Worries mounting among jute stock investors

Two listed jute firms have been incurring losses for years – one due to a halt in production and the other for poor demand from foreign buyers – leaving investors in mounting worries.

Out of the three firms listed on the stock market from the jute industry, only Sonali Aansh Industries – an exporter of jute products – posted a profit for fiscal 2020-21.

While the other two – Jute Spinners, and Northern Jute Manufacturing Company – are incurring losses.

According to sources, Northern Jute has gone out of production following a loan scam.

Its officials said there is no possibility of the company returning to operation very soon.

Jute Spinners' losses increased because of lower demand for its products from foreign buyers during the Covid pandemic.

General shareholders own 84.91% of more than 21 lakh shares of Northern Jute, and 36.98% of 17 lakh shares of Jute Spinners.

Despite the loss and production halt, the share price of Jute Spinners, and Northern Jute mills skyrocketed as the stock market went up in September this year.

According to the Dhaka Stock Exchange (DSE) data, from June to September this year, the share price of Jute Spinners and Northern Jute Manufacturing rose 95% and 45%, respectively, despite weak financials.

Later, the share prices of both companies also declined significantly.

Ups and downs in prices

Jute Spinners – the manufacturer of Jute Yarn and Twine for 100% export — has witnessed a fall in export in recent years. 

According to data, the share price rose to Tk185.6 each on 16 September, from just Tk95.1 on 20 June this year. And, the price declined to Tk100.3 on 30 November. 

In the first quarter of the current fiscal year, the loss per share stood at Tk10.83, which was Tk11.16 at the same period of the previous fiscal year.

Due to a loss of Tk44.59 per share, it did not pay any dividend for FY21.

Northern Jute – a jute yarn and twine manufacturer – fell into crisis as its factory was laid off this year due to a loan scam.

However, the company did not publish any information and financial update since January 2021.

Due to the crisis coupled with its frozen bank account, the company failed to disburse the declared 5% cash dividend to its shareholders for FY20.

Shahadat Hossain Patwary, company secretary of Northern Jute, said, "The production was suspended in March this year. As a result, it failed to publish financials."

Jute Spinners' liabilities exceed the assets

The auditor of Jute Spinners expressed concerns as its current liabilities have exceeded its assets.

According to the auditor, it incurred a loss of Tk7.57 crore for FY21 while the accumulated loss stood at Tk68.60 crore till 30 June 2021.

Its current liabilities stood at Tk68.86 crore, which exceeded the value of its total assets of Tk28.90 by Tk39.95 crore.

As per an Artha Rin suit filed by the Janata Bank, the company's outstanding liabilities stand at Tk49.16 crore.

The auditor has also drawn attention to the labour difficulties, inability to pay creditors, adverse key financial ratios, discontinuance of dividends, discontinuance of production, inability to comply with terms of loan agreements, loss of market and customers, and others.

These conditions indicate that manifest uncertainties exist that may cast significant doubt on the company's ability to continue as a growing concern, says the auditor.