After a successful business expansion into power generation, Paramount Textile Ltd is stepping into dredging work. The textile company is set to form a subsidiary, Paramount Dredging Ltd, for this.
The textile company will own 65 percent share of Paramount Dredging Ltd, which is preparing to secure river dredging tenders worth around Tk2,500 to Tk3000 crore. Paramount Insurance Company Ltd's Chairman Nawaz Ahmed, and Paramount Holdings Ltd will also invest in the dredging company.
The Bangladesh Inland Water Transport Corporation (BIWTC) has a masterplan to dredge 10,000 kilometres of river routes. The plan will cover as many as 178 rivers in a bid to revive river-based transportation.
The project budget is estimated at nearly Tk50,000 crore, and the textile company wants a piece of the pie — which is why the textile company is pitching into the dredging business.
The company secretary of Paramount Textile Ltd, Mohammad Robiul Islam, told The Business Standard that the paid-up capital of Paramount Dredging Ltd will be Tk1 crore, and 65 percent of it will come from the textile company.
"Apart from dredging, the company will also provide technical support," he explained.
The textile company made a handsome profit after a successful venture in the power generation business last year. The subsidiary, Paramount BTrac Energy Ltd, went into production with its 200MW electricity generation unit in February 2019.
Paramount Textiles holds a 49 percent share in the energy company. BTrac Energy posted a net profit of Tk19.81 crore in the 2018-19 fiscal year, and gave Tk9.71 crore to the textile company.
The power generation company posted a net profit of Tk20.88 crore in the first quarter of the current fiscal year, giving Tk10.23 crore to the textile company.
Paramount also expanding textile business
The textile company will invest Tk81 crore to modernise its factory with financing from Pubali Bank.
Company secretary Mohammad Robiul Islam said, "Our business is good even though the textile sector is going through a tough time. Most companies are totally dependent on cotton-based fabrics, but we have shifted focus to synthetic cotton because that has a growing demand."
The company secretary added that they manufacture quality woven fabrics that are consumed by the export-oriented garments industries.
"Paramount Textile has been diversifying its products since 2013 because the global market has been changing rapidly. Moreover, we are exploring markets in other countries to shake-off excessive dependence on the European or the American market," said Robiul.
He said the modernisation initiative will benefit them further as the readymade garments industry has a great potential to earn more foreign currency from Latin America, South Africa, Russia, South Korea, Malaysia and Japan. It can earn up to $400 million by exporting apparels to three Latin American countries alone.
Bangladesh can secure a slice of the $4 billion apparels market of China, Brazil and Mexico. It can also grab about 14 percent of South Africa's $1.20 billion clothing market if local exporters make an aggressive foray.
The recent financial crisis, especially in Europe, has reduced exports to European countries. The economic slow-down in Europe has resulted in a fall of purchasing capacity, which in turn has resulted in reduced apparel imports from Bangladesh. To offset the export reduction in the EU and the USA, Bangladesh exporters are going to dispatch trade missions to South Africa, Malaysia, Australia and Latin American countries.
Paramount Textile has recommended 7 percent cash and 9 percent stock dividend for its stockholders in the 2018-19 fiscal year. The annual general meeting is slated for December 9.
Growth in sales of the company jumped 38 percent last year amid a tight apparel business. Paramount sold woven fabrics worth Tk567.38 crore in the 2018-19 fiscal year. Its like-for-like sale was Tk411.95 crore.
In the last fiscal year, the company posted a net profit of Tk41.15 crore, and the Earnings Per Share (EPS) was Tk3.04. The like-for-like net profit and EPS were Tk27.75 and Tk2.05 respectively.
The company's sales dropped slightly in the first four months of the 2019-20 fiscal year. However, the net profit rose by 127 percent. The power generation subsidiary is pumping up the profit.
Sales in the first quarter of this fiscal stood at Tk142.19 crore, while the like-for-like sale was Tk143.48. The company posted a net profit of Tk18.19 crore in Q1 while the EPS was Tk1.34. The like-for-like net profit and EPS respectively were Tk8.03 and Tk0.59.
The closing price of the Paramount Textile share at the Dhaka Stock Exchange was Tk54 on Wednesday. The highest price in the last one year was Tk75.