Walton retains sales, but profit drops 26% due to rising finance costs

Walton Hi-Tech Industries PLC, well managed its sales retention in the July-September quarter as its turnover inched up by 0.95% to nearly Tk1,215 crore for the three months.

However, higher foreign currency losses due to depreciated taka against the dollar and euro on top of a higher interest expense dragged its quarterly profit after taxes by around 26% to around Tk150 crore.

Earnings per share dropped to Tk4.92 for the quarter, which was Tk6.67 in the same period of last year.

The past quarter was a tough one for the businesses as the nationwide sales were hindered by unusual floods and political volatility, said the company's Finance Controller Sazedul Kabir.

However, as the market-leading electronic appliances company Walton retained sales by customer-centric pricing of its wide range of products. It did not increase product prices in proportion to the cost hike, according to Kabir.

However, financial factors impacted the company's profitability, reflecting the current financial challenges, Walton said in a statement to shareholders on Monday.

The company had to incur a foreign currency loss of Tk45.85 crore in the July-September period, according to the statement.

The impact of taka depreciation is bigger on companies having higher foreign currency borrowing, be it long-term loans or short-term exposure for imports. Walton has a foreign currency loan exposure equivalent to $160 million, according to the company official.

The company secured dollars at Tk110.5 at the end of September 2023, which increased to around Tk118 in June this year and surged to over Tk120 in September this year, he said.

Similarly, it was buying euros at Tk137.82 on average at the end of September, up from Tk132.78 in June and Tk119.07 in September last year. Some 23% of its foreign currency exposure is in euros and the rest is in US dollars, according to the Finance Controller.

Also, the surging interest is hurting the profitability as the company has a total debt of Tk3,284 crore, of which nearly Tk2,400 crore is for working capital.

Of the Tk893 crore long-term loans only Tk351 crore is in local currency.

Sazedul Kabir said that borrowing costs against loans from different banks now surged up to 14.5% for Walton, with a weighted average borrowing cost of around 12.5%, roughly 200 basis points up from that a year ago.

Also, an extended credit facility to the retailers dragged its quarterly net operating cash flow per share to Tk3.92 from Tk16.68 a year ago. 

Walton posted over Tk7,512 crore in annual sales in the 2023-24 fiscal year, up from Tk6,637 crore a year ago, while its net profits for the year increased to Tk1357 crore from Tk783 crore. 

April-June has been the best quarter for the company due to the seasonality. Eid and the hot summer then boost its refrigerator and cooling product sales. 

Walton Hi Tech's net asset value per share increased to Tk384 at the end of September, which was Tk282 without the impact of asset revaluation.

Walton shares having a face value of Tk10 inched up by 1.66% to Tk514.8 apiece.