Akzo Nobel — Q1 FY26 earnings call

Call held 5 Aug 2025

Management summary

Akzo Nobel faced a challenging first quarter, reporting a 4% revenue decline primarily due to significant disruption in June caused by the announcement of its acquisition by JSW Group. While volumes remained flat, profitability was impacted by an unfavorable product mix and investments in digital initiatives. Management was transparent about the short-term pain, highlighting a strong sales recovery in July. The focus is now on stabilizing the business, executing on distribution expansion plans, and preparing for integration with JSW, with the core 'Dulux' brand set to be the flagship for future growth.

Highlights

  • Revenue declined by approximately 4% YoY, with flattish volumes for the quarter.

  • Decorative paints business saw a decline marginally higher than the company average.

  • Coatings business registered low single-digit growth, but gross margins were diluted due to a mix skewed towards lower-margin products like coil coatings.

  • A significant sales decline was witnessed in June, attributed to dealer and customer apprehension surrounding the strategic review and acquisition by JSW Group.

  • Management reported a strong 'bounce back' in sales during July as anxieties subsided.

  • The company plans to expand its distribution network from 5,500+ towns to 8,000 towns over the next two years.

  • The 'Dulux' brand and its IPRs are part of the transaction and will be a core asset for the new entity.

  • Full-year revenue growth guidance is now for 'high single-digit' growth, revised down from earlier double-digit hopes.

Concerns

  • Channel disruption and sales impact from change in ownership

Key financials

  1. Revenue Growth -4%
  2. Volume Growth 0%

What they filed

Q1 FY27: revenue down 3.0%, net profit down 12.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue982 1,050 1,014 995 835 −15%894 −15%883 −13%965 −3%
EBITDA146 167 159 134 111 −24%136 −19%127 −20%115 −14%
Net profit98 109 108 91 1,683 +1617%74 −32%126 +17%80 −12%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Decorative Paints
    -4% Revenue Growth— Margins
  • Coatings
    — Revenue Growth— Vehicle Refinish Performance

Guidance & targets

Distribution

  • Towns Reach Distribution · next two years · High confidence close to 8,000

    From 5,500+ today

    We traveled from 1,400 towns to 5,500-plus towns, and our ambition is to continuously reach close to 8,000 towns in the next two years.

    — Rohit Totla

  • Point-of-Sale Tinting Network Coverage Distribution · Unspecified · High confidence close to 70%
    So, our aim is to reach close to 70% of our network of point-of-sale tinting.

    — Rohit Totla

Revenue

  • Full Year Revenue Growth Revenue · FY26 · Medium confidence high single digit

    Previously double-digit (hoped for) → high single digit

    Look, I have said this, I was hoping that we would do a double-digit but obviously given the first quarter I have to be a little firm, we have got an aggressive number which caters to about a high single digit growth. That is what we are now focused on.

    — Rajiv Rajgopal

Margin

  • EBITDA Guidance Margin · FY26 · Medium confidence same range as last 2-3 quarters
    As far as the EBITDA guidance, I do not want to give anything. We will be in the same range that we have been over the last two, three quarters. We are not seeing a huge further dilution coming in.

    — Rajiv Rajgopal

Risks & concerns

  • Channel disruption and sales impact from change in ownership

    high

    Management confirmed this caused a 'huge decline' in June but stated the issue is now resolved with a 'good bounce back in July'.

    Management acknowledged

  • Anti-dumping duty on a key raw material impacting costs

    medium

    Management noted an impact on all paint players but believes it will not be 'very detrimental' due to existing stock cover until Aug/Sep.

    Management acknowledged

  • Organizational culture clash during integration with JSW Group

    medium

    Management expressed high confidence in the cultural fit, citing JSW's high governance standards and performance-oriented culture.

    Analyst downplayed

Areas of evasion (1)

  • Providing pro-forma financials ex-powder coatings was deferred to the next quarter's official filing, which is a standard governance-based deferral rather than evasion.

Q&A highlights

3 direct
Management continuity and attrition post-JSW acquisition Direct
As far as the management is concerned, at this point of time, Parth intends to run the two companies separately for a period of time. So, everybody remains as is... Senior management, in my reports, no, none.

Directly addresses key investor concerns about leadership stability and talent retention following the change in ownership.

Asked by Lakshminarayanan Ganapathi

Future branding strategy and ownership of the 'Dulux' brand Direct
The Dulux name and entire IPRs have been brought over by AkzoNobel India. And it is a part of the entire transaction, which is getting acquired by the JSW Paints Company.

Confirms that the company's most valuable consumer brand, Dulux, will remain with the new entity, securing critical brand equity for the future.

Asked by Niharika Karnani / L Ganapathi

Competitive intensity and dealer network dynamics Direct
So, we, yes, in some of the places, as I said, the competitive intensity of the most aggressive player amongst the newcomers obviously has tapered off a bit. And that is why dealers are coming back and a quotient of business has come back.

Provides crucial on-the-ground color that the threat from new entrants is moderating, allowing Akzo Nobel to regain lost channel partners.

Asked by Avi Mehta

2 min read 5 chapters

Detailed narrative

Q1 Performance Disrupted by JSW Acquisition Announcement

Akzo Nobel reported a challenging quarter with a revenue decline of approximately 4% on flattish volumes. Management was transparent that performance was severely impacted in June, which saw a 'huge decline' due to apprehension among dealers and customers following the announcement of the company's acquisition by JSW Group. This disruption overshadowed underlying business trends. Gross margins were also diluted due to a product mix skewed towards lower-margin businesses like coil coatings, while investments in futuristic digital projects further pressured EBIT and EBITDA.

JSW Integration and Future Branding Strategy

A key focus of the call was the upcoming integration with JSW. Management conveyed that JSW Chairman Parth Jindal has been well-received and intends to run Akzo Nobel and JSW Paints as separate entities for a period. It was clarified that while the 'AkzoNobel India' corporate name can only be used for one year, the crucial 'Dulux' brand and its associated IPRs are part of the transaction and will be a flagship asset for the combined entity. This secures the company's primary source of brand equity going forward.

Competitive Intensity Moderating, 'Ghar Wapsi' for Dealers

Management provided an update on the intense competitive environment. They noted that the aggression from new entrants has 'tapered off a bit,' which is leading to dealers returning to Akzo Nobel through a program termed 'Ghar Wapsi' (Homecoming). The company's unique distributor-led route-to-market is seen as a competitive advantage. While the East remains a stronghold, the company is now deploying specific resources to win back market share in the South, where competitive pressure has been highest.

Aggressive Distribution Expansion Plans

To drive future growth, Akzo Nobel has laid out clear distribution expansion targets. The company aims to increase its reach from the current 5,500+ towns to nearly 8,000 towns within the next two years. Alongside geographic expansion, there is a focus on deepening presence through technology, with a goal to have point-of-sale tinting machines in 70% of its network. The company is also beginning to enter the construction chemicals space to tap into new revenue streams.

Tempered Outlook for FY26

Reflecting the weak start to the year, management has moderated its full-year outlook. The initial hope for double-digit growth has been revised down to a more cautious 'high single-digit growth' target for FY26. EBITDA margin guidance was directional, with management expecting it to remain 'in the same range' as the last few quarters, suggesting no further significant dilution is anticipated. A looming risk is an anti-dumping duty on a key raw material, which could impact costs from September onwards, though management currently believes the impact will not be 'very detrimental'.

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