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Bangladesh post-lockdown review: Consumer staples outperformed during Q2 20

  • Consumer staple businesses generated c11% yoy revenue growth, compared to a decline in other businesses

  • Construction and consumer electronics businesses are the worst sufferers with c45% and c58% yoy decline in sales

  • The overall profit of the selected companies declined by c19% yoy

IDLC Securities
16 August 2020
Published byIDLC Securities

After the detection of first Covid-19 case on 8 March, Bangladesh entered a prolonged ‘holiday’ from 26 March to 31 May. The 66-day long lockdown slowed down the economic activities. During the first three weeks, all businesses except those for emergency services (pharmaceuticals, banks) were closed. During the mid-April, the textiles and RMG companies started operations. The lockdown ended on 31 May, after which all businesses started their operations from June. As most of the economic activities remained shut almost two-thirds of the Apr-Jun quarter (Q2 2020), the lockdown affected all businesses. We have observed the following trends in the performance of some listed companies during Apr-Jun 2020 quarter.

The consumer staple business generated c11% yoy growth, outperforming our expectations. Earlier we expected a 0-5% decline in revenue because of the lockdown. The growth resulted from significant demand for personal care and household hygiene products (+19% yoy).

Tobacco revenue dropped by low single-digit despite the double-digit dent in volume. The decline in volume is in line with expectations. However, the revenue figures surpassed what we expected. We attribute this out-performance to the sales of premium brand cigarettes. We think the volume of premium cigarette brands was less affected because of stockpiling by the retailers in anticipation of tariff hike in the FY21 budget, thus keeping revenue decline low.

7% decline in telecom revenue driven by a 14% decline in the voice business. The 66-day holiday significantly decreased business activities during April and May, resulting in a dent in voice call revenue. But the data business was buoyant as more subscribers switch to internet-based communication services and social media platforms, resulting in a c20% increase in data revenue. The revenue performance of the sector is in line with our expectations.

Construction and consumer discretionary business were affected severely by the pandemic, as expected. The performance of the cement sector, however, slightly better than our expectation (actual -40% yoy vs expected -50% yoy). The consumer discretionary businesses are the worst sufferer because of the decline in the consumer electronics business (-43% yoy) and footwear business (-85%).

Overall, 16% yoy decline in revenue and a 21% yoy decline in earnings. Please note that we conducted the analysis based on 14 companies, which disclosed their Apr-Jun 2020 figures (3 constructions, 1 tobacco, 2 telecoms, 3 constructions, and 2 consumer discretionary). The companies we included are the prominent names of their respective industry and therefore we expect them to be the representative of the respective industries. However, they may not be an actual representation of the GDP since total sales of these companies are c3% of GDP. Please also note that most of the manufacturing companies will disclose their Apr-Jun 2020 from late October to early November since their year-end is in June. We will provide another update of the business performance as and when the new numbers become available.

Revenue performance of different sectors during Apr-Jun (Q2) 2020

Source: IDLC Securities Limited