SS Steel's profit plunges 98pc on costlier raw materials, imports

SS Steel Limited's net profit plunged 98 per cent year-on-year in the first half of the current fiscal year despite an impressive growth in revenue.
It blamed the decline in profit on a sharp rise in production cost, rendered by costlier raw materials and foreign currency transaction loss.
The steel manufacturer published its first quarter (Q1) and second quarter (Q2) financial statements at a time on Monday.
Its consolidated revenue rose 140 per cent year-on-year to Tk 7.62 billion in the six months through December 2022, thanks to subsidiaries.
But higher expenditure on raw materials and the devaluation of the taka against the dollar ate up a larger chunk of profit.
The company's cost of sales skyrocketed to Tk 7.01 billion in the six months to December 2022, from Tk 2.25 billion in the same period a year earlier.
As a result, the steel maker's profit dropped to Tk 6.01 million in July-December 2022, from Tk 449 million a year earlier.
Company Secretary Md. Mostafizur Rahman could not be reached for comment.
Almost all the listed steel makers' profit slumped in the recent quarters for pricier raw materials, rising freight charges and gloomy economic conditions due to the Russia-Ukraine war.
The foreign currency conversion rate sharply increased raising import and production costs.
Raw materials' prices eased a bit in the recent months, but a dollar shortage in banks is not letting companies take advantage of the present market as most of them have failed to open LCs for imports needed.
The crisis has been intensified by frequent power cuts caused by gas supply shortage, industry insiders said. On top of that, the taka continued to lose value against the dollar.
The local currency devalued by 14 per cent against the US dollar in the first half of the FY23 amid the depletion of the foreign currency reserves.
Importers took a severe blow since they had to pay more to purchase raw materials and equipment from external sources.
The consolidated net operating cash flow per share of SS Steel turned negative at Tk 8.13 in July-December 2022 while it was positive at Tk 0.79 for July-December 2021.
The company said the consolidated net operating cash flow per share turned negative as the company's payments outstripped the cash received during the period.
In 2020, SS Steel acquired 99 per cent shares worth Tk 1.60 billion of Saleh Steel.
Saleh Steel produces and sells rods and coils, and its annual production capacity is around 86,000 tonnes.
In April 2022, SS Steel acquired 99 per cent stakes of Al-Falah Steel and Re-rolling Mills by investing Tk 875 million.
Al-Falah Steel and Re-Rolling Mills, a reputed steel manufacturing company in Bangladesh, is engaged in steel production and sales. The firm's annual production capacity is around 64,800 tonnes.
SS Steel financed the investment from its retained earnings and bank loans.
Listed in 2019, SS Steel shares remain stuck at the floor price of Tk 16.60 since October last year.
The company's annual profit dropped 19 per cent year-on-year to Tk 615 million in the FY22.
It declared 2 per cent cash dividend for general shareholders, and 8 per cent stock dividend for all shareholders for FY22. The company is yet to get regulatory approval to disburse stock dividends to shareholders.
There are about 40 active manufacturers with a combined capacity to produce more than 10 million tonnes of steel a year. Of them, Abul Khair Steel, GPH Steel, BSRM and KSRM meet more than half of the annual demand of eight million tonnes. The steel industry in Bangladesh is worth Tk 550 billion.

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