Apex Footwear's shoe export dropped in the last fiscal year.
Selling 9.44 percent more to the rapidly growing local market, the company managed to deal with its setback in the international market.
Apex increased its focus to the local market in 2015. The shoemaker has now decided to invest Tk100 crore more for building a new factory, targeted to be completed by December 2020, just beside its existing factory Unit 2 where it makes both leather and non-leather shoes, to cater to the growing local demand.
"We are investing more in the local market as more people are showing interest in Apex shoes. It will be sourced from bank loans and the company's reserve fund," said Syed Nasim Manzur, managing director of the company.
2018-19's financial result
Lower export orders, fall of euro and an adverse conversion rate of Taka caused Apex's export earnings to fall by 8.82 percent in the last fiscal year to reach Tk820 crore, which was Tk900 crore in the previous year, says the company's latest annual report.
Also, domestic sales revenue of the company in the last fiscal year grew to Tk760 crore from Tk694 crore in the 2017-18 fiscal year.
Leather and non-leather products, which saw a 6.58 percent and 22.8 percent year-on-year growth respectively, helped the company with its revenue.
However, Apex's net profit after tax came down to Tk12.2 crore at the end of 2018-19 fiscal year, which is 6 percent down from the previous year.
A change of focus
Between 2014 and 2019, Apex experienced negative export growth in four years. Only 2016-17 and 2017-18 were the years when the company had positive export growth.
Apex officials are waiting for ease in infrastructure strains for reducing lead time. They are also looking for a competitive exchange rate and a supporting ecosystem for exports.
The government is pursuing a midterm plan to boost leather and footwear exports. But the export figures of a top shoe exporter like Apex are not speaking volume about that.
Industry players estimate that the size of Bangladesh's footwear market is Tk17,000 crore, where pairs of shoes sold each year should not be less than 20 crore and may be up to 25 crore, according to an EBL Securities research. Also, the market is growing 12-15 percent each year.
Multinational company Bata Shoe is the market leader here and Apex is trying to take that spot.
In the local market, Apex has been growing at a compound annual growth rate of around 20 percent since 2014 when the company's domestic sale jumped by 40 percent to cross Tk500 crore.
The company never had to look back after that as in the last six years its domestic sales have been continuously rising, despite ups and downs in growth rate.
Since 2015, Apex is increasingly investing in its domestic sales network, owning over 260 outlets across the country. The company also has a large number of dealers and franchisees over the country.
The latest expansion project
Apex is going to buy 196 decimal land from two of its sister concerns at Gazipur's Chandra for a new factory at Tk14.7 crore – 96 decimals from Apex Pharma and 100 decimals from Apex Enterprise.
Another Tk60 crore has been allocated for building the factory, Tk20 crore for purchasing machinery and Tk5.3 crore for maintenance.
Is Apex turning away from export?
The answer is a big "no."
In the company's latest annual report, Syed Manzur Elahi, chairman and founder of Apex, said to shareholders that the "largest shoemaker of South Asia" is contributing to 15 percent of Bangladesh's footwear exports and it should aim higher as there is a huge potential in the international market for a time-tested company like Apex.
The US-China trade war has emerged as a bigger opportunity for the company as many American buyers may shift their orders from Chinese factories.
Apex has recently invested $8.4 million for turning its export-oriented Unit 1 into a green one. The company's target is to get the Leadership in Energy and Environmental Design (LEED) certification next month.
In the first quarter of the current fiscal year, Apex made a revenue of Tk416 crore which was Tk476 crore in the same period last year. The company's net profit has fallen by 73 percent during this time. Apex's earnings per share was Tk1.05 which was Tk3.92 in the same period last year.
The closing price of Apex Footwear's share was Tk220 at the Dhaka Stock Exchange on Thursday, the highest in one year being Tk320.