Berger Paints Pakistan Limited’s growth seems to have slowed down in FY17. From FY15 to FY16, turnover increased by 18 percent while profit after tax increased by 69 percent. In comparison, FY 17’s performance is slightly lackluster with net sales seeing only marginal growth.

The increase in profit after tax is partly due to lower taxation and tightening of other expenses and finance costs. In its last quarter’s result, BPPL attributed lower financial costs due to better treasury management and reduced interest rates.

In the last quarter, cost of goods sold increased less than proportionately to turnover since higher sales were generated in the category of premium products. It seems that BPPL may not have been able to sustain momentum since gross profit declined in FY17.

In 2016, BPPL posted highest profit after tax in the last 10 years due to improved economy and market conditions. It is possible that rising competition from multinationals such as AkzoNobel Pakistan, Jotun, Kansai, Nippon and local companies Brighto, Diamond, Happilac, Master and Nelson has put pressure on Berger. Berger also faces competition from the unorganised sector that has the advantage of not paying taxes and selling at substantial discounts, appealing to the more cost conscious strata of the society.

As a result of increased competition and Berger’s promotion of its premium products, its selling and administrative expense have risen due to increased spending on advertising and promotional activities.

Another reason for its decline in profit before tax in FY17 was a significant drop in other income. In FY16, BPPL’s insurance claim of more than Rs103 million was recognised against inventory and operating assets destroyed in the fire.

Though no final dividend was announced, Berger Paints gave an interim dividend of Rs4.5 per share in FY17.

Despite slowing down of momentum, Berger on the whole is continuing its upwards trajectory with an increase in EPS of Rs1/=. Its future outlook still appears positive since the housing sector is booming and as new houses are made, they will have to be painted.