Aziz Pipes Limited – one of the oldest plastic pipe makers in the country – has suspended production for an uncertain period because of a raw material crisis amid the pandemic.
Being a loan defaulter, Aziz Pipes has not been able to import raw materials since 2005. Since then, the company had been purchasing raw materials of pipes at high cost from the local market.
But, the novel coronavirus pandemic has led to a severe crisis of the raw materials in the local market.
AHM Zakaria, company secretary of Aziz Pipes, told The Business Standard that PVC resin, the main raw material of the company for making pipes, was not delivered on time by the supplier and a lack of adequate stocks of the raw material hampered the company's production activities.
Besides, due to an abnormal increase in the price of raw materials in the local market, the cost of production will be much higher than the current market price, he added.
"The company will face difficulties in marketing its products. In this circumstance, production of the company has been stopped temporarily from 10 January. Production activities will resume once the supply of PVC resin resumes and the situation improves."
According to the company's annual report, Aziz Pipes has defaulted on a Tk15.28 crore loan taken from Uttara Bank. It has also defaulted on Dutch Bangla Bank's Tk8.17 crore credit.
The two banks have filed cases against the company to recover the loans. But, the cases are still pending in the court. The company, however, is looking to an amicable settlement to reschedule the loans.
The company was listed with the country's stock exchanges in 1986. It could not pay dividends regularly as it incurred losses due to high-cost productions in the last one decade.
However, in the last three fiscal years the company posted positive net profit and paid minimum dividends to its shareholders. Now its shares are being traded under the 'B' category at the Dhaka Stock Exchange (DSE).
Companies that pay less than 10% dividend are placed under 'B' category.
Even after being a weak company, Aziz Pipes is always liked by gamblers of the stock market due to its low paid-up capital. Its paid-up is only Tk5.37 crore.
For example, the company's share price rose from below Tk20 per share in 2015 to above Tk250 per share in 2018. In August 2018, the Bangladesh Securities and Exchange Commission (BSEC) sent the company into the spot market as punishment because of excessive speculation.
In the spot transactions at stock exchanges, buyers need a cash balance in their investment accounts instead of using sales proceeds the day before maturity.
In July last year, the BSEC allowed the company to return to the public trading market after it observed some satisfactory changes with respect to their corporate disclosures and other factors.
Now, the company's share price is stuck in the floor price mechanism of Tk97.50 each. Floor price is the regulatory mechanism that was imposed in March last year on the wake of the coronavirus pandemic to prevent individual scrip prices from dipping below a certain level.
General shareholders have 61.45% stake in the company, while sponsors and directors hold 33.83% share.