Berger Paints’ finance cost jumps more than 32-fold to N21m

The finance cost of Berger Paints Nigeria Plc surged by 3,134.8 percent in the first half of 2024, BusinessDay analysis has shown.

Data sourced from the Nigerian Exchange Limited (NGX) showed that the company’s finance cost rose to N21.5 million in the first six months from N667,000 in the same period last year, driven by interest expense on borrowed funds.

The company’s borrowed funds during the period rose to N345 billion from an overpaid balance of N1.13 billion.

The Central Bank of Nigeria in a quest to reduce inflation and stabilise the economy has increased the country’s monetary policy rate to 800 basis points in 2024, marking the four consecutive times with the most recent increase in July to 26.75 percent.

As a result of the elevated interest rate environment in the economy, the cost of borrowing funds has more than doubled for companies which impacts their profitability.

During the period, Berger Paints’ after-tax profit declined by 71 percent to N87.5 million in H1 from N299 million in the same period of last year.

Further breakdown of the company’s financial statement disclosed that the it’s revenue for the period grew by 42 percent to N5 billion, driven by higher proceeds from sale of paints and allied products (N4.9 billion).

Its other income declined by 28 percent to N35 million from N49 million a year ago, this was driven by 75 percent in its income on property leases to N4 million from N15 million.

Administrative expenses amounted to N1.03 billion in the period under review from N662 million recorded in the same period of 2023 while the company’s distribution expenses rose to N303 million from N132 million.

Earnings per share declined to 70 percent to N30 from N103 with its current share price as of August 5 at N13.5.

The paint manufacturer’s total assets rose to N7.2 billion in the first six months from N5.5 billion in the same period of 2023 while total liabilities rose to N2.9 billion from N1.5 billion.

Its shareholders fund during the reviewed period also rose to N3.3 billion from N3.4 billion.

The company’s cash flows for the six months of 2024 were as follows: Net cash from operating activities amounted to N104 million from N313 million recorded in 2023; net cash generated from investing activities amounted to N694,000 from N39 million recorded in 2023.

Net cash used in financing activities recorded amounted to a negative N265 million from a negative N229 million generated in 2023.

Cash and cash equivalent for the period decreased to N641 million from N618 million recorded in the same period of 2023.

Despite the challenging operating environment, Berger Paints declared a dividend of N232 million for the 2023 financial year up from N203 million paid in 2022, which was ratified by the shareholders and amounts to a dividend of N.80 kobo per share for shareholders.

Commenting on the Company’s performance at its 64th Annual General Meeting in Lagos, Adebisi Bakare, National Co-ordinator, Pragmatic Shareholders Association stated that the 2023 performance was a significant improvement on the previous year against the background of headwinds such as high energy cost, soaring inflation rate and exchange rate, in addition to low purchasing power of consumers. According to her, Berger Paints was able to maintain its leadership position in the paint manufacturing industry in Nigeria.

“The performance is highly commendable, especially when we consider the challenges, such as energy cost, high-interest rate, weak purchasing power of consumers and rising inflation amongst others in the operating environment,” said Bakare.