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Berger Paints’ improved margins ride on the back of cost efficiency

Berger Paints Plc (BERGER) started the year on a weak note as its Q1:2019 revenue declined marginally by 1.08% YoY to NGN797.62mn (vs. NGN806.33mn in Q1:2018) and by 13.66% QoQ. 

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Berger Paints Plc, Berger Paints offers support for Lagos State to combat coronavirus

Marginal Decline in Revenue: Berger Paints Plc (BERGER) started the year on a weak
note as its Q1:2019 revenue declined marginally by 1.08% YoY to NGN797.62mn (vs.
NGN806.33mn in Q1:2018) and by 13.66% QoQ.

The marginal reduction was the effect of 3.03% decline in sales of paints and allied products to NGN781.94mn. Although it made additional NGN15.68mn in contract services, specifically, supply and apply services contract, the contribution to total revenue is paltry at 2.01%.

We believe that higher infrastructural spending, further deepening of the real estate
sector, and the recent change in the company’s management team (with respect to the Managing Director and Chief Operating Officer) will help position BERGER on the path to achieve modest revenue growth in 2019. We forecasted revenue growth of 6.5% to NGN3.59bn for the year.

Larger Decline in Production Cost Delivers Better Margins: Decline in cost of sale by
9.78% YoY to NGN416.63mn led to improvement in the gross margin from 42.73%
(NGN344.55mn) in Q1:2018 to 47.73% (NGN380.99mn) in Q1:2019. Although
operating expenses (OPEX) was 4.34% higher as personnel (NGN129.53mn) and
corporate (NGN14.53mn) expenses increased by 13.36% and 39.32% respectively,
operating margin remained solid at 15.19%, greater than 12.22% reported in the
corresponding period of 2018.  Pre-tax and after-tax profit settled at NGN124.17mn and NGN84.43mn apiece with margins of 15.57% and 10.59% respectively.

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We believe the lower cost-to-sales ratio is sustainable through the year, owing to the
positive outlook on FX stability, which will support the company’s cost management
for the purchase of raw materials. Hence, we project a cost-to-sales ratio of 53%, while
we forecast OPEX/sales ratio of 34%. Based on our expectation of revenue and cost,
we expect 2019FY profit to grow by 6.13% to NGN340.15mn, implying a net margin of
9.47%.

More Working Capital Tied in Inventory and Receivables: BERGER’s total asset grew
moderately by 1.89% to NGN4.62bn (vs. NGN4.54bn as at 2018FY). The growth was
largely driven by investment in inventories and receivables, which increased by
13.82% (+NGN83.83mn) and 27.17% (+NGN51.89) respectively.

Meanwhile, BERGER maintained a stable current ratio of 1.28x, although the cash
ratio fell from 0.40x to 0.24x. Also, net operating cashflow was negative as a direct
consequence of more working capital tied up in inventory and receivables.

Deal book 300 x 250
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Recommendation: We forecast EPS of NGN1.17 (vs. NGN1.11 in 2018FY) for 2019FY.
Based on a likely mean reversion tendency, we project BERGER closing the year at a
P/E multiple of 7.5x, which combined with our EPS expectation, gives a revised target
price of NGN8.78, down from the previous target of NGN9.45. This represents an upside
of 19.39% based on the closing price of NGN7.35 on May 10, 2019, we therefore rate
the stock a BUY.


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Coronavirus

COVID-19 Update in Nigeria

On the 27th of October 2020, 113 new confirmed cases and 3 deaths were recorded in Nigeria

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 62,224 confirmed cases.

On the 27th of October 2020, 113 new confirmed cases and 3 deaths were recorded in Nigeria, having carried out a total daily test of 2,326 samples across the country.

To date, 62,224 cases have been confirmed, 57,916 cases have been discharged and 1,135 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 614,480 tests have been carried out as of October 27th, 2020 compared to 612,154 tests a day earlier.

