Fuel, power companies lose profitability

Most fuel and power stocks registered lower profitability in the first half of the current financial year (FY) due to the pandemic-induced economic slowdown.

Firms expect that it will take at least six more months for fuel and power consumption to fully recover from the Covid-19 fallout, enabling them to post higher earnings for their investors.

Among the eight fuel and power companies listed with the Dhaka Stock Exchange (DSE), three recorded lower profits in the first half of FY20-21 compared to the same period a year ago.

Another company saw higher losses while the remaining four booked higher profits.

"Our profit declined because of falling sales," said Engr Md Atiqur Rahman, company secretary of the Dhaka Electric Supply Company (Desco).

Desco's earnings per share (EPS) dropped 85 per cent year-on-year to Tk 0.31 in the first half of FY21, DSE data shows.

According to the company secretary, power consumption did not improve much as many factories had been shut.

In some cases, many factories are yet to go into full operation, he said, adding that industrial power usage accounts for a lion's share of their income.

"We normally do not see profits from residential use," Rahman said.

Interest expenses against loans and payroll expenses also increased, he added.

Desco shares dropped 2.26 per cent to Tk 35 yesterday from Tk 35.80 the previous day.

However, MJL Bangladesh posted increased earnings and profits thanks to the higher import duty imposed by the government to discourage imports.

"Our profit rose despite the economic slowdown mainly because of government measures to reduce imports of low quality lubricants," said Md Rokibul Kabir, company secretary of MJL Bangladesh.

The marketer of Mobil recorded 14.5 per cent higher profits year-on-year to hit Tk 120 crore in the first half of FY21.

"Besides, the drive by law enforcement agencies to stop sales of fake lubricants also had a positive effect on our sales," he said, adding that around 30 per cent of local demand for mobile is met by non-branded lubricants.

Bangladesh was not so badly impacted by the pandemic but many other countries are still struggling.

"We need around six more months to return to the growth rate we achieved in the pre-pandemic era," said the official of MJL, which holds around 40 per cent of the local lubricant market.

Share prices of MJL remained unchanged yesterday at the DSE.

Meanwhile private power producer Doreen Power, the state-owned Power Grid Company of Bangladesh and Jamuna Oil also saw higher profits.

Intraco Refuelling, and state-owned Meghna Petroleum booked lower profits.

Power Grid and Intraco ended marginally lower while Doreen and Meghna gained yesterday at the DSE.

Abdul Hadi, a stock investor who completed his post-graduation in the business faculty of the University of Dhaka, said the reduced profit of power and fuel companies was expected as demand is yet to fully recover.

"Fuel and power sector companies will book higher profits again once the economy recovers fully," he added.