Lub-rref struggling to pay declared cash dividend
Lub-rref (Bangladesh) Ltd, a lubricant producer under the BNO brand, is struggling to pay the recommended 10% cash dividend for the fiscal year 2021-22 due to a shortage of liquidity.
So far, the company has managed to pay the dividend to 50% of the eligible shareholders.
The crisis has arisen due to injecting excess funds for raw materials import for the company's operations.
Recently, the Bangladesh Securities and exchange commission (BSEC) formed a three-member inquiry team to conduct dividend issues, utilisation of initial public offering (IPO) funds, the role of the board and management, and relevant issues of the company since listing.
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BSEC Additional Director Mohammad Siddiqur Rahman is the team leader while Deputy Director Md Sirajul Islam and Assistant Director AKM Faruk Alam are members of the inquiry team.
A senior official of the BSEC said the commission has formed the inquiry committee based on complaints received from investors who are yet to get a dividend for FY22.
The team will review all the stipulated issues within 30 working days and submit the report to the commission.
Mofijur Rahaman, chief financial officer of the company, told The Business Standard the company is clearing its dividend step by step. So far, 50% of the eligible shareholders have been paid.
The company is paying the recommended dividend gradually as the lubricant producer is facing a liquidity crisis amid the current situation, he added.
Now, the company has to inject two or three times the funds to import raw materials as their prices are high globally. Besides, the company is not getting permission for large LCs due to the dollar crunch.
As a result, the company is now able to operate production at around 30% of its normal capacity, he added.
He further said the company has already applied to the commission to use its remaining IPO funds as the working capital to continue its business properly, as it is facing a shortage of working capital.
The lubricant re-refiner and blender raised Tk150 crore in 2021. The company wanted to purchase machinery of Tk98 crore for expansion. But the firm could only use 46.1% of its machinery fund. As a result, it could not complete its IPO project within the stipulated time.
Mofijur Rahaman said the base oil refinery project cost was Tk1,283 crore including Tk150 crore IPO fund. Of this project, Tk900 crore was loans and Tk750 crore foreign loans which was supposed to be used as LC for the project.
But due to the global crisis and local liquidity shortage, those loans are becoming delayed. As a result, it is not possible to proceed with continuing the IPO project now, he further added.
Despite this situation, the company posted 17% year-on-year profit growth in the third quarter of the current fiscal year.
From January to March quarter 2023, the net profit of the company stood at Tk6.74 crore, which was Tk5.76 crore in the same period of the previous year.
Its revenue came down 8% to Tk33.75 crore from Tk36.56 crore compared to one year ago.
Lub-rref is the lubricant recycling pioneer in the country that went public in 2021.
As of 31 May 2023, sponsors and directors jointly held 35.70%, institutions 24.84%, foreign investors 0.06%, and the general public 39.40% shares in the company.
The last trading price of its shares was Tk35.10 each at the Dhaka Stock Exchange on Thursday.
