Apr 2007 Financial News

Berger Paints Limited Releases 2006 Year End Results

Apr 19, 2007

Results for the year ended December 31, 2006

For the year ended December 31 2006, Berger Paints Limited (BER) reported a Loss of $1.401 million. This represents a fall of $2.631 million or 213.87 per cent from the previous financial year and converts to a Loss Per Share of $0.27. At the end of the first half of fiscal 2006, a Loss Per Share of $0.45 was reported and as such, a minimal gain was realized between the half year and year end results of $0.18.

Revenues amounted to $45.247 million for fiscal 2006, an increase of $6.499 million or 16.77 per cent compared to the corresponding period for 2005. According to the Chairman, this significant growth was due to lucrative marketing launches of new products resulting in successful product integration both in the local and domestic markets.

While healthy sales revenues were recorded for the year, these figures were diluted by high increases in Raw Material Input costs as Cost of Sales rose by 23.03 percent or $5.683 million to $30.358 million. This lead to a lower increase in Gross Profit which amounted to $14.889 million for fiscal 2006, an increase of 5.80 per cent or $0.816 million from the prior year.

Rising Operating Expenses stood at $16.045 million for fiscal 2006 and was up by 15.62 per cent or $2.168 million on the comparable period in 2005. Included in this was Marketing and Customer Service Expenses which totaled $0.874 million for fiscal 2006, up 119.09 per cent or $0.475 million from the previous period. Additionally Advertising and Promotion Expenses increased by $0.816 million to $2.445 million or 50.13 per cent from fiscal 2005. The Chairman however stressed that these high Advertising and Promotional costs were not expected to recur in the next fiscal year. This ultimately resulted in an Operating Loss for fiscal 2006 of $1.156 million. This figure represents a significant fall of 693.33 per cent from fiscal year 2005’s Operating Profit of $0.195 million.

The Chairman in his review has stated that the profitable gains expected from the heavy expenditure for the year will not be recognized until a future date and is optimistic that these returns will be realized from the initiatives undertaken.

Given these results we are forecasting an Earnings Per Share (EPS) of $0.07 for fiscal 2007. At this forecasted EPS and the current price of $3.40, BER is trading at a price to earnings multiple of 48.57 times. Thus, we continue to recommend a SELL on this share.

The Board of Directors has recommended a dividend of 19 cents per share, which is equal to the dividends paid for fiscal 2005.

Nancy Chen
WISE Research Team
Thursday April 19, 2007