Pandemic sends Apex Tannery into losses

Apex Tannery Limited (ATL) sank to losses in the first quarter of the fiscal year due to a drop in sales of leather goods amid the Covid-19.

Its earnings per share (EPS) stood at Tk 2.25 in the negative in the July-September quarter while it was Tk 0.35 in the positive during the same period the previous year, according to the company's disclosure posted on the Dhaka Stock Exchange website yesterday.

The tannery's net asset value per share was Tk 61.73 as of September 30, 2020, while it was Tk 63.89 as of June 30 in 2019.

The company also informed that its EPS and consequently, gross profit, operating profit, profit before income tax and profit after tax decreased due to the ongoing coronavirus pandemic compared to a year earlier.

The net operating cash flow per share decreased as collections from turnover and bills receivables fell by 30 per cent at the same time.

Meanwhile, payment for the purchase of leather, chemicals, spare parts, creditors and other expenses decreased by 18 per cent.

And so, the company's overall net operating cash flow per share was impacted negatively, Apex Tannery said in its disclosure.

Syed Nasim Manzur, managing director of Apex Footwear, a sister concern of ATL, said the global demand for finished and crust leather has crashed due to a collapse in demand for non-essential goods, especially in the EU, Japan and the US.

Leather shoes, bags and accessories like wallets are particularly more expensive compared to non-leather alternatives and the sales of these products have been hit hard as a result.

"It must be remembered that the buyers of finished leather and semi-finished leather exported from Bangladesh are mainly factories making such kinds of products in China, India and Italy," Manzur said.

All of these factories that produce finished leather goods have seen massive order cancellations and a drop in new orders and so, they are still not buying leather at a rate anywhere near the pre-pandemic level.

"Therefore, almost all tanneries have seen a large drop in sales volume," he added.

Bangladesh's finished leather exports declined 22.45 per cent in September compared to the same period last year.

Manzur said in order to stimulate demand, tanneries have been forced to sell their wares at reduced prices.

Apex itself witnessed a 21 per cent drop in the price for average finished cow leather while the cost of average finished goat leather fell 23 per cent.

Apex Tannery's also has a large inventory of raw materials due to the low sales and most of this material is of low grade and therefore, need to be sold at very low prices.

As a result, the company's gross profits declined despite a 34 per cent decrease in operating expenses amid the pandemic.

Still, it has not been enough to compensate for the low revenue and has negatively impacted the operating profit and EPS, Manzur said.