Two Square Group firms to invest Tk676cr to boost production capacity

To meet the growing demand and increase their market stakes, two listed companies of Square Group will invest Tk676 crore for enhancing their production capacity.

Square Textiles will invest Tk376 crore and Square Pharmaceuticals Tk300 crore.

Square Pharma said in its financial report that the board of the company approved the investment plan to buy new capital machinery and land for expansion.

A senior officer at the company said the new investment will be implemented gradually.

"Besides, its export is on the rise. And the local pharma market is seeking double-digit growth. That is why it needs a new facility with modern technology," he told The Business Standard, seeking anonymity.

Square Pharma's main competitors Beximco Pharma, Renata Pharma, and Incepta Pharma have together invested more than Tk1,000 crore in recent years to expand their market shares.

Beximco Pharma has acquired Sanofi and Novartis factories.

Accordingly, as the market leader Square needs to increase its production capacity, according to the company insider.

Square Pharma posted Tk1,594 crore in profit for fiscal 2020-21, which was 19.38% higher than the previous year.

The profit growth boosted the top pharmaceutical company's earnings per share to Tk17.99 for the year, up from the previous year's Tk15.07.

Square Pharmaceuticals' board of directors recommended a 60% cash dividend for its shareholders, which would cost the company less than half of its annual profit.

Despite the double-digit growth and handsome dividend, its share price fell 3.25% and closed at Tk226.20 at the end of Sunday's trading session at the Dhaka Stock Exchange (DSE).

Square Pharmaceuticals is waiting to begin manufacturing at its newly built plant in Kenya.

Due to the pandemic situation, the commencement of operation abroad was delayed and the company is expecting to begin production in the African plant at the end of this year.

Meanwhile, Square Textile will invest to enhance its yarn production capacity. The company expected that the new project will produce 11,565 tonnes per annum, which will add Tk371 crore to the company's turnover. The new project will complete in April 2023.

To meet the growing demand of the country's textile abroad, most of the large companies are investing in this business to grab the opportunities, said a senior officer at Square Textile.

So, Square is investing more to grab the market stake, he added.

In fiscal 2020-21, its earnings per share jumped 11 times to Tk3.41 thanks to a reduction in the corporate tax to 22.5%, from 25%, and an increase in productivity by using modern technology.

The company declared a 20% cash dividend for its shareholders for the last fiscal year, which was 10% in the previous fiscal year.

On Sunday, its share price rose 4.22% and closed at Tk51.90 at the DSE.