Berger thrives in dull market

Berger Paints Bangladesh Limited thrived over the years despite a dull market caused by a slowdown in the country's housing and infrastructure sectors.  

The sale of the country's leading paint company grew by 11 percent every year on average over the last six years, and it has maintained the pace during the nine months of the current financial year. 

In the nine-month period, the company's net profit grew by 30 percent, riding on declining prices of raw materials in the international market. It will wrap up its financial year on March 31.

Income from equity investments in two joint venture companies has also contributed to Berger's profit growth.

"The profit growth jumped as we had to spend less on production," said Rupali Chowdhury, managing director of Berger Paints Bangladesh Ltd.  

She said the housing and infrastructure sectors are experiencing a slowdown for the last two years and its impact has spread to the paint market. "That is why our growth has not been up to the expectations."

Rupali said Berger will launch a new project next year and its production will then double. 

"That is why the company is working for the development of paint supply network across the country," she added. 

In nine months until December last year, Berger's sale was Tk1,364 crore. Its net profit stood at Tk162 crore, while the earnings per share (EPS) was Tk34.97. 

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 six percent year-on-year growth in recent times, thanks to the rapid urbanisation in the country.

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 two percent last year due to a slowdown in the economy, said Rupali. 

Market analysts said the paint market may grow by eight to ten percent annually if the real estate market starts recovering.

Currently, a total of 45 foreign and local companies are selling paint 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 five percent, Elite at eight percent,

Pailac at five percent and Aqua Paints at five percent.

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

How is Berger dominating the market?  

Berger began its journey back in 1970 and is thus one of the 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.

Plastic emulsion and distemper are close substitutes for each other. Emulsion is used in high-end residences all over the country and distempers are economy class products that are in demand in the semi-urban and rural markets.

Berger added many new products over the years. Initiatives were launched in 2019 to fulfil the diversified needs of customers and to explore new frontiers.

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

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

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

Financial and stock performance

In the last six years, Berger's net profit grew by 127 percent, which rose to Tk195 crore from Tk86 crore. Sales went up by 101 percent during this period, to Tk1,773 crore from Tk880 crore.

The company has no loans with any bank.   

Berger paid its shareholders a 250 percent cash dividend in the 2018-19 financial year. In the previous year, it paid 200 percent in cash and 100 percent in stock dividends.

The company was listed on the stock market in 2006, with a paid-up capital of Tk46 crore. The reserve surplus is Tk771 crore.

Berger shares closed at Tk1,405.5 on Tuesday at the Dhaka Stock Exchange.       

Share prices surged to its highest at Tk2,130, while the lowest was Tk1,250 in the last 12 months.

The J&N Investments (Asia) Ltd holds 95 percent share of Berger while institutional, foreign and general investors respectively hold 2.35 percent, 1.30 percent and 1.35 percent.