Walton moves out of sluggish business but yet to be on growth trajectory

Stronger dollar and runaway inflation coupled with costlier raw materials dragged down the sales revenue as well as gross profit of the local electronic giant --- Walton Hi-Tech Industries PLC in January-March 2023.

Walton, the most valued local company in terms of market capitalisation, reported 37 per cent lower profit year-on-year to Tk 2.36 billion in the latest quarter.

The sales revenue of electronic goods and home appliances slumped 32 per cent to Tk 15.03 billion during the quarter, compared to the same period of the previous year, striking a blow to the company's bottom-line growth.

Apart from the increase in the prices of raw materials, higher freight cost, vulnerable market conditions and sharp devaluation of local currency impacted the profit growth, said Company secretary Md Rafiqul Islam.

The Ukraine war has hampered the prospects of post-pandemic recovery, causing high inflation that in turn squeezed the purchasing capacity of consumers, he said.

The company, however, performed better in the third quarter of FY23, compared to the previous two quarters as global market conditions eased to some extent.

The company went into the red in the first quarter (Q1) through September of FY23, enduring a loss of Tk 461 million. In the second quarter, it managed to make a profit of Tk 606 million.

However, Walton's nine-month combined profit nosedived almost 70 per cent year-on-year to Tk 2.50 billion while sales revenue dropped 24 per cent to Tk 40.89 billion.

The costlier dollar played a major role in driving up production costs, eventually shrinking the company's nine-month profit.

Due to the sharp depreciation of local currency, the company's net finance cost itself soared 324 per cent year-on-year to Tk 6.02 billion in the nine months through March.

No sooner had the severe impacts of the pandemic gone away than the global economy took a fresh blow as the war broke out in February last year.

The taka has lost its value by more than 25 per cent since the war began, making imports expensive.

As the inflation raged on, consumers have tightened their purse strings, and spending on appliance products has come down drastically.

Inflation surged to a 10-year high of 9.52 per cent in August last year. In March this year, it came down to 9.33 per cent, still higher than expected level.

For the same challenges, Walton's competitor Singer Bangladesh, a multinational electronics and home appliance company, endured an 86 per cent plunge in profit in 2022. That year's profit was its lowest in 14 years.

Singer managed to make a profit of Tk 112.35 million in January-March by raising product prices.

The demand for electrical and electronic products and home appliances will rise in the near future due to affordable prices, a rapid expansion of rural power distribution networks and the fast-growing middle-class population in Bangladesh, industry insiders say.

Walton has become the leader in the domestic market.

There is a high possibility of the company expanding its market share in the days to come, given the demographic and socio-economic factors, Walton said on its website.

Walton Hi-tech was listed in the Dhaka Stock Exchange in September 2020. The leader in the country's refrigerator market is emerging as one of the top manufacturers of modern electronic goods targeting both local and international markets.

A high demand for its shares in the bourses within four months after the stock listing helped the company become the second largest listed firm in terms of market capitalization after Grameenphone.

Currently, Walton's total market value stands at Tk 317 billion. GP's market-cap is Tk 387 billion.

Walton raised Tk 1 billion by floating only 0.98 per cent of its total shares.

Experts have been critical about the company's less than 1 per cent share offload in the capital market. The Bangladesh Securities and Exchange Commission (BSEC) asked Walton to offload more shares to meet the 10 per cent target.

The company sought time up to three years to comply with the regulatory order by offloading shares in phases.

Meanwhile, Walton's share price has remained stuck at the floor -- Tk 1047.70 -- since September last year.

Having set up its first compressor manufacturing plant in 2017, Walton now exports refrigerators to many countries. It has reached as many as 40 countries with different products.

Walton holds 75 per cent share of the refrigerator market and accounts for half of all television sales in Bangladesh. Alongside refrigerator, freezer, air conditioner, and television & compressor, it has branched out to manufacturing elevators.

Walton became the first company to start manufacturing refrigerators and freezers in the country in 2008 by importing compressors from the famous Italian brand Acc. Walton now owns the compressor brand.

In April last year, Walton won the bid to acquire three European brands and the trademark and branding rights in 57 countries, beating down two renowned companies.

Walton looks to expand its compressor production capacity to 4.8 million per year, which will earn the company a significant market share in Europe and other markets around the globe.

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