BSRM firms nosedive to losses in Sept quarter
Despite posting record sales and profits last year, both of the steel market leader Bangladesh Steel Re-rolling Mills’ (BSRM) listed firms fell into losses during the July-September quarter. According to the stock exchange filings of both firms, the soaring prices of raw materials and disrupted power supply did not let BSRM Steels and BSRM Ltd enjoy their continuous sales growth.
The registered sales growth for BSRM Ltd – the mother entity- exceeded Tk2,075 crore in the July-September quarter of this upcoming FY23, as opposed to Tk1,539 crore last year during the same quarter. Even though these sales are impressive, the company still managed to rack up a loss of Tk164 crore in the quarter. This is quite a contrast to the after-tax profits of Tk128 crore it posted in the same quarter last year.
The other company BSRM Steels, who are in the business of making construction rods, had a sale of Tk1,682 crore in their last quarter, which is an increase from their Tk1,318 sale from the previous year. However, their net profits from Tk108.5 crore last year turned into a Tk35 crore loss in the most recent quarter.
Chartered Accountant Shekhar Ranjan Kar is in charge of finance and accounts for the BSRM Group. He explained that the recent loss is because of the sudden change in exchange rate.
He said that the letters of credit for raw material imports had to be settled at a dollar rate that was 20% higher than a few months earlier and this was enough to make the already thin-margin industry to lose money.
In addition, the price of raw materials was higher during the July-September quarter and because of the current market situation, none of the companies were able to successfully raise steel prices.
Despite some recent corrections and spikes, steel prices have been soaring since late 2020 both globally and locally. The pre-Covid price of Tk65,000 per ton construction rod soared to nearly one lakh and is still hovering around Tk90,000. If prices continue to rise, it could result in a slowdown of the steel market and development work, said Shekhar Ranjan Kar.
The industry’s ability to transfer the soaring costs to consumers helped companies book hefty profits.
National steel consumption in the first 11 months of the year was slightly higher compared to the corresponding period of 2021, he said.
Raw material prices have eased a bit in recent months, but a dollar shortage at banks is depriving companies of the opportunity as they cannot open LCs (letter of credit) for needed imports, said Kar.
If LC issues are not resolved soon, the steel market might face supply scarcity and price destabilisation, he warned.
There is also a need for an uninterrupted power supply in the mills, BSRM Ltd shares closed at the floor price of TK90 in the DSE on Tuesday while BSRM Steels shares closed at TK60.3.
