Local appliance and electronic giants have incurred losses in the third quarter of the current year, due to the dollar crisis and devaluation of the taka against the foreign currency as well as price hikes of materials, freight costs and ongoing macroeconomic crisis.
A loss of Tk46.05 crore was reported in the first quarter of 2022 by Walton Hi-Tech Industries PLC, compared to a profit of Tk281.12 crore in the same three-month period last year.
Although it made an operating profit of Tk275.72 crore, the company nonetheless recorded a loss.
Meanwhile, the company's closest rival, multinational Singer Bangladesh, posted a loss of Tk8.5 crore in the July-September quarter, against a net profit of 1.27 crore in the same period of last year.
The company had a net profit of Tk 42.63 crore in the third quarter of 2020.
According to both companies, several factors both local and international have led to the downfall in profit.
Dwelling on these financial issues, Walton authorities said the recent European geo-political crisis, the global economy continues to be weakened through significant disruptions in trade, food and fuel price shocks, all of which are contributing to high inflation and subsequent tightening in global financing conditions.
The company's overall profitability fell as a result of the sharp rise in material and freight costs, shaky conditions on the international market, and the depreciation of the Bangladeshi Taka versus the US dollar.
In addition, VAT has been imposed on the supply of refrigerator products.
Overall, Bangladesh's economy has been suffering from forex losses on the retranslation of foreign currency monetary liabilities into Bangladeshi Taka and a higher inflationary impact than in the past which leads to a decrease in the purchasing capacity.
All these factors impact rising cost of operation and as a result, the financial profit of the company has been negatively affected in the first quarter of the current financial year compared to the previous year.
The amount of finance cost reached significantly higher than comparative period because of the devaluation of the Bangladeshi Taka against US dollars and the company suffered foreign currency losses during the current fiscal year's first quarter amounting to Tk 262.45 crore, which was only Tk10.11 crore in the same period of the previous financial year.
In the first quarter, the total finance cost was Tk322.42 crore, which was Tk39.55 crore in the comparative period.
The company would have been profitable in the first quarter of the current financial year if the US dollar exchange rate had not increased abnormally and at that time Walton's EPS would have been at least Tk7.14 and the net profit more than Tk 200 crore.
The Walton authorities hoped that the situation would improve soon and the company would return to profit in the next quarters, according to a statement shared with Dhaka Tribune.
On the other hand, according to Singer Bangladesh Limited, consumers who are now spending less on buying home appliances amid the ongoing macroeconomic hardships and the soaring import costs of raw materials had led to the downfall.
As per Singer, Russia's invasion of Ukraine has hampered the prospects of the post-pandemic recovery and transported the new scenario of continuous higher inflation around the globe that has led to the fall in the purchasing capacity of consumers and adversely influenced the overall profitability of the company.
Soaring inflation in recent times reportedly forced consumers to curtail their expenditures on buying non-essential goods except for food items, a reason that also hammered the home appliance manufacturer's earnings in the third quarter.
The company also pointed out that the economic activities both on the global and the domestic fronts remained subdued in recent months due to the hike in freight and energy costs.
Besides, the deprecation of the Taka against the US dollar also led to the increase in import costs of raw materials.
The import costs of raw materials soared in the meantime that resulted in a 20.5 % rise in the cost of sales in July-September this year.