Listed apparel makers bleed for pandemic-induced demand collapse
The profits of most of the listed apparel companies tumbled in the July-September quarter due to the collapse in demand abroad amid the coronavirus pandemic.
Among the 56 textile and garment companies listed on the Dhaka Stock Exchange (DSE), 39 companies published their first quarterly financial reports. Of them, 15 posted profits that were lower than in the same period a year ago.
Nine companies returned to red after making profits in the same period last year. Five companies extended their struggle to return to profits.
"The apparel industry witnessed lower earnings due to a drop in sales in our export destinations amid the pandemic," said Anwar-Ul-Alam Chowdhury, chairman of Evince Textile.
"At the height of the pandemic, our export orders had been cancelled, hold, or revised," he said.
He said the woven sector received the major blow as people did not go to offices or have been working from home and limited attending social gatherings and parties. So, the demand for formal shirts and apparel products has dropped.
In the July-September quarter, the export earnings of the woven sector declined by 5.78 per cent year-on-year to $3.88 billion, data from the Export Promotion Bureau showed.
Of the total earnings from the garment sector, $4.46 billion came from knitwear shipment, which rose 7.04 per cent.
"The overall situation will not improve until the pandemic goes," said Chowdhury, also a former president of the Bangladesh Garment Manufacturer and Exporters Association.
Evince Textile's earnings per share stood at Tk 0.32 in the negative in the first quarter. It was Tk 0.19 in the same period last year.
Many retailers thought they would do good business during Christmas, the biggest spending season in the western world, but it might not happen because of the second wave, he added.
After the lower profit disclosure by the apparel sector, the stocks of the industry fell on the DSE. Of the firms, the price of 11 companies rose, 22 declined, and 23 remained unchanged yesterday.
The market capitalisation of the textile sector was Tk 10,477 crore yesterday, or around 3.20 per cent of the total market capitalisation of the DSE. It was 3.75 per cent on July 1.
"Our textile sector is mainly related to international trade, but the growth of the export earnings during the period was not encouraging due to the pandemic. We knew that their earnings would not delight us," said Mir Ariful Islam, head of research of Prime Finance Asset Management Company.
"But the textile sector had performed worse than our analysis. Our export earnings did not see de-growth in the quarter," he said.
Between July and September, the shipment of apparels, which typically contribute 84 per cent to the national export, grew 0.84 per cent year-on-year to $8.12 billion.
Among the listed textile firms, 14 apparel companies, or 25 per cent of the sector, incurred loss in the quarter, the highest ratio among all the industries, an analysis of DSE data showed.
Safko Spinning was the biggest loser: its EPS was Tk 2.09 in the negative in the quarter, higher from Tk 1.62 in the negative in the first quarter of 2019-20.
Evince Textile, Generation Next, Hamid Fabrics, Nurani Dyeing, Prime Textile, Shepherd Industries, Sonargaon Textile, Stylecraft and Zaheen Spinning Mills incurred loss in the July-September quarter. They all were in profits in the same period in 2019.
Prime Textile and Sonargaon Textile witnessed the highest deviation in their earnings. EPS of Prime Textile was Tk 0.12 in the first quarter of the previous financial year, but it declined to Tk 0.96 in the negative in the first quarter this year.
Paramount Textile booked the highest EPS among all the listed textile and garment companies. Its earnings per share were Tk 1.51 in the last quarter, up from Tk 1.23 a year ago.
"The earnings of the apparel sector fell mainly due to the lower orders from the international market," said Mustafa Kamal, chief financial officer of Argon Denim.
Argon's turnover dropped to Tk 65 crore in the first quarter from Tk 91 crore in the same quarter in the previous year.
As most of the European economies had enforced lockdowns to limit the spread of the virus, the sector in Bangladesh struggled, he said, adding that the industry had started feeling the heat from April.
The order has begun to rise of late, but the revival may not last as some countries, including the UK, Spain and France have already reintroduced lockdowns amid a surge in infections, he added.