Bata Shoe sees profit plunge 26pc, to pay record dividends for 2024

Bata Shoe has reported a 26 per cent lower profit of Tk 296 million for 2024, compared to the year before, as sales dropped amid persistent economic and political instability.

Loss of working days due to "unforeseen events" in the country impacted retail operations on a limited scale, the company said in its earnings note, which reduced sales and profitability.

The year was challenging, particularly for political changeover, severe floods, and macroeconomic instability while inflationary pressure squeezed demand.

Political changeover in August last year and the subsequent countrywide natural disaster shrunk the company's sales by more than 18 per cent year-on-year in the July-September (Q3) quarter of the year. Bata incurred a loss of Tk 128 million during the quarter.

Despite the decline in yearly profit, the company's board declared a 105 per cent final cash dividend for 2024. So, the annual cash dividends would amount to 445 per cent for the year, highest for the company since its 1985 stock market listing.

The multinational shoe maker had already paid 340 per cent interim cash dividends.

It earned Tk 21.62 per share in 2024, down from Tk 29.31 the year before, according to a stock exchange filing on Wednesday.

However, investors will get Tk 44.5 per share in total in cash dividends for the year.

Presently, Bata's outstanding share is 13.68 million. Hence, the company will pay Tk 608.76 million in cash dividend for the year against its profit of Tk 296 million.

That means the company will spend an additional Tk 312 million from its retained earnings to pay dividends. Its retained earnings stood at Tk 3.18 billion as of September last year.

Sponsor-directors of the company will get most of the dividend amounts as they jointly hold 70 per cent stakes in Bata Shoe at present.

Due to the record dividend declaration, the company's dividend yield is estimated to be an all-time high of 5.57 per cent for 2024.

Analysts attributed the sharp rise in dividend payouts to the improvement of the foreign exchange reserves allowing multinational companies to repatriate profits more smoothly than before.

The record dividend payout indicates that the dollar crisis eased and exchange rates attained stability, said Akramul Alam, head of research at Royal Capital.

In the past two years, the multinational companies faced hurdles in sending back dividends to foreign investors due to the greenback shortage.

Such companies' recent trend of recommending higher dividends may also bear signs of worry.

"When the reinvestment opportunity squeezes, the cash-surplus companies announce higher dividends to their shareholders, which will be paid from retained earnings," said Mr Alam.

The company will hold an annual general meeting (AGM) on June 26 while the record date is May 26.

The net operating cash flow per share, a measure of a company's ability to generate cash from its operations, dropped to Tk 71.42 for 2024 from Tk 93.80 in the year before due to payments to suppliers and contractors.

Meanwhile, the stock fell 0.15 per cent to Tk 798.8 per share on the Dhaka bourse on Wednesday.

The company is yet to disclose annual revenue figures for 2024.

Its revenue in the nine months through September was Tk 6.96 billion, reduced by 8 per cent from the revenue earned in the same period of the previous year.

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