Dated: April 30th, 2006 Mr. Riyashad Ahmed (RyA) Faculty School of Business, North South University, Bangladesh.

Baridhara, Dhaka. Subject: Submission of Group Project Report Dear Sir, We were advised to prepare a report on the Financial Performance of Berger Paints Bangladesh Limited. As were advised, we have successfully completed the report Financial Performance of BPBL. It gives us immense pleasure to tell you that working on this report has given us a wide range of exposure. To prepare this report, we have to make intensive analyses of the companys financial performance in last five years. We applied all our knowledge gathered in this course to judge and evaluate the financial condition of the company. This report basically gives an overview the companys performance on the basis of sixteen major financial ratios. We also had to make recommendation as to how the company can improve its performance and whether the company would be a good investment for the stockholders. As this was an actual company project, research was done on an extensive basis. It will be a great honor for us if you require us to explain any sort of queries. Yours Sincerely,

Acknowledgment
Preparing this report was both exciting and hard work at the same time, it is for the first time that we had a real life experience working on an actual company project. We tried our best and helped each other as much as possible. We would like to express gratitude to Mr. Riyashad Ahmed, Lecturer, School of Business, North South University, Bangladesh for providing us with the proper guidance and support.

Executive Summary:

Introduction
Lewis Berger founded Berger in 1760 as a business of producing Dye & Pigments. Soon the business evolved to produce Paints & Coatings which remained the core business of Berger till today.

In 1970, Berger Paints Bangladesh Limited (BPBL) erstwhile Jenson Nicholson set up its paint factory in Chittagong at an estimated investment of TK.4 million. The shareholders were Jenson & Nicholson (J& N), Duncan Macneil & Co Ltd and Dada Group. In August 2000, J& N investment (Asia) Ltd achieved 100% ownership of the company. The head office of the company is Uttara Model Town, Dhaka. BPBL holds 44.7% market share in the Paint Industry. Its nearest competitor is Sagar Chemical and Paint Ind. Ltd., who resides far below market share (13.6%) than BPBL. Other companies are Elite, Asian, Pailac etc. Paints & Coatings are the main product of BPBL. There are some categories of its products. Such as: Decorative Industrial Marine

Financial Performance Analyses

Liquidity Ratios:
Year Current Ratio Acid Test Ratio 2005 1.83 1.16 2006 1.91 times 0.91 times 2007 1.53 times 0.65 times 2008 1.45 time 0.529 times 2009 1.62 times 0.995 times

In the year 2009, the companys Current Assets were 1.62 times higher than its Current Liabilities. The companys Current Assets increased by 47.54% than the Current Assets of 2008, whereas, the Current Liabilities increased by 32.55%. Relative change was higher in assets than liabilities which increased the Current Ratio.

In the year 2009, the companys current assets excluding the inventories were 0.995 times of its current liabilities. The companys assets excluding inventories were 111% higher than of 2008. Whereas, the current liabilities increased by 32.55%. So relative change is higher in assets excluding inventories than the change in liabilities which increases the quick ratio

Asset Management Ratios:

Year Inventory Turnover Ratio Total Asset Turnover Ratio Fixed Asset Turnover 2005 3.94 1.60 5.83 2006 4.51 times 2.23 times 6.07 times 2007 3.91 times 2.15 times 6.15 times 2008 4.55 times 2.59 times 6.9times 2009 5.598 times 2.21 times 6.63 times

Ratio Average Collection Period Average Payment Period

28 Days 58 days

23 days 53 days

23 days 61 days

17 days 55 days

20 days 76 days

In the year 2009, the company has sold out and restocked its inventories 5.598 times. The companys cost of sold increased by 9.11%. So logically, the inventory decreased. That is why the ratio increased in 2009.

In the year 2009, every 1Tk worth of total assets generated 2.21Tk worth of sales. In the year 2009, companys sales increased by 18.53%. Total assets increased by 38.91% which is relatively higher than the change in percentage of sales. That is why total assets turnover decreased.

