SS Steel Faces Auction: A Reflection of Financial Turmoil and Strategic Growth
SS Steel, a prominent player in the Bangladesh steel industry, is in the midst of a significant financial crisis. An auction notice, published in daily newspapers, has invited interested buyers to submit price quotations for its assets by January 30, 2025. The auction concerns 148.5 decimals of land located in Gazipur, along with the factory building and machinery. All assets are owned by SS Steel, a company that has made substantial strides in the industry but now finds itself at the mercy of creditors.
The auction proceedings are in line with the provisions of the Money Loan Court Act, 2003, following SS Steel’s failure to meet the financial obligations stemming from a demand loan taken for working capital. Despite several reminders, SS Steel has failed to make the necessary loan repayments, prompting the current situation.
Financial Challenges and Loan Burden
The company’s loan burden has surged dramatically. According to SS Steel’s audited financial statement, the company’s loans have increased by an astonishing 113%, reaching Tk1,967 crore in FY24, compared to the previous year. This is a concerning figure, especially when considering that the total loans are 251% higher than the company's shareholders' equity.
Among the company’s lenders, National Bank stands out as the largest creditor, with an exposure of Tk392 crore, followed by United Commercial Bank (Tk211 crore), AB Bank (Tk188 crore), and Trust Bank (Tk138 crore).
Strategic Investments Amidst Financial Struggles
Despite its financial turmoil, SS Steel has pursued strategic growth through acquisitions. In August 2020, the company invested Tk160 crore in Saleh Steel, acquiring 99% of its shares. Saleh Steel, with an annual production capacity of 84,000 metric tons of rods and coils, became an integral part of SS Steel’s expanding footprint in the industry.
In April 2022, SS Steel made another significant move by acquiring 99% of the shares of Al-Falah Steel and Re-rolling Mills Limited for Tk87.46 crore. This acquisition gave SS Steel access to an annual production capacity of 64,800 metric tons of steel.
By accumulating these two companies, SS Steel’s total annual production capacity grew to an impressive 442,800 metric tons of MS rods per year, further solidifying its position in the market.
Sales Growth and Profitability Concerns
Despite its strategic expansions, SS Steel is grappling with profitability issues. In FY24, the company reported a 62% increase in consolidated revenue, which reached Tk2,407 crore, driven largely by income from its subsidiary companies. However, the company posted a modest net profit of only Tk5 crore, reflecting its struggle to manage rising expenses and debt.
The company’s financial difficulties have not gone unnoticed. In November 2023, the Bangladesh Securities and Exchange Commission (BSEC) raised concerns regarding SS Steel’s growing liabilities. However, no action has yet been taken by the regulatory body.
Dividend and Stock Performance
Despite its financial struggles, SS Steel recommended a 2% cash dividend for its shareholders in FY24, which was approved at the company's annual general meeting. However, the dividend has yet to be disbursed, reflecting the company’s ongoing liquidity issues.
On the Dhaka Stock Exchange, SS Steel’s shares closed at Tk8.50 on the day of the auction notice publication, showing a 1.16% decline from the previous session. This signals the market’s cautious approach toward the company’s prospects amidst its current financial challenges.
The Road Ahead: A Fork in the Road for SS Steel
SS Steel’s current predicament, with assets set for auction and the mounting burden of loans, has brought its future into sharp focus. While the company’s sales growth and expanding production capacity show potential for future success, its liabilities, loan defaults, and financial mismanagement have placed it on unstable footing.
The coming weeks will likely be critical for SS Steel, as it works with its legal department to address the auction notices from Bank Asia and other financial institutions. The company remains committed to its customers, shareholders, and stakeholders, but it remains to be seen whether its strategic investments will be enough to weather the storm.
In the interim, stakeholders, including creditors, investors, and industry observers, will closely monitor SS Steel’s next moves as it navigates its financial crisis.
