Did the cost spikes hit the profits of Berger Paints in the Dec-21 quarter?
Answer
Answer
Yes Berger paints did get hit by the higher input costs but the impact was not too big. In fact, Berger Paints showed good traction on top line and that largely neutralized the negative operating impact to a large extent. Berger Paints was hit by a spike in material costs, due to higher crude prices. However, the overall damage to the net profits was not too significant. Here is a gist of the financials of Berger Paints in a nutshell.
Berger Paints
Rs in Crore
Dec-21
Dec-20
YOY
Sep-21
QOQ
Total Income (Rs cr)
₹ 2,550.77
₹ 2,118.19
20.42%
₹ 2,225.01
14.64%
Operating Profit (Rs cr)
₹ 336.06
₹ 362.12
-7.20%
₹ 298.10
12.73%
Net Profit (Rs cr)
₹ 252.72
₹ 274.80
-8.03%
₹ 218.85
15.48%
Diluted EPS (Rs)
₹ 2.60
₹ 2.83
₹ 2.25
Operating Margins
13.17%
17.10%
13.40%
Net Margins
9.91%
12.97%
9.84%
For the Dec-21 quarter, Berger Paints reported 20.4% higher sales at Rs.2,551 crore with very strong traction in the core decorative paints business. It also saw good revenue growth in the home solutions business. During the quarter, the debt equity ratio surged from 0.05 to 0.15 times while the current ratio compressed from 1.72X to 1.44X. Berger Paints also faced pressure from COVID impact on paint demand. The Omicron fears hit construction sector in the Northern part of India, which impacted OEM demand for paints.
Operating profits for the Dec-21 quarter were lower by -7.20% at Rs.336 crore on a consolidated yoy basis. EBITDA margins for Berger Paints stood at 13.04% as against 17.80% in the Dec-20 quarter. EBITDA margins were marginally lower than 13.16% in Sep-21. However, the coverage ratios took a hit due to lower profits and higher debt. Interest coverage fell to 29.03 times from 63.04 in Dec-20 quarter. Similarly, debt service coverage fell from 2.31 times to just about 0.62 times in the Dec-21 quarter.
Net Profits were lower by -8.03% at Rs.253 crore. This was on the back of higher operating costs transmitted to net profits. For example, raw material costs were up 30.5% at Rs.1,422 crore. Incidentally, the debtors turnover ratio and the inventory turnover ratio also showed deterioration putting added pressure on the working capital cycle. PAT margins fell sharply on a yoy basis from 12.97% in the Dec-20 quarter to 9.91% in the Dec-21 quarter. However, the PAT margins were higher by 7 bps on sequential basis.