PACRA assigns Berger Paints ‘A-’ credit rating

September 20, 2021: Pakistan Credit Rating Agency (PACRA) has assigned initial entity rating of ‘A-’ for long term to Berger Paints Pakistan Limited, while the short-term rating is ‘A2’. Meanwhile the outlook forecasted on this rating is ‘stable’.

As per an official press release by the agency, 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 presence of large unorganized sector. Paint industry is closely linked with construction industry and recently Government announced various construction packages which created a positive impact on industry and raised demand for paints.

Company’s non-retail business which is dominant by automotive paints also performing well as car OEMs showed a significant growth in production and sales volumes. Thus, financial performance of the Company showed improvements during 9MFY21, revenues depicted ~ 30% growth and overall decline in raw materials prices (i.e, petrochemicals and commodity chemicals) and reduction in finance cost due to fall in policy rates further strengthen margins and profitability which has a positive effect on ratings.

The financial risk profile of the Company is characterized by strong coverages and adequate working capital management. The capital structure remains moderately leveraged mainly comprising short-term borrowing.

The ratings are dependent upon the management’s ability to sustain operations in prevailing uncertain environment as pandemic situation is still underway and third wave is around. Generating operating cashflows along with maintaining efficient supply chain and prudent working capital management is important.

Press Release