GPH Ispat's Profits Tumble: A Costly Quandary

GPH Ispat
GPH IspatImage Source: GPH Ispat

Synopsis:

GPH Ispat, a major steel manufacturer in Bangladesh, has seen a significant drop in profits in the 2022-2023 fiscal year. The decline is attributed to rising raw material costs and unfavorable exchange rates, marking the company's lowest profits in at least six years.

Article:

GPH Ispat Ltd, a frontrunner in Bangladesh's steel industry, has reported a dramatic decline in its earnings for the financial year 2022-2023. The slump is mainly due to escalating raw material prices and the increased cost of the US dollar in foreign currency transactions.

The Chattogram-based company disclosed a net profit of $316,800 (converted from Tk 26.76 crore) for the year ending June 30. This figure is an 82 percent plunge from the $1,766,000 (converted from Tk 149.42 crore) reported the previous year.

GPH Ispat made this announcement to its shareholders following a board meeting on Saturday. According to data on the Dhaka Stock Exchange (DSE) website, this is the lowest profit the company has seen in at least the past six years.

Despite posting higher net sales and operating profits, the Earnings Per Share (EPS) for GPH Ispat plummeted to $0.007 (converted from Tk 0.58) in FY23, down from $0.04 (converted from Tk 3.42) a year ago. The company attributed this decrease to skyrocketing raw material costs on the international market, coupled with losses incurred due to fluctuating exchange rates.

It's worth noting that GPH Ispat is not the only steelmaker in Bangladesh facing this dilemma. Earlier this month, BSRM Ltd, the largest steel manufacturer in the country, also reported a drop in its profits for FY23. However, BSRM did note a 44 percent increase in sales, bringing their total turnover to over $136,200,000 (converted from over Tk 11,500 crore).

For the current fiscal year, GPH Ispat's board recommended a slightly lower dividend. They proposed a 5 percent cash dividend for general shareholders, excluding sponsors and directors, and a 5 percent stock dividend. This step was taken with the aim of using retained earnings as capital for installing a reheating furnace under the company's BMRE (Balancing, Modernisation, Rehabilitation and Expansion) project.

Conclusion:

GPH Ispat's significant profit loss this fiscal year sheds light on the challenges currently facing the steel industry in Bangladesh. Rising raw material prices and unfavorable currency exchange rates have put the company in a precarious position. While dividends are still being offered, they are notably lower, signaling cautious times ahead for shareholders.

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