Unhealthy competition hampers chemical firms’ business recovery

Listed chemical manufacturing companies have been facing challenges on their way to recovery from pandemic-related losses due to an upsurge in raw material prices and an unfair competition with the companies that abuse bond facilities.

Industry insiders said raw material prices at home and abroad rose by around 10%-30%, while freight cost doubled or trebled amid the pandemic. 

The chemical manufacturers, who sell their products mainly to local small and medium enterprises (SMEs), said their sales declined as the local consumption and local companies' productions decreased during the pandemic.

Consequently, many small companies ran operations partially to survive, while some others closed down their operations temporarily.

Besides, an unhealthy competition with bond facility abusers has been harming the chemical manufacturers, alleged the people involved in this sector.

They alleged that a number of companies import chemicals using the bond facility and sell them in the local market at comparatively low prices. In this situation, local chemical manufacturers lose business.

WATA Chemicals Limited, a producer and seller of a variety of acids, witnessed a 51% fall in profit in the first quarter of FY21 compared to the same period of the previous fiscal.

Ali Ahsan, chief financial officer (CFO) of WATA Chemicals, said the company has not been able to maintain a consistency in their sales and production during the period of recovery from the pandemic shock.

The sales of Global Heavy Chemicals plunged by 31% in the first quarter of the current fiscal compared to the same period in the previous fiscal.

During the period, the company made a loss of Tk1.53 crore due to a decline in sales.

An official of the company said it produces caustic soda that is mainly used in local small and medium textile mills, but their business has declined amid the pandemic.

"Currently, the company competes with firms which import chemicals using a bond facility," he said.

Besides, the company's production cost has gone up due to an increase in raw materials prices, freight fees, and utility bills.

"As a result, our operational cost has gone up and net profit has declined," he added. 

FAR Chemical Industries posted a loss of Tk0.65 crore in the July-September period.

An official of the company said their profit margin has shrunk as they could not increase product prices due to a tough competition in the market.

"Besides, demand for some products declined during the first quarter of this fiscal," he added. 

Another company, Active Fine Chemicals, earned Tk41.88 crore revenue in the July-September period of this year, which was Tk38.67 crore in the same period the previous year.

Md Mahbubur Rahman, company secretary of Active Fine Chemicals, said the addition of cash incentives on exports in this quarter's sales helped to increase the net profit.

Salvo Chemical Industry Ltd also posted Tk3.58 crore net profit during the period.