AHSAN HABIB

The last fiscal year 2024-25 (FY25) was hard for listed companies. During the period, firms saw their profitability fall to the lowest level since post-Covid, squeezed by inflation that outpaced sales growth, rising borrowing costs, political upheaval and limited public spending.

According to an analysis by The Daily Star based on published company data, in FY25, the net profit margins across 153 listed firms fell to 5.29 percent from 7.85 percent a year ago. In FY23, profitability was 6.74 percent, down from 9.26 percent in FY22.

“The economy has been going through a high inflationary period for the past couple of years, which has multiple effects on corporate profitability,” said SM Rashedul Hasan, managing director and CEO of UCB Asset Management.

High inflation squeezes people’s real wages, reducing their overall purchasing power and demand. As a result, firms’ sales drop. When sales fail to grow faster than the inflation rate, profitability suffers as overhead costs rise.

Explaining further, he said, “A firm cannot reduce manpower, but it has to raise salaries above the inflation rate. If sales do not increase at the same pace, overhead costs rise, which ultimately drags down profitability.”

Last year, sales growth of listed firms was 5.8 percent, while inflation exceeded 8 percent.

“Another factor that heavily impacted profitability was higher interest rates. Although sales were under pressure, interest costs rose last year, directly hitting profitability,” he added.

EXCLUSIONS AND SECTOR PERFORMANCE

Although 158 companies have published financial reports so far, five June-ending The