The company became a public concern in 1974 when over 49 percent of its shares were acquired by Pakistani investors. In 1991, Slotrapid Limited, a UK based company with diversified business interests, acquiring control of Berger Paints Pakistan Limited by gaining 50.62 percent shares of the company. Berger has the most comprehensive product range for various paint market segments at different price points. To improve its product quality and enhance customer satisfaction, Berger has entered into a number of collaborations. Its collaboration with Japan's largest paint manufacturer enables it to develop automotive, vehicle refinishes and industrial paints in adherence to the international standards.
With other partners like Japanese Paint Company, Berger produces bumper paints; with PCS Powders, UK, it produces Powder Coatings; with DPI Sendirian Berhad, Malaysia, it produces Road & Runway Markings; with Cerachem, it produces Construction Chemicals and with Asian Paints, it produces Decorative Paints. Recently, Berger acquired distribution rights of DuPont for Pakistan's vehicle refinish paint segment. Berger has an extensive presence in the country - via regional offices in Karachi, Lahore, and Islamabad and through territorial offices in Gujranwala, Multan, Faisalabad, Peshawar and Hyderabad.
Berger Business Lines:
Berger is not just a paint company; it offers one stop solution across different paint product categories in order to meet the demands of its customers. Its line of business includes: Decorative Business, Automotive Business, General Industrial Finishes, Powder Coatings, Protective Coatings, Vehicle Refinishes, Road Safety, Government & Marine, Construction Chemicals, Printing Inks, and Adhesives.
Performance Highlights for FY11-FY12:
During the period under review, Berger's top line grew by 13 percent owing to a staggering 42 percent growth in its export sales coupled with 10 percent uptick in local sales. The sales growth, however, came at an added cost which impaired company's gross margins. During the year, Berger's gross margin dropped from 21 percent in FY11 to 20 percent. Operating margin however witnessed some improvement.
During FY12, other income of the company grew by 26 percent mainly on the back of written off liabilities, late payment charges from a related party and gain on the disposal of fixed assets.
Other expenses surged owing to exchange losses borne by the company during the year, however finance cost dropped due to low interest rates prevailing in the country. Apparently, company's bottom line lingers in negative terrain, nevertheless, it has improved by 85 percent YoY.
Performance Snapshot over the years: Company's top line witnesses an upward movement over the years except for a plunge experienced by the company in FY10 owing to unabated power crisis, worsening law and order backdrop especially in the central and northern regions of the country and continued political uncertainty which hampered the construction and real estate business on which Berger's business greatly depends on.
In FY10, Berger attained a gross margin of 23 percent, similar to the level reached in FY09, as sales dip of six percent resulted in proportionate cost cut. However, high operating expenses owing to galloping inflation took its toll on company's operating margin which plunged from three percent in FY09 to one percent in FY10.
To add to ado, other income, which lent significant sustenance to company's bottom line in FY09, shaved off 53 percentage points in FY10. The exogenous impediments harshly marred the company's net profit witnessing a sharp decline of over five times.
In FY11, sales grew by six percent. Growth mainly came on the heels of exports which grew by 17 percent over the year while local sales improved by seven percent YoY. However, in real terms, local sales are far above the exports sales.
High cost of raw and packaging materials hurt company's gross margins in FY11, which plunged to 20 percent. Drop in distribution cost particularly advertising expenses buttressed the company's operating margin which climbed by 100 bps over the year. Other income continued its downward ride in FY11 too, dropping by 45 percent owing to a significant dip in sale of scrap, gain on disposal of fixed assets, insurance claims and management fee from Berger road safety.
Despite a significant cut in other charges and financial cost in FY11, the company's bottom line couldn't reach the profit territory it left in FY09. The company's operations in FY11 translated into a loss per share of Rs 3.87. However, when this is compared to last year's loss per share of Rs 8.91, it signifies remarkable improvement.
Liquidity Management: Berger's current ratio lingers under one in all the years under consideration with net working capital wandering in the negatives zone. This raises a red flag on the company's abilities to meet its short-term obligations.
This might be attributable to the highly leveraged capital structure of the company. Berger hasn't enhanced share capital since 2010, hence constant share capital. Furthermore, continuous losses are gobbling up company's reserves, resulting in shrinking equity. The increased reliance on debt financing is deteriorating company's liquidity position.
Moreover, company's quick ratio is almost half the size of its current ratio, bearing out the fact that company maintains a sizeable portion of inventory in all the years. This might be company's strategy to shield itself from erratic movements in the prices of its raw materials and also to defend itself from exchange losses.
Outlook: The future of paint industry is highly correlated with the activity in real estate and construction business. Owing to the election year, widespread infrastructure development activities are taking place in the country which is indirectly leading to growth in the sales volume of paint products. However, lingering power crisis still remains a concerning factor for the company and might result in shrinking margins.
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Berger Paints Pakistan Limited Year of
Sector KSE_Ticker Reuters Code Bloomberg Ticker Year End Face value Listing at KSE Latest Price
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Construction and Materials BERG BERG.KA BERG:PA June 10.00 1974 21.10
52-weeks High Low Year to date High Low Shares outstanding Free Float Market Cap Rs(mn)
24.85 12.39 24.65 20.20 18,186,382 8,225,920 383.73
Market Cap USD mn EPS FY12 EPS 1HFY13 P/E (%) trailing ROE (%) ROA (%) Book Value / Share Latest Payout Cash Bonus
3.90 -0.57 0.57 n/a n/a 32.38 Nil Nil
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Berger Paints Pakistan Limited
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Ratios FY10 FY11 FY12
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Gross profit margin % 23% 21% 20%
Operating profit Margin % 1% 2% 3%
Net profit margin % -3% -2% -0.3%
D/E times 3.5 4.2 4.1
Net Working capital Rs In mm -215 -41 -146
Current ratio times 0.91 0.98 0.94
Quick Ratio times 0.49 0.50 0.50
Total asset turnover times 1.13 1.14 1.35
Inventory turnover times 3.5 3.2 4.1
Fixed asset turnover times 3.78 3.92 4.48
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Source: Company accounts