Asian Paints yesterday intimated that it has closed its two units in Egypt. We estimate Egypt accounts for 4% of AP's consolidated revenues, and it has been one of the best of AP's operations outside of India. However, the impact on AP should be marginal as we estimate its share of PBT at 2.8%.

Asian Paints temporarily shuts its Egypt plants
􀀟 Asian Paints units in Egypt through Scib Chemicals yesterday intimated that it has shut its two manufacturing units due to the ongoing protests in Egypt. It said it would review re-opening the operations when the political situation stabilises. Egypt has been one of the better run operations for Asian Paints in its portfolio in the international business.

The contribution to sales from Egypt to AP is around 4%
􀀟 The international business accounts for 17% of AP's consolidated revenues, and the Middle East business for around 50%. We estimate 50% of the Middle East revenues come from Egypt, so its share of overall consolidated revenues for Asian Paints is around 4%. So clearly, there is likely to be pressure on the business in 4Q11, until the situation returns to normal in Egypt.

The share of PBT from Egypt would be around 2.8%
􀀟 Asian Paints has derived 89% of its consolidated profit before tax in FY11 ( so far ) from Indian standalone business in India of decorative paints and chemicals. We estimate the Egypt business's share of the consolidated PBT would around 2.8%. We therefore expect no material impact on earnings due to the closure of the Egypt business, and we believe any sharp correction due to sentiment reasons should be used to Buy Asian Paints.