Profit keeps rising – Shipping Corp to start repaying govt

The Bangladesh Shipping Corporation has decided to initiate repayment to the government for previously acquired vessels and purchase two more ships with its own funding since its financial capacity has been bolstered by continuous profits since 2019.

Established in 1972, just months after the country's independence, the corporation last fiscal year logged a profit of Tk250 crore for the first time in its 52-year history.

The board of the corporation also recommended a 25% cash dividend for its shareholders, according to officials present at a meeting held yesterday.

Commodore Mahmudul Malek, managing director of the Shipping Corporation, told The Business Standard, "Since assuming office, the current management has implemented various measures to expand the corporation's business. Thanks to these multifaceted initiatives, including operating ships to new destinations, we have achieved the highest profit in history."

He said, "We are taking steps that had not been taken in the past. The corporation will now purchase ships using its own financing, showcasing its growing financial strength. Adding new ships will expand our fleet and improve business operations."

Regarding repayments to the government, the MD explained that the corporation had procured six ships through a government-to-government agreement between Bangladesh and China.

"The government has covered the purchase costs for these ships. Following a debt repayment agreement with the government, our board approved an initial payment of Tk475 crore. The entire amount will be repaid in phases," he said. "In the past, we could not repay these funds due to limited financial capacity."

The ships the corporation is planning to buy may cost between Tk750 crore and Tk800 crore, though the figure may change after the ship purchase project proposal is finalised, officials said.

The state entity previously bought ships with government funding. The Shipping Corporation purchased six vessels from China for approximately Tk1,500 crore, according to its financial report.

For the first time, however, the corporation has decided to repay the government, a move approved in the board meeting on Wednesday.

Currently, five of the six ships are transporting goods on various routes. 

Following the onset of the Russia-Ukraine war, the vessel Banglar Samriddhi was damaged by a missile strike while anchored at a Ukrainian port. The Shipping Corporation received compensation, as the vessel was insured.

Key drivers behind the profit surge 

According to its financial report, the Shipping Corporation's profit for the fiscal 2018-19 was only Tk17 crore. In six years, the profit has surged by nearly 1,370%, reaching Tk250 crore in FY24.

The profit increased to Tk72 crore in FY21 but saw a significant jump in FY22, surging by 212% to Tk225 crore.

Officials at the corporation attribute this remarkable profit growth to four main factors – an increase in shipping rates for the transportation of goods, the implementation of the Bangladesh Flag Vessels (Protection) (Amendment) Act, higher interest rates on fixed deposit receipts, and the appreciation of the dollar.

An official who has long served in the corporation's finance department told TBS that since the onset of the Russia-Ukraine war in February 2022, the state entity's revenue and profits have been consistently rising.

The war has led to increased freight rates on international routes, benefiting the corporation significantly. Moreover, all government institutions enforcing the flag vessel act, particularly the Bangladesh Petroleum Corporation and Bangladesh Chemical Industries Corporation, are now importing products through the Shipping Corporation.

"Revenues and profits are also rising due to the appreciation of the dollar. The Shipping Corporation's vessel fares are charged in dollars. Previously, the dollar rate ranged from Tk82 to Tk86, but it has now risen to Tk120. As a result, the conversion from dollars to taka is generating substantial profits," the official told TBS on the condition of anonymity.