High raw material costs eat up profits of Linde Bangladesh

Linde Bangladesh Ltd – a leading medical and industrial gas producer in the country – has experienced a decline in profits owing to a rising cost of raw material imports exacerbated by a strong dollar.

In the first nine months of 2022, its profit has dropped by 17.88% compared to the corresponding period of the previous year, the company said in a stock exchange disclosure.

Due to forex market volatility, diesel price hikes and power disruptions, the company saw a 9.48% increase in its production cost.

As a result, the profit dropped to Tk74.23 crore in the January to September period, from Tk90.41 crore a year ago.

The earnings per share (EPS) declined to Tk48.78, from Tk59.41 in the January-September period of 2021.

Md Anisuzzaman, chief financial officer (CFO) of Linde Bangladesh, told The Business Standard that the company's growth is good even during the economic slowdown.

"Due to volatility in the foreign exchange market, the company's profit has decreased. The dollar rate has exceeded Tk100 from Tk84 in the import of raw materials. As a result, the profit margin has decreased because of an increase in the costs," he added.

The CFO said because of the Covid pandemic, the demand for medical oxygen in hospitals increased drastically last year when Linde Bangladesh did good business in its medical oxygen segment.

But the company's revenue from this segment declined due to lower demand for medical oxygen following the improvement in the Covid situation.

As a result, among the three revenue segments of the company, the industrial gas and hard goods segments have seen good growth in the business, he added.

Md Anisuzzaman said, "Forex market volatility coupled with diesel prices and power disruptions have increased costs for the company. As the cost of importing raw materials has increased, the cost of distribution of products has also increased."

In the July to September quarter of 2022, its revenue declined by 1.51% to Tk120.61 crore, and profit fell by 23.09% to Tk21.05 crore.

In the same quarter of the previous year, its revenue stood at Tk122.47 crore, and profit at Tk27.37 crore.

During the period, its cost of goods sold increased by 13.11% to Tk72.78 crore, an increase from Tk64.34 crore in the same period of the previous year.

Linde Bangladesh got listed on the Dhaka Stock Exchange (DSE) in 1976 under the fuel and power sector when the stock market resumed trading after independence.

The company's paid-up capital is Tk15.21 crore.

In 2021, the company logged a profit of Tk122.57 crore and paid a 550% cash dividend – the highest in seven years.

As of September 2022, sponsors and directors owned 60%, institutional investors 28.80%, and general investors 11.10% shares of the company.