Berger Paints Managing Director/Chief Executive, Mr. Peter Folikwe, has attributed the low demand for products in his sector, to macro-economic challenges in the country. He was addressing the stockbrokers and members of the investing public at the company’s facts-behind-the figures, last week, at the Nigerian Stock Exchange. Ngozi Amuche and Haulat Afolabi were there. Excerpt:
You are in the technical industry and a lot of chemicals are involved. What safety measures have you put in place in your factory and the environment in which you operate?
For safety measures, we are in a regulated industry, for you to have environmental impact assessment, certification; it shows that you have actually gone through all the procedures. Because we are quoted, we are corporate organisation. The likes of NAFDAC are on our neck to make sure those procedures we go through is not cheap but expensive, those are the leverage, we are always trying to do things differently and that is part of the Chairman’s new plan to see how we can assist in regulating the industry
better.
We equally have safety methods, you can’t enter the factory if you are not well kitted even if you are a supplier and you have been there for ages.
The fact still remains that where we have cases of staff who don’t take care of safety, he is punished for it. We have a clinic in-house where we check the health status of all the staff on a weekly basis. At our management meeting, we check even down to headache, we want to know why this man has a headache. Because at the end of the day,
if an employee has a headache, he doesn’t have a healthy company and besides , we keep changing safety equipment time
to time.
How difficult is it to be in business, tell us your challenges?
Raw material importation is a major requirement in that industry because of the level of fractional displeasure of crude in Nigeria. We are still at the very basic level, so most of those raw materials we buy, we need forex to buy them and that is a serious challenge for us. We have been challenged with sourcing for foreign exchange through the Central Bank of Nigeria, but we manage to get some, while some were sourced locally. We have some synergy between local suppliers and ensuring that international suppliers don’t disappoint us as well.
Tell us about your journey so far, from 2017 financial year to
date?
In terms of the operating environment, we all know how 2017 turned out; we have low demand in our sector, particularly in the real estate sector. It has been a very difficult sector because investment in that sector is capital intensive, so we found out that there was a drop in demand for our product. Although in spite of that,
we tried to look out for a leverage and again, there is a lot of leverages in the sector where we have a lot of small players who actually used price as a basis for competing and because of the economy, quite a number of consumers had this capacity towards prices that are
higher.
Apart from that, paint industry revenue marginally grew by 7per cent in 2017 and in terms of Gross Domestic Product contributions; the sector is still at 0.03 per cent. We have two main categorizations of players in the industry, we have the formal sector and the unorganized sector and they control quite a number of volumes in
that industry.
However, we in the formal organized sector, contribute about 60 to 65 per cent of the sector and in terms of pay consumption in Nigeria compared to South Africa, per capita in Nigeria is a bit lower. There are about 2.8 per capita while in South Africa it’s about 5.6 in basis of comparison.
To what extent have you addressed your franchise model, and how have you been able to control your franchise chain. What does it portray in the bottom line?
About the franchise, frankly in the Nigerian context, to do franchising is a difficult process to go through but I’m telling you that Berger Paints has successfully done that. But I can tell you that the core of our production still
resides in Berger Paints. However, in the process, the cause of how we need to meet with customer service, we have basis that will be produced sitting at that outlet.
In terms of our strategic outlook, our focus in the short term would be to increase earnings and profitability because it is our choice to make sure that we make profit for our shareholders
What is your outlook for the next financial year?
In terms of our strategic outlook, our focus in the short term would be to increase earnings and profitability because it is our choice to make sure that we make profit for our shareholders. We have to leverage it with support from government in ensuring that we have the industry properly regulated because one of the challenges the
industry faces is the poor regulation on the part of government to ensure that the unsuspecting consumer does not buy substandard products. We do all we can with the new equipment to ensure that Nigerians buy the right paints not what they called the imported
paints.
We grew our production output because that is very critical, as you grow, your market volume, market space, you need to grow your production volume and the POS machine is on the trail of that. We empower our route to market, our OBB’s is our source business partners, and we just have to empower them such that we credit anything that can help them
buy more.
