Hoping for a brighter future and faster recovery, a leading primary textile manufacturer has planned to pour more money into spinning business despite pandemic shocks on the clothing sector.
Maksons Group, one of the top 10 spinners in the country, has announced to invest around Tk1,000 crore in three new spinning units in the Mirsarai Economic Zone, a big leap forward amid falling profit for a decade.
The group's Metro Spinning Limited will invest Tk340 crore, while another entity Maksons Spinning Mills Limited will pour Tk254 crore and Tk348 crore into two separate units, according to company insiders.
This has been viewed as the biggest investment plan by any Bangladeshi textile group in the pandemic situation.
Spinning mills, as a backward linkage to the textile and export-oriented readymade garments industry, have been seriously suffering from uneven competition with imported fabrics and yarns for the last four-five years.
On top of that, the utility price hike kept squeezing the mills' bottom line since 2018 pushing the capital-intensive sector into trouble even before the pandemic.
The pandemic came as a fresh blow on the sector hampering production, creating stock lots and disrupting cash flow.
However, many textile mills have already cleared their stock lots and fresh orders are coming in from apparel-makers.
As per Bangladesh Textile Mills Association (BTMA), local spinning mills can support about 80% demand of export-oriented knit yarns and 40% of woven yarns.
The investment plan
Maksons Group has acquired 30 acres of land on a lease for 50 years in the economic zone for three units intended to produce high-end yarns and fabrics.
To this end, the business group signed separate land lease agreements with the Bangladesh Economic Zones Authority (Beza) on Monday.
Work on the new units will begin next year and the factories are expected to go into production by 2023.
Mohammad Ali Khokon, managing director of Maksons Group, told The Business Standard, "Despite some losses in the last fiscal year, we are going for a big investment to manufacture high-value products so that we can stay in the competitive market."
Most funds for setting the spinning units will be arranged from their own sources while the rest of the amount will come from foreign investors, Khokon, also president of the BTMA said.
"We have already had talks with some foreign investors but cannot disclose the details right now," he added.
Addressing the lease agreement signing ceremony, Paban Chowdhury, executive chairman of Beza, said industrial synergy in the economic zone will be boosted with the establishment of the three mills.
The government is offering many benefits, such as tax exemption, uninterrupted electricity, gas, water supplies at lower costs, to woo investors in economic zones, he added.
Mohammad Ali Khokon further said they also have a plan to establish a garment factory in Mirsharai, with intent to produce readymade clothing.
The next venture – involving an investment amounting to Tk150 crore for its establishment – will create jobs for another 8000 people, he added.
"We are also mulling setting up a chemical factory to meet demand of the textile industry. Currently, we depend on imports for high-value chemicals required for textiles," said Khokon.
Established 35 years back, the group runs seven spinning factories and two of those are listed with bourses.
Khokon hopes the new production units will take the group's annual turnover to around Tk1,200 crore from the existing Tk700 crore, alongside creating employment opportunities for around 4,000 people.
Currently, the group's seven spinning factories have capacity to produce 132,672 spindles or 25,150 tonnes annually.
Maksons Spinning Mills Limited and Metro Spinning Limited are listed with the country's stock exchanges.
The group posted an around 378% growth in turnover but its net profit fell by 75% over the last decade as of the fiscal 2018-2019. The FY20's turnover figure has not been disclosed yet.
Maksons Spinning Mills Limited suffered a loss of Tk9 crore in the last fiscal year while Metro Spinning Limited posted Tk50 lakh in profit. Maksons Spinning Mills contributed 60% to the group's revenue.
Consequently, its share price came down to Tk6.70 against Tk10 each of its face value at the Dhaka Stock Exchange. Till 30 September this year, this company has a loan of Tk475.33 crore.
The company has paid only a 2% cash dividend to its shareholders for the last two fiscal years.
Besides, the condition of Metro Spinning is so worse that the company paid only a 2% cash dividend to its shareholders for the last four fiscal years. At the end of Monday, its share price stood at Tk8.50 at the DSE.