in ARF, Protective Coating and Powder segments of the market. Our subsidiaries in Nepal and Bangladesh have done well. During the quarter, input costs were stable and in line with the previous quarter trend. This along with judicious control on costs has helped improve the bottom-line. Exchange rate and crude oil prices continued to show volatility creating challenges in raw material cost management. Company commenced commercial operations at the Punjab plant. The company sees a slowdown in Decorative segment though it expects a revival once the un-seasonal rains subside. Challenges of demand in Industrial are expected to continue for the near future."

In its outlook, Kansai Nerolac said the size of domestic paint industry is estimated at Rs 50,000 crore as of March 2019. The good growth in infrastructure, core sector as well as automobile and real estate is likely to have a positive effect on the overall demand of paint for the industry.

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Kansai Nerolac is a paint manufacturing company. The company manufactures a diversified range of products ranging from decorative paints coatings for homes, offices, hospitals and hotels to sophisticated industrial coatings for most of the industries.

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First Published: Nov 01 2019 | 3:14 PM IST

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