Covid, absence of CETP eat into Apex Tannery's business

Apex Tannery Ltd, which produces finished leather for export, is losing track of its business owing to the Covid-19 pandemic and the absence of a Central Effluent Treatment Plant (CETP) in Savar industrial area.

In its financial report, the company stated that the global demand for finished leather has decreased over the last few years. In the interest of wildlife protection and environmental stewardship, most countries are increasing their use of synthetic leather to reduce the killing of animals.

However, the market for animal leather is still sound. But many countries, including in Europe, must issue environmental clearances prior to placing export orders for leather goods. Again, those countries do not provide environmental clearance without CETP, the statement added.  

A senior official at Apex Tannery said taking these issues into consideration, the government has set up a separate tannery industrial city in Savar but has not yet implemented the central CETP. The government did not agree to the company's proposal to build its own CETP. As a result, the company has completely lost its European and American markets.

Since, only Apex Footwear currently has its own CETP, only they can enter the European market; for other companies, China is now the only option.

He added that the leather industry would not improve easily if the CETP issue was not resolved. The coronavirus epidemic has made the situation more critical.

The company lost 46% revenue in the last four years till June 30, 2019 due to the CETP issue.

Because of the Covid-19 pandemic, it lost 80% revenue during the fourth quarter of the 2019-20 financial year.

In the last financial year, Apex Tannery posted a revenue of Tk128 crore, representing a 37% drop from Tk204 crore in the previous year.

Last year, it reported a loss per share of Tk1.19.

Apex Tannery recommended only 12% cash dividend for its shareholders for the 2019-20 financial year, which was the lowest dividend payout for the company in the past decade. 

The company will pay this dividend from its reserve fund.

The company's share price also followed the same trend. Its share price decreased 33% in the last two years and many general investors lost their investment.

On Tuesday, the closing share price of the company at the Dhaka Stock Exchange (DSE) was Tk108.40 each. 

With a view to increasing its business, the Board of Directors of the company has decided to enter into a contract with FB Footwear Ltd, Footbed Footwear Ltd and Nuovo Shoes (BD) Ltd, an exporter of footwear items, to sell its finished leather.

Apex Tannery Managing Director Rahmatullah is also a director of FB Footwear and Footbed Footwear. 

Apex Tannery will sell products worth Tk21 crore to these two companies.

Main Uddin, chief financial officer of Apex Tannery, told The Business Standard that the board reached this decision to expand their business through their local entities.

The company was listed on the DSE in 1986 and its paid-up capital is Tk15 crore.  

Sponsors and directors hold 31.30%, 36.86% is held by institutional investors, and general investors hold 31.84% shares of the company.