Berger Paints fell $2.07 to $17 with the largest block of shares on Tuesday.
Berger Paints just released its 2017 annual report, filled with a series of goodies for shareholders from talk of going after market share and adding new product lines to the addition and upgrading equipment to increase efficiency.
The report also disclosed the company will pay a final dividend of 28.5¢ per share totaling $61 million, equivalent to 35 percent of the profit to December 2017. The payment will to be made on May 28, to shareholders on record at the close of business of May 11, the proposed dividend compares to 50 cents or just over 30 percent of profit to March in 2017.
“For the nine-month period, revenues were $1.91 billion versus $2.36 billion for the 12-months ended March 2017, with a net profit of $174 million versus $316 million for the previous fiscal year. Berger enjoyed steady growth in profits from the 2012 fiscal year when it posted a profit of $33 million and rising in each year. Profit nearly doubled in 2016 to $122 million from $67 million the year before and more than doubled to March 2017.
The biggest contributor to the revenue decline for the December 2017 period “was a deliberate strategy of using aggressive pricing in an extremely competitive environment, to drive volume growth and take market share. This, coupled with increasing market acceptance and demand for our economy line, put downward pressure on margins. There has been an increase in administration expenses, some of which were one-off and related to the acquisition. Apart from these, there were higher costs for legal settlements as well as higher inventory and bad debt provisions, which adversely affected the current period compared to 2016/2017,” Andy Mahadeo, the Managing Director told shareholders in his report to them.
Andy Mahadeo, the Managing Director
“In addition to the one-off expenses identified in the Overview, raw material prices have also increased significantly over 2016. In a very competitive environment, we have made a deliberate decision to grow market share by absorbing the price increases and ensuring our customers get the best possible value for money. While this has resulted in declining Gross Margins in the short term, it positions the brand for growth in the future as our strategies are implemented going forward.”
“The outlook for 2018 and beyond is extremely positive. The Berger brand remains strong and continues to dominate the local market with strong brand equity and a reputation for quality. With GDP projected to grow by at least 1.5 percent in 2018, construction activity and the demand for coatings is expected to remain relatively strong for the next two to three years. Plans are already being implemented to expand the company’s local distribution and product range as well as to improve our level of customer service and responsiveness. In 2018, there will also be greater emphasis on building out exports by targeting new markets in Central America and the Greater CARICOM region,” the Managing Director reported.
Of note are developments in 2017 that are pointed out in the Managing Director’s report, “While the performance is creditable, there has been a decline in revenue and profits when compared to 2016/2017 on a pro-rata basis, with a few one-off extraordinary events that adversely affected the results. The one-week shutdown of operations and sales in order to conduct the verification exercise prior to the transfer of ownership as well as the significant legal and valuation costs incurred in September, will not be repeated going forward.”
Berger Paints is one of IC Insider’s TOP 10 stocks.
We expect to realize the full effect of our coatings synergies across our five operating plants in 2018 as we leverage our regional supply chain to remove cost. Our Strategic Plan over the next three years will see the company investing heavily in plant and equipment. This will enable us to increase production capacity and improve operational efficiencies while maintaining an unwavering focus on creating additional value.
Gross cash flow brought in $267 million, but growth in receivables, inventories, addition to fixed assets offset by increased payables and the paying of $113 million in dividends, left negative cash flow of $156 million. At the end of December, shareholders’ equity stood at $1 billion with no borrowed funds. Net current assets ended the period at $1.3 billion, inclusive of Trade and other receivables of $674 million, cash and bank balances of $232 million. Current liabilities stood at $494 million of which trade payables accounted for $381 million.
The stock traded at $18.20 on the main market of the Jamaica Stock Exchange with a PE ratio of 7 times 2018 projected earnings of $2.60. Net asset value is $4.93 with the stock selling at 3.5 times book value.
