Berger's sales plummet record 49% during pandemic

In its five-decade long journey, Berger Paints Bangladesh suffered the highest quarterly drop in sales owing to the 66-day general holiday put in place to curb the coronavirus pandemic.

The company's consolidated revenue plummeted 49 percent in the April-June quarter when the country's housing and infrastructure sectors went through a slowdown. 

Besides, it faced a cash crisis due to low collection from customers during the pandemic.

However, the annual sales of the country's leading paint company grew by 11 percent on average over the last six years. 

A top official of the company said the revenue for the first quarter that ended on June 30, 2020 decreased significantly from the same period of previous year due to lower sales in April and May due to the countrywide lockdown.

The financial year of the company begins in April and ends in March every year. 

First quarter scenario

Berger posted consolidated revenue of Tk232.45 crore in the first quarter of its new financial year, which was Tk455.97 crore in the previous year in the same period.

The consolidated net profit also decreased by 79 percent to Tk10.75 crore and its earnings per share stood at Tk2.32 in the first quarter of this year. 

In this period, its net operating cash flow per share was Tk10.34 negative that means the company is in a cash crisis.

Earlier, Berger paid 295 percent cash dividend to its shareholders in the 2019-20 financial year that ended on March 31.

The company was listed on the stock market in 2006, with a paid-up capital of Tk46.37 crore.

Berger share prices declined by 2.52 percent to Tk1,362 on Thursday at the Dhaka Stock Exchange (DSE).

The J&N Investments (Asia) Ltd has 95 percent share of Berger, while institutional, foreign and general investors hold 2.45 percent, 1.14 percent and 1.41 percent, respectively.   

How is Berger dominating the market?  

Berger began its journey back in 1970, becoming one of the country's oldest paint brands.  

Company officials said plastic emulsion, distemper, weatherproof exterior coating and synthetic enamel are their key products that helped them hold onto the majority of the market share.

The company diversified its business and expanded, estimating growth in infrastructure development in Bangladesh.

Jenson and Nicholson (Bangladesh), a subsidiary of Berger, produces tin containers and prints tin sheets.

Berger Fosroc, a joint venture between Berger and Fosroc International, manufactures and sells chemicals used in construction. Berger has a 50 percent share in the venture.

A number of new products and initiatives were undertaken in 2019-20 to fulfil the diversified customer needs and explore new frontiers.

From January 2019, Berger Paints has taken an initiative to establish Berger Experience Zones, with an objective to create one-stop centres where customers can get all painting solutions and experience the wide range of offerings of the company. 

Currently, 24 Berger Experience Zones are operating throughout the country. Among these, 16 outlets are owned and operated by Berger Paints directly. These are called "Flagship Point". 

These include the previous Berger Home Décor services, which have been rebranded as Berger Experience Zone. The rest eight outlets are franchised to dealers.

Berger Paints Bangladesh and Chugoku Marine Paints of Japan have entered into an agreement for cooperation and collaboration in the field of marine and related industrial paints in Bangladesh. 

The agreement envisages joint efforts in producing, marketing and purchasing marine and related industrial paints in Bangladesh. 

Berger will be the first Bangladeshi company to manufacture such world-class marine paint products in the country.

The company has also decided to invest Tk7.60 crore in ordinary shares of Berger Fosroc to fund the establishment of a factory.

Berger has also launched hand sanitiser and professional sanitisation services to help curb the coronavirus spread in the country.

Local paint market

A Berger Paint official said the country's annual use of paint currently stands at about 1.80 lakh tonnes. The sector recorded an over 6 percent growth up to 2018 financial year. 

The size of the local paint market nearly doubled in the last ten years. In 2019, it was worth around Tk4,000 crore.

But the market grew by just 2 percent last year due to a slowdown in the economy, particularly in the real estate sector, said a Berger Paints review. 

However, the review said, a number of international paint companies are now operating in Bangladesh. 

The product offerings of Bangladesh paint market is diversifying from decorative paints towards specialised coatings and industrial paints to cater to the changes in demand structure. 

The paint market is currently facing very soft demand due to the lockdown measures undertaken to contain the spread of novel coronavirus. 

In 2020-21, the overall paint market in Bangladesh may witness negative growth. As a result, competitive pressure among the paint companies will be intensified, the review forecast.

Currently, a total of 45 foreign and local companies are selling paints in Bangladesh. 

According to data provided by the Bangladesh Paint Manufacturers Association, Berger alone holds over 50 percent of the market share, followed by Asian Paints at 16 percent, Roxy at 5 percent, Elite at 8 percent, Pailac at 5 percent and Aqua Paints at 5 percent.

Some 30 local companies, including Rainbow Paints, RAK, Ujala and Jotun Paints, together hold only 11 percent of the total market share.