Macroeconomic headwinds put chemical-makers in dire straits
Listed chemical manufacturers that had not even fully recovered from the Covid-19 pandemic blow were further dragged down by macroeconomic headwinds in the first half of the ongoing fiscal year.
Among five chemical-makers listed on the country's capital market, only Kohinoor Chemicals posted profit growth, while all the others failed to weather the inflation storm.
Active Fine Chemicals and Wata Chemicals faced profit declines, while Far Chemical and Global Heavy Chemicals turned bigger losses compared to the July to December period of the fiscal 2021-22.
Industry people mainly blamed the strong dollar, increasing prices of raw materials, freight costs, difficulties in opening letters of credit (LCs), and decline in production for such dismal performance of the sector.
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They said the prices of raw materials at both home and abroad went up by around 30% to 140%, while freight costs straight up doubled and even tripled for some products from the pandemic time.
The chemical manufacturers, which sell their products mainly to local small and medium enterprises (SMEs), faced decline in sales as local consumption dropped and also production was severely hampered by gas and power disruptions.
Consequently, many small companies ran operations partially to survive, while some others closed down their operations temporarily.
Industry insiders also blamed the unhealthy competition created by abusers of the bond facility.
They said that a number of companies import chemicals using the bond facility and sell them in the local market at comparatively low prices. In this situation, local chemical manufacturers lose business.
Global Heavy Chemicals Limited – a manufacturer and distributor of Sodium Hydroxide (Caustic Soda), Chlorine, and other chemical products – incurred a loss of Tk6.51 crore in the July to December period of FY23 as the company could not run operations properly due to the gas crisis.
During the period, the company made revenue of Tk22.46 crore, which was Tk21.11 crore a year ago.
Seeking anonymity, a senior official of the company said minimum 40% production has decreased due to the gas crisis.
Wata Chemicals Limited, a producer and seller of a variety of acids, witnessed a 67% profit fall in the first half of the current fiscal year compared to the same period of the previous fiscal.
During the period, the company made revenue of Tk61.31 crore, which was Tk42.08 crore a year ago. Its net profit stood at Tk1.21 crore and earnings per share at Tk0.82.
Ali Ahsan, chief financial officer (CFO) of Wata Chemicals, told The Business Standard, "Our chemical products are used in different sectors but the demand declined significantly. We import raw materials mainly from Russia and the middle-east. Now, because of the Russia-Ukraine war, we could not import from Russia."
Our production declined by 15% to 20% because of pricey raw materials, problems in LC opening and lower demand from the customers," he added.
Far Chemical Industries made a loss of Tk5.31 crore in the July-December period.
Sudeep Banik, a manager of Far Group, said, "The company has shifted to its own place. We could not run the chemical unit after shifting. Some machinery has to be imported but our LC opening is pending due to the current crisis."
Recently, the High Court has allowed Far Chemical Industries Limited to merge with the non-listed SF Textile Industries Limited.
Another company, Active Fine Chemicals, posted a 52% profit decline in the July to December period.
