Intercompany interest catapults Aramit Cement into profit

Aramit Cement, a listed cement manufacturer, has bounced back into profit from losses riding on an increase in other operating income mainly from the interest against its intercompany loans.

In the first nine months of the outgoing fiscal year, the company posted a profit of Tk1.63 crore although it suffered a drop in revenue. It had incurred a loss of Tk13.11 crore in the same period of the previous fiscal year. 

The cement maker has enjoyed a big jump in other operating income as it started charging interest against loans to its associate and subsidiary companies to comply with an instruction of Bangladesh Securities and Exchange Commission (BSEC).

According to the latest financial statements, in the July-March period, its other income rose to Tk6.20 crore, which was Tk10.39 lakh in the same period of the previous fiscal year.

According to the data available with the Dhaka Stock Exchanges (DSE), in the last seven trading sessions, its share price rose 46% to stand at Tk46.5 on Sunday from Tk31.9 on 10 June. 

The share price soared by 9.93% or Tk4.2 on Sunday alone. 

In reply to a query by the country's premier bourse, Aramit Cement said there was no undisclosed price-sensitive information for the unusual price hike.

"As per the management's decision, the company had not received interest against its intercompany loans for two or three consecutive years. But as per the BSEC direction, the company has started charging interest against the loans, which has resulted in net profit increase," Company Secretary Syed Kamruzzaman told The Business Standard. 

"Previously, the company fell into losses due to raw material price hikes. Now it has come down as well as the bank loan interest was very low for the implementation of the single-digit interest. Also, the company has managed to control the cost during the pandemic."

Aramit Cement, which is a sister concern of Aramit Group, sells its products both in domestic and international markets.

The company had incurred losses for the four consecutive years since 2016-2017 fiscal year and failed to pay dividends to its shareholders since then. 

In the last fiscal year, it incurred a loss of Tk23.23 crore although its revenue increased by 3.74% compared to the previous year.

About the losses, the company said, in its annual financial statements, a continuous increase in financial expenses and failure to achieve the breakeven point are the main reasons behind the increasing loss.

In the first nine months of the 2020-2021 fiscal year, Aramit Cement's total revenue decreased 3.61% compared to the same period of the previous fiscal year.

The revenue stood at Tk155 crore, down from Tk160.81 crore in the same period of the previous year. 

In the January-March quarter of FY21, the revenue stood at Tk59.63 crore, down from Tk62.75 crore in the same period of the previous year. Its other operating income rose to Tk2.30 crore, from Tk7,000 only in the same period of the previous year.

Eventually, the net profit stood at Tk2.42 crore against a loss of Tk3.99 crore it had incurred in the same period of the previous fiscal year.

The Chittagong-based Aramit Cement Ltd, which got listed on local stock exchanges in 1998, has been placed in the Z category as it failed to declare dividends.

The company imports raw materials from Iran, Thailand, China, Japan, Indonesia, and Vietnam.