The listed textile and RMG companies illustrate ‘poor show’ in their financial performance in the last decade. The net profit was down by 73% in fiscal year 2018 compared with the same period of 2011.
RMG and Textile sector is the largest one at Dhaka Stock Exchange (DSE) in terms of number of companies being listed. Currently, there are 55 listed RMG and textile companies are traded at DSE, of which 16 were listed in last one year or so.
Of them, 10 companies were downgraded to ‘Z’ category in different times for not recommending dividend or not holding annual general meeting (AGM) regularly. Shares of 16 companies dipped below their face value on the stock exchanges following investors’ less participation.
Out of 55 companies, 44 so far disclosed their financial statements for the year ended on June 30, 2019.
According to DSE information, Earning per share (EPS) of the 22 companies declined, while 8 other companies reported loss for the period ended on June 30, 2019. Only 14 companies witnessed rise in EPS in the last FY compared to previous year.
The companies which witnessed rise in EPS are Apex Spinning & Knitting Mills, Envoy Textile, Evince Textiles, HR Textile, Hwa Well Textiles (BD), Kattali Textile, Metro Spinning, Pacific Denims, Queen South Textile Mills, Saiham Cotton Mills, Simtex Industries, Sonargaon Textiles, Stylecraft and VFS Thread Dyeing.
Of 22 companies whose profits declined, seven witnessed correction in EPS ranging from 21 percent to 90 percent.
Of those, EPS of Alif Industries declined 21 percent to close at Tk 2.74, Desh Garments 39 percent to Tk 2.67, Generation Next Fashions 53.26 percent to Tk 0.43, Maksons Spinning Mills 75.51 percent to Tk 0.12, Malek Spinning Mills 35 percent to Tk 0.76, Matin Spinning Mills 68 percent to Tk 0.97, and Tosrifa Industries 90 percent to Tk 0.12.
Alltex Industries reported a loss of Tk 6.09 percent, Dulamia Cotton Spinning Mills Tk 2.28, Familytex (BD) Tk 0.07, Mozaffar Hossain Spinning Mills Tk 0.93, R. N. Spinning Mills Tk 15.47, Saiham Textile Mills Tk 0.97, and Tallu Spinning Mills Tk 1.13 for the year ended on June 30, 2019.
The share prices of 16 of the 55 firms trading at much below of their face value of Tk 10 each.
On Thursday, the share price of Alif Manufacturing Company closed at Tk 7.60, Alltex Industries at Tk 8.20, C & A Textile at Tk 1.90, Dacca Dyeing & Manufacturing at Tk 3.20, Delta Spinners at Tk 4.50, Familytex (BD) at Tk 2.20, Generation Next Fashions at Tk 2.40, Maksons Spinning Mills at Tk 4.30, Metro Spinning at Tk 6.0, Mozaffar Hossain Spinning Mills at Tk 9.0, Mithun Knitting and Dyeing at Tk 7.0, R. N. Spinning Mills at Tk 3.0, Tallu Spinning Mills at Tk 3.60, Tung Hai Knitting & Dyeing at Tk 2.0, Zaheen Spinning at Tk 6.30, and Zaheentex Industries at Tk 3.50.
The companies transferred to ‘Z’ category are Alltex Industries, C & A Textile, The Dacca Dyeing & Manufacturing, Delta Spinners, Dulamia Cotton Spinning Mills, Generation Next Fashions, Mithun Knitting and Dyeing, Tallu Spinning Mills, Tung Hai Knitting & Dyeing, and Zaheentex Industries.
Of the companies which disclosed financial statements for the FY 2019, 22 have recommended dividend ranging from 1.0 percent to 10 percent. On the other hand, 11 companies have recommended dividend ranging from 12 percent to 20 percent in the form of cash or stock or both.
Between 2011-2018 period, the net profits of the 36 listed companies were down to Tk 341 crore in 2018 from over Tk 1,252 crore eight years ago.
Entrepreneurs blamed higher cost of production, over capacity, competition, exchange rate and lower prices from international buyers for the situation.
Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, claimed that the cost of production of apparel items increased 30 percent between 2014 and 2018. Furthermore, the minimum wage of garment workers has increased 51 percent since December last year. She also blamed the unplanned expansion in the industry for the retailers’ accepting low prices.
Between fiscal years 2015-16 and 2018-19, the industry’s value addition has gone down 1.61 percent though apparel exports have increased from $28.10 billion to $34.13 billion during the period.
The export volume increased but the profit declined following the price war among the companies for manufacturing goods at the lowest price.
As many as 39 percent of the garment manufacturers are selling garment items to buyers at prices lower than the production costs now, according to a survey of the Fair Wear Foundation, an Amsterdam-based organisation that works to improve labour conditions in garment factories.
Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, also claimed that the price of captive power has increased 435 percent since 2012, which is one of the main input of the textile companies.
The interest rate of the banking sector also rose, so bank loan-dependent companies are hurt by the higher interest rate, said Khokon, also the managing director of Maksons Spinning Mills. The price of product also fell in the last two years, which hurt the textile makers’ profit, he added.
However, market experts and analysts are raising questions about the quality of financial reports these companies make public.
They are mostly blaming for the poor and flawed financial reporting behind the ‘Under-performance’ of the sector while acknowledging that the sector also suffers for higher cost to meet compliance after Rana Plaza incident and the price of per unit dropped in the international market.
Since then, local garment entrepreneurs put more than $1 billion to remediate the factories for preventing such tragedies in future.
In 2013, the building collapsed in Savar on the outskirts of the capital, leaving at least 1,138 people dead and 2,500 others injured in the country’s deadliest industrial accident.
The under performance of the sector in the capital market shows that listed textile companies failed to perform as per investors’ expectation though the sector posted over 11 percent growth in exports in the FY 2019 and accounted for 84 percent of Bangladesh’s exports last fiscal year.
This put the whole sector into question mark in terms of long term sustainability.