In the year 2009, every 1Tk worth of fixed assets generated 6.63Tk worth of Sales. C sales increased by 18.53%. Fixed assets increased by 24.42% which is relatively higher than the change in percentage of sales. That is why fixed assets turnover decreased.

In the year 2009, on an average, it took 20 days for the company to collect its Accounts Receivables from the customers. The company sold its products more on credit and thus

the accounts receivable increased by 37.10%. But the daily sales increased by only 18.53% which resulted the DSO to increase in 2009.

In the year 2009, on an average, it took 76 days to make their payments to the creditors. The company purchased more than 50% on credit than previous year which was more than its daily purchase which resulted in increase in Average Payment Period in 2009.

Debt Management Ratios:

Year Debt to Asset Ratio Times Interest Earned 2005 46% 2006 39.13% 2007 46.28% 27.39 times 2008 47.5% 31.11 times 2009 44.8% 214.36 times

17.64 Times 38.56 Times

In the year 2009, 44.80% of the total assets were financed by the creditors. The companys total debt increased by 31.26%, whereas, the total asset increases by 38.9%. As a result the overall debt-to-asset management ratio decreases in the year 2009.

In the year 2009, EBIT was 214.36 times higher than Interest Expense. The companies EBIT increased by 46.92%, whereas its interest expense decreased by 78.68%. As a result the overall times-interest-earned ratio increased in the year 2009.

Profitability Ratios:
Year Gross Profit Margin Net Profit Margin Return on Asset Return on Equity 2005 34.37% 11.77% 18.80% 51.74% 2006 32.85 % 10.93% 24.32% 39.41% 2007 32.27% 9.62% 20.70% 38.53% 2008 30% 8.9% 23.1% 44.01% 2009 35% 10.9% 24.06 43.7%

In the year 2009, the company has earned gross profit of 35Tk for every 100Tk of sales. The companies gross profit increased by 39.34%, on the other hand sales increased by 18.53%. Thats why companys gross profit increased in 2009.

In the year 2009, the company earned Net Profit of Tk 10.9 for every Tk 100 worth of Sales. The companies net profit after tax increased by 44.68% than 2008. Whereas the the sales increased by 18.53%. Thats why companys net profit margin increased in 2009.

In the year 2009, Every Tk100 worth of assets generated Tk24.06 of Net Profit for the company. Analyzing the data, we can see the marginal change in Net Income (44.68%) is slightly higher than marginal change in total assets (38.92%). That is why the increase in ROA is minimal.

In the year 2009, Shareholders earned Tk43.7 out of every Tk100 of investment. Relative change is almost same between Net Income (44.68%) and Total Stockholders Equity (45.84%). This resulted a little increase in ROE.

Stock Market Ratios:

Year Earnings Per Share Market Value to Book Value Price to Earning Ratio 2005 10.77 N/A N/A 2006 $13.54 5.01 times 11.76 2007 $14.63 7.18 times 18.65 2008 $17.28 7.22 times 16.34 2009 $25 10.92 times 24.996

Common Shareholders earned Tk25 for every share they hold. This has increased by TK7 from last year and the change is drastic. The reason is a high amount of change in Net Income (44.68%)

Market value is 10.92 times higher than its book value per share. After staying same in 2007 and 2008, the ratio went to 10.92 times from 7.22 times as the Market Price of the share increased drastically from Tk283.57 to Tk624.90.

Companys shareholders were willing to pay Tk24.99 for each Taka of reported earnings. As the Market Price per Share rose more than 120% the change in P/E Ratio is also bigger.

