Analyst
Ateeb Riaz
ateeb.riaz@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Berger Paints Pakistan Limited
Rating Type | Entity | |
Current (20-Sep-19 ) |
Previous (21-Mar-19 ) |
|
Action | Maintain | Initial |
Long Term | BBB+ | BBB+ |
Short Term | A2 | A2 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings reflect Berger’s established position and brand recognition in the premium domestic paint market of the country. The ratings incorporate strong governance framework and experienced management team along with effective control framework. The revenue of the company has largely remained at the same level due to relative slowdown in overall construction and related activities. However, the revenue stream is well diversified with retail, industrial and government clients. The Company imports most of its raw materials, the cost of which have increased due to rupee devaluation. The margins have come under pressure lately as the Company was not able to fully pass the costs to its customers due to high competition. This has led to lower profitability accentuating business risk. The financial profile of the Company is characterized by adequate coverages and moderately leveraged capital structure, while the working capital management is considered adequate.
The ratings are dependent upon the management’s ability to improve margins and profitability. Prudent management of the working capital, maintaining good coverages and strong capital structure is also important for the ratings. Significant decline in top line and/or deterioration in margins leading to erosion of profitability will have negative impact on the ratings.
About
the Entity
Berger Paints Pakistan Limited was initially incorporated in 1950 as a Private Limited Company under the repealed Companies Act 1913 (now Companies Act, 2017). It was subsequently converted into a public listed company in 1974. It is currently listed on Pakistan Stock Exchange (PSX). In 1991, Slotrapid Limited, a company incorporated in British Virgin Islands, acquired control of Berger Paints Pakistan by purchasing 52.02% shares from its former parent, Jenson & Nicholson Limited. The principal business activity of the Company is manufacturing and trading of paints, varnishes and other related items. The registered office and manufacturing facility of the Company is located in Lahore.
The control of the Company vests with board of directors, which comprises eight members including Dr. Mahmood Ahmad (Managing Director). There are four independent directors and three non-executive directors. Dr. Mahmood Ahmad is the nominee of Slotrapid limited. Dr. Mahmood Ahmed has ~25 years of experience and is well versed with the industry dynamics. He is ably supported by a professional management team.