Listed SME firms thrive on strong sales, low forex risk

Despite persistent high inflation and macroeconomic challenges, majority of companies listed on the SME Platform of the Dhaka Stock Exchange reported year-on-year profit growth for FY24, with six firms posting double-digit gains.

SME companies in sectors such as seafood, poultry and fish feed production, and cold storage witnessed growth driven by higher demand for their products, alongside a lower risk of foreign exchange fluctuations.

In contrast, firms involved in copper alloy manufacturing, footwear production, and flour milling for both the local and export markets experienced a slowdown due to weaker demand resulting from inflationary pressures.

Of the 14 companies that published their annual earnings as of Thursday, eight reported profit growth ranging between 3.5 per cent and 167 per cent year-on-year for FY'24. However, six others saw their profits decline between 3 per cent and 46 per cent.

Overall, the combined profit of these firms grew by 9 per cent year-on-year, reaching Tk 585 million in FY'24, up from Tk 538 million the previous year, according to their disclosures.

Among the SME firms, Oryza Agro Industries, which manufactures and markets fish and poultry feed, reported the highest profit of Tk 72 million in FY'24, marking a 167 per cent year-on-year growth.

Company Secretary Bayazied Hossain attributed the profit growth to higher sales, driven by increased demand and higher selling prices.

He also noted that lower finance costs, primarily due to a reduced impact from currency devaluation amid stability in the forex market, contributed to securing a healthy profit.

The local feed market serves as a key backward linkage for the poultry, livestock, and fisheries industries. As the livestock and fisheries sectors have experienced steady double-digit growth in recent years, the demand for feed has risen accordingly, according to industry insiders.

The ban on importing livestock from India has also had a positive impact on feed demand, as a significant number of domestic cattle farms have been established in recent years to offset the ban's effects.

Bengal Biscuits reported an impressive 79 per cent year-on-year profit growth, reaching Tk 20.7 million in FY'24.

Higher sales and lower production costs contributed to the company's strong profit, according to Company Secretary Khondker Hasan Reza.

The biscuit manufacturer also offset some costs by adjusting sales prices, resulting in a comparatively higher profit, he added.

Popular products from Bengal Biscuits include Horlicks Cookies, Lexus Biscuits, Pineapple Cream Biscuits, and Instant Energy Biscuits, among others.

Himadri, which operates six potato cold storage units in northern Bangladesh and is a subsidiary of Ejab Group, reported a 57 per cent profit growth in FY'24.

Higher potato prices contributed to the profit growth, with prices reaching Tk 60-70 per kilogram this year -- nearly double the price from the previous year.

Despite the higher income, the board declared a 5 per cent cash dividend for FY'24, as against the 10 per cent cash and 250 per cent stock dividend paid out for FY'23.

The relatively unknown company's stock traded between Tk 1,085 and Tk 9,278 over the past year. It closed at Tk 1,428 on Thursday, down nearly 10 per cent from the previous day, but still significantly higher given the company's earnings.

On the other hand, Al-Madina Pharmaceuticals saw its profit drop 44 per cent year-on-year to Tk 18 million in FY'24.

This drop was partly due to an increase of 5 million outstanding shares following its listing in May last year.

Despite the profit decline, the company's board declared a 12 per cent cash dividend for general shareholders for FY24, up from the 10 per cent cash dividend paid in 2023.

Company Secretary Mohammad Anwar Hossain could not be reached for comment.

Nialco Alloys, a manufacturer of copper alloy products, reported a 15 per cent decline in profit, falling to Tk 50 million in FY'24, primarily due to higher finance costs amid rising interest rates.

Nialco Alloys is a 100 per cent export-oriented company, which exports its products to Europe, Africa, and Asia, including Japan.

Although its export revenue grew 20 per cent year-on-year to over Tk 730 million in FY24, finance expenses surged 45 per cent to Tk 8.35 million.

The lower profit led Nialco to reduce its dividend to 6 per cent cash for FY24, down from 11 per cent cash paid out the previous year.

Yusuf Flour Mills reported a 42 per cent year-on-year profit decline, falling to Tk 8.62 million in FY'24, primarily due to lower sales.

The company manufactures, sells, and supplies flour, refined flour, suji, and other products in both domestic and export markets.

Company Secretary Md Shahedul Islam attributed the profit decline mainly to lower sales, although the company has yet to disclose its annual sales data.

He noted that business conditions were more challenging due to inflationary pressures, with production costs rising due to higher energy prices.

The profit drop led the company to reduce its dividend to 5 per cent cash for FY'24, down from the 12 per cent cash dividend paid out in 2023.

As an immediate effect of the lower profit and dividend cut, the company's stock plunged 46 per cent or Tk 2,837 per share, in a single day on Tuesday, closing at Tk 3,300.

It further declined by 1.7 per cent to close at Tk 3,245 on Thursday, though still relatively high compared to the earnings.

Trading on the DSE SME platform began on September 30, 2021, with six companies, providing small and medium enterprises (SMEs) an opportunity to raise capital from the stock market. This initiative aims to help SMEs reduce their debt burden, enhance their corporate profiles, and create optimal value.

SMEs with a paid-up capital between Tk 50 million and Tk 300 million are eligible to raise funds on the platform.

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