Recommendation:
BPBL has completed a successful financial year in 2009. There have been improvements in every aspect of its financial performance though the company missed out in some. For example, companys assets and liquidity, Return on assets, TIE, Collection Period, EPS and PE Ratio increased remarkably. Whereas, efficiency of assets and Return on Equity decreased but the decline is not significant. The major change that consolidated the companys position towards the creditors is its ability to pay the debts back. TIE of the company has increased to 214.36 times which before was 31.11 times. The companys shares became lucrative among the people investing the in the share market as the company has managed to show impressive improvement in EPS and PE ratio. We think buying shares from BPBL would be profitable for the shareholders as the demand of this companys shares and the price is increasing significantly day by day. Though ROE has decreased but the decline is too little to be worried about and past years show enough significant evidence about the increase in this ratio. Overall, BPBL is a good investment in our eyes.-

Appendix:
Working of 2005: (1) (i) Liquidity Ratio: Current Ratio= Current Asset/Current Liabilities

= 963768/527422 = 1.83 Times (ii) Quick Ratio or, Acid test Ratio= (Current Assets Inventories)/Current

Liabilities = (963768-353001)/527422 = 1.16 Times

(2) (i)

Asset Management Ratio: Inventory turnover Ratio = COGS/ Inventories = 1392024/353001 = 3.94 Times

(ii)

Total asset turnover Ratio= Sales/ Total Assets = 2121116/1327839 = 1.60 Times

(iii)

Fixed assets turnover Ratio= Sales/ Fixed Assets = 2121116/364071 = 5.83 Times

(iv)

Average Collecting Period= A/R/(Sales/ 365) = 162932/ (2121116/365) = 28 Days

(v)

Average Payment Period= A/P / (COGS/365)

=219352/ (1392024/ 365) = 58 Days (3) (i) Debt Management Ratio: Debt to Asset Ratio= Total Debt / Total Assets =613432/ 1327839 = 46 % (ii) TIE Ratio= EBIT or, Operating Income/ Interest Expense =305585/17325 = 17.64 Times (4) (i) Profitability Ratio: Gross Profit Margin Ratio= (Gross Profit *100)/ Sales = (729092 *100) / 2121116 = 34.37 %

(ii)

Net Profit Margin Ratio= (NPAT * 100)/ Sales = (249660* 100)/ 2121116 = 11.77 %

(iii)

ROA= (NPAT * 100) / Total Assets = (249660* 100) / 1327839 = 18.80 %

(iv)

ROE= (NPAT * 100)/ Total OE

= (249660 * 100)/ 714407 = 34.95 % (5) (i) Stock Market Ratio: EPS= Net Income Available to common stockholders/ Total no. of common = 249660000 / 23188940 = 10.77 per share (ii) M/ B Ratio= Market price per share / BV per share =N/A (iii) P/ E Ratio = Market Price per share/ EPS = N/A

shares outstanding

Working of 2006: (1) (i) Liquidity Ratio: Current Ratio= Current Asset/Current Liabilities = 817325/428350 = 1.91Times (ii) Quick Ratio or, Acid test Ratio= (Current Assets Inventories)/Current

Liabilities = (817325-427690)/428350 = 0.91Times

(2) (i)

Asset Management Ratio: Inventory turnover Ratio = COGS/ Inventories = 1928861/427690 = 4.51 Times

(ii)

Total asset turnover Ratio= Sales/ Total Assets = 2872447/1290393 = 2.23 Times

(iii)

Fixed assets turnover Ratio= Sales/ Fixed Assets = 2872447/473068 = 6.07 Times

(iv)

Average Collecting Period= A/R/(Sales/ 365) = 182061/ (2872447/365) = 23 Days

(v)

Average Payment Period= A/P / (COGS/365) = 280571/ (1928861/ 365) = 53 Days

(3) (i)

Debt Management Ratio: Debt to Asset Ratio= Total Debt / Total Assets = 504882/ 1301275 = 38.80%

(ii)

TIE Ratio= EBIT or, Operating Income/ Interest Expense = 422208/ 10949 = 38.56 Times

(4) (i)

