PT Avia Avian Tbk (FRA:P2C) (Q3 2026) Earnings Call Highlights: Double-Digit Growth, Margin ...

Negative Points

• PT Avia Avian Tbk ( FRA:P2C ) experienced a volume decline of 6.3% in Q3 2026 for its Architectural Solutions segment, reflecting destocking by retailers following two price increases in Q2 2026.

• The company's inventory increased significantly from Rp1.679 trillion in December 2025 to Rp2.233 trillion in September 2026, raising concerns about working capital management, although it remains at around 30% of sales.

• PT Avia Avian Tbk ( FRA:P2C ) lost the bid to acquire Akzo Nobel Indonesia to Nippon Paint, which will result in the company returning to the number two position in the Indonesian paint market next year, increasing competitive pressure.

• Gross margin in Q3 2026 was impacted by higher raw material costs flowing through, and the company expects Q4 2026 margin to be at least in line with Q3, with a slight moderation from last year's full-year margin.

• The company faces a challenging macroeconomic environment in Indonesia, including weak consumer demand, government policy missteps, fuel shortages, and demonstrations, which could suppress demand in the near term.

Q & A Highlights

Q: With Nippon Paint's acquisition of AkzoNobel Indonesia (Dulux) set to make the combined entity the market leader, what is Avia's strategy to defend market share and shelf space? A: Kurnia Hadi Sinanto, Director of Finance and Investor Relations, acknowledged Avia will return to the number two position once the merger completes, but stressed Avia will retain the best distribution reach in the country since AkzoNobel historically had weak penetration. Avia will intensify its multi-strategy approachinnovation (11 new products launched in 9M 2026), superior service quality, and DC network expansionto defend and grow shelf space, with particular focus on the premium wall paint segment where Dulux strengthens Nippon.

Q: Why did Q3 2026 gross margin decline, how much of the higher-cost inventory has flowed through, and what is the margin outlook for Q4 2026 and 2027? A: Ruslan Tanoko, Vice President Director, explained that the raw material price hike was not felt in Q1 due to inventory buffers, but more expensive inventory began hitting COGS in Q3. Management expects Q4 margin at least in line with Q3, supported by normalized retail inventory levels, and remains confident in a healthy full-year margin with only slight moderation from last year. No third price increase is currently planned, though the company remains agile.

Q: Sales grew 16.7% in 9M 2026 but volume only grew 3.5%, with Q3 volume falling 6.3% year-on-year. Is this weaker demand, retailer destocking, or trading downand what did October look like? A: Kurnia Hadi Sinanto attributed the Q3 volume decline primarily to retailer destocking after the unique back-to-back April and May price hikes, which prompted customers to build inventory in Q2. He noted October growth was very high and November is expected to be strong, with December typically more competitive. Any trading down is not a major margin concern since Avia offers products across all price tiers with low single-digit margin differences between them.

Q: With the failed AkzoNobel bid, what are the plans for Avia's significant cash positionhigher dividends, buybacks, or other acquisitions? A: Kurnia Hadi Sinanto stated the company remains committed to distributing at least 50% of net profit and will maximize dividend payouts when CapEx needs are low, noting the third Cikarang factory expansion is nearly complete. An interim dividend is expected in December 2026. Avia continues to evaluate other acquisition targets, though few companies fit its criteria.

Q: Why did Avia lose the AkzoNobel Indonesia bid to Nippon Paint? A: Kurnia Hadi Sinanto explained Avia's interest was limited to the Indonesian business only, while Nippon bid for the entire five-country Southeast Asia package. Avia believes its Indonesia-only bid was actually priced higher than Nippon's, but AkzoNobel likely favored the regional dealpossibly also considering Nippon as a future buyer of its China business.

Q: Inventory rose significantly from Rp1.679 trillion in December 2025 to Rp2.233 trillion in September 2026. What is the plan for inventories? A: Ruslan Tanoko said the increase was partly to anticipate rising material costs, but management's key focus is overall working capital, which remains reasonable at approximately 30% of sales. Kurnia Hadi Sinanto added that the launch of 11 new products in 9M 2026 required stock buffers at distribution centers so products are ready when customers order.

Q: If raw material prices decline in 2027, will Avia hold prices or give some back? A: Kurnia Hadi Sinanto stated Avia has never reduced paint prices in its nearly 48-year history, and no paint company in Indonesia has done so. If raw material costs fall, prices will remain the same but promotions will intensify as competitors chase market share. He also noted that if margins come under pressure, Avia would first cut below-the-line promotions rather than raise prices.

Q: With 60,000+ general trade stores, how does Avia keep street prices consistent and prevent price wars among GT stores? A: Kurnia Hadi Sinanto explained two key measures: the Avian Brands app's points-based loyalty system, where rewards (iPhones, gold, motorcycles) are perceived differently by each retailer versus uniform cash rebates, helping mitigate price competition; and deliberately avoiding discounts on products where Avia holds the number one position, preventing customers from redistributing stock to other shops.

Q: Why build one large Cikarang plant (costing Rp750 billion) instead of regional plants across Indonesia's many islands, and is the plant owned or rented? A: Kurnia Hadi Sinanto explained that for a vertically integrated paint companyproducing resins, additives, and packaging in-housea single massive location is far more efficient than scattered facilities. Transport costs are very low relative to product value: a container of Avia paint is worth Rp450550 million versus roughly Rp150 million for ceramic tiles. He confirmed the Cikarang plant and land are fully owned.

Q: In regions where Avia is not yet the leading brand, what has been most effective in turning newly stocked retailers into active advocates who consistently reorder? A: Kurnia Hadi Sinanto credited best-in-class service qualitysame-day or next-day delivery through the DC networkwhich surveys show retailers consistently recognize. He also highlighted a new digital price-list feature in the Avian Brands app launched two months ago, used by over 15,00020,000 customers in its first weeks, allowing retailers to search products and prices in seconds instead of combing through thick physical price lists.

Q: How are smaller paint players reacting in this tough demand environment, and could many go out of business over time? A: Kurnia Hadi Sinanto said small players typically take a "wait and see" approach and have done nothing on promotion or innovation, relying on one or two legacy products. He cited a 60-year-old competitor whose sole wood-and-metal product faces structurally declining demand and whose packaging hasn't changed in six decades. Avia expects some smaller competitors to disappear over time, viewing them as no threat as Av

For the complete transcript of the earnings call, please refer to the full earnings call transcript .