Yeakin Polymer reports abnormal profit in Q2

• In Q2, reported profit margin was 52%
• No explanation for the significant revenue and profit growth
• Reportedly facing working capital shortage for the last four years
• They claimed their factory operation ran partially
• Share price jumped 147% since December

Yeakin Polymer Limited, a plastic bag packaging producer for local and export industries, has reported an abnormal profit in the October-December quarter of the fiscal year 2021-22.

During the period, the company posted a net profit of Tk4.70 crore, while it sustained a loss of Tk0.90 crore in the same period last fiscal.

Yeakin Polymer earned only Tk8.42 crore from selling products – four times higher than the same time last fiscal year, and their profit margin stood at 52% in the second quarter of the current fiscal.

Despite the requirement as per the corporate governance code, it did not clarify the reason for such significant growth in profit and revenue.

It revealed the quarterly report on 10 February, which was approved by its board on that day.

This correspondent tried to reach Yeakin Polymer's Chairman Quazi Anwarul Haque, Managing Director SM Akter Kabir and Company Secretary Akhtaruzzaman for their comments on the significant profit jump in the second quarter but found their phone numbers switched off.

Deshbandhu Polymer, Yeakin's competitor in the stock market, earned Tk24.29 crore as revenue and reported a net profit of Tk1.19 crore in the corresponding period.

At the end of the second quarter of FY2022, Deshbandhu Polymer's profit margin stood at 5%.

Profit margin is one of the commonly used profitability ratios to gauge the degree to which a company or a business activity makes money. It represents what percentage of sales has turned into profits.

A senior officer at DeshBandhu Polymer earlier said to The Business Standard that the company could not make much profit due to a hike in raw material and freight cost.

Yeakin's production status

Yeakin Polymer has gone out of production for more than two years but they did not disclose it, keeping its shareholders in the dark about its latest status.

The company allegedly stopped production three years after it was listed on the capital market in 2016 owing to a decrease in demand for plastic bags in the market and a shortage in its working capital.

Fames and R audited the company's accounts for three years from fiscal 2018-19 to fiscal 2020-21 but did not give any qualified opinion on its production, which is a violation of the securities law.

When the report was published at The Business Standard, the Dhaka Stock Exchange (DSE) came forward and sent a query letter to the company to inquire about its operational status.

Replying to the DSE letter, the company said that they are facing working capital crises in the last four years. It also suffered losses during the Covid-19 pandemic which led them to continue production in a limited capacity from March to July 2021.

During the pandemic, one of the directors and two workers died of the Covid-19 while other officials and directors were also affected.

They also said, during this great unimaginable period the company could not find any kind of assistance from the Prime Bank and the Islami Bank. From 2020 the company has reached out to other banks and non-banking financial institutions for additional working capital but the processes have been slow due to the pandemic.

The unusual share price hike

Since December, Yeakin Polymer's share price soared unusually without any apparent reason. Till 10 February this year, its share price jumped 147% and closed at Tk24.90 at the DSE.

The DSE sent a query letter to the company to learn the reason for the unusual price hike on 2 February. In response to the DSE letter they said, the company has no undisclosed price sensitive information for the recent unusual price hike and increase in the volume of shares.

Information was spread beforehand that the company was going to show good profits in the second quarter, it was revealed speaking with several brokerage firms.

They also mentioned another rumour on possible ownership changes being spread in the market.

In 2016, the company raised Tk20 crore by offloading 2 crore shares in the capital market to increase its production capacity.

In the initial public offering (IPO) prospectus, the plastic bag manufacturer had shown 183% growth in revenue and 4.18% in profit during the previous five years till 2016.

In the year of listing, the company paid a 10% stock dividend to its shareholders.