Shift from outsourcing weakens GPH Ispat sales growth
The steel manufacturer is shifting its focus from outsourcing to self-sufficiency to meet the extra demand
Sales of GPH Ispat Limited hit a slump in the first half of the current fiscal year, although the company posted a double-digit growth in sales in the last accounting year.
Sales of the company rose only by 0.7 percent to Tk547.97 crore in July-December period of 2019. GPH Ispat's like-for-like sales in the last year increased by 28 percent. The growth in sales was 15 percent in the July-December period in the 2017-18 fiscal year.
Kamrul Islam, executive director of GPH Ispat, said, "The demand for our products is higher than the supply. We used to outsource to meet the extra demand. We stopped outsourcing as one of our new projects will go into production next month."
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The executive director said sales slipped during the transition period. But in the long run, the initiative will increase their sales once the new project goes into commercial production, he added.
GPH Ispat manufactures steel billets and rods. The company produced 1.69 lakh tonnes of billet and 1.60 lakh tonnes of rod in the last accounting year.
Kamrul said Bangladeshi rod manufacturers have been experiencing a dull sale. However, their dependency on private sector helped them avoid this business slump.
Financial health of GPH Ispat
Sales of the company increased in the first half of the 2019-20 fiscal year. However, the company's net profit dropped by 3 percent to Tk32.48 crore in this period.
The year-on-year net profits in the previous two years till 2019 witnessed 15 percent and 19 percent hikes, respectively.
Sales of the company peaked up by 121 percent to Tk1,342 crore for the last five years till FY2018-19. Last year was good for the steel manufacturer as it touched the milestone of Tk1,000 crore sales, with a net profit of Tk80.62 crore.
Plans for the future
Demand for steel is on the rise as Bangladesh is witnessing massive industrialisation and infrastructural expansion with the aim to become a developed nation by 2041. In line with the progress, GPH Ispat has taken up an initiative to set up a quantum technology-based steel manufacturing unit.
The construction, worth Tk2,500 crore, is going on in full swing in Chattogram. The new unit will speed up the production manifold.
GPH Ispat says its market share will jump to 10 percent from current 3 percent once the new unit goes into production.
Presently, steel production of the company is around 1.50 lakh tonnes per annum and the inclusion of the extended plant will add 8.5 lakh tonnes more.
Steel market
The market size of steel is around Tk45,000 crore. The local steel market grew at a rate of 15-20 percent in the last two years, from 8-10 percent per year previously.
According to the EBL Securities research report, in terms of production capacity for both finished and semi-finished (billet) steel, Bangladesh is now self-sufficient.
Bangladesh's combined annual installed capacity of producing steel in 2018 was 8.5 million tonnes and the country consumed 7 million tonnes of steel – which was only 1.6 million tonnes a decade ago.
Installed capacity of producing steel will cross 9 million tonnes by the end of 2019 and the production capacity to increase by another 3-4 million tonnes in the next few years after completion of various ongoing and planned capacity expansion projects by various industry players.
It is expected that by 2030, steel consumption will reach 18 million tonnes. Abul Khair Steel and BSRM Steels Limited currently hold the major portion of the Bangladeshi steel market.
Share performance
GPH Ispat shares rose 4.60 percent at the Dhaka Stock Exchange on Sunday, while the last turnover was Tk27.30 each share. The closing price of GPH Ispat share stood at Tk27.20 on that day.
GPH Ispat share prices saw the highest Tk38.50 and the lowest Tk23.70 in the last one year.
