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Listed cos feel the pinch of global economic crisis

Number of profit-making entities suffering losses up threefold in Q1, FY23
Niaz Mahmud
06 Dec 2022 00:00:00 | Update: 06 Dec 2022 10:40:04
Listed cos feel the pinch of global economic crisis

As many as 24 publicly traded profit-making companies have joined the club of loss-making entities in the first quarter (July-September) of FY2022-23, compared to the same period of last fiscal year, due to the ongoing global economic crisis caused by the Russia-Ukraine war, appreciation of US dollar against taka and the energy crisis.

During the same period in FY2021-22, only eight publicly listed companies were incurring losses. But the number went up three times, or by 200 per cent, to 24 companies between July and September in FY23.

Currently, 353 companies are listed in the country’s stock exchanges, and 294 of them published their latest quarterly (Jul-Sep 2022) financial reports recently.

Among them, 232 companies made profits. The remaining 62 suffered losses. Of these, 24 are new companies that posted losses, compared with the same period last year.

According to the companies’ statements, a sharp increase in import costs due to the yen’s steep depreciation against the USD resulted in a decrease in their consolidated profit during July-September in FY23.

According to company insiders, production and management costs had started rising in the first months of the fiscal year. Of the companies, seven are from the engineering sector while the others are from the power, textile, finance, insurance, chemical, tannery, and tourism sectors.

The companies that have gone from profit to loss are Walton Hi-Tech Industries, SingerBD, ACI Limited, Baraka Power, Baraka Patenga Power, Apex Tannery, Phoenix Finance, Bay Leasing, Ifad Autos, Runner Automobiles, Legacy Footwear, National Bank, Islamic Finance, Provati Insurance, Peninsula Chittagong, Golden Son, Safko Spinning, BD Thai, Far East Knitting, Prime Textile, Golden Harvest Agro, United Insurance, Rahim Textiles, and Khan Brothers PP Woven Bag Industries.

The local electronics and appliance maker Walton Hi-Tech Industries witnessed a massive setback in its business growth as the electronics giant posted a loss of Tk 46 crore in the first quarter of FY23.

The company said it had suffered losses in the just concluded quarter because of a steep rise in its production costs and other expenses, triggered by the soaring raw materials prices in the global market amid the Russia-Ukraine war. The rising dollar value against the taka also eventually burned through its cashbooks.

The publicly traded large-cap firm posted Tk 281 crore in net profit in the first quarter of FY22.

Meanwhile, the ongoing macroeconomic strains cast a shadow over ACI Limited as the country’s leading business conglomerate posted a net loss of Tk 18.6 crore in the first quarter of FY23.

The listed giant company, however, had registered Tk 30.12 crore in net profit in the first quarter of FY22.

This year-on-year shock in earnings refers to the fact that the company faced a massive blow to its business progress in the latest quarter.

A sharp rise in import costs caused by the steep depreciation of the taka against the USD, unusual hike in raw material prices, surging freight costs and volatile market conditions caused by the Russia-Ukraine war led to the decline in its consolidated earnings and profit in the first quarter of FY22, says the company.

Out of the country’s eight listed power generation companies, seven had registered negative growths in their earnings in FY22. In the first quarter of FY23, two of them — Baraka Power and Baraka Patenga Power Limited — posted losses.

According to market insiders, the companies’ earnings dropped mainly due to the heavily inflated fuel prices in the global market, a significant loss in foreign currency transactions, economic uncertainty and volatility caused by the Russian-Ukrainian war and energy supply shortages.

In the first quarter of FY23, The Peninsula Chittagong hotel’s revenue grew by 65 per cent to Tk 9.55 crore, compared to the same period last fiscal year. But inflation has eaten up its revenue, causing a loss of Tk 3.93 crore, compared to Tk 3.69 crore in profits last year.

“We have to import many products to ensure the quality of service. The higher value of the US dollar has increased the cost. However, in the interest of clients, we have kept the price of the services unchanged. As a result, we’ve had to count losses,” said The Peninsula’s Company Secretary Mohammed Nurul Azim.

Runner Automobiles, the country’s leading bike manufacturer, also reported a loss of Tk 8.93 crore in the first quarter of FY23, compared to the Tk 10.4 crore profits it posted during the same period in FY22.

The company’s Chief Financial Officer Shanat Datta said the depreciation of the taka alone increased the cost of raw materials by more than one-fifth this year, and companies have had to increase prices accordingly. Unit prices increased in a season when buyers were stressed by the fuel price hike and high inflation.