Financial crisis puts Hakkani Pulp in endless fall-off

FT ONLINE

To recover the losses made in the last four years, Hakkani Pulp and Paper Mills Limited increased its production capacity. But a financial crisis is still holding it back.

Hakkani Pulp's, a paper producer and marketer listed with the share market, production capacity has increased by 150 percent in the last six years, from 2012 to 2019, and reached 11,250 tonnes.

Because of a shortage of working capital, the company can use only 43.31 percent of its production capacity now.

The crisis is so serious that the company could not even apply for the National Curriculum and Textbook Board's tender for supplying papers.

The main buyer of the company's paper is the National Curriculum and Textbook Board. The Hakkani Pulp delivered 3,000 tonnes of papers to the Textbook Board in 2017. Despite having work order, it could not deliver papers in 2018. In 2019 it even failed to participate in the tender.

The company built a 24-tonne capacity tissue plant with Tk31 crore. The plant started its commercial operation in 2019.

Md Abdullah, chairman of Hakkani Pulp, said, "We need new machinery for the full use of the tissue plant but do not have enough money. We have a huge shortage of working capital too."

"To overcome the losses, we built the plant with our internal source and loans. We are trying to get rid of the working capital crisis with the support of other sources."

The company took Tk42 crore loans from Social Islami Bank six years ago. After the 2018-19 fiscal year, the total loans of the company stood at Tk34 crore.

Directors selling shares for collecting working capital

The directors of the company have come forward to collect working capital. Managing Director Md Golam Mostofa and Director Md Golam Kibria will sell three lakh shares.

Both of them will sell 1.5 lakh shares each. The shares will be sold at the Chattogram Stock Exchange.

"We could not get loans from banks or other monetary organisations for working capital," said a company official. "So, the directors are going to sell their shares."

Consecutive losses

Hakkani Pulp faced a loss of more than Tk2 crore in 2018-19. Half of the loss came from the tissue business.

Despite the loss, the company gave two percent cash dividends to its shareholders. But the sponsor directors did not take any dividends.

The company made a loss of Tk42 lakh in the first quarter (July-September) of 2019-20.

The closing price of the company's shares was Tk46.60 on Thursday. In last year, the maximum price of the company's share was Tk95.70 and the minimum price was Tk30.40.