Berger Paints - Q3 Results

Let us begin with the top line of Berger Paints. The company reported 20.4% higher sales revenues for the Dec-21 quarter at Rs.2,551 crore on a consolidated YoY basis. During the Dec-21 quarter, Berger Paints saw strong traction in the core decorative paints business as well as its home solutions business. On a sequential basis, the revenues of Berger Paints were up by 14.64% compared to the Sep-21 quarter.

The principal pressure on the company came from the input costs. Among other key financial metrics of the company, the debt equity ratio surged from 0.05 to 0.15 times in the latest quarter. The current ratio compressed from 1.72X to 1.44X. In between, Berger Paints also faced pressure from the impact of COVID on paint demand. Omicron fears had hit construction sector especially in the Northern part of India, hitting OEM demand for paints.

Let us now turn to the operating performance of Berger Paints. For Dec-21 quarter, the operating profits fell by -7.20% at Rs.336.06 crore. The consolidated EBITDA margins for Berger Paints came in at 13.04% compared to 17.80% in the year ago quarter due to operating cost pressures. The EBITDA margins were also marginally lower compared to the 13.16% recorded in the sequential Sep-21 quarter.

On the downside, the lower profits and higher debt in the quarter meant that coverage ratios took it on the chin. For instance, interest coverage ratio for Dec-21 quarter came in at 29.03 times, much lower than 63.04 times interest coverage in Dec-20 quarter. Similarly, if you look at the other metrics of debt service coverage ratio; even that deteriorated from 2.31 times to just about 0.62 times due to the profit pressures and higher debt levels.

Finally, we come to the bottom line of Berger Paints. Net Profits for the Dec-21 quarter was down -8.03% YoY at Rs.252.72 crore. This was largely on the back of higher operating costs in the quarter getting transmitted to the bottom line. For instance, during the Dec-21 quarter, the cost of material inputs went up sharply by 30.5% to Rs1,422 Cr. This has been the situation with most of the paint companies in India.

During the quarter, the debtors turnover ratio and the inventory turnover ratio also showed deterioration on a YoY basis. This shows lower circulation efficiency and also puts greater pressure on the working capital cycle. PAT margins tapered from 12.97% in the Dec-20 quarter to just about 9.91% in the Dec-21 quarter. The PAT margins were higher by a mere 7 bps on a sequential basis compared to the Sep-21 quarter.