Listed textile companies in a tight spot

Highlights: 

• Bangladesh has 56 listed textile companies 
• 51 of 56 published quarterly financial reports for Q3
• 84% or 43 companies saw fall in earnings
• Only six registered slight rise in income

Stock market data reveals a sorry picture of listed textile and garment companies in the January-March quarter of 2019-20 fiscal year. This occurred even before the Covid-19 fallout affected the businesses.

For instance, textile, yarn and garment-maker Ring Shine Textiles Ltd raised Tk100 crore capital in 2019 by floating an initial public offering (IPO) on the stock market, and went public in December last year. Though the company began trading at the end of the second quarter, it registered a loss just in the January-March quarter.

The company claims the novel coronavirus-led decline in demand and order cancellations affected their businesses badly in the third quarter (Q3). However, the virus outbreak had yet to affect the businesses when Ring Shine reported losses in Q3.

Not only Ring Shine, but as many as 84% of the listed textile companies witnessed a fall in their income in Q3 of 2019-20 fiscal year compared to the previous quarter, according to analysis of the financial statements published by 51 companies.

Out of the total 56 listed textile companies, financial statements of five companies for Q3 are not available.

The analysis shows that the income of six companies slightly rose while two others – who had already been in a sorry state – reported losses in Q3. Despite the performances, they were able to minimise their previous losses, slightly.

Aman Cotton Fibrous Limited and Alhaj Textile did not publish the quarterly report while Tung Hai Knitting and CNA Textiles' reports were not found as their factories remained shuttered. Dacca Dyeing's report was also unavailable.

In the meantime, the slump in textile companies' earnings affected the market as their share prices started plummeting. Though the market began bouncing back in August, textile stocks still fail to bring cheer.

According to the Dhaka Stock Exchange's (DSE) data, share prices of 18 textile companies are still below their respective face value while stocks of 33 companies were being traded at Tk11 to Tk50.

The share prices of two companies are hovering around Tk51-100 while only three textile companies have crossed the Tk100 stock price-mark.

After Q3, Dragon Sweater and Spinning Mills, Matin Spinning Mills, Kattali textile Limited, Envoy Textile, Desh Garments, and Paramount Textile registered a hike in their earnings.

Meanwhile, Dulamia Cotton was still suffering losses though it improved slightly from the previous year's distress. The factories of CNA Textile, Sonargaon Textile, Tallu Spinning Mills, Tung Hai Knitting, Dacca Dyeing, and Dulamia Cotton Mills remain closed.

In the third quarter of 2019-20 fiscal year, Alltex, Anlimayarn, Metro Spinning, Nurani Dyeing, Prime Tex, Rahim Textile, Ring Shine Textile, RN Spinning, Safko Spinning, Tosrifa Industries, and Zaheen Spinning slid into losses from profit.

Shariful Islam, company secretary of Aman Cotton that failed to publish the quarterly report, told The Business Standard (TBS) they were unable to release the report due to the novel coronavirus shutdown. He, however, hoped to publish the financial statement soon.

A Matin Chowdhury, former president of the Bangladesh Textile Mills Association (BTMA), told TBS that the challenge in the textile sector is a lot greater now.

"The sector has been witnessing a business slump for quite a long time. In the fourth quarter of the last fiscal year, the companies were unable to keep their production units running and the output of the quarter was zero. When they reopened in June, there was no demand and the prices were not good," he added.

Matin Chowdhury claimed that the textile sector had already slumped in January-March even before the virus began its round-ups.

He said, "The major challenge for the industry is that when the global garment business declines, buyers in other countries lower their prices. The textile business has been in a production surplus for the last few years due to a decline in demand."

"For this, prices of textile items drastically dropped in China, India and Pakistan – prompting the fall in income. Moreover, the entire year was ruined due to virus-led closures," he added.

However, DSE Director Rakibur Rahman disagreed with the statement. He told TBS that the textile companies' earnings were not supposed to decline in the January-May period.

"It is true that their income dropped a bit during the pandemic, but the virus shock was not supposed to ruin the earnings of the third quarter in 2019-20 fiscal year," he argued.

He said textile companies whose conditions were already poor entered the capital market and got permission for IPO.