Khulna Packaging plays with numbers

bdnews24.com :
Some companies inflate their financial performance to raise capital through public issues-but they soon admit losses and leave investors high and dry.
Padma Cements, listed in the capital market in 2002, claimed profits, but then started to show losses until it went into liquidation in 2012.
bdnews24.com investigated claims made by Khulna Printing & Packaging Limited (KPPL) after the company was found claiming a sharp jump in profits in its IPO prospectus.
The printing and packaging firm got Bangladesh Securities and Exchange Commission’s (BSEC) nod to raise Tk 400 million by issuing 40 million shares on Mar 4 this year.
KPPL’s initial public offering (IPO) prospectus says the firm’s revenue in 2009 -10 fiscal was Tk 340 million.
But the very next year it sky-rocketed to Tk 1.19 billion, up by 247 percent.
Then, between July 2011 and June 2012, the company’s sales shot up to Tk 2.08 billion before dipping somewhat in July 2012- June 2013 to Tk 1.91 billion .
A general manager of a firm in a similar business to KPPL told bdnews24.com that to achieve a sales of Tk 2 billion in packaging material, the company would have to handle fish and shrimps worth Tk 20 billion.
On condition of anonymity, he said packaging accounts for not more than 10 percent of the costs for exports.
Since Bangladesh’s total fish and shrimp exports stood at Tk 45 billion in 2011-12 fiscal, the question that follows is whether KPPL handles half the country’s share alone.
Not at all, indicates the company’s IPO prospectus.
It says Khulna Printing and Packaging has only 18 percent of the national market share in packaging.
Sarifa Printing & Packagers Ltd has 21 percent, Bangla Printing & Packaging Ltd 16 percent and BRAC Printing & Packaging Ltd 23 percent.
Now KPPL says in its IPO prospectus that 67 percent of their revenue comes from their sister concerns.
KPPL’s Director Amzad Hossain told bdnews24.com the total export of their whole group in 2012-13 fiscal was Tk 9.5 billion.
Amzad Hossain claims to have clarified thrice the huge rise in sales to the BSEC. “We have installed new machines, so our sales have increased.”
Did KPPL’s sister concerns experience a similar rise in sales to support a jump in its sale of packaging material?
“The packaging cost can be 13 percent of the export price,” says Hossain.
Managing director of Elite Printing and Packages, Mohammed Arshad Ali told bdnews24.com: “Khulna Printing and Packaging and my firm operate in different industry, but I can assure you that we have the largest facility in the country which is 10 times the size of KPPL’s facility and we have never achieved Tk 2 billion in annual sales as yet.”
Arshad Ali is a member of Bangladesh’s Packaging Association.
SA Wadud, Managing Director of Bengal Marine Fisheries and a member of Bangladesh Fish Exporters & Importers Association. told bdnews24.com: “Whatever the price of the fish is there will be Tk 10 packaging cost per kg.”
The president of the Bangladesh Frozen Foods Exporters Association, Aminullah, agrees.
“We need Tk 20 to package a kg of shrimp that costs Tk 800. That is the maximum,” said Aminullah, the managing director of Ark Sea Foods.
KPPL’s flagship company Lockpur Fish Processing Co. Ltd is also a member of Bangladesh Frozen Foods Exporters Association.
On its claimed exports of Tk 9.5 billion, one would expect a packaging cost not exceeding Tk 1 billion.
Internal synergy between sister companies drives down costs sharply – so one would expect KPPL’s annual sales to be half of the claimed Tk 1.91 billion.
Gemini Sea Food Ltd is listed in the capital market since 1985. Its financial statement says the packaging cost of exported shrimp is less than 2.5 percent.
In 2013, Gemini exports touched Tk 767 million. Their consumable stores stood at Tk 19 million, about 2.48 percent of total sales.
Consumable stores include packaging cost and many other costs, so in reality, packaging cost is much less than 2.5 percent.