The Main FIN 254

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Dated: April 30th, 2006

Mr. Riyashad Ahmed (RyA)

Faculty

School of Business,

North South University, Bangladesh.

Baridhara, Dhaka.

Subject: Submission of Group Project Report

Dear Sir,

We were advised to prepare a report on the Financial Performance of Berger Paints

Bangladesh Limited. As were advised, we have successfully completed the report

Financial Performance of BPBL. It gives us immense pleasure to tell you that working

on this report has given us a wide range of exposure. To prepare this report, we have to

make intensive analyses of the companys financial performance in last five years. We

applied all our knowledge gathered in this course to judge and evaluate the financial

condition of the company. This report basically gives an overview the companysperformance on the basis of sixteen major financial ratios. We also had to make

recommendation as to how the company can improve its performance and whether the

company would be a good investment for the stockholders. As this was an actual

company project, research was done on an extensive basis.

It will be a great honor for us if you require us to explain any sort of queries.

Yours Sincerely,


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Acknowledgment

Preparing this report was both exciting and hard work at the same time, it is for the first

time that we had a real life experience working on an actual company project. We triedour best and helped each other as much as possible. We would like to express gratitude to

Mr. Riyashad Ahmed, Lecturer, School of Business, North South University, Bangladesh

for providing us with the proper guidance and support.

Executive Summary:


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Introduction

Lewis Berger founded Berger in 1760 as a business of producing Dye & Pigments. Soon

the business evolved to produce Paints & Coatings which remained the core business of

Berger till today.


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In 1970, Berger Paints Bangladesh Limited (BPBL) erstwhile Jenson Nicholson set up its

paint factory in Chittagong at an estimated investment of TK.4 million. The shareholders

were Jenson & Nicholson (J& N), Duncan Macneil & Co Ltd and Dada Group. In August

2000, J& N investment (Asia) Ltd achieved 100% ownership of the company. The head

office of the company is Uttara Model Town, Dhaka.

BPBL holds 44.7% market share in the Paint Industry. Its nearest competitor is Sagar

Chemical and Paint Ind. Ltd., who resides far below market share (13.6%) than BPBL.

Other companies are Elite, Asian, Pailac etc.

Paints & Coatings are the main product of BPBL. There are some categories of its

products. Such as:

Decorative

Industrial

Marine


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Financial Performance Analyses

Liquidity Ratios:

Year 2005 2006 2007 2008 2009

CurrentRatio

1.83 1.91 times 1.53 times 1.45 time 1.62 times

Acid TestRatio

1.16 0.91 times 0.65 times 0.529 times 0.995 times


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In the year 2009, the companys Current Assets were 1.62 times higher than its Current

Liabilities. The companys Current Assets increased by 47.54% than the Current Assets

of 2008, whereas, the Current Liabilities increased by 32.55%. Relative change washigher in assets than liabilities which increased the Current Ratio.

In the year 2009, the companys current assets excluding the inventories were 0.995

times of its current liabilities. The companys assets excluding inventories were 111%

higher than of 2008. Whereas, the current liabilities increased by 32.55%. So relative

change is higher in assets excluding inventories than the change in liabilities which

increases the quick ratio


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Asset Management Ratios:

Year 2005 2006 2007 2008 2009

InventoryTurnoverRatio


Total AssetTurnoverRatio


Fixed AssetTurnover

5.83 6.07 times 6.15 times 6.9times 6.63 times


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Ratio

AverageCollectionPeriod

28 Days 23 days 23 days 17 days 20 days

Average

PaymentPeriod

58 days 53 days 61 days 55 days 76 days

In the year 2009, the company has sold out and restocked its inventories 5.598 times. The

companys cost of sold increased by 9.11%. So logically, the inventory decreased. That is

why the ratio increased in 2009.

In the year 2009, every 1Tk worth of total assets generated 2.21Tk worth of sales. In the

year 2009, companys sales increased by 18.53%. Total assets increased by 38.91%

which is relatively higher than the change in percentage of sales. That is why total assets

turnover decreased.


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In the year 2009, every 1Tk worth of fixed assets generated 6.63Tk worth of Sales. C

sales increased by 18.53%. Fixed assets increased by 24.42% which is relatively higher

than the change in percentage of sales. That is why fixed assets turnover decreased.

In the year 2009, on an average, it took 20 days for the company to collect its Accounts

Receivables from the customers. The company sold its products more on credit and thus


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the accounts receivable increased by 37.10%. But the daily sales increased by only

18.53% which resulted the DSO to increase in 2009.

In the year 2009, on an average, it took 76 days to make their payments to the creditors.

The company purchased more than 50% on credit than previous year which was more

than its daily purchase which resulted in increase in Average Payment Period in 2009.


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Debt Management Ratios:

Year 2005 2006 2007 2008 2009

Debt to

Asset Ratio

46% 39.13% 46.28% 47.5% 44.8%

Times

Interest

Earned

17.64 Times 38.56 Times 27.39 times 31.11 times 214.36

times

In the year 2009, 44.80% of the total assets were financed by the creditors. The

companys total debt increased by 31.26%, whereas, the total asset increases by 38.9%.

