Akzo Nobel — Q2 FY26 earnings call

Call held 7 Nov 2025

Management summary

Akzo Nobel India reported a mixed Q2 FY26, marked by a strategic pivot towards aggressive growth ahead of its integration into the JSW Group. While comparable revenue saw a slight decline of 1.5%, the return to a 3% volume growth and mid-single-digit growth in the premium segment were key positives. Management outlined a clear strategy of correcting price premiums to regain market share, supported by a strong outlook for Q3 with double-digit volume growth expected. The quarter's results reflect a company in transition, balancing current performance with a significant strategic realignment for future market aggression.

Highlights

  • Comparable revenue declined 1.5% YoY to ₹834.9 crores, impacted by strategic price corrections and a challenging mass market.

  • Overall volume grew 3% YoY, driven by a recovery in demand and strong performance in the premium decorative segment.

  • Gross margin stood at 41.3%, impacted by product mix and some raw material inflation in the coatings business.

  • EBIT margin was stable at 11.1%, reflecting disciplined cost management which offset top-line pressures.

  • Premium decorative paints grew at a mid-single-digit rate, highlighting the strength of brands like Velvet Touch and Weathershield.

  • The company is undergoing a major strategic shift following the impending JSW Group acquisition, focusing on aggressive growth and market share gains.

  • Management guided for a sustained EBITDA margin of 14% to 16% and expects double-digit volume growth in Q3 FY26.

  • The slump sale of the Powder Coatings business and International Research Center was completed on July 1, 2025, impacting YoY comparability.

Concerns

  • Intense Market Competition

Key financials

  1. Revenue (Comparable) ₹834.9 Cr -1.5%YoY
  2. Overall Volume Growth 3%
  3. Gross Margin 41.3%
  4. EBIT Margin 11.1%
  5. Cash Generation ₹277 Cr

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
    — Premium Segment Growth— Overall Growth
  • Coatings
    — Growth

Guidance & targets

Margin

  • EBITDA Margin Band Margin · sustained basis · High confidence 14% to 16%
    My guidance is very clear. We should be in the EBITDA margin of 14% to 16% on a sustained basis. That's what I've always maintained.

    — Rajiv Rajgopal, Chairman and Managing Director

Revenue

  • Revenue Growth Revenue · Q3 FY26 · High confidence high single digit
    I see next quarter definitely as a double-digit growth quarter for volumes and high single digit for revenue.

    — Rajiv Rajgopal, Chairman and Managing Director

Distribution

  • Revenue Contribution from New Distribution Distribution · FY26 · Medium confidence slightly higher than 4-4.5%

    Previously 4-4.5% → slightly higher than 4-4.5%

    The distribution is adding close to 4%, 4.5% kind of our revenue every year to us. And this year, it will be a little higher.

    — Rohit Totla, Whole Time Director

Market context

  • Volume Growth Volume · Q3 FY26 · High confidence double-digit
    I see next quarter definitely as a double-digit growth quarter for volumes and high single digit for revenue.

    — Rajiv Rajgopal, Chairman and Managing Director

Risks & concerns

  • Intense Market Competition

    high

    Management acknowledged a 'fight happening in the market' between leaders and challengers, which has impacted industry profitability and market shares.

    Management acknowledged

  • Adverse Product Mix

    medium

    In the Coatings segment, growth was led by lower-margin Industrial Coatings while the high-margin Automotive and Specialty Coatings faced challenges.

    Management acknowledged

  • Weather Disruptions

    medium

    Incessant and prolonged rainfall in September and October across the country impacted seasonal demand.

    Management acknowledged

  • Raw Material Inflation

    low

    Some raw material inflation was experienced in the Coatings business, impacting gross margins.

    Management acknowledged

Areas of evasion (2)

  • Specifics of top 3 long-term priorities under new ownership.
  • Strategy regarding a sharper entry into the mass market.

