Investing in paperless operations pays off: Berger CFO

During the months of the Covid-19 shutdown, Berger Paints Bangladesh Limited restricted the entry of external auditors, other stakeholders and even its own officials to its office.

Instead, the multinational paint company gave its auditors online access to the ERP system so that they could get relevant information required for conducting a financial audit. It had its audit completed in less than two months, the fastest in the history of Bangladesh. The auditor, EY Bangladesh, meticulously completed the procedure within the digital environment.

"The pandemic has been an eye-opener for us all. It has proved that investment in information technology and efforts for paperless operations actually pays off," said Sazzad Chowdhury, director and chief financial officer of Berger.

In a recent interview with The Business Standard, the chartered accountant–with his nearly three decades of experience working with renowned companies like Unilever, British American Tobacco, Karnaphuli Fertiliser Company Limited, and Novartis–shared his thoughts on the utility of technology and financial strategy during a crisis.

He also revealed his views on the ways a company can become a market leader, and gave an overview of and outlook for the paint industry.

Berger has long been one of the most technology-oriented companies in the country. Its state-of-the-art technology infrastructure has always enabled the transaction system, management information system and internal controls to be more robust and agile, said Sazzad.

When the pandemic began in Bangladesh in March, Berger did not have to invest any additional money in IT to adjust to the new normal. It had already invested in an electronic approval process, which was further delegated down the line, based on individual needs; to ensure smooth functioning of the approval process yet maintaining a strong control environment.

A paper-based approval system involves some face-to-face interactions. Since it was missing during the initial days of the pandemic, the whole system required some modification. Eventually, everyone adjusted to the new system.

The biggest challenge was human interaction. However, online conversations among team members helped everyone overcome that.

According to Sazzad, good governance within an organisation matters more when technology-based operations dominate. He firmly believes that paperless operations will continue to increase even after the pandemic is over as it is more efficient and less bureaucratic.

Alongside investing in growth and sustainability, Berger will continue to invest more in IT for faster responses to any challenges in the upcoming days, he said. 

Financial strategy during a pandemic

Like construction and various other industrial sectors, the paint industry in Bangladesh experienced a downturn at the beginning of this year. The ongoing pandemic and the shutdown in the months of April and May pushed the company to incur a net loss in April.

However, with the partial reopening of the economy, the company managed to bring profits back in May and June. As the lockdown was in effect in March and April, April-June quarter sales almost halved compared to the same period of the previous year. However, the company has managed to post some profits that helped it create value for shareholders even in the worst quarter in business.

The prudent and responsible financial strategy helped the company in this regard as it simply deferred unnecessary costs.

"It was cost avoidance for the time being. Eventually, it helped us save the bottom line as revenue was declining while we fixed other unavoidable costs," said the Berger director.

The company did focus on cost optimisation but did not go for cost cutting. Being a responsible corporate body, it did not resort to job or pay cuts either. Rather, it spent more on the wellbeing of its employees and provided moral support to employees and stakeholders during the pandemic.

"Cost optimisation helped us offset adversity. Instead of sending small consignments frequently, the company sent larger ones to reduce the frequency of trips," Sazzad explained.

What a company needs to lead the market

The paint industry in Bangladesh has been growing at an average rate of 8-9% for the last couple of years, complementing average GDP growth. However, Berger's growth has been more than 10% on average for the last couple of years, indicating its expanding market share.

"Brand value and continuous quality assurances have been the most important factors for the company. Everyone recognises Berger as the best paint company in Bangladesh, and that reputation was not built in a day. With its diversified portfolio, research and development, best product offerings, commitment to customer satisfaction, agility to respond to market requirements– everything played a role," said Sazzad.

Berger maintains a diverse array of products with a significant portfolio of all types of decorative and industrial paints, which are best suited for the top- and mid-tier of the market. It keeps innovating and bringing new products to the market every year. Its two joint ventures–Berger Becker Bangladesh Limited and Berger Fosroc Limited–offer coil coatings and construction chemicals, respectively.

"Customers believe that Berger means quality, durability and transparency," Sazzad said.

The company recently entered into an agreement with Japanese Chugoku Marine Paints to manufacture marine paints of international standards for the first time in Bangladesh.

For a company to become a corporate entity like Berger, a good management team is a prerequisite. Berger has remained the first choice as an employer in the country for decades. An excellent corporate environment and the culture to celebrate performance secure the dedication and commitment of team members.

Many employees who started their career at Berger have stayed there for years. That has also been the case for the company's leadership team. The continuity of leadership had a remarkable impact on the company's ability to retain outstanding performance over the recent decade.

The managing director and board members are also giving motivation and guidance to the management team to keep the company on track, said Sazzad. The board comprises seasoned professionals having diverse experiences in major functional areas.

Industry overview and outlook

As the economy is quickly recovering from an extended lockdown, the annual demand for paint should not fall, said Sazzad.

He said the Tk4,000 crore market for the paint and coating industry of Bangladesh is likely to remain flat, or grow marginally, in the current fiscal year. However, a lot depends on how the weather behaves in the next couple of months.

In the next five years, the industry may see a growth in line with that of GDP or may surpass it.

Sazzad said 78-80% of the current local demand comes from the decorative category that includes building and interior painting, and repainting. The category will dominate the demand for at least the next three to five years.

The rest of the demand is for industrial paints, wood coating, vehicle painting, printing ink, and other new dimensions that continue to emerge.

Meanwhile the demand for marine and textile chemicals will also grow at a higher pace, believes the Berger director.