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Olympic Industries—the largest biscuit manufacturer and supplier in Bangladesh— faced drop its quarterly profit due to rising imported raw material costs and escalating price of commodities.
In the first nine months from July to March of the fiscal 2021-2022, its net profit declined by 36 per cent to Tk 102.37 crore. The figure was Tk 159.06 crore in the same period of the previous fiscal year.
The company's profit in the first three quarters of the current fiscal was the lowest in the last seven fiscal years as the prices of ingredients used in its products have jumped sharply in recent times, said the EBL Securities in a note.
In recent quarterly declarations, it suffered a significant decrease in profitability margins due to costlier procurement of imported raw materials, primarily used in biscuit and bakery manufacturing, including flour, sugar, and edible oil, and the escalating price of commodities, it said.
Materials consumed accounted for 85 percent of total cost of goods sold in FY21.Thus, the gross profit margin fell to 24.4 percent in FY22, down from 31.4 percent on average over the previous three years, according to the brokerage firm’s analysis.
Additionally, a 30 per cent year-on-year increase in sales and distribution expenses has led to further erosion of operating profit margin to 8 per cent in FY22 as against 16.4 per cent on average in the last three years.
As a result, the net profit margin has fallen to 6.4 percent, down from 12.6 percent on average over the last three years, according to the analysis.
As per company’s financial statements, Olympic Industries experienced a 28 per cent profit drop in the July-September (first) quarter of FY22 in the same period a year earlier.
The company's earnings per share (EPS) was down to Tk 2.06 from Tk 2.85 during the period.
In the January-March quarter of FY22, the company's revenue rose by 27 per cent to Tk 561.02 crore from Tk440.03 crore, and its profit declined by 41 per cent to Tk30.25 crore from Tk51.69 crore in the same period of the previous fiscal.
In recent fiscal measures, the government continued the policy of raising the import duty of raw and refined sugar to 30 per cent from the previous rate of 20 per cent.
Customs duty on the manufacturing of milk powder had been increased from the previous rate of 5 per cent to 10 per cent, and also regulatory duty had been increased to 20 per cent from the existing 10 per cent on the maize starch and manioc starch, which may contribute to the rising input costs of production.
Olympic has a noodle production line with an initial capacity to produce 9,000 metric tons, which was launched in May 2018, at a time when the instant noodles market was already crowded with giants i.e. Nestle (Maggi), Unilever (Knorr), New Zealand Dairy (Doodles), Pran (Mr. Noodles), and Kallol Thai President Foods (Mama). The segment is yet to contribute significantly in the total revenue of the company, said the EBL Securities study.
Recently, the media reported that the management of Olympic Industries owned by Aziz Mohammed Bhai has expressed intentions to sell Olympic Industries, but parties could not agree on the overvalued share price of the company in the capital market.
Such speculation has eroded investors' confidence in the company, resulting in a substantial price correction.
The company’s share price was on August 9, 2021, at Tk 179.6, which declined 6.87 per cent to Tk 132.9 on Monday on the DSE.
Olympic Industries was listed in 1989 on the DSE and its popular brands include Energy Plus, Tip, Nutty, First Choice, and Hilux.
The company engages in the manufacturing and retailing of consumer goods, particularly branded biscuits and confectionary items, and batteries.
In terms of market share, Olympic Industries ranks first among the manufacturers, accounting for 22 per cent of the entire market share in the snacks industry and around 40 per cent of the auto biscuit manufacturing industry.
