Strong dollar, production cost surge eat up Walton’s profit

An appalling surge in production cost coupled with a constant depreciation of the domestic currency as well as high inflation ate up the profits of the local electrical and electronics appliance giant Walton Hi-Tech Industries in the first half of the current fiscal year.

The publicly traded electrical and electronics appliance maker posted a 97 per cent year-on-year plunge in its net profit in the July-December period of the fiscal year 2022-23.

The listed company reported a net profit of Tk 14.36 crore in the first half of FY23 against a profit of Tk 446.14 crore in the same period last fiscal year.

The local giant figured out that the price hike of raw materials, higher freight costs, high inflation, and the devaluation of the taka against the US dollar played the role in eating up its year-on-year profit.

Of them, the high-valued dollar played the principal role to push up its production cost many times, eventually shrinking its first half-yearly profit.

The company’s H1 earnings per share (EPS) fell to Tk 0.47 from earnings per share of Tk 14.73 for the same period last year.

“Earnings have plunged mainly due to pandemic and post-pandemic effects, and the current global economic shocks created by the recent Russia-Ukraine war,” Walton said in a filing posted on the Dhaka Stock Exchange (DSE) website Thursday.

Besides, the price hike of materials and soaring freight costs amid the vulnerable global market condition, coupled with the devaluation of the taka against foreign currencies mainly the US dollar led to a severe decline in the overall profitability of the company, the DSE filing added.

Moreover, a value-added tax (VAT) was recently imposed on the supply of refrigerator products, another reason to affect the company.

The company’s earnings declined to Tk 2 per share in the October-December quarter of the current fiscal year, down 63 per cent from Tk 5.45 in the same period a year ago.

Its net operating cash flow per share (NOCFPS) surged to Tk 61.07 in the July-December period of FY23 against a negative Tk 16.78 in the first half of FY22.

The NOCFPS increased significantly due to inventory control, receivables improvement, and close monitoring and control over expenses and resource utilisation, according to the company disclosure.

In addition, payments to suppliers and others fell similarly from its working capital contributing to achieving a healthy net operating cash flow per share, the company added.

The local electronics and home appliance giant that offers a wide array of products, such as TV, refrigerator, and air-conditioner posted Tk 1,216 crore in net profit in the fiscal year 2021-22.

The net profit of the company in the fiscal year 2020-21 was Tk 1,639 crore.

Its annual EPS declined to Tk 40.16 in the fiscal year 2021–22 from Tk 54.21 in the previous fiscal.

The company in FY22 paid its shareholders Tk 25 in cash dividends against each share, while sponsors and directors received Tk 15 per share.

Golam Murshed, managing director of Walton, stated in its last fiscal’s annual financial report, “Despite multi-directional global challenges, including skyrocketing material and shipping costs, leading to a drastic upward shift in product costs, Walton has been able to achieve a sustainable net profit in the year under review.”

The giant company witnessed a massive setback in its growth in the first quarter of the current fiscal year with posting a net loss of Tk 46 crore in that quarter.

Thus, it reported a loss per share of Tk 1.52 for the July-September of 2022 against earnings per share of Tk 9.28 for the same quarter a year earlier.

The company said it had suffered losses in the first quarter because of a steep rise in production costs and other expenses, triggered by the soaring raw material prices in the global market amid the Russia-Ukraine war.

Walton shares closed at Tk 1,047.7 per share on the DSE trading floor Thursday.

Walton Hi-Tech is a billion-dollar company with a market capitalisation of Tk 31,737 crore.

The company has a paid-up capital of Tk 303 crore, while it has Tk 9,742 crore in surplus reserve. Incorporated in 2006, Walton Hi-Tech Industries started its operation in 2008.

Getting listed on the capital market in 2020, the company raised a Tk 100 crore fund to expand its business.