Berger Paints Bangladesh Limited has posted a 40 percent growth in net profit during the April-September period (H1) of this year, as the price of raw materials of paint is currently very cheap.
The prospect of the paint business in Bangladesh has been surging up by 6 percent per year during the last decade. During this period, Berger saw an 11 percent rise in its sales.
Although income from equity investments also contributed to Berger's profit growth, the prime cause behind the growth is the low price of raw materials.
"Growth in profit jumped as we had to spend less on production," said Rupali Chowdhury, managing director of Berger Paints.
The company wrapped up its accounting year on March 31 this year.
During the April-September period, it sold paint worth Tk860 crore, up from Tk770 crore during the corresponding period of 2018.
Berger earned Tk9 crore during this period, a significant improvement from the loss of Tk12 lakh in the first six months of their last accounting year.
As of September, its net profit stood at Tk96 crore, while the Earnings Per Share (EPS) was Tk20.61.
Profit for H1 last year was Tk68 crore, while the EPS stood at Tk14.74.
The local paint market
As the economy grows, resulting in rapid urbanisation and a surge in spending capacity, individual investment in building infrastructure has also gone up.
Size of the local paint market nearly doubled in the last ten years. In 2018, the domestic paint market was worth around Tk3,700 crores.
The average growth in the Bangladeshi paint market has been 6 percent in the last decade. However, the market witnessed only a 2 percent growth in the 2018-19 fiscal year, due to a slowdown in the real estate business.
Market analysts said as the real estate market is starting to recover, the paint market may grow by 8 to 10 percent as a result.
Currently, a total of 45 foreign and local companies are selling 1.8 lakh tonnes of paint per year.
According to data by the Bangladesh Paint Manufacturers Association, Berger alone holds 48 percent of the market share, followed by Asian Paints at 18 percent, Roxy at 7 percent, Elite at 7 percent, Pailac at 5 percent and Aqua Paints at 2 percent.
Some 30 local companies, including local brands Rainbow Paints, RAK, Uzala and Jotun Paints, hold 20 percent of the total market share.
However, none of the foreign brands, except Berger, are listed with the stock market. Earlier, as per the Bangladesh Securities and Exchange Commission's rules, the foreign companies had to float shares in the bourses if they wanted to sell in the local market.
However, after changing that rule in 2017, foreign brands have been doing business in Bangladesh without listing.
How is Berger dominating the paint market?
Berger began its journey in Bangladesh in 1970 and has become one of the oldest paint brands.
Officials of the company say that plastic emulsion, distemper, weatherproof exterior coating and synthetic enamel are their key products that helped them hold onto majority of the market share.
Plastic emulsion and distemper are close substitutes of each other. The emulsion is used in high-end residences all over the country and distempers are economy class products generating demand in semi-urban and rural markets.
They added, many new products and initiatives were launched in the 2018-19 fiscal year to fulfil the diversified needs of customers and to explore new frontiers.
Berger diversified its business and expanded, estimating a growth in infrastructure development in Bangladesh.
Jenson & Nicholson (Bangladesh) Limited, the subsidiary of Berger, produces tin containers and print tin sheets.
The joint venture, Berger Fosroc Limited, manufactures and sells chemicals used in construction. Berger Paints Bangladesh Limited has a 50 percent share in the joint venture.
From these two companies alone, Berger received a profit of Tk9 crore during the first half of this fiscal year.
Annual profitability and share performance
In the last six years, Berger saw a 127 percent rise in its net profit, which rose to Tk195 crore from Tk86 crore. Sales went up 101 percent during this period, to Tk1,773 crores from Tk880 crore.
The company has no loans with any banks.
Berger gave a 250 percent cash dividend to its shareholders in the 2018-19 accounting year. In the previous accounting year, it gave out 200 percent in cash and 100 percent in stock dividends.
The company got listed with the stock market in 2006, with a paid-up capital of Tk46 crore. The reserve surplus of Berger is Tk771 crore.
Shares of Berger closed at Tk1,447 on Monday at the Dhaka Stock Exchange.
Berger share prices surged up to its highest point at Tk2,130, while the lowest price reached Tk1215.20.
The J&N Investments (Asia) Limited holds a 95 percent share of Berger Paints Bangladesh Limited while institutional, foreign and general investors respectively hold 2.32 percent, 1.32 percent and 1.36 percent of its shares.