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Berger turns to credit reports to tame receivables

Published:Friday | May 6, 2016 | 12:00 AM
Berger Paints Jamaica head office in Kingston.

Berger Paints Jamaica Limited now uses credit bureau services to vet all new customers seeking to open credit lines.

The disclosure comes as Berger reports a spike in receivables over the course of last year ending March 2016.

"Before accepting any new customer, the company uses a credit bureau to assess the potential customer's credit quality and defines credit limits by customer," said company directors Mustafa Turra and Warren McDonald in a statement appended to the newly released annual financial results.

"Limits and scoring attributed to customers are reviewed annually."

Turra, Berger's managing director, was said to be out of office when the Financial Gleaner reached out for comment.

On the face of it, Berger receivables over 90 days doubled year-on-year. Specifically, Berger's trade receivables totalled $297 million, with 18 per cent or more than $50 million of that outstanding for more than 90 days as at March 2016. This compares with year-earlier levels at $281.5 million in trade receivables, with nine per cent outstanding over 90 days.

The average credit period on sale of goods is 30 to 60 days. Berger said "approximately 98 per cent" of its trade receivables are in good standing - neither past due nor impaired - and have the best credit scoring attributable under the external credit bureau assessment, as well as the internal assessment system used by the paint company.

Nearly one-third of its trade receivables or $120.1 million is due from two of the company's customers.

"There are no other customers who represent more than 5.0 per cent of the total balance of trade receivables," Berger added.

The company has provided fully for all receivables due for over one year because historical experience shows that receivables that are past due beyond this period are generally not recoverable, stated Berger.

The company made $122.1 million annual profit at year end March 2016 or nearly double its $67 million of earnings a year earlier. Sales were moderately higher at $2 billion, up from $1.85 billion.