Despite 316% profit growth, Emerald Oil's shares nosedive

Despite a substantial 316% growth in profit in the first half of the current fiscal year 2023-24, the share price of Emerald Oil Industries has been declining in recent trading sessions.

On 31 March, the Spondon-branded edible oil producer, in its half-yearly financial statement, reported the growth in revenue for the July–December period of FY24, and since then, its shares price fell over around 16% in just four days.

According to its un-audited financials during the July-December period, its revenue grew to Tk86.57 crore, and net profit after tax stood at Tk15.24 crore, which was Tk51.33 crore, Tk3.65 crore, respectively, at the same time of the previous fiscal year.

The company said its revenue and profit increased owing to the enhancing its capacity utilisation by 75%. At the same time of the previous fiscal, the company utilised its 50% capacity, it said.

Officials at the company said its revenue and profit grew significantly riding on a robust growth in sales at the first quarter from July of FY24.

In that quarter, Emerald Oil's revenue grew by 159% to Tk69.74 crore and profit by 590% to Tk13.39 crore as sales increased.

But in the second quarter, it had reported a fall by 31% in revenue owing to factory closure for the lack of gas.

An official of the company said its factory operation remained suspended over two months owing to the gas crisis, and still it is struggling to utilise its capacity amid the gas crisis.

That is why its revenue during the October–December period fell but its profit surged compared to the same time of the previous fiscal year. In the second quarter, its revenue stood at Tk16.82 crore and profit Tk1.83 crore.

At the same time of the previous fiscal year, its revenue was Tk24.42 crore and profit stood at Tk1.70 crore.

However, at the mid of March, the Bangladesh Securities and Exchange Commission (BSEC) allowed its parent company Minori Bangladesh to sell 46.66 lakh shares, representing a 7.81% stake in Emerald Oil in the market to provide the company with a loan aimed at enhancing its financial health.

According to the decision of BSEC, Emerald Oil will use the funds to repay its outstanding loans to banks, but the company will not issue any shares to Minori against the loans.

According to the financial statement, by the end of September 2023, the company had a Tk130.45 crore loan from banks.

Currently, Minori Bangladesh, a subsidiary of the Japanese farming company Minori Co Ltd, that took over the oil producer in 2021, owns 38.26% shares of the company, of which Minori bought 7.81%, or 46.66 lakh shares, from the secondary market.

The Minori already sold-off 10 lakh shares from its holding, and over 36 lakh shares are in process.