Profit growth signals strong economic rebound

 

Listed companies across almost all sectors saw their profits rise 8.6 per cent on average in the first quarter of the ongoing fiscal year, indicating that Bangladesh is making a strong economic recovery from the Covid-19 pandemic.

The collective profits of 288 listed companies stood at Tk 7,203 crore in the July-September period of 2021-22, up from Tk 6,631 crore a year earlier, according to Sandhani Asset Management Company.

Although the Dhaka Stock Exchange features a total of 384 enterprises, some 288 were analysed as the remainder were either listed after 2018 or are yet to publish their quarterly financial reports.

“As the economy is returning to normalcy, most listed companies saw higher profit,” said AB Mirza Azizul Islam, a former finance adviser to the caretaker government.

However, there is conflicting data regarding Bangladesh’s recovery as some private organisations’ surveys show that poverty rates rose when the demand for non-essentials dropped significantly amid prolonged countrywide economic shutdowns aimed at combating the rogue virus.

“So, the fact that most listed companies registered increased profits might be because they are export-oriented, as evinced by the country’s rise in export earnings,” said Islam, also a former chairman of the Bangladesh Securities and Exchange Commission.

Bangladesh earned about $11.02 billion from exports in the first three months of the current fiscal, up 11.37 per cent year-on-year from $9.89 billion, data from the Export Promotion Bureau showed.

Islam also attributed the increased consumption for this year’s growth in profits as the demand for all goods and services rocketed soon after the country observed a two-month strict nationwide lockdown in 2020.

As such, listed companies saw their profits climb 38 per cent year-on-year to Tk 6,631 crore in the first quarter of FY2020-21. With this backdrop, the profit growth in the recently ended quarter is seemingly low even though it is at a considerably normal level, Islam added.

Mominul Islam, managing director of IPDC Finance, said one positive aspect of the pandemic was that people were now more bullish about the economy.

“People have confidence in the country’s economic rebound as their earnings are now in good shape,” he added.

Besides, remittance earnings also increased and so peoples’ consumption and expenditure in construction, fast-moving consumer goods, and all other sectors saw a marked rise.

Among the 288 companies, 48 incurred losses while the remaining 240 registered profit, as per DSE data.

Grameenphone logged the highest first-quarter profit of Tk 856 crore, followed by Square Pharmaceuticals at Tk 499 crore.

Profits of Beximco Ltd, British American Tobacco Bangladesh, and United Power Generation stood at Tk 360 crore, Tk 294 crore and Tk 289 crore respectively.

Not all sectors enjoyed such stellar performances though: the service and the fuel and power sectors witnessed a fall in profits in the July-September period.

Due to the expiration of power purchase agreements, the profitability of some listed electricity generation companies was negatively impacted, said Shahidul Islam, chief executive officer of VIPB Asset Management.

Low interest rates on bank deposits also impacted the profitability of some cash-rich companies.

“Their quarterly profit reports for the last five years show that there was huge volatility in corporate earnings, but an average growth of about 11 per cent is in line with the growth of nominal gross domestic product,” he said.

Some big companies incurred losses in the July-September quarter of FY2018-19 and this had a negative impact on the total profits of all listed companies for that period, Islam added.

The profits of listed companies during the period had dropped 7 per cent year-on year to Tk 4,778 crore compared to Tk 5,175 crore the year before.

ICB, ACI, Al-Arafah Islami Bank, Exim Bank, RN Spinning Mills, and Heidelberg Cement incurred a combined loss of Tk 260 crore in July-September 2019 after logging profits in the same quarter the previous year.

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