Q&A highlights

2 direct
Impact of price corrections and competitive intensity Direct
I think post the acquisition by the JSW Group and the new direction that we've already started work on, they see a little bit of aggression coming in because that is also the sort of strategy that has been articulated by Mr. Parth Jindal...

This confirms a fundamental shift in company strategy from margin preservation to aggressive market share gain, driven by the new ownership.

Asked by Mihir Shah

Priorities for the company and the future of the 'Dulux' brand Partial
No Dulux is now owned by AkzoNobel. It's for perpetuity it's owned by AkzoNobel as a part of the AkzoNobel India as a part of it, and that moves to the, obviously, now the new owner is the JSW family. In terms of top 3 priorities... I think it's not appropriate for me to talk about it. I would wait.

It clarifies that the valuable 'Dulux' brand is part of the deal and will remain with the company under JSW ownership, but management deferred outlining the top 3 strategic priorities, leaving some uncertainty.

Asked by Lakshminarayanan KG

Royalty savings and sustainable margins post-restructuring Direct
Yes. I think, Aniruddha, we have fully factored in that the royalty, which we pay for the Decorative IP, ceased to exist effective 1st of July 2025... However for the performance paints or the Industrial Coatings, the royalty IP lies with AkzoNobel, and we continue to pay the royalty for that product.

This provides crucial clarity on the financial impact of the new structure: royalty payments have stopped for the larger Decorative business but will continue for Industrial Coatings, directly affecting future profitability.

Asked by Aniruddha Joshi

2 min read 5 chapters

Detailed narrative

Strategic Pivot to Aggressive Growth under JSW

The overarching theme of the call was the company's strategic shift towards aggressive growth and market share gains, a clear directive from the incoming owner, the JSW Group. Management has already initiated this by taking cumulative price corrections of 1.5% to 2% to become more competitive, particularly in premium segments where they were operating at a 7% to 9% premium. This move is a departure from a more margin-focused approach and signals a clear intent to challenge market leaders more forcefully. The management team expressed high energy and enthusiasm for this new phase, viewing it as an opportunity to 'play in the market the way that you should play'.

Q2 Performance: Volume Recovers, Revenue Dips

On a comparable basis (excluding the divested businesses), Akzo Nobel's revenue declined 1.5% YoY to ₹834.9 crores. However, a key positive was the return to 3% overall volume growth, indicating a demand recovery. The performance was bifurcated: the premium Decorative paints segment grew at a healthy mid-single-digit rate, while the mass market segment declined. In the Coatings business, while volume and revenue grew, the mix was unfavorable, with lower-margin industrial coatings outperforming the high-margin automotive and specialty coatings.

Margin Stability and Future Outlook

Despite a 1.6% dilution in gross margin to 41.3% due to product mix and some raw material inflation, the company maintained a stable EBIT margin of 11.1%. This was attributed to disciplined cost management. Looking ahead, management provided a strong, sustained EBITDA margin guidance of 14% to 16%. This confidence is partly supported by the cessation of royalty payments for the Decorative IP, effective July 1, 2025, which provides a structural cost benefit.

Business Reorganization and Financial Comparability

The quarter was the first to reflect the slump sale of the Powder Coatings business and the International Research Center to AkzoNobel NV, which was completed on July 1, 2025. Management proactively provided restated, unaudited numbers for the previous year to allow for a like-for-like comparison. This transparency is crucial for investors to accurately assess the performance of the continuing business. The royalty for the Decorative business has ceased, but will continue for the Industrial Coatings portfolio.

Demand Environment and Strong Q3 Expectation

Management noted that demand was impacted by prolonged and unexpected rainfall in September and October. However, they are optimistic about a sharp improvement in the coming months, driven by the onset of the repainting cycle, which typically follows a 3-5 year pattern from the post-COVID surge in 2021-22. This confidence translated into a specific and bullish forecast for Q3 FY26, with expectations of double-digit volume growth and high single-digit revenue growth.

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