CVO Petrochemical left to stew amid raw material supply choke-off
Stock investors of CVO Petrochemical Refinery have been in a flap as the company has announced to close operations for at least three months due to a shortage of condensate, a gas by-product used as a key raw material by refineries.
The energy and mineral resources division under the power and energy ministry asked Petrobangla, a government-owned national oil company, last week not to supply the condensate to any private refineries for the next three months through September.
Once the current stock of the raw materials runs out, the company won't be able to operate, it informed its investors yesterday through the website of the Dhaka Stock Exchange.
"Petrobangla has cut the supply abruptly without any prior notice or talking to us," said Mowin Hossain, company secretary of CVO Petrochemical.
All the 12 private petroleum refineries in the country run hand to mouth and if the companies close their operations for three months, they will face dire consequences.
"Employees' salaries, bank loan repayment -- everything will be left in a state of uncertainty," the official added.
The government on several occasions have asked the refiners in the country to upgrade their product quality but to no avail, which is why the harsh decision had to be taken, said a top official of the ministry asking not to be named.
"We had initially decided to halt the supply of the raw material in the month of February or March because of the inferior quality of the products [of the refiners]," he added.
Hossain, however, said no local company could maintain the high standards as the ministry demands.
"The government should sit with the stakeholders to find a way out."
Such a development is undoubtedly a fresh blow to the stock market, which had been bleeding for long until further aggravated by the ongoing pandemic, said Abdul Malek, a stock investor.
There should be a consensus among all the regulatory bodies before taking any decision against any listed company, he added.
Now the refiner should talk with the stock market regulator and then the ministry officials to find a solution very fast, Malek said.
"Our association is working to end the stalemate. We are hopeful that the government will reconsider the decision. As we are a public limited company, our general investors will be badly impacted," Hossain said.
However, the supply of condensate remains open for octane producers.
CVO Petrochemical, whose paid-up capital was Tk 25.24 crore, traded at Tk 115.40 on bourses yesterday.
Sponsors hold 50 per cent, general shareholders 22.47 per cent, foreigners 0.22 per cent and institutional investors the rest 22.31 per cent share in the company.
Earnings per share of the company were Tk 0.37 in the negative between July last year and March 20 this year, down from Tk 0.21 a year earlier.
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