Following aggressive marketing innovations and corporate restructuring embarked upon by the management of Berger Paints Plc, experts have predicted a rise in the company’s revenue as against gloomy projections for the paint manufacturing sector for 2015.
According to experts at Fulfilgate, a research firm, Nigerian manufacturing companies have been projected to witness a decline in sales volume by five per cent in 2015 from N48.5 billion to N46.1 billion as a result of growing contraction in consumer spend during the year.
However, the analysts noted that Berger Paints Plc may defy all industry odds and have positive sales growth of 10per cent in 2015 from N3b to N3.3b, as a result of aggressiveness, marketing innovations and corporate restructuring embarked upon by the management, which now yield good dividends.
In a statement made available to reporters, the experts stated that “analysis of the Paint industry shows that while industry’s cost grew year-on-year between 2012 and 2014, sales growth was flat at 9 per cent during the period, resulting in the industry’s profit growth shrinking from 33per cent in 2013 to 19per cent in 2014.
“The industry’s ratio of cost of sales to revenue dropped from 56per cent to 54per cent and 52per cent in 2012, 2013 and 2014 respectively while the ratio of other costs to revenue was 30per cent in 2012, dropped marginally to 29per cent in 2013 and remained flat at that rate in 2014. Industry’s cost of sales grew year-on-year in volume by 3per cent in 2013 from 2012 figures and by 6per cent in 2014, while other costs grew by 4per cent in 2013 and 10per cent in 2014. Total expenses grew by 3per cent and 7per cent in 2013 and 2014 respectively”.
Reviewing Berger Paints’ three year average, the analysts stated that it spent N0.58 on raw materials and packaging to generate N1 of sales but spent N0.94 as total cost to generate N1 of sales as against the industry average of N0.54 and N0.83 respectively.
“Whilst the industry spent N0.29 in other costs apart from cost of sales to generate N1 of sales and which has remained flat in the 3 year period being reviewed, the company’s spending this category was N0.36 to generate N1 of sales.
“In line with the industry’s trend of rising total expenses year-on-year, Berger Paints Plc is forecasted to record increase in its Total Expenses by 9per cent to N3.153b in 2015 and thereafter by 11per cent. Analysts at Fulfilgate therefore opined that if the current trend is allowed to continue by the management of the company, even though, the company is estimated to grow revenue by 10per cent, its profitability is not likely to improve as the ratio of Operating Profit to Sales is projected to be at 10per cent in 2015 and is further forecasted to drop to 7per cent by 2019.
“The company is however advised to take bold and strategic decision to radically embark on and implement Cost Optimisation Programme that will see it more efficient in spending and achieving enhanced value for its stakeholders”, the analysts added.
Posted by: thebrandradioblog.