Aziz Pipes suspends production for lack of funds

Aziz Pipes, a listed PVC product maker, has suspended production for a temporary period as it could not buy raw materials because of a shortage of funds.

"Our supplier did not deliver PVC resin, the main raw material, on time due to Covid-19," the company said in a filing on the Dhaka Stock Exchange (DSE) website yesterday.

The lack of stocks of PVC (polyvinyl chloride) resin hampered production.

Because of the abnormal increase in the price of raw materials in the local market, the cost of production will also be much higher for the company, Aziz Pipes said.

As a result, the company will suffer in marketing products. Under the circumstances, production was temporarily stopped from C-shift on January 10, the disclosure said.

Production activities will resume once the supply of PVC resin begins, and the situation improves, the company added.

However, stocks of Aziz Pipes were unchanged at Tk 97.50 on the DSE despite the suspension of production.

The price of raw materials has risen three to four times since July. Moreover, they are not coming from China, said a top official of the company, preferring anonymity.

Although the price of PVC pipes has gone up by about 10 per cent during the period, the increase has not been enough to offset the hike in the price of raw materials, he said.

"Our peer companies have funds. Most of them maintain the stock of raw materials and can import raw materials through letters of credit," he added.

Aziz Pipes cannot import raw materials through LCs because of its bad record in the Credit Information Bureau report, the official said.

Dutch-Bangla Bank and Uttara Bank have classified Aziz Pipes, according to the 2019-20 annual report of the pipe-maker. The loan amount could not be known immediately.

"We wrote to the banks to reschedule the loans so that we can run operation. They are yet to approve our proposals, so we are struggling," the official added.

As it can't open the LCs to procure the raw materials from international markets, Aziz Pipes has to rely on local suppliers, who are also importers. As a result, the cost of goods is higher for the company than its peer firms.

An official of another PVC pipe-maker said the price of raw materials rose but the hike had been much lower, not the three to four times being claimed.

"We are also feeling the heat of the increase in the raw material price. But we are not suspending our production," the official said. 

Due to the working capital shortage, the manufacturing of PVC plastic wood and flexible corrugated conduit pipes was suspended earlier.