Following flat sales growth in 2022 and the inflationary impact on earnings, Berger Paints Jamaica Limited will be retooling its operations as it plans to double its capacity and improve its plan to expand in the Caribbean.

In an interview with the Business Observer last Thursday, Trinidadian General Manager Shashi Mahase outlined that the company will be spending over $150 million in retooling the company’s operations to drive more efficiencies in the business at a time when the construction sector is experiencing a slowdown locally. The first component of the expansion is to begin this month with the next milestone set for October.

“You’re going to see some investments this year in being prudent. We have some major equipment changes, and we also have investments in one of the filling lines that we have. We try to improve the efficiency of the operations and how we create savings from that side as opposed to passing on price adjustments,” he explained on the planned investment at its 256 Spanish Town Road head office.

When asked about the impact of the investment on capacity, Mahase stated, “It’s like almost an entirely new filling line to manufacture the texture products, filling it and having it packaged. This is going to be significantly more and could be almost doubling the capacity of what we do now.”

Texture paints create a rough patterned effect on a wall when applied and represent just one of the range of paints that the company produces. Decorative/architectural paint products grew four per cent to $3 billion last year while industrial and automotive products hit $219.84 million and $80.30 million, respectively.

Apart from the company growing its product range, it has been focusing more on re-energising its brand and interacting with its consumers. This has resulted in the company opening two colour stores located at Tropical Plaza in St Andrew and at Drax Hall, St Ann.

“Because we are the premium brand and market leader, how we’ve been positioning ourselves is that we want to make sure people understand the application of the paint, provide consultation and technical advice, create more awareness of the brand, etc. Whether they buy from us or a dealer, it doesn’t matter as it’s about the brand itself,” Mahase responded as he emphasised that the colour stores aren’t intended to compete with hardware stores and other dealers.

“We can very proudly state that we are the market leader and remain the market leader,” added Berger Paints Chairman Adam Sagba on queries about its market leading position. Sagba is also the sector head of construction for Ansa McAl.

While the company is looking at growing its domestic sales which peaked at $3.28 billion last year, it is also seeking to increase its exports which decreased 64 per cent to $12.70 million. Although the Berger Paint principals are confident in the growth prospects, they were cognisant of the constraints that were posed in 2022 from the supply chain disruptions and commodity fluctuations which dragged on earnings.

“The ability for us to just take the price adjustments that we’ve been getting from suppliers and roll it into market is not a viable option for us. From a financial position, we have been impacted and it’s the trade-off of a short-term financial position, leveraging the strength of the Ansa McAl group and the ability for us to ride off this storm so that when the market does recalibrate, we’re poised, and we’ve maintained our position in the hearts and on the shelves. That’s our focus,” Sagba said in response to the ability to adjust to price increases.

Berger Paints applied three price increases in 2021 and only applied one hike in April 2022 as the company sought to not add more pressure to consumers whose wallets shrunk with elevated inflation. Mahase pointed out that sales from hardware stores are consumer-driven which means that additional hikes can drag sales. This is against the backdrop of numerous brands in the market including imported paints.

While the company would have significantly benefited from the construction boom in 2021, its sale volumes dipped in 2022 with the company’s inventory remaining flat. Berger’s 2021 production output was 5.3 million litres while it sold 5.11 million litres, but 2022 sales being higher reflected the price hikes. The company’s inventory balance would have increased 16 per cent to $858.99 million in figurative terms, but Mahase noted that the actual inventory mirrored 2021 with the financials showing higher carrying costs.

“At the end of the day, the situation is not one that had reverted as yet. In that, not just limited to titanium dioxide, but all raw materials continue to be elevated in price. Shipping continues to be high whilst again it is coming down, but it’s not at pre-pandemic levels. In Trinidad, we have problems with containers where containers are not coming to Trinidad. We can’t even export on time. So, the to think that the ripples of the pandemic are over for a manufacturer is far from the truth,” Sagba said on the realities that are impacting manufacturers in Jamaica and the region.

When asked about local options for raw materials, Mahase explained, “We sourced a local supplier just to fill a gap, but because the quality isn’t up to the standard that we wanted, we couldn’t even pursue that. While we are working on the local market to see how best we can manage costs and get value from our local economy, in some cases, the quality is not that great, and we don’t want to compromise that.”

Despite this hurdle, Mahase believes that the company has the opportunity to meet new markets in the Caribbean and provide an avenue for businesses affected by supply chain issues such as containers with the increased capacity.

“Based on the capacity that we will now have with the retooling, we will be looking at supplying local demand which there is strong demand for and supplying Trinidad and Guyana. One of the texture products is relatively new in that Trinidad market. There is no limit to whatever territory you want to see, but those are two big markets,” Mahase said about the opportunities for exports.

Whilst net profit dropped from $123.34 million to $702,000 due to higher expenses and the net change in inventories of finished goods and work in progress, Mahase believes that the current trajectory of the company will improve as they focus on reducing wastage and meeting the demands of customers. Though the company can’t install more solar panels due to capacity, it is examining proposals for electric forklifts over the gas powered forklifts as part of its ESG (environmental, social and governance) strategy.

“Our focus continues to be on the long term. Of course, we’re not short-changing what the demand is now, but it’s really about a long-term success and sustainable-driven company. We are the market leader and what we’re doing now is to not just maintain that position, but to grow that position in a stronger way and continue to be the brand of choice,” Mahase closed in his message to shareholders.