Textile firms wobble as gas crisis hits production

The gas crisis has put an ominous impact on industries, as most of the publicly traded textile firms witnessed an earnings slump in the July-December period of the current fiscal year due mainly to a fall in production hours.

Besides, many export-oriented companies faced order cancelations owing to their failure to hand over shipments on time after gas shortages hampered their production capacity to a great extent.

Meanwhile, the government last month raised the retail price of gas by 14.5 per cent to 178.9 per cent for industries, power plants, and commercial establishments, who together account for 78 percent of gas usage in the country.

The decision, already put into force, would push the businesses on the verge of collapse, already grappling with a massive rise in import costs and other strains due to the ongoing global economic crisis, industry insiders said.

Out of the 58 textile-sector companies listed on the Dhaka Stock Exchange (DSE), 48 firms so far published their first half-yearly unaudited financial reports in the current fiscal year.

Of them, 29 companies reported a year-on-year plunge in their net profits, DSE data show.

The remnant 19 firms witnessed a rise in their profits.

Matin Spinning, a leading textile sector firm, posted Tk 37.83 crore in net profit in July-December of the fiscal year 2022-23 against a profit of Tk 54.01 crore in the same period of the fiscal year 2021-22.

MA Rahim, vice chairman of Matin Spinning told The Business Post that the shortage of gas hampered their production on a large scale, consequently sending down their H1 profits.

“Due to the gas supply crunch, we had to use diesel to keep our factories afloat which pushed up production cost many times. As a result, our year-on-year profit plunged in the July-December period of the current fiscal,” he added.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said most of the apparel and textile firms could not utilise their full production capacity so far this fiscal due to a gas supply crunch.

Pacific Denims reported a net profit of Tk 2.57 crore in H1 of the current fiscal year which was much lower than the figure of Tk 4.04 crore in the corresponding period last fiscal.

The company’s earnings, according to its latest financial report, dipped due to a surge in raw materials prices as well as production disruption owing to gas shortage.

Similarly, the July-December profit of Saiham Cotton Mills Ltd fell to Tk 5.95 crore this fiscal from Tk 12.35 crore in the July-December period last fiscal.

According to the company’s financial report, the price fall of finished goods against the soaring prices of raw materials caused the plunge in its net profit.

Meanwhile, Shepherd Industries Ltd registered Tk 6.16 crore in net profit in H1 of FY23 against Tk 9.4 crore in H1 of FY22.

Industry insiders said businesses now awaiting more bad days as the recent retail gas price hike would eat up industrial profitability almost entirely.

Under the new gas rate for retail consumers, the large, medium, and small industries are now paying Tk 30 per cubic metre (m3) against the previous prices of Tk 11.98 for large, Tk 11.78 for medium, and Tk 10.78 for small, cottage and other industries respectively.

Public and private power plants, including the independent power producers (IPP) and rental power plants, are now paying Tk 14 per m3 of gas instead of the previous rate of Tk 5.02. Meanwhile, the captive, small, and commercial power plants are paying Tk 30 per m3 instead of Tk 16.

The commercial users of gas – such as hotels and restaurants – are now being charged Tk 30.50 instead of the previous Tk 26.64 per unit.

Industry leaders are terming the decision a suicidal move as sky-high gas prices would force many factories to shut their doors for good, employment opportunities to fall, exports to decline, domestic inflation to rise, and government revenue to take a serious hit.