Inflation, currency crisis and gas shortage hit international companies in April and June

Multinational corporations (MNCs) operating in the country’s manufacturing sector suffered the highest losses in the April-June quarter this year due to high inflation, currency crisis, taka devaluation and gas shortages.

Of the 13 listed multinational corporations, 11 — nine from the manufacturing sector and two from the telecommunications sector — have released their unaudited financial statements for the second quarter of this year.

BAT Bangladesh and Berger Paints Bangladesh are yet to release their financial statements for the June quarter.

Among the nine MNCs, Bata, Heidelberg Materials, RAK Ceramics, Unilever Consumer Care and LafargeHolcim Bangladesh reported a decline in revenue during the quarter compared to the same period in the previous year. Besides, Bata, Heidelberg Materials, Reckitt Benckiser, Singer and LafargeHolcim reported a decline in profit.

However, in the face of the economic crisis, Linde, Marico, Reckitt Benckiser and Singer reported revenue growth. Of these, only Linde and Marico reported profit growth in the April-June quarter. Unilever Consumer Care reported profit growth despite falling revenue.

Among international corporations, only RAK Ceramics reported a loss in the last quarter.

RAK Ceramics in its financial report reported that sales dropped by 16.48% due to a decline in market demand and the inability to deliver the desired goods to the customer due to a production interruption caused by the lack of adequate gas.

The decrease in net profit after tax was mainly due to reduced production and lower sales, while fixed costs did not decrease proportionally.

A senior officer at RAK Ceramics said, requesting anonymity, that the materials are sold to the customers at very competitive prices to survive in the very unhealthy price and market competition. The financial costs have also increased due to the increase in loans from the bank and also the increase in the interest rate.

Both revenue and profits of LafargeHolcim Bangladesh fell in the second quarter due to lower demand. CEO Iqbal Chowdhury said in a press release: “The Bangladesh economy is going through some challenges that are affecting the construction industry, resulting in a decline in sales this quarter.”

He added, “However, our focus on channel expansion, improved aggregate performance, digitalisation and solving waste challenges through Geocycle remains unchanged.

“With our continued focus on agility, cost and innovation, we are confident that we will demonstrate solid results in the coming quarters.”

Another international cement producer, Heidelberg Materials, reported weak results.

In response to queries from The Business Standard, Saikat Khan, the company’s Chief Legal and Corporate Affairs Officer, said the lower sales and lower net profit were due to a decline in market momentum and the adoption of a higher pricing strategy to maintain the desired margin.

In addition, soaring commodity prices are squeezing consumers’ purchasing power, causing them to postpone or slow down construction, he said. “Unstable economic and political conditions are also contributing to these delays.”

He added that the company is facing serious challenges due to market saturation, currency crisis, high inflation and logistical problems.

In explaining the decline in turnover of Bata Shoe Company (Bangladesh) Ltd in its financial report it was stated that due to unfavourable economic conditions caused by high inflation, the company’s turnover decreased by almost 4% during the period.

The report states that, along with revenues, selling costs fell by 6%, while operating costs increased slightly by 1% compared to the previous year.

During the April-June quarter of 2024, Singer Bangladesh’s revenue grew by about 10% to Rs 785 crore, but net profit declined by 47% to Rs 25 crore over the same period in the previous year.

The company said in its financial report that the reason for the decline in profit margin was the increase in sales of merchandise, including local products, caused by the currency crisis, as well as higher discounts and promotional activities aimed at financing sales.

To cope with the currency crisis, Singer took out a long-term intercompany loan of EUR 27.5 million from its ultimate parent company, Arcelik AS, Turkey in March 2024. The loan has a term of seven years, including a two-year grace period and a five-year repayment period.

Meanwhile, Unilever Consumer Care reported profit growth amid challenges. The financial report said profit improved due to operating cost efficiencies, a rise in net finance income and a one-time waiver of technology and trademark royalties granted by the parent company.

According to the Bangladesh Bureau of Statistics (BBS), the monthly inflation rate was 9.74% in June, down 0.2 percentage points from the previous month.

The country recorded inflation of 9.94% in May, the highest in a decade, according to BBS data. Food inflation was 9.73% in June, while non-food inflation hit 9.6%.

Shahidul Islam, CEO of VIPB Asset Management, said sales of some companies fell as inflation rose faster than people’s incomes, which has already become an economic problem.

He added that companies have been forced to raise product prices due to the increase in raw material prices, which is affecting consumers.