Fragile and poised for further deterioration – this is what the latest financial report of Aziz Pipes says.
After 2020, the pipe-maker announced suspension of production twice due to raw material and working capital crunch. In a turnaround bid, Aziz Pipes recently appointed a seasoned banker to the driving seat.
Just after assuming office, the new managing director sent a distress signal to the finance ministry as the company's loan rescheduling plea got turned down by banks.
For the struggling pipe manufacturer, things, however, were completely the opposite just 25 years ago. Frequent and popular television commercials, national export trophy and recognition as one of the top ten companies in the bourse would depict Aziz Pipes' single-handed dominance in a booming plastic pipe market.
In an expansion and product diversification misstep, the company lost its huge reputation and potential. Besides, a lack of leadership, inept management and disputes with banks contributed to the gradual fall of the company.
Aziz Pipes' current survival mode includes purchase of raw materials at a higher rate from the local market, minimal use of the production lines and payment of remaining 200 employees and officials.
"The company is facing various challenges including defaulted loans and lack of working capital," company Chairperson Hasina Akhter wrote in the financial report of Aziz Pipes Limited for the 2020-21 financial year. She feared that it might become difficult to run the company in the future.
The company's auditor Rahman Mostafa Alam and Co mentioned in the annual report that the equity of Aziz Pipes has been negative consecutively, as the debt service and interest service ratio are low.
"Due to the liquidity and raw materials crisis, the company used only 11.21% of its production capacity in the 2020-21 financial year," notes the audit report.
The company board appointed SM Hemayet Uddin, a 40-year veteran in the banking sector, as the managing director of the pipe manufacturer in December last year.
After taking over, Hemayet Uddin approached the finance ministry to resolve the financial issues of the company. In a letter to the ministry, he sought government intervention to regularise or reschedule the bank loans.
The Business Standard approached several top officials of the company for comment, but none of them agreed to speak publicly.
In the late 1980s, when large investments started arriving in the country's infrastructure sector, installing tube wells for potable water began on a large scale throughout the country. This led to a burgeoning demand for plastic pipes – especially in the southern districts.
To seize the opportunity, Aziz Pipes started the journey in 1981 and began commercial production in 1985 with an annual capacity of 1,200 tonnes. In the next 12 years, the production capacity was scaled up to 7,500 tonnes.
With the headquarters at Aziz Bhaban in Dhaka's Motijheel, the company's manufacturing plant is located in Faridpur. The pipe-maker was founded by Abdul Halim, Ahsan Ullah and Asad Ullah.
The trio is still the company's board as institutional directors.
In the good old days, Aziz Pipes' annual turnover used to hover around Tk60 crore, which has now plummeted to only Tk1 crore.
The company was listed with the Dhaka Stock Exchange (DSE) in 1986 and Chittagong Stock Exchange (CSE) in 1995.
As a deemed exporter, the firm received the National Export Trophy Award in 1997-98 fiscal year. In the 90s, the company was in the top-ten company list of Dhaka bourse.
Currently, the Investment Corporation of Bangladesh (ICB) and ICB Unit Fund hold a 12.77% stake in the company.
A company official said they still receive many orders but are unable to take those thanks to their fragile health.
After the pipe business became established, the company decided to diversify its business in 1998.
Aziz Pipes put money into plywood – which was gaining popularity then as an alternative to wood. The business expansion strategy largely depended on cashing in on pipe-making reputation for plywood business.
But time was not in favour of Aziz as it opted for a risky gamble.
In the wake of an increasing market competition, the company ramped up plywood sales on credit. But it could not recoup the dues from the market thanks to management irregularities. As a lot of money was stuck with the market, Aziz started facing a working capital shortfall.
But companies like Pran-RFL, National Polymer and BRB started plastic business much later than Aziz and are now performing well. Besides, other plywood ventures that entered the market in the 90s are doing well too.
The deteriorating business pushed Aziz to default on bank loans. It repaid Southeast Bank and National Bank after rescheduling, but still owes Tk12.4 crore to Uttara Bank and Dutch-Bangla Bank.
In the letter to the finance ministry's Financial Institutions Division, Aziz Pipes Managing Director Hemayet Uddin mentioned the company is unable to open letters of credit (LCs) for raw material import due to its defaulted status.
He said raw material purchases from local sources cost the company more, intensifying the working capital crunch.
The limited production allows Aziz only to pay its 200 employees and officials.
Preferring anonymity, several officials of the company told The Business Standard that Ahsan Ullah and Asad Ullah now live abroad. They do not come to company meetings, leaving Abdul Halim infirm in leading the company.
After listing in the stock market, the company offered dividends to the stockholders regularly till 1998. After that, it could not pay dividends for a long time due to losses.
It started paying dividends again from 2017. However, it did not pay dividends in 2020-21 for recurring losses.
In 2021, Aziz Pipes' share price rose by 90% from Tk87 to Tk 165. Subsequently, it decreased by 50% to Tk83. Similarly, the company's shares rose in September this year.
In 2018, the stock regulator had stopped the company's trading on the main trading platform of Dhaka Stock Exchange due to abnormal trading and price jump.