Increased gas price and labour costs have eroded the comparative advantages of Bangladesh for producing ceramic tableware to a great extent
Mohammed Humayun Kabir FCA, chief executive officer (CEO) of Shinepukur Ceramics Limited (SCL) - a sister concern of BEXIMCO group, in an exclusive interview with Dhaka Tribune’s Johura Akter, discussed the present situation of the Bangladesh ceramic industry and existing challenges of the local and international market.
Mohammed Humayun Kabir has more than 38 years of working experiences in various financial institutions and industries of the country.
As the country's leading ceramic manufacturer and largest ceramic exporter company, Shinepukur Ceramics Limited received the National Export Gold Trophy for the sixth time for highest export in ceramics.
Recently your company has received the National Export Gold Trophy 2016-17 for the highest export in ceramics products. Now tell us about your exported products and their international market.
Shinepukur Ceramics Ltd (SCL) is the leading bone china and porcelain dinnerware manufacturer and exporter of Bangladesh. SCL has been a successful brand because of its state-of-the-art manufacturing facilities, cutting-edge technology and about 2,871 highly skilled and motivated workers.
From its inception in 1999, it has been able to make substantial progress and seize commendable market share from its competitors both in porcelain and in bone china. It has more than 250 dealers to sell and retail SCL products in Bangladesh Market.
Owing to its premium quality tableware products and timely delivery to export countries, it has gained huge demand in the international market, especially in the USA, Canada, the UK, Germany, France, Italy, Japan, Sweden, Norway, Denmark, Australia, India, Russia and many other countries.
What is your company’s position in domestic and international market?
There are 20 tableware manufacturing companies in the country with a total investment of Tk2,200 crore. Among them, nine ceramic companies export their products, in which SCL has the highest share, 30% or $12 million.
The total share of Shinepukur in the local market is 18%, production capacity is 50,000 pieces per day and yearly turnover is about Tk150 crores.
Tell us about the globe status of tableware export business
Since the financial meltdown in USA in 2008, the economies in the West are yet to get back the expected growth. The recent USA–China trade disputes have worsened the recovery prospects of global business.
As you know tableware is used by people of a higher income level. These are durable household products. The state of employment and economic growth has a direct link to the demand of tableware.
Cultural shifts also have a bearing on this. In the developed economies, late or no marriage (lessening the number of families) and increased consumption of junk foods has caused a decline in the use of tableware. This trend will probably continue in coming years.
Another important scenario in the international market is currency devaluation and duty imposition in the importing countries which have a direct impact on the price of the tableware at consumer end in the importing countries.
For example, the value of the Turkish lira plunging down from below 3 to almost 6 against the US dollar within a year, and imposition of duties by the Turkish government to protect their local industry, has made imported tableware costlier and obviously caused down trend in the demand there.
Challenges of this sector
Traditionally, the tableware industry is labour-intensive. Focusing towards export market, this industry started flourishing in Bangladesh in the late1990’s based on un-interrupted gas supply and low labour costs. But the situation has changed now. Gas pressure has become erratic, supply of Bangladesh’s own gas has become uncertain.
The price hike of gas and electricity makes the process more costly. It is assumed that this trend of increased cost in gas and electricity will continue in coming years as well. Increased gas price and labour costs have eroded the comparative advantages of Bangladesh for producing ceramic tableware to a great extent.
The negative impact of economic slowdown in advanced economies and GSP withdrawal by the USA has further impeded the growth in export of ceramics tableware from Bangladesh.
Therefore, exports of tableware from Bangladesh in the coming years, in face of the rising gas prices and wages will be more challenging.
What sort of government policy support do you need?
As SCL is contributing a lot to the foreign exchanges as well as revenue earnings, the government should take some measures for further development of this sector. According to the annual report of FY2017-18, SCL has paid over Tk140.717 million in the form of VAT & Income tax. But this sector is yet to get much facilities in terms of import duty and export subsidy.
It really is a great initiative to provide incentives of 10% export subsidy to the company. But, despite the government announcement, none of the banks have released export subsidies in the last 14 months.
The government should take action on releasing the export subsidies and decrease custom duties on the imports of raw materials.
As a listed company since 2008, how much dividend do you give to your share holders?
Right now SCL cannot facilitate any dividend to its shareholders due to inadequate profit earnings. The company has adjusted the losses with current year’s profit to replenish previous year’s cumulative loss of Tk186.18 million, but still the retained earnings balance stood at negative Tk124.635 million as of June 30, 2018.