Most listed apparel makers log profit despite sluggish sales

Two-thirds listed apparel companies either made a higher profit or managed to stay in the black in July to December despite sluggish sales, reflecting the recovery for the most export-earning sector in Bangladesh.

Of the 44 garment companies listed with the Dhaka Stock Exchange, 14 firms took home more profit in the first half of the fiscal year compared to a year ago.

They include Alhaj Textile, Anlima Yarn, Apex Spinning, Far East Knitting, HR Textile, Maksons Spinning, Malek Spinning, Matin Spinning, Metro Spinning, New Line Clothing, and Queen South Textile.

The profits of 16 garment companies declined, eight incurred loss and the losses for six firms widened further.

Earnings per share of Envoy Textiles fell to Tk 0.37 in the first half of the fiscal year, from Tk 1.15 in the same period a year ago.

The EPS of Esquire Knit Composite decreased to Tk 1.13 from Tk 1.53 and that of Square Textiles to Tk 0.79 from Tk 0.84.

Desh Garments, Evince Textile, Hamid Fabrics, Nurani Dyeing, Prime Textile, Regent Textile, Shepherd Industries, and Stylecraft all fell into losses.

"Due to the pandemic, export orders were affected for almost all apparel companies," said Ehsanul Habib, managing director of Esquire Knit Composite.

Retail shops are still closed in many of the export destinations of Bangladesh, and many people are confined to homes as the deadly virus is affecting and killing people across the world every day.

"So, the demand for formal clothes fell mostly," Habib said. The clothes that are worn informally or at homes are rising, he said.

In July-December, earnings from apparels, which account for more than 80 per cent of export receipts, declined 2.99 per cent to $15.54 billion, according to the data of the Export Promotion Bureau.

Of the amount, $8.52 billion came from knitwear exports, an increase of 3.9 per cent, and $7.01 billion from woven product exports, down 10.22 per cent.

Exporters say the knitwear shipment rose compared to the woven ones as people are spending more time indoors because of the pandemic.

"The inflow of work orders at the spinning mills are still low although the order for the overall industry is improving," said Kutub Uddin Ahmed, chairman of Envoy Textiles Ltd.

"Orders are fewer. The denim segment had not been in good shape. However, the situation has been improving from last month."

The entrepreneur said cotton prices increased a lot worldwide, causing orders to Bangladesh slow. "We had to increase the yarn prices even during the pandemic because of higher cotton prices."

Cotton prices have gone up globally because China is purchasing a lot of the raw material from the world markets, Ahmed said.

The prices of manmade fibre are also increasing because of the chain effect of the rise in cotton prices, he said.

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, said April, May and June were the worst months for the spinning sector as the segment took a serious beating from the pandemic.

The situation had improved from July last year, and it continued up to October. The business again started falling from November because of the second wave of coronavirus infections, he said.

The order situation in the spinning segment has been improving from January. "The garment business globally is also reviving," he said.

An analysis of the earnings of the listed garment and textile companies showed that spinning companies were comparatively in a better position in the July to December period. Among nine spinning mills, five witnessed higher earnings.

Listed apparel companies are operating their business with low margin, so investors' demand from the sector is comparatively low, said Md Moniruzzaman, managing director of IDLC Investments Ltd.

Also, the sector has been impacted by wage cost and the pandemic-related shocks, he said, adding that spinning companies were affected by the volatility of cotton price in the international market.

"So, their stock prices behaved in line with their earnings in the last six months," Moniruzzaman added.