Over 100 listed cos fear heavy losses

More than 100 publicly traded companies from the manufacturing and service sectors are fearing heavy losses following the government announcement to hike retail gas prices for industries, power plants and commercial establishments.

The government on Wednesday hiked retail gas prices by 14.5 per cent to 179 per cent which is scheduled to come into force in February.

This staggering increase blindsided industrialists across the country already grappling with a looming global recession.

Four other consumer categories—household, fertilizer, the tea industry, and compressed natural gas— however, did not see any change in their rates but were bracing for multiple impacts from the price hike.

The hike in gas prices came just after six days of retail price hike of electricity. On January 12, the government increased retail power prices by 5 per cent.

Earlier, the Bangladesh Energy Regulatory Commission (BERC) in June last year, raised the average gas prices by 22.78 per cent for retail consumers, except for CNG-run vehicles, in the country.

Out of the listed companies, at least 130 companies belong to the manufacturing sector, such as RMG, cement, ceramics, engineering, and tannery while, nine other companies come from the real estate and the service sectors, according to the Dhaka Stock Exchange (DSE) data.

Talking to The Business Post, industrialists said this was not the right time to increase gas prices. The government hiked gas and electricity prices at a time when we are facing severe order shortages. It is a suicidal decision, they added.

“Many factories do not have work orders since February or March last year due to the ongoing global economic crisis posed by the Russia-Ukraine war. But the government has hiked gas and electricity prices at this crucial time, which would surge the production cost manifold.”

“If the production costs rise, the number of work orders would also dwindle further. We would think about our next steps to do after discussing the matter with other industrialists,” many industry owners told The Business Post wishing to remain unnamed.

All these listed companies were now anticipating a massive decline in their revenues and earnings in the coming quarters which would be the highest since the Covid-19 pandemic began, according to capital market insiders.

The coronavirus pandemic had cast a negative impact on the revenue and net income of companies in the manufacturing and service sectors. Investors would again see the dark in their eyes if companies display poor performance due to the massive rise in their production costs, they said.

Meanwhile, some listed companies have suspended their production due to the lack of demand and disruption in the global supply chain.

Besides, stocks faced a major pause in recovery amid a sharpened selloff by profit bookers on Wednesday as soon as the news of the gas price hike came.

Household users are yet to pay more, while commercial users like hotels and restaurants would face the least price jump of 14 per cent.

On the other hand, power producers are set to pay 179 per cent more for their gas usage, while industries would pay 150 per cent to 178 per cent more, while the gas factories used in captive power generation would become 88 per cent costlier from 1 February next.

The sharp rise in the key industrial fuel prices would hurt manufacturers’ profitability on a large scale, analysts fear.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said they recently wrote to the government expressing willingness to pay additional rates if the gas supply was uninterrupted. But if the supply does not improve, then the industry would not be able to survive.

Anwar-ul Alam Chowdhury, chairman of Evince Textiles Limited, a publicly traded company, said it would be very tough for industries to sustain as the inflated gas price would impact the cost of production, reducing their competitiveness in the global market.

“Exports would decline and foreign exchange reserves would also be impacted. The same could happen for domestic sales as well because the price of products would increase, shrinking the consumer purchasing capacity,” he added.

Mohammad Ali Khokon, chairman of Maksons Spinning Mills, said, “Such a price jump would double our production costs. The government has increased gas prices, but it is not clear whether we would get an uninterrupted gas supply.”

He is also the president of the Bangladesh Textile Mills Association.

As many as 24 publicly traded profit-making companies joined the club of loss-making entities in the first quarter (July-September) of the current 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 the fiscal year 2021-22, only eight publicly listed companies joined the loss-making rally. This figure refers to that the number went up three times, or 200 per cent, 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.

Of them, 232 companies reported year-on-year profits, while the remaining 62 suffered losses. Of the 62 companies, 24 were new to joining the club.

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 were from the engineering sector while the others were from the power, textile, finance, insurance, chemical, tannery, and tourism sectors.

The companies that moved from profit to losses included 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.