Wed | Nov 25, 2020

Berger Paints banking on Christmas to close earnings gaps

Published:Friday | November 20, 2020 | 12:12 AM

Berger Paints Jamaica’s third-quarter sales are running eight per cent ahead of last year, a sign that the paint market has shrugged off some of the effects of the pandemic, and the company is gearing its promotions to wring as much value as the market can deliver when the high season for retailers rolls around.

The No. 1 paint maker, with about a 60 per cent share of the Jamaican market, sold $574 million worth of paint products over the July-September quarter, compared to $534 million a year ago, but those gains were not enough to eliminate the shortfall in sales revenue in the preceding quarters. Nine-month sales are tracking $140 million below the previous year, at $1.49 billion, compared to $1.63 billion recorded in 2019.

The company made nearly $43 million in profit for the third quarter, a near sixfold growth that flowed from savings on inputs and operations, but was still insufficient to net off the losses of the previous quarters. Nine-month earnings were negative, with losses topping $20 million.

General Manager Shashi Mahase is now looking towards Christmas to add to the September numbers.

“The peak season is upon us and although COVID-19 continues to impact market activity, we launched our Christmas promotion earlier than usual to engage our dealers and consumers with offers,” Mahase said.

“While COVID-19 presents a level of uncertainty, we remain positive in our outlook for the future,” he told the Financial Gleaner.

Paint makers traditionally earn most revenue in the second half of the year, as schools refresh their plants for the annual September start to the academic year; hotels ready their rooms for the high tourist season which begins annually on December 15; and households brighten up for Christmas.

This year, the coronavirus has upended much of that – classrooms are unused as schooling migrates online; travel is diminished and with it the tourists the hotels depend on; and disposable income is under pressure in households, due to either job cuts or salary adjustments.

It’s forcing businesses to be creative in controlling costs and driving efficiencies. Berger Jamaica’s expenses are running around $65 million ahead of last year, but it did manager a lower cash burn on operations in the third quarter by around $10 million.

“The objective is to maximise the opportunities available by ensuring everything we do adds value throughout the supply chain,” Mahase said.

The company in late 2019 rolled out an enterprise resource planning, or ERP, system that is meant to assist with that goal.

“It has been providing management with key insights to allow for deeper appreciation of the business drivers and, with that, quicker decision-making. Although a relatively new deployment, it is already contributing value to the business,” Mahase said.

“While the COVID-19 pandemic continues – and there remains uncertainty as to how the business will be impacted into the near future – we remain positive,” he said.

neville.graham@gleanerjm.com