Manufacturers fret over scale of losses

Listed manufacturing companies are looking forward to a sort of normalcy to recover from losses incurred during the suspension of production amid curfew, Internet outage, and vandalism carried out after the fall of the government.

Representatives of several companies talking to The FE said they were yet to assess the losses. But they said they were worried about indirect losses apart from revenue loss and damage to properties.

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Only if the interim government can restore an amicable environment for business and if people can regain momentum in daily lives, the manufacturing sector will bounce back. The exporters will also be able to earn back the confidence of foreign buyers.

Textile to pharmaceuticals, cement to steel and food to beverage sectors are emphasizing the need to restore the transportation system and law and order. Supply chain disruptions, they fear, will have a severe impact on the companies' profitability, which will get reflected in the financial statements of upcoming quarters.

One of the largest manufacturers of consumer products, ACI said its production of food items and salt had remained suspended for five days in the run-up to the resignation of Prime Minister Sheikh Hasina on August 5. The manufacturing of medicines continued on a limited scale during the time.

The losses were then magnified when violence erupted after the ouster of the government. Seven shops of Swapno, a subsidiary of ACI, were looted and the ACI's factory located in Sirajganj was set on fire at the time.

"We are yet to assess the total loss," said Pradip Kar Chowdhury, chief financial officer of ACI.

"The impact of revenue loss of manufacturers will be visible in the financial statements of the next quarter."

Right now, the toughest challenge is to open LCs (letters of credit) as foreign banks are skeptical about the financial ability of local importers.

Not only ACI, business outlets of many other companies were vandalised.

The impacts of the shutdown were felt more acutely by the export-oriented textile sector, which accounted for 84 per cent of total exports from Bangladesh. They lost contact with foreign buyers and failed to meet shipment deadlines.

Though monetary losses seem to be significant, companies worry more about losing confidence of international clothing retailers and brands.

Asif Moyeen, managing director of Far East Knitting & Dyeing Industries, said his company had made a loss of Tk 50 million per day due to a halt in production and increased export costs caused by air shipment.

The sea port has also been facing backlogs as the overall situation is yet to be normal.

Cement manufacturers said they had already been facing the pressure of a higher dollar rate when the episode of curfew and shutdown curtailed revenue income, adding to their woes.

The foreign exchange rate was Tk 110 a dollar at the end of April and the price suddenly rose to Tk 117.50 in the first week of May this year.

"We are yet to adjust the price of our products to overcome the loss for the higher dollar rate. And the latest blow left a further impact on the revenue income of the cement sector," said Chief Operating Officer (CF) of Confidence Cement Newaz Mohammed Iqbal Yousuf.

The closure of transactions in banks rendered another hindrance to business operations. Financial institutions are yet to resume operations fully. Due to communication disruptions, they have been unable to send money to branches. Many ATM booths are shuttered over security concerns.

Businesses have been facing setbacks one after another since the outbreak of Covid-19, delaying their recovery.

Leaders of major sectors anticipated a substantial amount of losses in the latest episode centring on students' protest for reforms to the quota system in public hiring, which culminated into an uprising to throw out the Hasina-led government.

The sectors' leaders said it would take more than a year to overcome losses suffered before and after the removal of the government. The indirect losses would be costlier than direct losses, especially in terms of losing work orders of foreign buyers.

Bangladesh Garment Manufacturers and Exporters Association President SM Mannan Kochi recently said garment factories would have to pay around Tk 10 billion to workers despite no work being done during the shutdown.

Although a small group of garment & textile companies are listed in the stock market, the overall negative impact on the sector will hit the listed companies' bottom-line growth as well.

So, lower profits and low dividend payouts are expected in the upcoming year.

There are 58 companies listed on the stock exchanges under the textile sector, out of about 2,200 garment & textile units in Bangladesh.

Frozen food exporters have had a similar experience.

Company secretary of Gemini Sea Food AFM Nazrul Islam said the 100 per cent export oriented company had suffered suspension of exports during the curfew.

"We faced huge losses," said Mr Islam, adding that an assessment was ongoing.

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