Northern Jute halts production after account freeze | The Daily Star
12:00 AM, February 24, 2020 / LAST MODIFIED: 01:06 AM, February 24, 2020

Northern Jute halts production after account freeze

Northern Jute Manufacturing Company's factory at the BSCIC Industrial Estate in Kushtia was closed after it failed to clear workers' wages following bank account freeze by the central bank.

The decision to stop the production of the listed jute good producer caused its share to slide 8.74 per cent to Tk 421 on the Dhaka Stock Exchange (DSE) yesterday.

Northern Jute has previously informed investors through the DSE of the bar on its bank accounts as per a High Court order.

Since the chairman of Northern Jute, Uzzal Kumar Nandi, is also the chairman of People's Leasing and Financial Services (PLFS), the decision to discontinue the production could be considered as a consequence of recent events.

PLFS has gone into liquidation since July 2019 due to its weak financial situation.

"But Northern Jute has no connection with PLFS," said Shahadat Hossain Patwary, company secretary of Northern Jute.

Workers at the jute product factory are paid on a weekly basis and since all the bank accounts are frozen, operations had to be shut down, Patwary said.

The company could not realise any export proceeds. As such, it could not procure raw jute or make payments to spare part suppliers, according to the announcement of Northern Jute.

Besides, the company could not disburse any cash dividend to shareholders although an adequate fund has been maintained, it added.

"Now, we will move to courts so that we are allowed to transact through our accounts. We hope to reactivate the accounts within February 25. Until then, the factory will remain shut," he said.

According to data from the DSE, Northern Jute's stock was unstable over the past two years due to earnings volatility.

By the end of June 2018, the company's earnings per share (EPS) was Tk 17.15 in the negative and it provided no dividend that year. As a result, it was downgraded to Z category.

A year later, the EPS jumped to Tk 23.29, which sent Northern Jute back to the A category.

In the second quarter of this fiscal year, the company's EPS dropped to Tk 2.94, down from Tk 9.06 a year earlier.

Stock market analysts say PLFS's liquidation has had a huge toll on depositors, stock investors and many listed companies, all of whom parked their money in the non-banking financial institution.

"The sponsors and directors of PLFS should be punished," said an analyst.

The NBFI's problems came to the surface in 2013-14, when some of its directors made off with Tk 570 crore by way of submitting fake documents, according to a central bank inspection report.

On June 27 last year, the finance ministry instructed the central bank to shutter the NBFI for its failure to improve its conditions, in a first for Bangladesh's financial sector.

The High Court also ordered freezing the bank accounts of nine former directors and two top officials over their alleged involvement in driving the NBFI into the ground. 

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