Covid eats into Envoy’s 47% revenue in Q4

Envoy Textiles Ltd, the world's first LEED-certified green denim manufacturing facility, has been hit hard by the Covid-19 pandemic. 

The textile mill, also one of the largest denim manufacturers in the country, has lost 47% of its revenue in the fourth quarter of the last fiscal year, according to the company's financial statement.

The company incurred a loss of Tk7.15 crore for the first time since it was listed with the Dhaka Stock Exchange (DSE).

Saiful Islam, chief financial officer of Envoy Textile, told The Business Standard that denim exports have not recovered yet, "But we are trying to regain the business."

According to industry insiders, the Covid-19 pandemic is strongly affecting sales and processes within all segments of the apparel industry. Especially the sales of denim trousers have been affected by the increased possibility for staying at home and the interconnected change in daily outfitting. Staying home has increased the popularity of jogging pants and leggings, directly threatening denim sales.

They also noted that the demand for eco-friendly denim trousers has decreased since many sellers are looking for cost-effective solutions to rebuild their everyday businesses after the pandemic.

According to the Bangladesh Garments Manufacturers and Exporters Association, the apparel industry has faced about $3.18 billion worth of cancellations and withdrawals by international brands and buyers due to the global pandemic.

Due to the cancelations, the country's garment exports fell by 85% in April compared to the same month of last year.

The apparel exports also fell by 62% and 7% in May and June, respectively, compared to the same period of last year.

Meanwhile, the apparel exports experienced positive growth in the first quarter of this fiscal year.

Bangladesh became the largest denim exporter to the United States in the first half of this year though the export proceeds dropped from the same period a year ago owing to the Covid-19 pandemic.

The country has been the prime denim exporter to European Union markets for the last few years.

Considering the overall business situation, Envoy Textile, at its last board meeting on Monday, recommended a 5% cash dividend for its shareholders for the 2019-20 financial year, which was the lowest dividend since it was listed with the DSE.

The company has set 28 December to hold its annual general meeting (AGM) and 15 November as the record date.

Saiful Islam said that the board has recommended this dividend to maintain a strong operating cash flow to recover the business.

After the news on dividend was revealed, the share price of Envoy Textiles came down to Tk25 on Tuesday from previous session's Tk29.80 at the DSE.

However, in the last trading session, its share price recovered from a downtrend. At the end of the day, the closing price of the company's shares was Tk29.30 each.

Meanwhile, in the fiscal year 2019-20, the company posted revenue of Tk817.68 crore and earnings per share of Tk1.63.

"We had good business up to the third quarter of the last fiscal year, but in the last quarter everyone lost their businesses due to the pandemic and we were not spared from that," said Kutubuddin Ahmed, chairman of Envoy Textiles Ltd.

"In the new fiscal year, we saw a lot of inquiries from brands, but order placement was not like that due to the pandemic situation," he added.

The textile manufacturer has nominations from some big brands but most of the buyers are concerned about the second wave of the pandemic; that is why brands are not placing orders as they did in the pre-pandemic period, he added.

Kutubuddin said that the brands are now trying to develop some products as per their inquiries, and looking for the availability of vaccines on the market before placing fresh orders.

If the second wave largely affects the European Union and the USA (US), the apparel industry's recovery might be delayed, he added.

The Envoy Textiles chairman also hopes that business will be better if the second wave is managed well.

"Apart from that, Bangladesh's economy is doing better than that of other countries and the pandemic is no longer an issue. The county's macroeconomics is more robust," he added.

Envoy Textile, which started its commercial operations in 2008, has the production capacity of 24 million yards of denim per year.

The main export destinations of the company's products are the European Union and the US.

Since the very beginning, the company has developed good partnerships with some renowned global brands within a very short time.

Its partners include: LEVI'S, Marks and Spencer, VF Corporation, Calvin Klein, American Eagle, Uniqlo, GAP, C&A, H&M, Walmart, United Colors of Benetton, s.Oliver, Esprit, Tesco, E.land, Bestseller, Inditex, lc Waikiki, Debenham, NEXT, Carrefour, ZARA, Tema Turkiye, JCPenney, Gymboree, TCP, Sainsburys, and Disney International.

The company also achieved a national export trophy for several years.

In 2012, Envoy Textiles raised Tk90 crore from the capital market through an initial public offering. It offloaded three crore ordinary shares at an offer price of Tk30, including a premium of Tk20 for each share of Tk10.