Colouring the Caribbean

Berger plans entry into more regional markets

Business reporter

Friday, April 12, 2019

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Strengthened by its merger with ANSA Coatings Jamaica Ltd (ACJ), Berger Paints Jamaica Limited (BPJL) is targeting new regional territories and markets this year.

As Berger fights for increased market share in the highly competitive paint industry, the manufacturer is looking to expand its offering with new products that are “ideally suited” to the needs of the new markets. Berger's majority shareholder, ANSA McAL Group, is the leading conglomerate in the Caribbean with 73 companies spanning nine sectors in over eight territories.

“BPJL is now part of a much wider discussion when coupled with the group's other coatings brands and facilities. This opens BPJL to benefit from further economies of scale and efficiencies which can be driven in light of the increased scale and scope and allows us to open the brand up to target new regional territories and markets,” Berger Chairman Adam Sabga said in the company's 2018 annual report.

In early 2018, ACJ and Berger merged to allow the local paint company the benefit of adding new and complementary products to its portfolio, particularly the Penta brand and PPG's automotive line.

Berger and Penta are now both owned by ANSA Coatings International Limited (ACIL), a member of the ANSA McAL Group in Trinidad, and where both paints competed in overlapping market segments, prior to Berger's ownership change, they will now target business within Jamaica.

“Realignment of our market focus is very much on our agenda for 2019, and through diligent partnerships with local stakeholders, we expect this direction to yield improved returns,” Sagba continued.

He added that deeper integration within the ANSA McAL Group will allow Berger to benefit from a diverse pool of experts while exposing the company to best practices that will enhance operational efficiency and ultimately improve revenue and profitability.

While Berger looks to tackle the regional market, the company remains optimistic about its Jamaican operation. Berger noted that the outlook for the Jamaican economy is very positive, led by inflation which continues to hover in low single digit to result in a “moderating impact” on the company's expenses.

“Unemployment is declining and key sectors in the economy like construction are expected to continue [their] upward growth trajectory in 2019. Our efforts will be backed by more consumer-oriented marketing programmes that reinforce our premium positioning and better connect the Berger brand with consumers and shoppers in a more convincing manner,” Sagba told shareholders.

The chairman described 2018 as an interesting, challenging and successful year for Berger Paints.

Berger's revenue increased to $2.7 billion in 2018 compared to $1.9 billion for the audited nine-month period ended December 31, 2017. Revenue continued to be bolstered by the company's domestic sales, representing 96.6 per cent, with balance of 3.4 per cent being exports to the company's main market in Belize.

The company recorded net profit of $174 million for the year ended December 31, 2018 compared to a net profit of $174 million for the nine months ended December 31, 2017. This represented return on equity of 15 per cent, marginally below the comparative period.

Berger's cost of sales increased by 20 per cent to $1.3 billion for the year ending December 2018, due to higher raw material costs and devaluation of the Jamaican dollar against its US counterpart. The company also experienced higher operating expenses stemming in part to the consolidation of Ansa Coatings Jamaica Limited into Berger as well as increases in selling, distribution, and marketing costs.

“As a premium product, Berger operates in a highly competitive market place where consumers have increasingly been showing a preference for economy brands. Management took a deliberate strategy to defend our market position and this placed pressure on our price and margins,” Sagba reported.

Berger's share price has grown exponentially over the past five years, moving from $1.73 at December 2014 to $21.95 as at December 31, 2018.

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