Listed textile makers’ profits more than double

Originally posted in The Daily Star on Thu Feb 3, 2022

Listed textile manufacturers logged a staggering 152 per cent higher profits year-on-year in the October to December period of the current financial year of 2021-22.

Analysts reason higher yarn prices, unexpended stocks of cotton, higher exports and devaluation of the local currency against the dollar.

Among the 58 listed textile and garment companies, 44 properly disclosed their earnings data for the last two years.

The total profits of the 44 companies rose to Tk 250 crore in the second quarter of the financial year while it was Tk 99 crore in the same period of the previous year.

“We had a handsome amount of stock of raw material, cotton, so when yarn price rose in the market, our profits soared,” said Shah Alam Miah, company secretary of Matin Spinning Mills.

In the 2021 calendar year, Bangladesh imported 8.5 million bales of cotton, spending more than $3 billion. One bale equals 480 pounds or 218 kilogrammes (kg).

The price of the widely consumed 30 carded yarn had increased to $4.71 per kg in December last year while it was $3.9 per kg a year ago.

On average, yarn prices rose around 40 per cent.

As exports of the garments sector rose after the pandemic, all the related sectors saw improved growth in their profits, he said.

Between July and December, the first six months of the current fiscal year, garment exports grew by 28.02 per cent year-on-year to $19.90 billion.

“Meanwhile, our utility costs dropped as we are now generating our own electricity from our generator instead of buying from United Power Generation,” he said.

In addition, the generator runs on natural gas instead of diesel, so the cost fell, he added.

Matin Spinning Mills earned the second highest profits in the second quarter after Square Textiles. Its profits climbed 121 per cent to Tk 27.8 crore in the quarter year-on-year.

In the same period, Square Textiles logged a staggering 318 per cent jump in profits to reach Tk 46 crore.

Performances of textile companies was very impressive this year, which makes stock investors happy, said Emran Hasan, chief executive officer of Shanta Asset Management.

“Due to the higher yarn prices, their profits grew and the price rise was expected so many of them announced expansions earlier,” he said.

Some Tk 600 crore was invested in the spinning sector to set up 26 new mills last year, according to Bangladesh Textile Mills Association (BTMA)

“On the other hand, the dollar appreciated against the taka, which ultimately gave a boost to their profits as most of them are export based companies,” he said.

The interbank exchange rate hit a record high of Tk 86 per dollar on January 10, according to central bank data. The local currency is trading at more than Tk 90 per USD in the kerb market.

With the higher profits, their stock price also advanced during the last few months, Hasan added.

Market capitalisation of the textile sector soared 73 per cent to Tk 17,594 crore yesterday compared to that of June 1 of 2021, according to the data of LankaBangla Securities.

Among the 44 textile and garment companies, 25 saw higher profits in the last quarter. Five returned to profits from loss and 14 logged lower profits, the data shows.

Profits of Evince Textiles soared the most as it rose to Tk 91 lakh in the last quarter, up from Tk 1 lakh in the same period of the previous year.

Profits of Mozaffar Hossain Spinning Mills jumped to Tk 7 crore from Tk 30 lakh while profits of Envoy Textiles climbed to Tk 19 crore from Tk 4 crore.