Textile firms bear the brunt of dollar, energy crises in March quarter

Infographic: TBS

Textile and apparel industry in the country incurred losses, and many of them saw lower profits in the January-March quarter of the current fiscal owing to energy shortage, strong dollar and a slowdown in global market demand caused by the Russia-Ukraine war.

The industry entrepreneurs said that the dollar shortage affected the local textile industry as most of them are not able to open letters of credit (LC) for the import of raw cotton despite it becoming cheaper in the global market, affecting apparel prices.

As a result of a fall in demand for textile and apparel finished goods and a rise in production cost, the country's listed companies in this sector saw a sharp fall in profit during the first quarter, according to the data of the Dhaka Stock Exchange (DSE). 

The DSE data shows that 45 out of 58 listed companies published their January to March quarter financial statements. Of them, 17 incurred losses while the profit of 16 companies declined compared to the same period of the previous fiscal. Only 12 companies made a profit.

Industry insiders said spinners who are producing diversified yarn instead of basic ones are still getting orders and making a profit amid such a tough time.

Regarding the energy crisis, Bangladesh Textile Mills Association (BTMA) President and Maksons Spinning Mills Limited Chairman Mohammad Ali Khokon said, "The textile sector is facing a hard time as our production cost has gone high due to gas and electricity price hikes. On the other hand imported yarn also flooded the local market."

"Due to energy shortage and lack of orders, many factories have already shut down and over 40,000 employees in this sector have lost their jobs," he added.

Citing the National Board of Revenue data, BTMA president said in the third quarter of FY23, Bangladesh imported over 76,000 tonnes of yarn which can be produced by Bangladeshi textile millers.

He also claimed that Indian yarn flooded the local market illegally, while local textile millers are not able to sell their yarn.

Echoing the BTMA president, Square Textiles Director (operations) Taslimul Hoque said the energy shortage affected the textile sector significantly as production costs doubled due to gas price hikes during the first quarter.

He also acknowledged that India's yarn production capacity is almost ten times higher than Bangladesh's. They are also facing low demand in their market. That is why, some are focusing on exporting to Bangladesh at any cost.

Taslimul Hoque also mentioned that Square Textiles is producing 22 types of fancy items which helps them to maintain a profit despite other challenges in the market.

Anwar-Ul-Alam Chowdhury Parvez, a former president Bangladesh Garments Manufacturer and Exporter Association, said, "The global market has been facing a low sales volume for the last couple of months, which is reflected in our business."

However, Bangladesh is in a better position than other competing countries as it can produce much value-added yarn locally while the orders fell by 30%. The market will hopefully return to a positive trend by the end of this year, Parvez hoped. 

He mentioned that Bangladesh still lags in the activewear segment. If the government provides policy support, they could be able to perform better in this emerging item.

According to DSE data, 48 textile and apparel companies' share prices were stuck at the floor price as their business is not in good shape and 12 companies were traded at below their face value.