Walton Hi-Tech’s profit down over 7pc on higher borrowing cost

Despite higher sales, Walton Hi-Tech Industries' profit dropped 7.10 per cent year-on-year to Tk 3.92 billion in the third quarter of FY25, thanks to higher finance costs.

The electronic and home appliance giant's earnings per share came down to Tk 12.94 for January-March this year from Tk 13.93 for the same quarter the year before, according to price sensitive information published on Sunday.

While the company's sales grew almost 7 per cent year-on-year to Tk 20.51 billion in the quarter, higher finance costs and increased value added tax wiped out the bottom-line growth.

Finance costs jumped 62 per cent year-on-year in January-March as the company's bank borrowing increased.

"This increase in finance costs was primarily driven by higher bank borrowing and an increase in foreign currency losses," the company said in its earnings notes.

The nine-month profit also slid 8.66 per cent year-on-year through March to Tk 6.96 billion though revenue rose 7.28 per cent year-on-year to Tk 45.98 billion during the period.

The company said that due to post-pandemic macroeconomic challenges and dollar crisis, the material cost drastically increased impacting the company's production costs.

In addition, value added tax on refrigerators went up to 7.5 per cent from 5 per cent and VAT on air conditioners to 7.9 per cent, as per the Finance Act 2024.

Consequently, the company's operating profit margin fell to 22 per cent from 24.73 per cent.

"These factors collectively impacted the company's profitability," said the company.

The net operating cash flow per share, a measure of a company's ability to generate cash from its operations, turned Tk 1.83 in the negative in the quarter through March as against Tk 22.88 in the same period last year.

"This decrease [in cash flow] is primarily due to a strategic shift in working capital management, whereas payments to suppliers were made using collections from customers rather than bank borrowings," said the company.

Moreover, payments to suppliers for goods and services as well as disbursements to the government exchequer of income tax and VAT increased during the period, aimed at supporting anticipated sales growth in the current and upcoming quarters.

The strategic adjustments in cash flow reflect "our long-term commitment to sustainable growth and operational resilience, reinforcing our position in the market," the company said.

Meanwhile, the stock rose 0.09 per cent to Tk 449.9 per share on Sunday on the Dhaka Stock Exchange despite the decline in profit.

Annual Financial Performance

Walton secured a remarkable 73 per cent year-on-year growth in profit to Tk 13.57 billion in FY24, overcoming high inflation and macro-economic challenges.

Based on the profit growth, the local electronic giant declared a 350 per cent cash dividend for general shareholders and a 200 per cent cash dividend for sponsor-directors.

Walton has become the leader in the domestic market, holding around 75 per cent share of the refrigerator market and accounts for half of television sales in Bangladesh.

Having set up its first compressor manufacturing plant in 2017, Walton now exports refrigerators to many countries. It has reached more than 50 countries with different products.

Alongside refrigerator, freezer, air conditioner, and television & compressor, it has branched out into manufacturing elevators.

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