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Bata's historical high dividend fails to boost stock

Depreciation of taka, high cost of sales keep profit growth from reaching pre-pandemic level

BABUL BARMAN | April 17, 2023 00:00:00

Bata Shoe Company (Bangladesh) plunged by almost Tk 22 each share on Sunday despite the latest disclosure that showed its return to profit in 2022 after two straight years.

The multinational footwear maker posted a profit of Tk 410 million for 2022, driven by a growth in revenue while it incurred losses amounting to Tk 68.50 million the year before and Tk 1,325 million in 2020 mainly due to the pandemic and lockdowns.

The earnings per share stood at Tk 29.98 in 2022 as against Tk (5.01) a year ago, according to a regulatory filing on Sunday.

The board of Bata Shoe recommended 365 per cent cash dividend for 2022, the highest in its history since its listing on the Dhaka Stock Exchange (DSE) in 1985.

The company has declared a 105 per cent final cash dividend for the year, after 260 per cent interim cash dividend already paid in 2022.

This positive news, however, could not make investors much optimistic as Bata Shoe's stock price plunged 2.24 per cent to close at Tk 953.10 on Sunday.

Market operators said the company's financial performance is yet to become stable even after the recovery of the business in footwear due to the devaluation of the taka against the dollar; the company has to import a major portion of the raw materials used.

Out of the four quarters of 2022, the company suffered a loss of Tk 59 million in the July-September quarter. The three other quarters recorded profits of Tk 469 million.

"The company's net profit is yet to reach the expected level and is far below the pre-pandemic level, which might discourage investors to put fresh bets on its shares," said Md Sajedul Islam, senior vice-president of the DSE Brokers Association.

Besides, the overall bearish market situation and upcoming Eid festival also held back investors from injecting fresh funds in the stock market, said Mr Islam.

Generally, investors buy new stocks after selling their holdings of other stocks, but they do not have the scope due to floor price.

"So many good and well-performing stocks have remained stuck at floor as investors considered those stocks' current prices higher," said Mr Islam.

Foreign investors are in selling mode as their stake came down to 1.35 per cent from 1.58 per cent in Bata Shoe a year ago.

Shareholders of Bata Shoe will get Tk 36.50 per share as dividend against the earnings per share of Tk 29.98 for 2022, meaning the company will give an additional Tk 6.52 per share in dividends from its retained earnings.

The company's retained earnings stood at Tk 3.44 billion as of September 2022.

Company secretary Md Hashim Reza could not be reached over the phone despite repeated attempts.

An official of Bata Shoe spoke on condition of anonymity.

He said the profit growth of the company was not at the expected level due to the depreciation of the local currency.

In 2022, there were no Covid restrictions and the company was able to do good business in Eid festivals. As a result, the company's revenue went higher, but high cost of sales contained profit growth.

The company is yet to disclose the annual sales revenue data for 2022. However, its sales revenue jumped 37 per cent year-on-year to Tk 7.44 billion in the nine months through September 2022.

Bata Shoe for the first time in its six decades of operations in Bangladesh suffered a huge loss in 2020 when its annual sales dropped 41 per cent due to a nationwide shutdown.

Again in 2021, recurring virus waves ate away at the sales revenue as the business missed two Eid festivals that contribute more than 30 per cent of annual sales.

The multinational shoe company has been serving the local customers since 1962. Currently, Bata Shoe operates two manufacturing facilities: one in Tongi and the other in Dhamrai. The company manufactures and sells leather, rubber, plastic, canvas footwear, hosiery and accessories items.

With a production capacity of 160,000 pairs of shoes daily, its annual sales stood at about 30 million pairs before the pandemic.

Bata is the lone franchisee of internationally-renowned brands such as Adidas, Nike, Hush Puppies and Skechers in Bangladesh. It has its own sneaker brands: Power and North Star.

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