Industry Analysis The country entered the apparel export market in 1978 with only 9 units and earned

USD 0.069 million. During the last three decades this sector has achieved a phenomenal growth, due to policy support from the government and more importantly dynamism of the private sector entrepreneurs along with extremely hardworking but civic workers. Now the number of RMG units is more than 5,000 and the export earnings have exceeded USD 24 billion with 145 countries using `Made in Bangladesh' knit garments and 126 countries using Bangladesh woven products. Analysts are telling-the apparel export numbers can be more than tripled by 2020. Bangladesh had a clear advantage in wage and so it was cheapest in making garment. The new wage declared recently brings out a distinctive shift in that. Workers pay would be similar now in countries like Bangladesh, India & Pakistan. Recent currency depreciations in India & Pakistan are giving them an upper hand. Other cost components of doing business is potentially high here in Bangladesh. Namely cost of capital, political instability cost, cost occurred due to improper infrastructure, cost of interrupted power & gas supply and vandalism & turmoil cost. If Bangladesh cannot resolve the unprecedented and unexpected wraths on the garment sector, the growth here is to be stopped and orders can be shifted to countries like India & Pakistan. The garment industry has been acting as the backbone of the countrys economy as it earns about 80% of the total export revenue. The export value of the readymade garments grew three folds in just ten years and expected to touch 22 billion USD this fiscal year. In the fiscal year 2010-2011 countrys apparel export was 17.9 billion USD. Over the next three years, it can establish itself as the second biggest sourcing destination for overseas buyers, next to China, according to experts. The main factors acting behind this robust growth are the cheap labour cost, cheap resources compared to the competitive countries, falling attractiveness of China as a garment maker and supporting measures taken by the Bangladesh government. The preferential advantage to export in the EU is also helping the industry. The EU and the USA has been the main exporting destination accounting more than 50% of the total export. Total value of RMG exports to European countries rose to $10.5 billion in 2010-11 from $7.1 billion in 2009-10. RMG exports to the USA reached $4.6 billion in FY 2010-11, about 27

percent growth over the total RMG exports worth $3.6 billion in FY 2009-10. Germany alone has become a rising market for Bangladeshs readymade garments (RMG) in recent years, next to the largest market in USA show more than US$3.1 billion apparel exports to the largest economy of Europe last fiscal year, a sharp rise with 56 percent growth over $2 billion exports a year earlier (FY 2009-10). Market share is also growing in the new emerging markets. The chart shows the value of the total exports in last fiscal (2010-2011) countrywide. All values are in million USD. UK Japan France Australia India Canada Mexico Chile China Russia 1700 247 1400 192 36 894 81 12 52 51 Korean South Republic Africa 47 48 Brazil 94

Turkey 518

Bangladeshs export target for FY 2011-12 is $26.5 billion. The market is forecasted to be developed at an annual rate of 7 to 9 percent resulting in ten years time to an export value of approximately US D 36 to 42 billion, thus the market will double by 2016 and nearly triple by 2020.
Column1 Net Profit Margin Return on Asset Quick Ratio Price/Earnings Ratio Dividend Yield Debt Equity Ratio EPS 2009 2.40% 2.32% 0.53 121.68 86.42% 183.83% 9.85 2010 2.83% 1.58% 0.66 112.49 52.08% 145.38% 3.53 2011 4.10% 2.72% 0.42 87.77 29.94% 169.29% 12.31 2012 1.29% 1.92% 0.49 83.20 34.75% 169.65% 5.53 2013 6.05% 3.76% 0.64 29.78 44.40% 161.80% 5.21

The table above portrays the average ratios of the industry (based on 6 companies publicly listed in the DSE). The Net Profit Margin is pretty stable in the first two years, and rises very rapidly in 2011. It again drops in 2012 and rises back again in 2013. The overall increase was although positive. The drop in net profit margin in 2012 is quite mysterious. Both turnover and profit increased for most of the concerned companies, however net profit did not rise as much as turnover leading to a lower net profit margin in the previous year. This is probably because

of an extra ordinary in operating expenditure which has not been mentioned in the annual reports. The return on asset is on the other hand very fluctuating almost every year. It seems to be alternately increasing and decreasing between each year. The case of machinery life can be considered here. The business seems to be renewing fixed assets every alternate years. The year fixed assets are renewed have high return whereas the other years have a lower return. This is because the succeeding year tends to have low asset value due to depreciation then the preceding year, however when new assets are bought this increases. As it does not affect net profit much, the return on asset ratio tends to fluctuate. The quick ratio is relatively stable during this period. For export oriented businesses in the country this is pretty normal. However as per international standards this is considered very low and may dent the industrys credit rating. The liquidity ratio is low as per international standards and can therefore discourage foreign investors from investing in the industry. The P/E Ratio was very high to start off with but falls after the stock splits resulting from the change of face value declared compulsory by the SEC. However, overall this has a negative trend with the latest year recording very low P/E ratio. This is most likely due to the lack of investor confidence in the sector coming from the recent bad press the industry has been receiving in the international media with Tazreen Fashions fire and the Rana Plaza incident. Investors are trying to take their money out of the textile industry and invest in other less risky sectors. The dividend yield ratio has very high figures mostly because in the first two years due to Rahim Garments giving an extremely high amount of dividend in these two years as opposed to not giving any in the succeeding years. They seem to give high dividends in sudden years to make up for not giving dividends in most years. Apart from this, the last 3 years recorded gradual increase in the dividend yield of the companies. This is most likely because the low P/E ratio and lack of investor confidence due to bad press and political situation is causing problems for the company who is trying to counter the situation with providing higher dividend yields to make investors investment more profitable. The Debt Equity Ratio is high for the industry. The industry relies highly on debt. There is a major drop in this at the beginning but then increases again and then drops steadily. It

however does not change the fact that the industry is highly indebted to external factors. As mentioned in the overview, there is a certain tendency of textile entrepreneurs not to go for share issues in search of funds fearing loss of ownership and control. This has led them to look for loans and other sources of finances. This extreme reliance on debt is in no way beneficial to the company as it increased financing overheads and therefore reduces overall profitability.