Berger Paints Limited

“Berger’s restructuring reaping benefits”

Analysis for the 9 Months Ended September 2009

Financial Summary for the Nine Months

Ended September 2009 • Net Finance cost amounted to $5.73 million as
opposed to a net finance income of $809
Stock Highlights as at November 2, 2009 thousand the previous year. The rise in finance
Recommendation: BUY costs is linked to a bank overdraft which the
Industry Grouping: Manufacturing company recorded at its December year end.

Fiscal Year End: Dec 31 • Net profit reversed from -$9.59 million to a
Current Price: $1.20 creditable $17.97 million for the nine months
Current PE: 5.96X period.

EPS Last 4 Quarters: $0.20 9 Mths ended Sep.

%-age
Book Value Per Share: $1.97 J'000s 2008 2009
52 week High/Low: $2.81/$1.56 Balance Sheet
Shares Outstanding: 214,322,393 Non-Current Assets 290,108 273,984 3%
Current Assets 504,706 512,925 2%
Fair Value: $1.53
Total Assets 794,814 786,909 3%
Non-Current Liabilities 89,601 95,114 6%
Current Liabilities 326,468 269,722 -5%
On the Income Statement:
Total Liabilities 416,069 364,836 -2%
Total Equity 378,745 422,073 7%
9 Mths ended Sep
%-age Per Share Data
J'000s 2008 2009
Book Value per Share 1.77 1.97 11%
Income Statement
Turnover 1,020,379 993,906 -3% Price to Book Value 1.13 0.61 -46%
Operating Costs 1,016,884 961,896 -5% Ratios
Operating Profit 3,495 32,010 816% Current Ratio 1.74 1.88
Income from Investments 11,675 681 -94% R.O.A. - Average -1.2% 1.4%
Finance Costs 809 -5,730 -808% R.O.E. - Average -2.3% 2.7%
Profit before Tax -15,475 29,961 294%
Net Profit -9,594 17,974 287% On the Balance Sheet:
Per Share Data
Earnings per Share (cents) 0.020 0.025 3% • Total Assets slipped 6% from $290 million to
Ratios $273 million mainly due to a fall in fixed assets.
Operating Margin -0.2% 1.9%
Net Margin -0.6% 0.9% • Total Equity however improved 11% from $379
P/E Ratio 15.29 20.65 million to $422 million due an increase in
retained profits.
• Berger Paints Limited for the 9 months ended
September 2009 saw a 3% decline in revenues • The company’s current ratio increased from
from $1.02 billion to $993 million and the fall is 1.77 to 1.97 and illustrates the improved
attributed to the decline in the construction liquidity within the period.
sector.
• ROE and ROA stood at 1.4% and 2.7%
• Operating Profit grew eight-fold to $32.01 respectively compared to negative positions of
million compared to $3.45 million in the 1.2% and 2.3% respectively.
previous year which was plagued with rising
costs.

• Operating Margin saw a significant improvement

from 0.32% to 3.45% and was attributed to
cost containment measures and the correction
in raw material prices.
Outlook
Berger’s fourth quarter is traditionally the strongest
as it coincides with the Christmas season and
generally provides a boost in earnings correlated
with social practices. A profitable outturn for the
first nine months has done well to support the final
quarter ending December 2009. The company also
enjoys greater margins in the final quarter due to
the spike in demand.
The construction sector has been trending down
since 2008 and for the first six months of 2009 it
contracted a further 6.0% due to the postponement
of major housing & hotel construction projects as
well as cuts in government capital expenditures.
Creditably, the company has not seen the same
levels of falls in its revenues.
Operating costs were skillfully contained by BRG
and the implementation of cost cutting measures
which included cutting the company’s 5 day work
week to 4 days were successful. The company’s
Productivity (Litres per Man-hour) also improved
31% for the first six months of 2009. These are
clear attempts by the company to increase
efficiency and they augur well for future periods of
economic recovery in Jamaica.
Berger, over the last couple years has attempted to
increase their competitive advantage in the paint
market by the introduction of computerized systems
aimed at ensuring continued production of quality
products.
Notwithstanding, Berger’s operating margins have
fallen and this partly due to the increased
competition it faces with a wide variety of products
on the market which are sometimes more
affordable.
Projections
For the 12 months to September 2010, we expect
revenues to reach $1.49 billion. Operating Profit is
expected to show improvements due to staff cuts
and cost containment measures and should region
around $78.1 million. Net Profit is anticipated at
$46.70 million or an EPS of $0.22.
Forward projecting the stock price on a PE ratio of
about 7 times the fair value of the stock is $1.53.
With Berger’s positive outturn in challenging
circumstances we have changed our
recommendation from a sell to a BUY.
 FINANCIAL SUMMARY

12-m ths
Year ended Dec. 9-mths ended Sept. 12 Months
Projection to
J'000s 2004 2005 2006 2007 2008 2008 2009 %-age to Sep 2009 Sep 2010
Income Statement
Turnover 1,107,405 1,174,469 1,286,955 1,454,602 1,527,014 1,020,379 993,906 -3% 1,500,541 1,487,397
Operating Costs 1,003,775 1,077,212 1,233,824 1,375,747 1,497,908 1,016,884 961,896 -5% 1,442,920 1,409,308
Operating Profit 103,630 97,257 53,131 78,855 29,106 3,495 32,010 816% 57,621 78,088
Income from Investments 1,796 993 469 949 292 11,675 681 -94% -10,702 676
Finance Costs 50 535 -525 -3,210 -7,919 809 -5,730 -808% -14,458 -8,000
Profit before Tax 105,376 97,715 53,075 76,594 21,479 -15,475 29,961 294% 66,915 70,764
Net Profit 67,017 65,791 38,487 47,363 15,560 -9,594 17,974 287% 43,128 46,704
Balance Sheet
Non-Current Assets 153,923 195,883 231,749 264,316 292,738 290,108 273,984 -6% 273,984
Current Assets 530,184 557,415 587,890 673,698 687,594 504,706 512,925 2% 512,925
Total Assets 684,107 753,298 819,639 938,014 980,332 794,814 786,909 -1% 786,909
Non-Current Liabilities 52,566 67,336 78,674 89,574 95,114 89,601 95,114 6% 95,114
Current Liabilities 213,271 257,424 316,604 415,094 481,120 326,468 269,722 -17% 269,722
Total Liabilities 265,837 324,760 395,278 504,668 576,234 416,069 364,836 -12% 364,836
Total Equity 418,270 428,538 424,361 433,346 404,098 378,745 422,073 11% 422,073
Per Share Data
Earnings per Share 0.31 0.31 0.18 0.221 0.073 (0.04) 0.08 0.20 0.218
Book Value per Share 1.95 2.00 1.98 2.02 1.89 1.77 1.97 1.97
Price to Book Value 2.91 1.89 2.12 1.48 0.94 1.13 0.61 0.61
Ratios
Operating Margin 9% 8% 4% 5% 2% 0.34% 3.22% 3.84%
Net Margin 6% 6% 3% 3% 1% -0.94% 1.81% 2.87%
Current Ratio 2.49 2.17 1.86 1.62 1.43 1.55 1.90 1.90
R.O.A. - Annualized 10% 9% 5% 5% 2% -1% 2% 11%
R.O.E. - Annualized 16% 16% 9% 11% 4% -2% 4% 7%
P/E Ratio 18.13 12.31 23.39 13.58 24.52 14.88 5.96 5.96 5.51