SS Steel's debt keeps surging, BSEC flags concern

The securities regulator has expressed concerns regarding the escalating liabilities of SS Steel Limited, a publicly listed steel manufacturer.

At the end of the fiscal 2022-23, the company's bank borrowings and other liabilities stood at Tk974 crore, which was Tk60.83 crore five years ago.

The Bangladesh Securities and Exchange Commission (BSEC) has issued a letter to SS Steel seeking all the documents related to the company's bank loans and other liabilities along with relevant price sensitive information as per the latest audited financial statement.

The regulator has also sought a summary of utilisation of bank borrowings and other liabilities for the last three years.

Although SS Steel has been posting revenue growth over the last four fiscal years, its net profit has shown a declining trend in the last three.

The BSEC has therefore sought a justification of the revenue increase in line with the capacity and increase in debt burden.

What's more, the regulator observed that SS Steel's net operating cash flow stood at a negative Tk132.63 crore, thanks to a high-interest borrowing by the company.

The piling up of debt has left the company unable to declare decent dividends to its shareholders.

SS Steel's Company Secretary Md Mostafizur Rahman told The Business Standard, "We have acquired two companies after our stock market listing. That's what the term loan was for."

"The company's sales increased a few times over the years. Our revenue has been growing gradually after the acquisition of the two companies. Last year, we achieved a revenue of Tk1,486 crore."

"The new plant of Al-Falah Steel has already started production. We hope that SS Steel will achieve revenue of Tk2,200 crore in the fiscal 2023-24," he added.

"Last year, our revenue doubled compared to the previous year, but liabilities increased by Tk100 crore."

When asked why the company's after tax net profit decreased significantly, Mostafizur Rahman said the increase in cost of goods sold led by higher prices of raw materials, high utility cost, and taka devaluation are the reasons behind the profit fall.

In FY23, the company achieved a revenue of Tk1,486 crore, which was Tk764 crore in FY22.

During the year, its cost of goods sold stood at Tk1,331.22 crore, which was Tk599.29 crore in the previous year.

Its net profit after tax stood at Tk1.77 crore, which was Tk61.34 crore a year ago.

The company recommended a 2% cash dividend for its shareholders in the last fiscal year.

It raised Tk25 crore from the capital market to expand its business in 2019.

The company manufactures 500W MS-deformed rod, MS-ingot, billet, and steel for the reinforcement of concrete.

As of 31 October this year, the sponsors and directors hold 31.79%, institutional investors 10.98%, and general investors 57.23% shares in SS Steel.

At the end of Thursday's trading session, SS Steel shares closed at Tk16.60 each at the Dhaka Stock Exchange.

In August 2020, SS Steel decided to invest around Tk160 crore in Saleh Steel and be the owner of 99% shares of the company.

Saleh Steel produces and sells rods and coils under its brand name and its annual production capacity is around 84,000 metric tonnes, informed SS Steel.

In April 2022, SS Steel decided to invest in Al-Falah Steel and Re-rolling Mills Limited by acquiring 99% of its shares at Tk87.46 crore.

SS Steel will further invest Tk96.68 crore in Al-Falah Steel as a share money deposit. Al-Falah Steel will issue new shares to SS Steel for this investment.

Al-Falah Steel, a reputed steel manufacturing company in Bangladesh, can produce around 64,800 tonnes of steel per year.