Berger Paints: Improved portfolio & focus on premium products to boost profitability
Improving consumer sentiments, along with the low base effect since the second half of 2011-12 was not that great, should help Berger Paints to report good numbers in the second half of the current financial year.
By Narendra Nathan, ET Bureau | Updated:
Berger Paints has reported muted numbers for the second quarter of 2012-13, with its revenue and net profit for the period growing by 13% and 8%, respectively, on a year-on-year basis.
While the international operations continued to do well, the drag came from the domestic market. The delayed festive season is one reason for the slow sales growth in the second quarter.
The extended monsoon this year is another reason because decorative paints contribute to around 80% of Berger Paints' domestic sales, and the rains significantly impacted the sales of exterior paints.
However, things have started improving in the third quarter and the company has reported brisk sales in October. Improving consumer sentiments, along with the low base effect since the second half of 2011-12 was not that great, should help Berger Paints to report good numbers in the second half of the current financial year.
To augment its long-term growth rate, Berger Paints has launched several new products in the past few quarters to widen its portfolio. The company also plans to double its production capacity by the end of 2013 at a cost of Rs 140 crore.
The company has a wide distribution network under its belt, which is only 30% smaller than that of Asian Paints in size and depth. Since it has one of the strongest relationships with dealers and painters across the country, Berger Paints will be able to grow without investing further in network expansion.
This means that the company should be able to report a sales growth of 20% in the future and, thereby, consolidate its number two position in the domestic decorative paint segment.
Berger Paints is also expected to show more profitability in the future due to a steady change in the product mix. While the company continues to be the key player in the medium and economy products, it has renewed its focus on premium products, which offer better margins. The company's recent TV advertising campaign to increase brand recall in the premium products category is an example of this.
While the international operations continued to do well, the drag came from the domestic market. The delayed festive season is one reason for the slow sales growth in the second quarter.
The extended monsoon this year is another reason because decorative paints contribute to around 80% of Berger Paints' domestic sales, and the rains significantly impacted the sales of exterior paints.
However, things have started improving in the third quarter and the company has reported brisk sales in October. Improving consumer sentiments, along with the low base effect since the second half of 2011-12 was not that great, should help Berger Paints to report good numbers in the second half of the current financial year.
To augment its long-term growth rate, Berger Paints has launched several new products in the past few quarters to widen its portfolio. The company also plans to double its production capacity by the end of 2013 at a cost of Rs 140 crore.
The company has a wide distribution network under its belt, which is only 30% smaller than that of Asian Paints in size and depth. Since it has one of the strongest relationships with dealers and painters across the country, Berger Paints will be able to grow without investing further in network expansion.
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This means that the company should be able to report a sales growth of 20% in the future and, thereby, consolidate its number two position in the domestic decorative paint segment.
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Berger Paints is also expected to show more profitability in the future due to a steady change in the product mix. While the company continues to be the key player in the medium and economy products, it has renewed its focus on premium products, which offer better margins. The company's recent TV advertising campaign to increase brand recall in the premium products category is an example of this.
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