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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 company’s 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 company’s
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 2005 2006 2007 2008 2009


Current 1.83 1.91 times 1.53 times 1.45 time 1.62 times
Ratio
Acid Test 1.16 0.91 times 0.65 times 0.529 times 0.995 times
Ratio
In the year 2009, the company’s Current Assets were 1.62 times higher than its Current
Liabilities. The company’s 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 company’s current assets excluding the inventories were 0.995
times of its current liabilities. The company’s 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 2005 2006 2007 2008 2009


Inventory 3.94 4.51 times 3.91 times 4.55 times 5.598 times
Turnover
Ratio
Total Asset 1.60 2.23 times 2.15 times 2.59 times 2.21 times
Turnover
Ratio
Fixed Asset 5.83 6.07 times 6.15 times 6.9times 6.63 times
Turnover
Ratio
Average 28 Days 23 days 23 days 17 days 20 days
Collection
Period
Average 58 days 53 days 61 days 55 days 76 days
Payment
Period

In the year 2009, the company has sold out and restocked its inventories 5.598 times. The
company’s 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, company’s 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 2005 2006 2007 2008 2009


Debt to 46% 39.13% 46.28% 47.5% 44.8%
Asset Ratio
Times 17.64 Times 38.56 Times 27.39 times 31.11 times 214.36
Interest times
Earned

In the year 2009, 44.80% of the total assets were financed by the creditors. The
company’s 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 2005 2006 2007 2008 2009


Gross Profit 34.37% 32.85 % 32.27% 30% 35%
Margin
Net Profit 11.77% 10.93% 9.62% 8.9% 10.9%
Margin
Return on 18.80% 24.32% 20.70% 23.1% 24.06
Asset
Return on 51.74% 39.41% 38.53% 44.01% 43.7%
Equity

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%. That’s why company’s 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%. That’s why company’s 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 2005 2006 2007 2008 2009


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

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.
Company’s 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, company’s 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
company’s 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 company’s
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 company’s 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) Liquidity Ratio:

(i) 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) Asset Management Ratio:

(i) 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) Debt Management Ratio:

(i) 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) Profitability Ratio:

(i) 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) Stock Market Ratio:

(i) EPS= Net Income Available to common stockholders/ Total no. of common
shares outstanding
= 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

Working of 2006:

(1) Liquidity Ratio:

(i) 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) Asset Management Ratio:

(i) 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) Debt Management Ratio:

(i) 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) Profitability Ratio:

(i) 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) Stock Market Ratio:

(i) EPS= Net Income Available to common stockholders/ Total no. of common
shares outstanding
= 313877000 / 23188940
= 13.54 per share
(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) Liquidity Ratio:

(i) 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) Asset Management Ratio:

(i) 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) Debt Management Ratio:

(i) 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) Profitability Ratio:

(i) 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) Stock Market Ratio:

(i) EPS= Net Income Available to common stockholders/ Total no. of common
shares outstanding
= 339351000 / 23188940
= $14.63 per share

(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) Liquidity Ratio:

(i) 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) Asset Management Ratio:

(i) 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) Debt Management Ratio:

(i) 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) Stock Market Ratio:

(i) EPS= Net Income Available to common stockholders/ Total no. of common
shares outstanding
= 400660000 / 23188940
= 17.28per share

(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) Liquidity Ratio:

(i) 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) Asset Management Ratio:

(i) 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) Debt Management Ratio:

(i) 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) Profitability Ratio:

(i) 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) Stock Market Ratio:

(i) EPS= Net Income Available to common stockholders/ Total no. of common
shares outstanding
= 579681000 / 23188940
= $25 per share

(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