Flash Report /
Bangladesh

Q2 22: Declining sales and rising raw material cost trigger loss for HEID BD

  • HEID BD reported a net loss of BDT 38mn (EPS: BDT -0.66), against net profit of BDT 201mn (EPS: BDT 3.56) in 2Q CY21

  • Slow construction activities amid high inflationary scenario dented the quarterly revenue by 5% YoY.

  • 2Q CY22 GPM was down by 443bps YoY as it couldn't completely pass on the increased cost at the consumer level

Shopnil Paul
Shopnil Paul

Research Associate

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IDLC Securities
31 July 2022
Published byIDLC Securities
  • HEID BD reported a net loss of BDT 38mn (EPS: BDT -0.66), against net profit of BDT 201mn (EPS: BDT 3.56) in 2Q CY 21. A 5% decline in top line revenue, 443bps contraction of gross margin and higher operating expenses are attributable to the loss reported in the quarter.

  • Q2 CY22 revenue declined by c5% YoY to BDT 3,888mn. In the first half of this year, the sales of the cement manufacturer went down by 3% YoY. The rise of commodity prices in the international market, especially following the Russia-Ukraine War and the local currency (BDT) depreciation of 10.2% against USD in FY22 have increased the CPI inflation in Bangladesh. In June 2022, the point-to-point inflation was 7.56% - highest in nine years. During such high inflationary period, the private construction activities usually slow down. On top of that, the increasing price of other construction materials – steel, bricks etc. in the local market has further dissuaded the public to continue the construction works at the normal level.  Moreover, the government has decided to suspend low priority infrastructure development projects temporarily as the fiscal pressure is increasing. All of these contributed to the negative sales growth for HEID BD.

  • 2Q CY22 GPM stood at 6.2%, down by 443bps YoY. Unlike LHBL BD, Heidelberg has to import the raw materials for cement manufacturing, the price of which significantly increased in the international market. On top of that, HEID BD could not completely pass on the increased cost at the consumer level because of the existing intense competition in the market. Resultantly, the gross margin of the company contracted by 443bps.

  • The opex to sales ratio increased by 111bps in Q2 CY22. The increased distribution expenses following the hike in the price of fuel and the 3% technical-know fee charge on the net sales of previous year contributed to this. Please note that Heidelberg’s payment of technical fees in a quarter is equal to 3% of sales of the same quarter in previous year. In Q2 CY21, HEID BD reported highest quarterly revenue driven by the pent-up demand. Resultantly, the technical know-how free in Q2 CY22 increased.