Most listed readymade garment (RMG) producers secured higher profits during the October-December period of this fiscal year, buoyed by global demand even amidst the myriad challenges plaguing Bangladesh’s overall business climate.
Companies that are relatively large, based on their export volume and capital, staged improved performances but small companies continued to struggle.
Among the 40 listed companies from this sector that published the data, 25 saw higher profits while 15 saw lower profits. However, 15 companies that have been in the Z category for many years have not published any data yet.
The combined profit of the 40 companies that shared reports showed the continuation of a rising trend after being hit hard during the politically volatile July-September quarter last year.
Their total profit soared 50 percent year-on-year to Tk 197 crore in the October to December period of last year, according to data compiled by Sandhani Asset Management Ltd.
The RMG sector has been facing difficulties since 2023 when salaries were hiked and energy prices almost doubled, said Shams Mahmud, managing director of Shasha Denims Ltd.
That year, it was decided that the RMG workers would get a 9 percent annual wage increment whereas earlier it was 5 percent, he said.
Simultaneously, the minimum wage for an entry-level garment worker was raised to Tk 12,500 from Tk 8,000, he added.
Many companies, especially small establishments, could not absorb the rise in costs.
Their situation deteriorated further as political and industrial unrest and floods hampered production last year, Mahmud said.
Above all, factories were not supplied with adequate gas and electricity, so most fell into “deep problems”, he said.
Only large companies managed to absorb the shock, continued to get export orders and shipped products properly, he said.
Bangladesh’s RMG exports grew 13.28 percent year-on-year to $19.88 billion in the current financial year of 2024-25, according to Export Promotion Bureau.
Envoy Textiles Ltd saw a 161 percent rise in profits, while Square Textiles Ltd reported 58 percent and Malek Spinning Mills Ltd 22 percent.
One of the ways that large companies managed to absorb the shock was by using their financial strength, said Mahmud, who is also a former president of the Dhaka Chamber of Commerce and Industry.
Large companies usually keep a huge amount of cash on hand and can also borrow funds from their sister concerns. So, they have low dependency on bank loans, which charge high interest rates, he said.
Spinners struggling
An analysis of the financials of the sector’s companies shows that spinning mills struggled the most.
The spinning mills were troubled by a gas supply shortage. As they did not perform well, the country had to import yarn from India to meet demand, added Mahmud.
Bangladesh’s textile sector experienced profit fluctuations in 2024, reflecting challenges in global trade, inflationary pressures, and shifting demand patterns.
While some companies demonstrated resilience, others struggled to maintain profitability amid economic uncertainties.
An analysis of quarterly profit data for major textile companies reveals the stark contrast.
Stylecraft Limited suffered significant losses in the first half of 2024 before rebounding slightly in the two subsequent quarters with profits.
Saiham Textile Mills Ltd exhibited a more stable trajectory, recovering from moderate losses in early 2023 to post a steady rise in profits.
However, companies such as Tallu Spinning Mills Ltd faced persistent financial difficulties and widening losses, highlighting ongoing operational challenges. Meanwhile, Dulamia Cotton Spinning Mills Ltd displayed an inconsistent profitability trend. https://www.thedailystar.net/business/economy/news/large-listed-rmg-makers-secure-higher-profits-3831121
