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Walton gets severe blow in July-Sept as consumers' purchasing power erodes

BABUL BARMAN | November 08, 2022 00:00:00

Walton Hi-Tech Industries PLC, the most valued local company in terms of market capitalisation, went into the red in the first quarter of the fiscal 2022-23, ended in September, for costlier raw materials and soaring inflation bringing down the purchasing power of customers.

It endured a loss of Tk 461 million in the quarter as sales of electronic goods and home appliances dropped 13 per cent year-on-year to Tk 14.78 billion, striking a blow to the company that had gained remarkable growths every year until now.

The company made a profit of Tk 2.81 billion in the same period last year.

Apart from the increase in prices of raw materials, higher freight cost, vulnerable market condition and devaluation of local currency also contributed to the loss, said company Secretary Md Rafiqul Islam.

Russia's invasion of Ukraine hampered the post pandemic recovery while a soaring inflation around the world shrank the financial capacity of consumers. Therefore, the company could not raise product prices in proportion to the rising production costs, Mr Islam said.

The company's finance cost itself jumped a whopping 716 per cent year-on-year to Tk 3.22 billion for the July-September quarter this year.

"Amid the runway inflation, consumers have tightened their purse strings and they are now spending mainly on essential goods rather than home appliances," said a leading merchant banker.

Inflation surged to a 10-year high of 9.52 per cent in August before coming down slightly to 9.10 per cent the next month.

Economic activities have been slowed down as freight, energy and food price shocks continued to wreak havoc while the depreciation of the local currency against dollar eats into profits of local companies.

For the same reasons, Walton's competitor Singer Bangladesh, a multinational electronics and home appliance company, suffered a loss of Tk 85 million between July and September this year.

The demand for electrical and electronic products and home appliances will rise in the near future due to affordable prices, a rapid expansion of the rural power distribution network and the fast-growing middle-class population in Bangladesh, industry insiders say.

These products are no longer luxurious to consumers. Rather they are essential households and personal products, they say.

Walton has become the leader in the domestic market occupying a significant market share.

There is a high possibility of the company expanding its market share in the days to come, given the demographic and socio-economic factors, Walton said on its website.

Walton Hi-tech was listed with the Dhaka Stock Exchange in September, 2020. The leader in the country's refrigerator market is emerging as one of the top manufacturers of modern electronic goods targeting both the local and international markets.

A high demand for its shares in the bourses within four months after the stock began to trade helped the company become the second largest listed firm in terms of market capitalization after Grameenphone.

Currently, Walton's total market-cap stands at Tk 317.38 billion. Grameenphone's market-cap is Tk 387 billion.

Walton raised Tk 1.0 billion by floating only 0.98 per cent of its total shares. The company's total share now is 302.93 million.

The company disbursed 250 per cent cash dividend for FY2022 and FY21 each and provided 200 per cent cash in 2020.

Experts have been critical about the company's less than 1.0 per cent share offload in the capital market. The Bangladesh Securities and Exchange Commission (BSEC) in May this year asked Walton to offload 9.0 per cent more shares.

The company sought time up to three years to comply with the regulatory order by offloading shares in phases. The 10 per cent share offload is to avert any adverse impact on the stock price.

Meanwhile, Walton's share price has remained stuck at the floor-Tk 1047.70 -- since September 1.

Having set up its first compressor manufacturing plant in 2017, Walton now exports refrigerators to many countries. It has reached as many as 40 countries with different products.

Walton holds 75 per cent share of the refrigerator market and accounts for half of all television sales in Bangladesh. From making refrigerator, freezer, air conditioner, and television & compressor, it has branched out into manufacturing elevator.

Walton became the first company to start manufacturing refrigerators and freezers in the country in 2008 by importing compressors from the famous Italian brand Acc. Walton now owns the compressor brand.

In April this year, Walton won the bid to acquire three European brands and the trademark and branding rights in 57 countries, beating down two renowned companies.

Walton looks to expand its compressor production capacity to 4.8 million per year, which will earn the company a significant market share in Europe and other markets around the globe.

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