The latest entrant to the stock market blamed supply chain disruptions for the lower-than-projected profit growth
Dominage Steel, which made its debut on the bourse on Wednesday, saw its profit fall 8.9 per cent year-on-year to Tk 9.2 crore for the financial year that ended June 30 on the back of the massive supply chain disruption brought on by the global coronavirus pandemic.
In its initial public offering prospectus, the pre-fabricated building manufacturer had projected a profit of Tk 12.8 crore for the 2019-20 financial year.
Subsequently, Dominage’s board of directors recommended a 2 per cent cash and an 8 per cent stock dividend for the year, according to a disclosure on Monday.
Rafiqul Islam, managing director of Dominage Steel, blamed the supply chain disruption for the lower-than-projected profit growth in the last financial year.
As much as 95 per cent of the raw materials come from China, where a coronavirus outbreak in its Hubei province in January had left large swathes of its factories as desolate as a ghost town at the beginning of the year.
But when normal service resumed in China around March, the rest of the world, including Bangladesh, was in lockdown.
That meant Dominage Steel could not procure the raw materials needed to deliver the prefabricated construction systems to their buyers in the April-June quarter, Islam said.
“So our profit was less last year. But our business is going well now. Our income will increase a lot after purchasing new machinery using the IPO funds,” he added.
The company raised Tk 30 crore by issuing three crore shares at Tk 10 each for expanding its existing manufacturing facilities in Ashulia by 26,685 square feet (30.1 per cent), electricity installation (7.6 per cent), procurement and installation of machinery (55.8 per cent) and meeting IPO expenses (6.5 per cent).
The reason being, the demand for pre-fabricated buildings are on the rise thanks to the low investment, lesser time and higher safety that the structures require, according to Dominage Steel’s IPO prospectus.
Prefabricated structures are constructed by manufacturing whole building components, including beams, slabs, columns and walls, and transporting these to the site final where they are assembled, very much like putting lego blocks together.
As the bulk of the work is done at an offsite location, it increases construction speed, ensures consistent quality and reduces wastage.
While prefabricated buildings have been typically used so far in power plants and factories, their use is now being expanded to other areas such as warehouses, gyms, training centres, swimming pools, basketball courts, bus stations, markets, shopping centres, showrooms, police stations, CNG stations and grain storage facilities.
In Bangladesh, other than Dominage eight other companies provide prefabricated buildings.
Of them, Bangladesh Building System is listed and it too saw its profit crash 61.1 per cent in the financial year that ended on June 30 to Tk 10.9 crore because of the pandemic.
Shares of Dominage traded at Tk 15 on its debut. It was not allowed to go any higher because of a bar by the securities regulator from last year on newly-listed stocks to prevent their gambling.