September 23, 2019: Pakistan Credit Rating Agency (PACRA) has assigned initial entity rating of ‘BBB+’ 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 on this occasion, the rating reflects the company's established position and brand recognition in the premium domestic paint market of the country. The ratings incorporate strong governance framework and experienced management team along with effective control framework.
The revenue of the company has largely remained at the same level due to relative slowdown in overall construction and related activities. However, the revenue stream is well diversified with retail, industrial and government clients.
The Company imports most of its raw materials, the cost of which have increased due to rupee devaluation. The margins have come under pressure lately as the Company was not able to fully pass the costs to its customers due to high competition. This has led to lower profitability accentuating business risk.
The financial profile of the Company is characterized by adequate coverages and moderately leveraged capital structure, while the working capital management is considered adequate.
The ratings are dependent upon the management’s ability to improve margins and profitability. Prudent management of the working capital, maintaining good coverages and strong capital structure is also important for the ratings. Significant decline in top line and/or deterioration in margins leading to erosion of profitability will have negative impact on the ratings.
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