Textile sector under pressure; big players buck the trend

Infographics: TBS

Textile manufacturers have been struggling due to a range of challenges, including gas crisis, high interest rates, weak demand, political turmoil and economic uncertainty over the past three quarters of the current fiscal year.

However, despite these hurdles, major textile companies reported year-on-year revenue growth for the first nine months (July to March) of the ongoing fiscal year, largely driven by the advantages leveraged by the industry's leading players.

Among the 58 listed textile companies, only 20 posted a positive profit growth in the January to March quarter of the ongoing fiscal year. However, the firms have struggled overall in the past nine months.  

Showkat Aziz Russell, President of the Bangladesh Textile Mills Association, told The Business Standard that the export-oriented garment sector is currently going through a tough time. In April, apparel exports dropped significantly. On one hand, mill owners are struggling to keep factories running due to a gas crisis; on the other hand, reduced exports have led to a fall in demand.

"In this situation, many entrepreneurs have been forced to dip into their working capital to pay employee salaries and bonuses. As a result, several companies are unable to repay high-interest bank loans. Banks are also becoming reluctant to issue fresh loans. Eventually, this is pushing many companies into loan default," he added.

He also mentioned that yarn is being smuggled in from India, posing a serious threat to the local spinning industry. Overall, local entrepreneurs are struggling to sustain their businesses.

"Companies that are more compliant with regulations tend to perform better. One of their key advantages is their ability to keep production costs low. They also benefit from stronger financial footing, higher production capacities, greater operational efficiency, and stronger trust from buyers. As a result, they continue to attract buyers even during this downturn," he further added.

Moreover, he noted that listed companies enjoy an additional advantage — they operate using public funds, which reduces their dependence on loans. This is helping them maintain growth even during these challenging times.

Square Textiles PLC also posted impressive revenue growth in the nine months of current fiscal year, driven by increased yarn production from its new project.

The company achieved revenue of Tk1,832 crore, which was higher from Tk1,549 crore in the same period of last fiscal year. Profit after tax stood at Tk101 crore, compared to Tk84 crore a year ago.

The company stated that during the period, the sales increased by 21.03% due to the increased yarn production from the new project at Habiganj and the BMRE (balancing, modernization, rehabilitation, and expansion) at the Gazipur project, as well as the increased conversion rate of USD.

In the January- March quarter, its revenue stood at Tk581 crore, which was Tk576 crore a year ago. In this quarter, its net profit stood at Tk25.11 crore, and its earnings per share was Tk1.27. On Monday, the share price closed at Tk48.50 on the Dhaka stocks exchange.  

Envoy Textiles Limited, the world's first LEED-certified green denim manufacturing facility, reported a 130% increase in net profit for the July-March period compared to the same period last year due to a 39% increase in export sale of fabrics. 

According to its unaudited financial statement, the company achieved revenue of Tk1,366 crore, up 27% from Tk1,075 crore in the previous year. Its profit after tax increased to Tk101 crore during the quarter, compared to Tk44 crore a year ago.

Tanvir Ahmed, Managing Director of Envoy Textiles, earlier revealed that the mill operated at 92% capacity in the first quarter of the fiscal year. In November, the company secured full-capacity orders to produce 45 lakh yards of denim fabric.

"We have strong orders for the next month and projections from leading buyers for January onwards, which should allow us to maintain full-capacity operations," he said.

To add value, the company is planning a new recycling plant in line with global brands' goals to increase recycled yarn usage by 2030.
Matin Spinning Mills Ltd, a sister concern of DBL Group, reported a 40% year-on-year profit growth in the July-March period.

The company's unaudited financial statement showed a revenue of Tk650 crore, up from Tk557 crore a year ago. Profit after tax reached Tk36 crore, a significant turnaround from Tk15 crore in the same period last year.

Paramount Textile Limited, a subsidiary of Paramount Group, reported a 9% revenue growth in the first nine months. 

The company achieved revenue of Tk944 crore, up from Tk810 crore in the same period last year. However, its profit after tax stood to Tk96 crore, compared to Tk87 crore a year ago. 

According to the stock exchange, 58 textile companies are listed on the bourses.