Textile millers face squeeze in H1 amid rising costs

Spinning and textile mills across Bangladesh faced challenges during the first half of the current fiscal year, starting in July, due to a substantial increase in utility prices and bank interest rate hikes.

The price of cotton – a basic raw material for the sector – declined moderately, but it barely cushioned the entrepreneurs from a blow.

Among the 58 textile sector firms listed on the local stock market, 30 disclosed their financial reports for the six months to December, with 11 incurring losses and nine reporting a decline in profit.

Another nine companies recorded an increase in profit, while one reported no change in profit.

Bangladesh Textile Mills Association (BTMA) CEO Monsoor Ahmed told The Business Standard, "Most millers have not been in good shape since June last year due to a decrease in demand for apparel products."

"In addition, a significant hike in gas prices, increasing finance costs, wage hikes, and other associated cost increases have put entrepreneurs in a tight corner," he added.

"The 150% increase in gas prices, coupled with a 50% rise in wages, has significantly inflated the overhead costs of textile mills, making it difficult to maintain profitability."

Mohammad Ali Khokon, President, BTMA

The government hiked gas prices by 150% for large industries in February last year, conditioned on providing an uninterrupted supply. However, most textile mills cannot run at full capacity due to a gas shortage.

On top of that, the bank interest rate has been on an upward trend, increasing from 9% in July last year to 12.43% in February.

BTMA President Mohammad Ali Khokon told TBS, "The 150% increase in gas prices, coupled with a 50% rise in wages, has significantly inflated the overhead costs of textile mills, making it difficult to maintain profitability."

He urged the government to revert to the previous gas price for textile industries until the ongoing crisis is resolved, stating that their production capacity has declined to 40% due to a severe gas shortage.

Shasha Denim Managing Director Shams Mahmud has expressed concern about a recent increase in rental and utility charges by the Bangladesh Export Processing Zones Authority (BEPZA), saying, "We had already been paying more than the factories located outside export processing zones (EPZs)."

"We have to pay BEPZA in dollars. But it clears payments to the government in the local currency, making about 30% in exchange gains," he said, urging Bepza to revert the charges to their previous levels, providing some relief to businesses amid a slowdown.

Weathering all the odds, Malek Spinning, Envoy Textile, and Square Textile surged, with Malek Spinning surpassing Tk1,000 crore in revenue in the July-December period and posting a 505% year-on-year higher profit of Tk78 crore.

A Matin Chowdhury, managing director of Malek Spinning, told TBS, "We have experienced significant profit growth as a knit composite company, wherein we only import basic raw materials like cotton and chemicals and export finished goods."

In its financial statement, Square Textile has credited its surge in profit to an increase in yarn production from its new project in Habiganj.