As a result the overall debt-to-asset management ratio decreases in the year 2009.


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In the year 2009, EBIT was 214.36 times higher than Interest Expense.

The companies EBIT increased by 46.92%, whereas its interest expense decreased by

78.68%. As a result the overall times-interest-earned ratio increased in the year 2009.


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Profitability Ratios:

Year 2005 2006 2007 2008 2009

Gross ProfitMargin

34.37% 32.85 % 32.27% 30% 35%

Net ProfitMargin

11.77% 10.93% 9.62% 8.9% 10.9%

Return onAsset

18.80% 24.32% 20.70% 23.1% 24.06

Return onEquity

51.74% 39.41% 38.53% 44.01% 43.7%

In the year 2009, the company has earned gross profit of 35Tk for every 100Tk of sales.

The companies gross profit increased by 39.34%, on the other hand sales increased by

18.53%. Thats why companys gross profit increased in 2009.


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In the year 2009, the company earned Net Profit of Tk 10.9 for every Tk 100 worth of

Sales. The companies net profit after tax increased by 44.68% than 2008. Whereas the the

sales increased by 18.53%. Thats why companys net profit margin increased in 2009.


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In the year 2009, Every Tk100 worth of assets generated Tk24.06 of Net Profit for the

company. Analyzing the data, we can see the marginal change in Net Income (44.68%) is

slightly higher than marginal change in total assets (38.92%). That is why the increase in

ROA is minimal.

In the year 2009, Shareholders earned Tk43.7 out of every Tk100 of investment. Relative

change is almost same between Net Income (44.68%) and Total Stockholders Equity

(45.84%). This resulted a little increase in ROE.


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Stock Market Ratios:

Year 2005 2006 2007 2008 2009

Earnings PerShare

10.77 $13.54 $14.63 $17.28 $25

Market

Value toBook Value

N/A 5.01 times 7.18 times 7.22 times 10.92 times

Price toEarningRatio

N/A 11.76 18.65 16.34 24.996

Common Shareholders earned Tk25 for every share they hold. This has increased by TK7

from last year and the change is drastic. The reason is a high amount of change in Net

Income (44.68%)


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Market value is 10.92 times higher than its book value per share. After staying same in

2007 and 2008, the ratio went to 10.92 times from 7.22 times as the Market Price of the

share increased drastically from Tk283.57 to Tk624.90.


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Companys shareholders were willing to pay Tk24.99 for each Taka of reported earnings.

As the Market Price per Share rose more than 120% the change in P/E Ratio is also

bigger.


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Recommendation:

BPBL has completed a successful financial year in 2009. There have been improvements

in every aspect of its financial performance though the company missed out in some. For

example, companys assets and liquidity, Return on assets, TIE, Collection Period, EPS

and PE Ratio increased remarkably. Whereas, efficiency of assets and Return on Equity

decreased but the decline is not significant. The major change that consolidated the

companys position towards the creditors is its ability to pay the debts back. TIE of the

company has increased to 214.36 times which before was 31.11 times. The companys

shares became lucrative among the people investing the in the share market as the

company has managed to show impressive improvement in EPS and PE ratio.

We think buying shares from BPBL would be profitable for the shareholders as the

demand of this companys shares and the price is increasing significantly day by day.

Though ROE has decreased but the decline is too little to be worried about and past years

show enough significant evidence about the increase in this ratio. Overall, BPBL is a

good investment in our eyes.-

Appendix:

Working of 2005:

(1) Liquidity Ratio:

(i) Current Ratio= Current Asset/Current Liabilities


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= 963768/527422

= 1.83 Times

(ii) Quick Ratio or, Acid test Ratio= (Current Assets Inventories)/Current

Liabilities

= (963768-353001)/527422

= 1.16 Times

(2) Asset Management Ratio:

(i) Inventory turnover Ratio = COGS/ Inventories

= 1392024/353001

= 3.94 Times

(ii) Total asset turnover Ratio= Sales/ Total Assets

= 2121116/1327839

= 1.60 Times

(iii) Fixed assets turnover Ratio= Sales/ Fixed Assets

= 2121116/364071

= 5.83 Times

(iv) Average Collecting Period= A/R/(Sales/ 365)

= 162932/ (2121116/365)

= 28 Days

(v) Average Payment Period= A/P / (COGS/365)


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=219352/ (1392024/ 365)

= 58 Days

(3) Debt Management Ratio:

(i) Debt to Asset Ratio= Total Debt / Total Assets

=613432/ 1327839

= 46 %

(ii) TIE Ratio= EBIT or, Operating Income/ Interest Expense

=305585/17325

= 17.64 Times

(4) Profitability Ratio:

(i) Gross Profit Margin Ratio= (Gross Profit *100)/ Sales

= (729092 *100) / 2121116

= 34.37 %

(ii) Net Profit Margin Ratio= (NPAT * 100)/ Sales

= (249660* 100)/ 2121116

= 11.77 %

(iii) ROA= (NPAT * 100) / Total Assets

= (249660* 100) / 1327839

= 18.80 %

(iv) ROE= (NPAT * 100)/ Total OE


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= (249660 * 100)/ 714407

= 34.95 %

(5) Stock Market Ratio:

