Jute Spinners looking for foreign buyers to revive balance sheet – The Business Standard

April 02, 2023
The share price of Jute Spinners Ltd is buoyant six months into a partial resumption of activities, but failure to secure foreign buyers threatens continuation of its old financial struggles and imperils outlook.
The debt-laden company, known as the country’s first private jute mill, started trial production in September last year to strengthen its balance sheet after acute financial hurdles forced a production halt in June 2016. It cannot reach its full production capacity due to a lack of buyers, Company Secretary ATM Mostafa told TBS, adding that the search is continuing in overseas markets.
According to a regular auditor’s report in June 2022, the liabilities of the company stood at Tk77.32 crore which exceeded its total assets of Tk29.70 crore by Tk47.62 crore. The company rescheduled Tk50 crore loans from Janata Bank, extending the repayment deadline by ten years, ATM Mostafa said.
It has repaid Tk2-3 crore in other loans, ATM Mostafa added.
The company owners were hoping for a turnaround and the resumption of production activities, even if on a small scale. This revived investor hopes, sending its share prices to Tk256.9 on Thursday – a 60% jump in three months.
However, producers are continuing to incur huge losses because they are being forced to sell well below production costs to meet dwindling demand. While, domestic demand stays low, foreign demand is yet to generate with the sudden suspension of output in 2016, pushing away old overseas buyers – in a sharp reminder of how costly the production halt was.
At present, the company produces 3-5 tonnes of jute yarn daily under a trial phase, and for every Tk1.2 lakh production costs, it has to count sales worth Tk80 thousand to Tk1 lakh, incurring at least Tk20 thousand in losses.
The company is continuing its search for foreign buyers to help meet production costs and harness its full production capacity. However, the Bangladesh Securities and Exchange Commission is susceptible of Jute Spinners’ full-fledged production prospects after six months of trial production failed.
The securities regulator plans to launch a committee to inquire into the overall dealings of the jute yarn producer.
Jute Spinners has renovated two of its three warehouses, acquired new equipment, and taken maintenance steps for older capital goods as part of steps to resume activities. However, its once strong presence in the lucrative jute yarn markets of Turkey, Japan, and the UK is long gone, according to Company Secretary ATM Mostafa, making it almost impossible to return to profitable days as of now.
From July to December 2022, its net loss stood at Tk4.12 crore, compared with Tk3.69 crore in the same period of 2021.
Jute Spinners
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