Multinationals recovering from Covid-19 fallouts 

Listed multinational companies are seeing a steady recovery of their business performance as they are mostly the first ones to minimise the pandemic shocks and grow even further.

In the April-June quarter of this year, 11 out of 13 listed multinational firms demonstrated improvements in year-on-year earnings while more than three-fourths of them surpassed their profits over the same quarter of 2019, the pre-pandemic year.

On the other hand, in the April-June quarter of 2020, which was almost lost to the 66-day nationwide shutdown, all but two multinational firms – hair care champion Marico and hygiene product seller Reckitt Benckiser – suffered sales losses and deteriorated profitability.

However, as soon as the economy reopened, buyers began to return and almost all the firms registered year-on-year sales growth, just like their profits.

Why and how

Analysts divide business performance into two major parts – sales and profits.

Sales drop and recovery mainly depend on the nature of the products and industry that determines market demand in various circumstances, said Shahidul Islam, chief executive officer of VIPB Asset Management Company.

Multinational companies in Bangladesh are mostly operating in the fast moving consumer goods (FMCG) segment, which has strong demand among the flourishing consumer base in the country, he said.

"You are set to buy your tobacco, hair care products, and health drinks regardless of the macro-economic situation unless anything deviates too much," said Shahidul, also the former president of the CFA Society Bangladesh.

During the first wave of Covid-19, hygiene products, such as hand sanitizers and soaps, outsold everything, and Reckitt Benckiser registered a year-on-year growth even amid the shutdown.  

In case of durable items, consumers might have deferred their purchases during lockdowns but came back the following weeks as the economy performed well.

Footwear giant Bata and electronics manufacturer Singer are yet to reach their pre-pandemic April-June quarter sales and profits, but the 2020 nightmare is over for them.

Multinational companies have experienced and efficient management that can handle any crisis better, said Md Moniruzzaman, CFA, the managing director of IDLC Investments.

They do research to make better products and generate strategies for competitive edges to boost sales, which helped most of them with topline recovery, said Moniruzzaman, also a vice-president of the Bangladesh Merchant Bankers Association.

Not only sales but multinational companies are also very focused on how much return they generate against their shareholders' equity, said Shahidul. 

"That is reflected in how they better save their bottom line during stressed sales."

Berger Paints Bangladesh, the leader of the country's paint market, deferred their non-essential expenses in the April-June quarter of 2020 as the shutdown reduced their sales a lot.

By controlling costs, they averted after-tax losses and posted record sales and profits in the following quarters, said Moniruzzaman. 

With the economy entering a renewed construction pace since last winter, cement and steel companies began to see higher sales and profits too.

For multinational cement makers, such as HeidelbergCement Bangladesh and LafargeHolcim Bangladesh, recent quarters were even better than their pre-pandemic days as they were selling more. An improved profit margin in their industry now helps them book much higher profits.

Tiles market leader RAK Ceramics Bangladesh was in trouble during the 2020 lockdown as it had to lay off employees.

But in the meantime, they prepared their facilities and with the construction market growth, they are now enjoying higher sales and profits.

Telecom operators Grameenphone and Robi Axiata used to see voice call revenue drops during the lockdowns, but their data revenue keeps improving as more and more people are depending on mobile data for their everyday communication and entertainment.

Industrial gas giant Linde Bangladesh, which also sells welding electrodes, saw sales drop drastically in the April-June quarter of 2020 but has recovered most of the lost sales this year.

Better financial management helped the firm post even higher profits than the same quarter of 2019.

Shahidul said economic recovery since the end of the 2020 lockdown was remarkable and multinationals seemed to lead the corporate recovery.

"It is also because their accounts reflect their true picture," he added.