(i) EPS= Net Income Available to common stockholders/ Total no. of common

shares outstanding

= 249660000 / 23188940

= 10.77 per share

(ii) M/ B Ratio= Market price per share / BV per share

=N/A

(iii) P/ E Ratio = Market Price per share/ EPS

= N/A

Working of 2006:


(i) Current Ratio= Current Asset/Current Liabilities

= 817325/428350

= 1.91Times


Liabilities

= (817325-427690)/428350

= 0.91Times


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= 1928861/427690

= 4.51 Times


= 2872447/1290393

= 2.23 Times


= 2872447/473068

= 6.07 Times


= 182061/ (2872447/365)

= 23 Days


= 280571/ (1928861/ 365)

= 53 Days



= 504882/ 1301275

= 38.80%


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= 422208/ 10949

= 38.56 Times


(i) Gross Profit Margin Ratio= (Gross Profit x 100)/ Sales

= (943586 x 100) / 2872447

= 32.85%


= (313877* 100)/ 2872447

= 10.93%


= (313877* 100) / 1290393

= 24.32%


= (313877 * 100)/ 736393

= 39.41%



shares outstanding

= 313877000 / 23188940

= 13.54 per share


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=159.20/31.76

=5.01times


=159.20/13.54

= 11.76

Working of 2007:


(i) Current Ratio= Current Asset/ Current Liabilities

= 1054927000/687962000

= 1.53: 1 or, 1.53 Times


Liabilities

= (1054927000-610901000)/687962000

=444026000/687962000

= 0.65: 1 or, 0.65 Times



= 2389231000/610901000

= 3.91 Times


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= 3527759000/1639332000

= 2.15 Times


= 3527759000/574007000

= 6.15 Times

(iv) Average Collecting Period= Accounts Receivable /(Sales/ 365)

= 222791000/ (3527759000/365)

= 23 Days

(v) Average Payment Period= Accounts Payable / (COGS/365)

= 404318000/ (238923000/ 365)

= 61 Days



= 758665000/ 1639332000

= 46.28%


= 454553000/ 16590000

= 27.39Times


(i) Gross Profit Margin Ratio= (Gross Profit * 100)/ Sales


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= (1138528000* 100) / 3527759000

= 32.27%


= (339351000* 100)/ 3527759000

= 9.62%


= (339351000* 100) / 1639332000

= 20.70%


= (339351000* 100)/ 880667000

= 38.53%



shares outstanding

= 339351000 / 23188940

= $14.63 per share


Book Value per Share= Total number of common shareholders equity/ Total number of

common shares outstanding

=880667000/23188940


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=$37.98

M/ B Ratio=272.81/37.98

=7.18 times


=272.81/14.63

= 18.65

Working of 2008:


(i) Current Ratio= Current Assets/ Current Liabilities

= 1087648/749044

= 1.45: 1 or, 1.45 Times


Liabilities

= (1087648-691179)/749044

= 0.53: 1 or, 0.53 Times



= 3149240/691179

= 4.55 Times


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= 4499206/1734093

= 2.59 Times


=4499206 /646445

= 6.09 Times


= 214200/ (4499206/365)

= 17.37 days.


= 476748/ (3149240/ 365)

= 55 days



= 823889/1734093

= 47.5%


= 530,373/17,051

= 31.11times



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(i) Gross Profit Margin Ratio= (Gross Profit)/ Sales

= (1349966) / 4499206

= 30%

(ii) Net Profit Margin Ratio= (NPAT *100)/ Sales

= (400660* 100)/ 4499206

= 8.9%


= (400660* 100) / 1734093

= 23.1%


= (400660* 100)/910304

= 44.01%



shares outstanding

= 400660000 / 23188940

= 17.28per share


=283.57/ (910304000/23188940)

=7.22 times



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=283.57/17.28

= 16.41

Working of 2009


(i) Current Ratio= Current Assets/ Current Liabilities

= 1604688000/992824000

= 1.62: 1 or, 1.62 Times


Liabilities

= (1604688000-616622000)/992824000

= 0.995: 1 or, 0.995 Times



= 3451939000/616622000

= 5.598 Times


= 5333002000/2409097

= 2.21 Times


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= 5333002000/804409000

= 6.63 Times


= 293674000/ (5333002000/365)

= 20 Days


= 717799000/ (3451939000/ 365)

= 76 Days



= 1081435000/ 2409097000

= 44.8%


= 779,204,000/ 3635000

= 214.36 Times


(i) Gross Profit Margin Ratio= (Gross Profit * 100)/ Sales

= (1881063000* 100) / 5333002000

= 35%



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= (579681000* 100)/ 5333002000

= 10.9%


= (579681000* 100) / 2409097000

= 24.06%


= (579681000 * 100)/ 1327662000

= 43.7%



shares outstanding

= 579681000 / 23188940

= $25 per share


Book Value per Share= Total number of common shares outstanding / Total number of

common shares outstanding

=1327662000/23188940

=$57.25

M/ B Ratio=10.92 times


=624.90/25

= 24.996


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