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PACRA Maintains Entity Ratings of Berger Paints Pakistan Limited

Lahore, September 16, 2022 (PPI-OT):The ratings reflect Berger’s established position and strong brand in the premium domestic paint market of the country. The ratings incorporate a strong governance framework and an experienced management team leading to effective controls. The Company’s revenue stream is well diversified with retail, non-retail, and allied business segments.

The paint industry remains competitive and faces pressure due to the presence of a largely unorganized sector. The paint industry is closely linked with the construction industry and recent economic instability, coupled with massive rupee deprecation, cost escalation, and higher interest rates slowing down construction activity.

Furthermore, global inflation, commodities super cycle, and supply chain disruption is creating immense pressure on industry margins. The company’s non-retail business which is dominated by automotive paints will also be impacted as most of the OEMs announced a temporary shutdown due to hurdles in the clearance of import consignments.

The recent devastating flood also caused massive damage to the infrastructure, and it is expected construction industry will gain momentum though after a slow down initially, in response to the rehabilitation of affected sites. As a response to these challenges, the Board has formed a business risk strategy committee for better planning, forecasting, and operations sustainability. During the period under review, revenues recorded ~23% growth.

The customer base is well-diversified catering B2B and B2C segments. The financial risk profile of the Company is characterized by comfortable coverage’s and cash flows. Working capital remained stretched which depicts industry norms. The capital structure is leveraged and borrowings are mainly comprised of short-term to finance working capital.

The ratings are dependent upon the management’s ability to sustain the market operation amidst fierce competition. Generating operating cash flows along with maintaining an efficient supply chain and prudent working capital management is important.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com

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