How strong USD exhausts corporate earnings

The Covid-19 pandemic cast a serious shadow on the global economy from the very beginning of the year 2020, pushing business operations near to a halt.

The pandemic started to loosen its grip in late 2021 and early 2022, bringing in hope for thriving earnings for businesses, but the hope did not take much time to fade away.

The Russia-Ukraine war began in early 2022 which posed a fresh blow to the global economic supply chain after the pandemic which led businesses to the verge of collapse.

Since the start of the war, prices of industrial raw materials went up many times due to supply chain disruptions, while almost all currencies across the world plunged against the US dollar on a massive scale.

Due to this currency exchange volatility, the production costs as well as other operational costs of companies multiplied, which consequently ate up the entire earnings of most companies, pushing them into losses at the end of 2022.

Some 100 publicly traded companies published their latest quarterly or half yearly reports till Thursday and of them at least 15 companies said their profits plunged due mainly to the massive devaluation of the domestic currency against the US dollar.

Fuel and power sector companies topped the losers’ rally because energy prices surged many times in the global market since the start of the war.

The companies in their financial reports for the July-December period of the fiscal year 2022-23 said the principal reason behind their profit fall was the volatile foreign currency transactions.

According to the H1 financial statement of FY23, Power Grid Company of Bangladesh had spent Tk 729.57 crore on foreign exchange transactions during the period, which was only Tk 75.29 crore in the same period last year.

The company said during that period, it had to cost Indian Rs 99 against each US dollar compared to Rs 85 in the same period the previous year, while it had to spend Tk 114.64 against each euro compared to Tk 97 for the same period the year before.

The company posted a net loss of Tk 280.81 crore in the first half of FY23, against a profit of Tk 195.99 crore in the same period last fiscal.

Energypac Power Generation Limited, Doreen Power Generations and System, Baraka Power Limited, Baraka Patenga Power are the major power-sector companies in Bangladesh bracing for the same fate meantime.

Energypac Power Generation had spent Tk 4.90 crore on foreign exchange transactions in the July-December period of FY23 against Tk 1.82 crore in the same period last fiscal.

Meanwhile, Doreen Power Generations spent Tk 0.36 crore on foreign exchange transactions against its no cost on it in the same period last year.

Walton Hi-Tech Industries, a listed engineering-sector company, also reported a 96 per cent year-on-year decline in its net profit in the first six months of the current fiscal year.

It also blamed the volatile dollar price which ate up the giant company’s almost entire earnings in H1 of FY23.

The company suffered foreign currency losses of Tk 336.10 crore during the current fiscal’s first half which was Tk 23.18 crore in the same period last fiscal.

On the other hand, Crown Cement’s profit fell 16 per cent in the first six months of the current fiscal year, while National Polymer Industries Ltd reported a 93 per cent year-on-year profit fall in H1 of FY23.

Meanwhile, Index Agro Industries Limited witnessed a 15.58 per cent year-on-year slump in profit in the July-December of FY23.

BBS Cables Limited’s H1 profit dipped by 90 per cent this fiscal year, while BSRM Steels Limited’s net profit fell by 95 per cent in July-December of FY23.