Ailing Econo halts production with aim of fitting comeback

Econo, once a household name for ballpoint pens owned by GQ Ball Pen, is temporarily halting production to modernise its factory with the aim of making a fitting comeback in the highly competitive market.

The company's board of directors decided last week to suspend production for 12 months, starting on 30 June this year.

The brand's declining performance has prompted this decision, as its parent company has failed to modernise the product to compete in the highly competitive environment.

The company, as stated in its report published on the stock exchange last week, has been experiencing operational losses since 2014. In order to mitigate these losses and enhance product quality, it is imperative to modernise the factory, a process estimated to take a minimum of 12 months. During this period of renovation, production will be temporarily suspended.

Furthermore, the company stated that it plans to invest approximately Tk9 crore in the rebalancing and modernization of the factory. Operations will resume after completing the BMRE (Balancing, Modernization, Rehabilitation, and Expansion), saving the company from further losses. The statement also noted that the company will be able to continue paying dividends during the suspension of operations from other income.

GQ Ball Pen further mentioned that it can earn Tk3 crore per year in rental income. Moreover, their 14-storey commercial building in Uttara is almost complete, and they expect to rent it out starting this year.

At the last annual general meeting, shareholders expressed significant concerns about the company and strongly advised management and the board to suspend operations until the BMRE is completed and to release non-essential employees to save the company from further ruin, according to the company's statement. Shareholders emphasised that this was the only way for the company to survive.

Earlier in February this year, the company changed its top positions by appointing Uzzal Kumar Saha as managing director, Kajal Mridha as chief financial officer, and KM Ershad as company secretary.

Business performance

In the last decade, the company, which started its business in 1981, suffered a staggering 90% drop in sales.

In the fiscal 2022-2023, the revenue stood at just Tk5 crore, down from Tk30 crore ten years ago.

In GQ Ball Pen's fiscal 2019-20 financial report, its independent auditor Mahfel Huq & Co said the company's financial condition indicates that there is significant doubt about its ability to continue the business.

Its close competitor Matador Ballpoint Pen, which started business in 1998, dominates the market at present.

A company insider said GQ Ball Pen was established by Qazi Saleemul Huq and Salma Huq. Among them, Quazi Saleemul Huq, locally known as Econo Kamal, was a former BNP lawmaker from Magura and, in 2018, was jailed for 10 years in a corruption case.

A former officer at the company, seeking anonymity, said, Quazi Saleemul Huq is responsible for such a situation at the company.

"The company can still turn around by utilising its brand value. For this, it needs further investments," he added.

Earlier, in May 2023, GQ Ball Pen sold off the unused land located at Chattogram to repay a portion of its loan taken from Southeast Bank.

GQ Ball Pen is one of the oldest listed companies in the capital market. It got listed on stock exchanges in 1986.

Although the company incurred losses for years, it paid cash dividends regularly to the shareholders from the retained earnings.

But its sponsors and directors are not taking any dividends. The declared dividend helped the company's shares be traded under the "B" category in the secondary market of the stock exchanges.

Its share price was only Tk66 per share in June 2020, but in September that year, the share price jumped 276% to Tk248. The manipulation occurred on the rumour that the BRB Group was going to acquire the company.

At the end of Thursday's trading session, its shares closed at Tk112.40 each at the Dhaka Stock Exchange.

Ballpoint market

According to industry insiders, one crore students buy one crore ballpoints every four days. Besides, numerous offices buy ball pens regularly. But the total market size is not available, as the business is mainly dominated by imported pens.

Among the local companies, Pran-RFL, Janani, and Kumu produce 25 lakh ball pens every day. Meghna Group entered the ballpoint pen business in 2019 and is selling the products under the "Fresh" brand.

Olympic Industries and Rose Heaven have closed ballpoint pen production as the market became highly competitive due to the imported products.