#Title

FIRMS’ FALLING PROFITS testify to slowing business, economy
AHSAN HABIB
Businesses in Bangladesh went through a tough time in recent months due to a dearer US dollar that pushed up their costs of raw materials and a rocketing fuel bill that contributed to the surge in operating expenses.
The fear of an economic slowdown because of the dragging Russia-Ukraine war and the global energy crisis has made inflation-hit people more cautious, forcing them to tighten their purse strings that hurt the bottom line of companies.
It was evident again in the financial performance of 300 companies listed on the Dhaka Stock Exchange in the July to September quarter of the current financial year of 2022-23. They represented almost all sectors of the economy.
Of them, 110 companies posted a reduced profit in the three-month period compared to the identical quarter a year earlier.
Thirty-eight companies slipped into losses for the first time while the losses for 30 firms widened in the quarter, data compiled by Sandhani Asset Management showed.
Some 122 companies showed higher profits despite the mounting challenges, at home and abroad.
“The performance was not surprising as the whole world is suffering because of the Russia-Ukraine war. We are also facing the heat of the global crisis,” said Kazi Iqbal, a senior research fellow at the Bangladesh Institute of Development Studies.
Firms are facing monumental challenges on both the demand and supply sides.
On the demand side, people are buying less since their purchasing power has been squeezed for higher consumer prices, which surged to a decade high in Bangladesh in August.
People are also worried that the economy may slow down further since the factors responsible for the current global crisis and the strain facing Bangladesh’s economy are still there. And there are little signs that they would disappear anytime soon.
On the supply side, the cost of production has gone up for the higher global commodity prices, the unprecedented US dollar rate, and the fuel prices locally.
Since November last year, the government has hiked the diesel price twice, sending it to Tk 109 per litre from Tk 65 to minimise the subsidy on petroleum products.
“All of the factors have combined to hit the businesses,” Iqbal said.
Among the major sectors, the banking sector did comparatively better. The worst performers include electric, electronic and home appliance, and insurance sectors, the data showed.
“The export-based companies also suffered in the July-September quarter as the world economy and the export destinations of Bangladesh, especially, are seeing high inflation. So, demand for imported goods in these countries has dropped,” said Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry.
Inflation in the 19-member eurozone surged to 10 per cent in September, the highest since records began. In the US, it was 8.2 per cent in the month, hovering near the highest levels since the early 1980s.
Amid the worsening cost-of-living crisis, nearly three-quarters of European consumers are cutting back spending on everyday items, including food, to make ends meet, according to IRI, a data analytics and market research company, reported Bloomberg recently.
The EU and the US together account for more than 80 per cent of Bangladesh’s export earnings.
Exports from Bangladesh dropped 6.25 per cent year-on-year to $3.9 billion in September, the first fall in 14 months, leading to an overall slowdown in shipment.
The FMCG (fast-moving consumer goods) companies that serve the local consumers were also suffering from a lower profit since the cost of operation rose, said Rahman.
“The depreciation of the local currency against the US dollar sent the raw material costs soaring.”
The taka lost its value by at least 25 per cent versus the American greenback in September compared to a year prior amid fast-depletion of the foreign currency reserves.