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95% of listed Bangla textile firms post weak earnings

Feb '20
Pic: Shutterstock
Pic: Shutterstock
Most listed textile companies in Bangladesh declared poor financial results for the July-December period last year due to declining product prices, increased financial cost, overvalued local currency and rise in production cost, according to the Dhaka Stock Exchange data. The cost of utility bills has also been on the rise that raised production cost.

Of the 53 such firms that have declared financial results recently, only nine were able to post profit growth while nine declared loss and the rest 31 witnessed a sharp fall in profits in July-December 2019 compared to that in the same period of the previous year, the data revealed.

Factory owners claimed that the new wage structure raised expenses of their companies as the latest readymade garments (RMG) wage board set the minimum wage at Tk 8,000 and implemented the wage structure in December 2018, according to a Bangla newspaper report.

Despite all the investments made in workplace safety, compliance, implementation of new wage structure and green industrialisation, the unit price remained significantly lower, said company officials.

Expert said that Bangladesh was losing its competitive edge in the global arena as the exchange rate had remained high for a long time while the competing countries had devalued their currencies to gain share on the international market.

Lending rates to businesses in Bangladesh are high in terms of international standards that subsequently increased financial cost, they said.

Experts said the devaluation of the local currency, attracting foreign direct investment and adoption of new technology were important factors that could help keep the country’s RMG sector competitive in the global market.

The companies who saw profit growth during July-December last year were Rahim Textile Mills, HR Textile, Metro Spinning, Maksons Spinning Mills, Malek Spinning, Paramount Textile, Hwa Well Textiles, VFS Thread Dyeing, ML Dyeing and Kattali Textile.

On the other hand, Zaheen Spinning, RN Spinning, Toshrifa Industries posted loss during the July-December period compared with that of profits in the same period in the previous year.

Fifteen of the listed textile companies were trading under the ‘Z’ category, which groups low-profile and junk shares, on the stock exchange due to their poor business performance.

Out of 56 listed textile companies, 22 were trading below the face value of Tk 10 per share.

Despite the worse situation in the apparel sector, the Bangladesh Securities and Exchange Commission continued giving approval to textile companies’ initial public offerings without proper assessment, market operators said.

Fibre2Fashion News Desk (DS)

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