MNCs bear the brunt of stubborn inflation, forex crisis, gas shortage

Infographics: TBS

RAK Ceramics Bangladesh reported a 12% and 70% decline in revenue and profit, respectively, for the first quarter as business ebbed.

The UAE-based multinational company also experienced a downward trend in its stock market performance, with its share prices dropping by 36% in the January-March quarter of 2024.

The shares closed at Tk26.40 each at the Dhaka Stock Exchange (DSE) on Tuesday – the lowest in a year.

A senior officer of RAK Ceramics told The Business Standard, "A severe gas crisis forced the company to reduce its factory utilisation by almost 50%. Additionally, the depreciation of the taka and a foreign currency shortage have further driven up production costs, leading to a decline in both profit and revenue."

Like RAK Ceramics, British American Tobacco (BAT) Bangladesh, HeidelbergCement, LafargeHolcim, Reckitt Benckiser, and Unilever Consumer Care also struggled amid the country's economic crisis.

A total of 13 multinational companies (MNCs) are listed on the country's stock exchanges, and 11 of them have published their quarterly results, while Linde Bangladesh and Berger Paints have not yet done so.

Both BAT and LafargeHolcim experienced declines in revenue and profit during the first three months of this year. 

According to BAT's financial report, its cigarette sales dropped drastically due to inflationary pressures, which were the main cause of the reduction in income. 

Bangladesh's inflation rate has remained above 9% since March last year.

"The high prices have also taken a toll on the construction sector, which has impacted cement consumption," said LafargeHolcim Bangladesh's CEO Iqbal Chowdhury. 

Both BAT Bangladesh and LafargeHolcim shares were traded at their lowest prices of the year on the Dhaka bourse.

Despite achieving revenue growth, Singer Bangladesh incurred a loss during the March quarter. In a statement, Singer said the profit margin dropped as production and sales costs increased due to the forex crisis and higher discounts. 

Additionally, increased interest expenses also led to a decrease in the profit margin. Singer shares dropped by over 25% in the last five months, closing at Tk118.80 each on Tuesday.

Unilever Consumer Care, a subsidiary of Unilever Bangladesh Limited, and HeidelbergCement logged profit growth in January-March, even though both posted lower sales amid subdued consumption caused by stubborn inflation.

"As household income failed to keep pace with inflation, consumers' purchasing power eroded, resulting in sharp volume declines in the health food drink market," said Khan Salahuddin Mohammad Minhaj, managing director and CEO of Unilever Consumer Care, in the annual report for 2023.

HeidelbergCement stated in its report that the company managed to achieve profit growth by increasing product prices and implementing cost-efficient measures in the sale of goods. Its shares dropped over 16% since April, closing at Tk196.70 on Tuesday.

Only Bata Shoe, Grameenphone, Robi, and Marico managed to eke out growth in both revenue and profit during the March quarter. However, their shares were traded at their lowest prices of the year on the country's premier bourse.

Bata Shoe Bangladesh said in its statement that profit increased significantly compared to last year, driven by revenue growth, especially due to school, winter seasonal, Eid businesses, and other promotional activities.

Robi Managing Director and CEO Rajeev Sethi, in a press release, said, "We are observing that the macroeconomic conditions and high inflation are impacting the usage patterns of our subscribers. This comes on the heels of the stagnant state of smartphone device penetration growth."

"It may be noted that Bangladesh has a lot of room for growth in terms of data consumption when we look at the neighbouring countries. What we need is immediate policy intervention to unlock the growth potential amidst the trying state of the economy," he added.