COVID-19 Case Updates- 27th October 2020,

  • Total Number of Cases – 62,224
  • Total Number Discharged – 57,916
  • Total Deaths – 1,1135
  • Total Tests Carried out – 614,480

According to the NCDC, the 113 new cases were reported from 12 states- Lagos (51), FCT (15), Plateau (11), Kaduna (8), Oyo (8), Rivers (8), Ogun (4), Edo (2), Imo (2), Kwara (2), Delta (1), Kano (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 20,935, followed by Abuja (6,008), Plateau (3,614), Oyo (3,433), Rivers (2,781), Edo (2,654), Kaduna (2,625), Ogun (2,014), Delta (1,813), Kano (1,743), Ondo (1,666), Enugu (1,314),  Kwara (1,069), Ebonyi (1,049), Katsina (952), Osun (923), Abia (898), Gombe (883).  Borno (745), and Bauchi (710).

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Imo State has recorded 616 cases, Benue (486), Nasarawa (479), Bayelsa (403),  Ekiti (332), Jigawa (325), Akwa Ibom (295), Anambra (277), Niger (274), Adamawa (257), Sokoto (165), Taraba (140), Kebbi (93), Cross River (87), Yobe (82), Zamfara (79), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

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The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

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ENDSARS

Oyo sets up N500 Million fund each for youth entrepreneurs, compensation for victims of police brutality

Governor Seyi Makinde plans to disburse N500 million fund to youth entrepreneurs in Oyo state.

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#EndSARS: State Governors should have necessary powers to control the Police Force - Seyi Makinde, Seyi Makinde Proposes N3 Billion plan for water supply
Oyo State Government has directed that a N500 million MSME fund be set up to fund youth entrepreneurs in the State with bright business ideas.
This was disclosed by Governor Seyi Makinde while speaking at the Post-Protest Meeting with Traditional Rulers and other Stakeholders, held at Agodi, Ibadan.
According to the Governor, the fund will provide further employment and improve the economic landscape in Oyo State.

The Governor also approved N500 million as compensation to victims of police brutality and injustice. This fund is to encourage anyone who has suffered any form of injustice in the past or as a result of the #EndSARS protests.
He said, “I have directed that a N500 Million MSME fund be set up. This fund will be disbursed to youths who have bright entrepreneurial ideas that will provide further employment and improve the economic landscape in Oyo State.”
Let me also state that we have set up an initial Five Hundred Million Naira (N500million) Compensation Fund for victims of injustice.
“So, I encourage everyone who has suffered any form of injustice in the past or as a result of the #EndSARS protests, to please take advantage of the platforms we have provided to log their cases.
“We have an email service and a direct reporting portal on the Oyo State Government website. A judicial panel for Oyo State will be inaugurated in the next one week to look into cases of injustice.”
He stated further, “We know that the protests have been a result of simmering anger among the youths. We are aware of the economic situation, especially the reduced income of many due to the COVID-19 pandemic and also the general unemployment situation in the country. Let me reassure you that we will continue to prioritize actions that will positively impact the youths.”

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ENDSARS

VP Osinbajo leads Committee to address unemployment, poverty among others

The National Economic Council (NEC) is ready to address the concerns of youths and Nigerians at large.

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After over four hours of deliberations at the emergency meeting of the National Economic Council (NEC), a Committee was set up to meet the needs and demands of Nigerian youths behind the #EndSARS protests. The head of the Committee is Vice President Yemi Osinbajo.

This information is contained in the circular issued by the National Economic Council and shared by Laolu Akande, the Senior Special Assistant-Media & Publicity to the Vice President.

According to Akande, the Joint Committee was consequently set up by Osinbajo, SAN, to work with State governments represented by the Governors of Ebonyi, Ondo, Niger, Delta, Borno and the Sokoto States to implement the resolutions of the emergency meeting.

The National Executive Council during the meeting affirmed an unequivocal belief and assurance that most members of the nation’s security personnel are law-abiding and are capable of restoring law and order in the country.

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What you should know

The Joint Committee set-up by the NEC, to see to the implementation of the following frameworks and the given objectives:

• Framing of a new security and stability architecture for the country.

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• A framework of engagement with the youths, civil society, and religious leaders, in a bid to promote national unity.

• A framework to engage with security agencies that will devolve more control to State governors who are the chief security officers of their states.

• A framework for the Federal Government to provide compensation for those who have incurred losses in the last few weeks.

• A social security framework for the youths and Nigerians to deal with the problem of unemployment and poverty in the country.

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