InvestorQ : What explains the solid performance put up by Berger Paints?
rhea Babu made post

What explains the solid performance put up by Berger Paints?

Riya Dwivedi answered.
6 months ago

The big highlight of the Berger results was that profits were up in the second quarter despit ea five-fold rise in the tax burden. Let us look at sales first. Berger Paints reported 9% increase in the Sep-20 sales revenues at Rs.1743 crore.

This is a big bounce from the June quarter. The paints business being consumer driven business, saw weak off-take from retail and industrial consumers in Jun-20 quarter. That has now been overcome and the sales are back at above pre-COVID levels in the Sep-20 quarter.

Now for the operational performance! For Sep-20 quarter, operating profits were up 38% at Rs.282 crore on the back of better fixed cost absorption and also better cost management. Operating margins or OPM expanded from 12.75% to 16.16% in the Sep-20 quarter, indicating that core business was getting profitable once again.

There was good news on the bottom line too. Net profits for the Sep-20 quarter were up 13.56% at Rs.221 crore. You can argue that net profit growth has faltered compared to operating profit growth but that was more due to a 400% hike in the tax liability.

There was reduction in debt too. Berger Paints had a very conservative debt / equity ratio of just 0.11. As a result, the debt service coverage ratio of the company or the DSCR stands at 2.47 while the interest service coverage ratio or ISCR of Berger paints stands at a very healthy and robust 23.94 times.

Despite the tax pressures, there was positive traction on the cash generation front. Net cash from operations for the first half of the fiscal year was flat at Rs.255 crore. This was handled with more efficient handling of the working capital and a check on costs.