Profitability Ratio: Gross Profit Margin Ratio= (Gross Profit x 100)/ Sales = (943586 x 100) / 2872447 = 32.85%

(ii)

Net Profit Margin Ratio= (NPAT * 100)/ Sales = (313877* 100)/ 2872447 = 10.93%

(iii)

ROA= (NPAT * 100) / Total Assets = (313877* 100) / 1290393 = 24.32%

(iv)

ROE= (NPAT * 100)/ Total OE = (313877 * 100)/ 736393 = 39.41%

(5) (i)

Stock Market Ratio: EPS= Net Income Available to common stockholders/ Total no. of common = 313877000 / 23188940 = 13.54 per share

shares outstanding

(ii)

M/ B Ratio= Market price per share / BV per share =159.20/31.76 =5.01times

(iii)

P/ E Ratio = Market Price per share/ EPS =159.20/13.54 = 11.76

Working of 2007: (1) (i) Liquidity Ratio: Current Ratio= Current Asset/ Current Liabilities = 1054927000/687962000 = 1.53: 1 or, 1.53 Times (ii) Quick Ratio or, Acid test Ratio= (Current Assets Inventories)/Current

Liabilities = (1054927000-610901000)/687962000 =444026000/687962000 = 0.65: 1 or, 0.65 Times

(2) (i)

Asset Management Ratio: Inventory turnover Ratio = COGS/ Inventories = 2389231000/610901000 = 3.91 Times

(ii)

Total asset turnover Ratio= Sales/ Total Assets = 3527759000/1639332000 = 2.15 Times

(iii)

Fixed assets turnover Ratio= Sales/ Fixed Assets = 3527759000/574007000 = 6.15 Times

(iv)

Average Collecting Period= Accounts Receivable /(Sales/ 365) = 222791000/ (3527759000/365) = 23 Days

(v)

Average Payment Period= Accounts Payable / (COGS/365) = 404318000/ (238923000/ 365) = 61 Days

(3) (i)

Debt Management Ratio: Debt to Asset Ratio= Total Debt / Total Assets = 758665000/ 1639332000 = 46.28%

(ii)

TIE Ratio= EBIT or, Operating Income/ Interest Expense = 454553000/ 16590000 = 27.39Times

(4) (i)

Profitability Ratio: Gross Profit Margin Ratio= (Gross Profit * 100)/ Sales

= (1138528000* 100) / 3527759000 = 32.27%

(ii)

Net Profit Margin Ratio= (NPAT * 100)/ Sales = (339351000* 100)/ 3527759000 = 9.62%

(iii)

ROA= (NPAT * 100) / Total Assets = (339351000* 100) / 1639332000 = 20.70%

(iv)

ROE= (NPAT * 100)/ Total OE = (339351000* 100)/ 880667000 = 38.53%

(5) (i)

Stock Market Ratio: EPS= Net Income Available to common stockholders/ Total no. of common = 339351000 / 23188940 = $14.63 per share

shares outstanding

(ii)

M/ B Ratio= Market price per share / BV per share

Book Value per Share= Total number of common shareholders equity/ Total number of common shares outstanding =880667000/23188940

=$37.98 M/ B Ratio=272.81/37.98 =7.18 times (iii) P/ E Ratio = Market Price per share/ EPS =272.81/14.63 = 18.65

Working of 2008: (1) (i) Liquidity Ratio: Current Ratio= Current Assets/ Current Liabilities = 1087648/749044 = 1.45: 1 or, 1.45 Times (ii) Quick Ratio or, Acid test Ratio= (Current Assets Inventories)/Current

Liabilities = (1087648-691179)/749044 = 0.53: 1 or, 0.53 Times

(2) (i)

Asset Management Ratio: Inventory turnover Ratio = COGS/ Inventories = 3149240/691179 = 4.55 Times

(ii)

Total asset turnover Ratio= Sales/ Total Assets = 4499206/1734093 = 2.59 Times

(iii)

Fixed assets turnover Ratio= Sales/ Fixed Assets =4499206 /646445 = 6.09 Times

(iv)

Average Collecting Period= A/R/(Sales/ 365) = 214200/ (4499206/365) = 17.37 days.

