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Walton takes a hit in July-September as consumer purchasing power erodes

| Updated:
08 November 2022 13:34:36

Walton Hi-Tech Industries PLC, the most valuable local company by market capitalization, fell into the red in the first quarter of the 2022-23 financial year, ending in September, for more expensive raw materials and runaway inflation reducing the purchasing power of customers.

It suffered a loss of 461 million taka in the quarter as sales of electronics and household appliances fell 13% year-on-year to 14.78 billion taka, dealing a blow to the business which had recorded remarkable growth every year so far.

The company made a profit of 2.81 billion taka in the same period last year.

Apart from rising commodity prices, rising freight costs, market vulnerability and local currency devaluation also contributed to the loss, said company secretary Md Rafiqul Islam.

Russia’s invasion of Ukraine has hampered post-pandemic recovery while runaway inflation around the world has reduced consumer affordability. Therefore, the company could not increase product prices in proportion to rising production costs, Mr. Islam said.

The company’s financial costs themselves jumped 716% year-on-year to 3.22 billion taka for the July-September quarter of this year.

“Amid parade inflation, consumers have tightened their purse strings and are now spending mostly on essentials rather than appliances,” said a leading investment banker.

Inflation hit a 10-year high of 9.52% in August before falling slightly to 9.10% the following month.

Economic activities have been slowed as shocks in freight, energy and food prices have continued to wreak havoc while the depreciation of the local currency against the dollar eats into the profits of local businesses.

For the same reasons, Walton’s competitor, Singer Bangladesh, a multinational electronics and appliance company, suffered a loss of 85 million taka between July and September this year.

The demand for electrical and electronic products and household appliances will increase in the near future due to affordable prices, rapid expansion of the rural electricity distribution network and rapid growth of the middle class population. in Bangladesh, according to industry insiders.

These products are no longer luxurious for consumers. Rather, they are household essentials and personal products, they say.

Walton has become the leader in the domestic market occupying a large market share.

There is a strong possibility that the company will expand its market share in the coming days, given demographic and socio-economic factors, Walton said on its website.

Walton Hi-tech was listed on the Dhaka Stock Exchange in September 2020. The domestic refrigerator market leader is emerging as one of the leading manufacturers of modern electronic products targeting both local and international markets.

Strong demand for its shares in the stock exchanges within four months of the start of trading in the stock helped the company become the second-largest publicly traded company by market capitalization after Grameenphone.

Currently, the total market capitalization of Walton stands at Tk 317.38 billion. The market capitalization of Grameenphone is Tk 387 billion.

Walton raised 1.0 billion taka by floating only 0.98% of its total shares. The company’s total share is now 302.93 million.

The company paid 250% cash dividends for fiscal years 2022 and 21 each and provided 200% cash in 2020.

Experts criticized the shedding of less than 1.0% of the company’s shares in the capital market. In May this year, the Bangladesh Securities and Exchange Commission (BSEC) asked Walton to dump an additional 9.0% of shares.

The company has asked for up to three years to comply with the regulatory order by shedding shares in phases. The 10% offloading of the shares aims to avoid any negative impact on the share price.

Meanwhile, Walton’s share price has been stuck at the floor of 1047.70 Tk – since September 1.

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

Walton holds 75% of the refrigerator market and accounts for half of all TV sales in Bangladesh. From the manufacture of refrigerators, freezers, air conditioners, televisions and compressors, it has diversified into the manufacture of 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 brand of compressors.

In April this year, Walton won the tender to acquire three European brands and brand and trademark rights in 57 countries, beating two well-known companies.

Walton is looking to expand its compressor production capacity to 4.8 million per year, which will allow it to gain significant market share in Europe and other markets around the world.

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