Costly utility, weak taka make a dozen profitable firms incur losses in FY23

Owing to a multitude of headwinds such as weaker taka, costlier gas and electricity, a dozen listed firms that posted decent profits in the fiscal 2021-22, fell into losses in the 2022-23 fiscal year.

One company, however, managed to reduce its losses in FY23, compared to the previous fiscal.

Maksons Spinning, Runner Automobiles, ACI, Malek Spinning, Baraka Patenga Power, Ifad Autos, JMI Syringes, Rahim Textile, Aman Cotton, The Peninsula Chittagong, and state-owned Dhaka Electric Supply Company (Desco) and Titas Gas are the firms that transitioned from profits in FY22 to losses in FY23.

Meanwhile, Premier Cement, which was already experiencing a Tk112 crore loss in FY22, managed to decrease its loss to Tk84 crore in FY23.

Since its formation, Desco witnessed a loss for the first time, that too an amount as big as Tk541 crore in FY23. In the previous fiscal, it had made a profit of Tk63 crore.

Md Mominul Islam, general manager of finance and accounts at Desco, told The Business Standard, "This is the first time Desco has tasted a loss."

For various projects, Desco had turned to foreign loans and borrowed from the Asian Development Bank, the Japan International Cooperation Agency (JICA) and the Asian Infrastructure Investment Bank.

"But these loans were expensive as the cost of repayment was high. In addition, a surge in electricity tariffs due to the weakening of taka was one of the main reasons behind the company's loss," he added.

For Titas Gas Transmission and Distribution Company, there was no debt burden. But the reduction of gas distribution margin by the Bangladesh Energy Regulatory Commission (Berc) is what dragged the company into losses.

Arpana Islam, general manager of the finance division at Titas Gas, told TBS, "Titas incurred a loss because of the Berc's halving of the gas distribution margin. In June 2022, the transmission charge for Titas Gas was lowered to Tk0.13 from Tk0.25."

"Although the Berc pulled the transmission charge up to Tk0.21 later, it wasn't enough for making profits," she added.

Commenting on the FY23 loss of Runner Automobiles, its Chief Financial Officer (CFO) Shanat Datta told TBS, "Although the company had been through losses in its early years of operations, their severity was not as high."

"Due to the ongoing economic crisis, many people are delaying the purchase of new cars. Consequently, two-wheeler sales have dropped by about 50%, three-wheelers by 40%, and commercial vehicles by 35% in FY23 compared to the previous year," the CFO added.

Amid high inflation in an already slowed down economy, the appreciation of dollar against the taka, and higher prices of gas and electricity have exacerbated the profitability of many big companies such as Renata, GPH Ispat, Doreen Power, Anwar Galvanizing, Mozaffar Hossain Spinning Mills, Fortune Shoes, Shahjibazar Power, Esquire Knit and so on.

However, their situation is not as dire as that of the 13 loss-making ones, as they still managed to post profits, despite facing declines.

A dollar crisis has led to challenges in opening letters of credits (LCs), which has made importing raw materials more difficult. As a result, most manufacturing companies are tumbling in running their production full-fledgedly.

The economic headwinds

According to Bangladesh Bank data, the local currency depreciated by 1.52% in the new fiscal year (FY24) so far. The central bank pegged the dollar at Tk95 in the first week of September 2022, which means that the taka lost 16.32% of its value against the greenback over the past year.

At present, the new dollar rates are Tk110 for remittances and export proceeds and Tk110.50 for import settlements. Last year, the dollar rate soared to Tk122.

Consequently, the import cost of raw materials increased by 20-25% in the last fiscal year.

Just a few days after increasing electricity prices, the government leveled up gas prices for power, industries, and commercial (hotel and restaurant) sectors up to 179%.