Walton Hi-Tech Industries' profit fell 26 per cent year-on-year to Tk 1.49 billion in the first quarter of FY25 for higher finance expenses amid rising interest rates.
The electronic and home appliance giant's earnings per share slid to Tk 4.92 for July-September this year from Tk 6.67 for the same quarter of the year before, according to price-sensitive information published on Monday.
While the company's sales grew almost 1 per cent year-on-year to Tk 12.14 billion in the quarter, higher finance expenses had a negative impact on the bottom-line growth.
The operating profit margin decreased slightly to 21.38 per cent in the first quarter to September from 22.58 per cent a year ago, while finance costs rose to 10.12 percent of total sales in the first quarter this year from 5.22 per cent in the same quarter of the previous year.
Higher finance cost was primarily driven by higher foreign currency losses for currency devaluation and the impact of rising interest rates on short-term loans, the company said in its earnings note.
Foreign currency losses amounting to Tk 458.5 million, combined with increased interest expenses and sales & distribution costs, led to a reduction in net profit after tax, said the company.
"These factors collectively impacted the company's profitability, reflecting the current financial environment's challenges."
The company's net finance expenses jumped 79 per cent year-on-year to Tk 1.11 billion in the three months to September this year.
Walton's short-term debts grew 12 per cent year-on-year in the three months to Tk 23.91 billion while long-term loans jumped 26 per cent year-on-year to Tk 3.17 billion during the quarter.
The net operating cash flow per share, a measure of a company's ability to generate cash from its operations, dropped to Tk 3.92 per share from Tk 16.68 in the previous year.
"This reduction is primarily due to decreased collections from customers as we extended supportive credit terms to strengthen our distribution network, ensuring market stability and sustainability," said the company.
Moreover, payments to suppliers and the government exchequer increased alongside higher material purchases necessary for sustaining sales growth.
"These strategic adjustments in cash flows reflect our commitment to fostering long-term growth and maintaining a resilient operational foundation to support our market presence."
Despite the decline in profit, the stock rose 1.66 per cent to Tk 514.8 per share on Monday on the Dhaka Stock Exchange.
Yearly Financial Performance
Walton secured a remarkable 73 per cent year-on-year growth in profit to Tk 13.57 billion in FY24, overcoming high inflation and macro-economic challenges.
Based on the profit growth, it declared a 350 per cent cash dividend for general shareholders and a 200 per cent cash dividend for sponsor-directors.
Industry insiders say the demand for electrical and electronic products and home appliances will rise in the near future due to affordable prices, a rapid expansion of rural power distribution networks, and the fast-growing middle-class population in Bangladesh.
Walton has become the leader in the domestic market, holding around 75 per cent share of the refrigerator market and accounts for half of television sales in Bangladesh.
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