Why Sonali Paper keeps shareholders in the dark

With less than a week remaining for the end of the current fiscal year, Sonali Paper and Board Mills has only been able to publish financials for the first three months, keeping shareholders in the dark regarding performance for the following two quarters.

According to the Dhaka Stock Exchange (DSE), Sonali Paper, a concern of Younus Group, did not publish its financials for six months, from October last year to March this year.

The financials for the last two quarters have been overdue, which is a violation of securities laws. This non-compliance is considered a punishable offence, and the company will have to face penalties as a result.

According to officials in the company, the management is unwilling to disclose the financials due to the disappointing performance of their other income, specifically the gains from stock market investments. This underperformance is attributed to the volatility of the country's stock market.

The other income contributes significantly to the company's total profit. In fact, the other income surpasses the operational income or core business income by a considerable margin, they added.

Seeking anonymity, the officials said there is a possibility of a decline in net profit. This could be one of the reasons why Sonali Paper is delaying the board meeting and not disclosing the financials within the stipulated time as required by securities laws.

Around 60% of the total profit has been contributed by other income as the company has a large investment in the stock market, and the rest of the income came from the operation or main business, say sources.

What do the listing rules say?

According to the listing regulations of the Dhaka Stock Exchange (DSE), a company is given 45 days to publish its financials for the first quarter after the end of the period. Similarly, for the second and third quarters, the company is allowed 30 days to disclose its financials.

If a company fails to publish its financials within the stipulated time, it has to face a penalty of Tk5,000 for every day of non-compliance until the financials are disclosed.

So, Sonali Paper and Board Mills is going to face penalties for non-compliance.

An official in the company told The Business Standard, "It got a one-month time extension from the Bangladesh Securities and Exchange Commission (BSEC) for holding a board meeting to publish financials for the second quarter as the chief financial officer (CFO) was abroad due to his illness."

"In the meantime, the second quarter became due. So, the publication of the two quarters' financials has become due. As the company failed to declare its financials, it will face penalties for the non-compliance," he added.

Issuance of right shares

The company received approval from the stock market regulator to issue right shares in April last year to procure new machinery for business expansion as its product demand has been growing rapidly.

The subscription of right shares ended in June last year. After receiving the fund from right shares issued against ordinary shares, Sonali Paper and Board Mills became non-compliant and is still in the same condition.

The company raised Tk10.98 crore by issuing right shares for procuring and installing new machines.

The company has issued one right share against two existing ordinary shares at Tk10 each.

Jul-Mar 2022 financials

The company reported 17% growth in revenue in the first quarter from July to September of the fiscal 2022-23 while its net profit grew by 90% over the same time of the previous year.

Its profit from operations inched up by 30% to Tk4.82 crore, while its other income jumped by 112% to Tk25.55 crore.

After paying taxes and the workers profit participation fund, its net profit stood at Tk23.14 crore, which was Tk12.18 crore in the same period of the previous fiscal year.

In fiscal 2021-22, it made a profit of Tk13.24 crore and paid a 40% cash dividend to its shareholders.

The company got re-listed on the stock exchanges in 2020, though it was listed on the DSE in 1985.

The company has started its business in the manufacturing and marketing of media liner, simplex, duplex paper board, and writing papers.

Due to continuous losses, the previous management closed the company's production until 2006.

After that, Mohammed Younus and his family bought the entire shares of the company in 2007 and brought it into operation with the necessary renovations.