Berger investing Tk91.5 crore in paint container unit

Berger facts

• Berger's revenue fell by 49% in April-June during pandemic
• It paid 295% cash dividend to shareholders in FY20
• Berger owns Jenson & Nicholson
• Jenson & Nicholson is involved in metal container business

Berger Paints Bangladesh Ltd is going to invest Tk91.48 crore, through its subsidiary company Jenson & Nicholson (Bangladesh) Limited, to establish its second unit in Savar on the outskirts of the capital.

The board of directors of Berger approved the investment plan at a meeting held on 29 October.

The project is expected to be completed in 2022, the company said in a statement.

Berger owns 100% of the shares of Jenson & Nicholson, which has been involved in the metal container business in Bangladesh since 1990. Its factory is located in Chattogram.

Over the decades, the company has diversified its business into paint containers, lubricant oil, engine oil, and food grade containers.

Khandker Abu Jafar Sadique, company secretary of Berger, told The Business Standard that Berger is a big customer of Jenson & Nicholson, but its three factories are located in Dhaka.

Therefore, the cost of transporting packaging containers from Chattogram is increasing plus the product gets damaged, he said, adding that to build a second unit of the subsidiary company in Dhaka is under way to reduce the cost and time.

Post-lockdown financial position

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

The company's consolidated revenue plummeted 49% to Tk232.45 crore in the April-June quarter this year when the country's housing and infrastructure sectors experienced a slowdown.

However, in the post-pandemic period, the company has recovered its business. In the July-September quarter, its consolidated revenue rose by 72% to Tk400.41 crore compared to that in the first quarter.

Khandker Abu Jafar said the firm has recovered its business in the post-lockdown period – which had fallen drastically in the first quarter. Now the business situation in the country has stabilised.

"Therefore, we are trying to achieve the annual sales target," he explained.

However, in the first half that ended on 30 September this year, the consolidated revenue was still lower than that in the previous year at the same time.

In this period, consolidated revenue fell by 19% to Tk604.41 crore and the net profit by 16% to Tk75.11 crore and its earnings per share stood at Tk16.20.

Berger paid a 295% cash dividend to its shareholders for the 2019-20 financial year that ended on 31 March.

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

Berger's share prices rose by 2.82% to Tk1,360 on Sunday at the Dhaka Stock Exchange (DSE). The closing price of the company's each share was Tk1,350.90.

J&N Investments (Asia) Ltd has a 95% share in Berger while institutional, foreign and general investors hold 2.67%, 0.95% and 1.38% of its shares, respectively.

How is Berger dominating the market?

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

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

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

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

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, selling and purchasing marine and related industrial paints in Bangladesh.

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

Bangladesh Economic Zone Authority (BEZA) has allotted thirty acres of land at the Mirsarai and Feni Economic Zones to Berger. This land will help the company optimise the manufacturing process and support the growing demand for paint in Bangladesh's market, said the company in its annual report.

Local paint market

An official of Berger Paint said annual use of paint in Bangladesh currently stands at about 1.80 lakh tonnes. The sector recorded over 6% growth up to 2019 financial year.

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

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

In 2020-21, the overall paint market in Bangladesh may witness negative growth due to the coronavirus' impact.