(v)

Average Payment Period= A/P / (COGS/365) = 476748/ (3149240/ 365) = 55 days

(3) (i)

Debt Management Ratio: Debt to Asset Ratio= Total Debt / Total Assets = 823889/1734093 = 47.5%

(ii)

TIE Ratio= EBIT or, Operating Income/ Interest Expense = 530,373/17,051 = 31.11times

(4)

Profitability Ratio:

(i)

Gross Profit Margin Ratio= (Gross Profit)/ Sales = (1349966) / 4499206 = 30%

(ii)

Net Profit Margin Ratio= (NPAT *100)/ Sales = (400660* 100)/ 4499206 = 8.9%

(iii)

ROA= (NPAT * 100) / Total Assets = (400660* 100) / 1734093 = 23.1%

(iv)

ROE= (NPAT * 100)/ Total OE = (400660* 100)/910304 = 44.01%

(5) (i)

Stock Market Ratio: EPS= Net Income Available to common stockholders/ Total no. of common = 400660000 / 23188940 = 17.28per share

shares outstanding

(ii)

M/ B Ratio= Market price per share / BV per share =283.57/ (910304000/23188940) =7.22 times

(iii)

P/ E Ratio = Market Price per share/ EPS

=283.57/17.28 = 16.41

Working of 2009 (1) (i) Liquidity Ratio: Current Ratio= Current Assets/ Current Liabilities = 1604688000/992824000 = 1.62: 1 or, 1.62 Times (ii) Quick Ratio or, Acid test Ratio= (Current Assets Inventories)/Current

Liabilities = (1604688000-616622000)/992824000 = 0.995: 1 or, 0.995 Times

(2) (i)

Asset Management Ratio: Inventory turnover Ratio = COGS/ Inventories = 3451939000/616622000 = 5.598 Times

(ii)

Total asset turnover Ratio= Sales/ Total Assets = 5333002000/2409097 = 2.21 Times

(iii)

Fixed assets turnover Ratio= Sales/ Fixed Assets = 5333002000/804409000 = 6.63 Times

(iv)

Average Collecting Period= A/R/(Sales/ 365) = 293674000/ (5333002000/365) = 20 Days

(v)

Average Payment Period= A/P / (COGS/365) = 717799000/ (3451939000/ 365) = 76 Days

(3) (i)

Debt Management Ratio: Debt to Asset Ratio= Total Debt / Total Assets = 1081435000/ 2409097000 = 44.8%

(ii)

TIE Ratio= EBIT or, Operating Income/ Interest Expense = 779,204,000/ 3635000 = 214.36 Times

(4) (i)

Profitability Ratio: Gross Profit Margin Ratio= (Gross Profit * 100)/ Sales = (1881063000* 100) / 5333002000 = 35%

(ii)

Net Profit Margin Ratio= (NPAT * 100)/ Sales

= (579681000* 100)/ 5333002000 = 10.9%

(iii)

ROA= (NPAT * 100) / Total Assets = (579681000* 100) / 2409097000 = 24.06%

(iv)

ROE= (NPAT * 100)/ Total OE = (579681000 * 100)/ 1327662000 = 43.7%

(5) (i)

Stock Market Ratio: EPS= Net Income Available to common stockholders/ Total no. of common = 579681000 / 23188940 = $25 per share

shares outstanding

(ii)

M/ B Ratio= Market price per share / BV per share

Book Value per Share= Total number of common shares outstanding / Total number of common shares outstanding =1327662000/23188940 =$57.25 M/ B Ratio=10.92 times (iii) P/ E Ratio = Market Price per share/ EPS =624.90/25 = 24.996