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Company Updates ACI Limited

April 2012

Company Prole
ACI Limited was established as the subsidiary of Imperial Chemical Industries (ICI) in East Pakistan in 1968. After independence, the company was incorporated in Bangladesh in 1973 as ICI Bangladesh Manufacturers limited as a Public Limited Company. In 1992, the company was divested to local management and the name of the company changed to Advanced Chemical Industries (ACI) Limited. Initially in 1992, ACI started primarily with pharmaceutical business, now it has diversied its business interest in consumer brands, agricultural including shery & livestock and marketing them along with fertilizer, seeds and other agricultural items. At present, ACI has ve strategic business units along with 11 subsidiaries, 3 joint ventures and 1 associate. In response to growing demands of the consumers of Bangladesh, ACI has diversied its business to include wide range of products in its portfolio.

COMPANY SNAPSHOT Paid-up Capital Total No. of Securities Free Float (estimated) Market Capitalization Reserve & Surplus 52 Week Price Range Average Daily Turnover Face Value Market Lot Category Source: DSE & LBSL Research

BDT 197.0 Mn 19.7Mn 63.24% BDT 4751.256Mn BDT 3883.72Mn 158.7 - 329.9 BDT 5.59 Mn Tk. 10 50 A

Diversied revenue segment


Among the listed companies in Bangladesh, ACI has the most diversied sources of revenue. ACI groups total consolidated turnover stood at BDT 14498 Mn in 2010, which was 15% higher than that of previous year. This consolidated revenue came from 15 sources. Top contributors in revenue in 2010 were Pharmaceutical 22%, consumer brands 17%, ACI Pure our 15%, crop care and public health 7%, ACI motor 7%, Retail chain 6%, and corpex 6% respectively. Moreover, they are the eight largest pharmaceutical companies and one of the market leaders in consumer brands among the local manufacturers. Most of all their contribution in agricultural sector through corpex, fertilizer, crop care, public health, livestock and sheries made them forerunner in a growing agricultural segment.
12 M -19% -21% Revenue Contribution In 2010

PRICE PERFORMANCE Price Performance (%) 3M 6M DGEN 5% -15% ACI -5% -16% Income statements Revenue Gross prot Prot before income tax Net Prot

Growth (CAGR of 5 Years) 27.9% 23.1% 10.2% -3.5% Balance Sheet Non-current assets 33.5% Current Asset 28.8% Total Assets 30.9% Total equity 32.3% Long term liabilities 41.6% Current liabilities 27.7% Total equity and liabilities 30.9%

Source: LBSL Research

Md. Mahfuzur Rahman Research Analyst mrahman@lbsbd.com

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ACI Limited
Shareholding Pattern

April 2012

Market Leader in Pharmaceutical Segment


Among the top 10 pharmaceutical companies, ACI has ranked eighth. In 2010, they have exhibited only 9.3% growth in pharmaceutical division, while industry grew by 24% during the similar period. However, they have invested around BDT 600 Mn by issuing zero coupon bonds to introduce three lines of medicine products namely Anti Cancer, Hormone & Steriod and Amino Acid. It will eventually increase the market share of ACI in pharmaceutical industry. Moreover, in top 100 pharmaceutical products, they have three blockbuster products, which collectively contributed around BDT 880.9mn in 2011. Meanwhile, they have exhibited 21% growth in pharmaceutical sales in 2011, according to IMS report September 2011.

Performance of Pharmaceutical Segment

Top Products in Pharmaceutical Segment Brand Name Sales (BDT in Mn) Market Share (%) Growth (In%) XELDRIN 427.64 0.53 18.04 FLUCLOX 280.42 0.35 9.98 CEFIM-3 177.30 0.22 15.78 Source: IMS

Market Leader in Consumer Brand


Consumer brands segment of ACI grew at 15.6% in 2010. Increasing purchasing power and changing life style have mainly facilitated the growth of this segment. This business segment has three major categories of product range- Home care, Air care and Hygiene care. The following products are the key growth drivers in this business segment:
Performance of consumer brand segment Top Product in ACI Consumer Brand HOME CARE ACI Aerosol (Market Share 86%) ACI mosquito coil (Market Share 30%) AIR CARE Angelic fresh air freshener HYGIENE CARE Savlon (Market Share 78%)

Total Agricultural Sales (BDT mn)

ACI aerosol maintained market leadership with over 86%. Coil business also did exceptionally well and striving for becoming absolute leader in the market place. In Air care category, ACI has also very attractive product range with Angelic Fresh Air Freshener, which has become market leader in two years time. ACI has another very strong range of products in its Hygiene Product category. Savlon Liquid Antiseptic is the highest selling antiseptics in the country, which more than 78% market share of its category. Products like Savlon Antiseptic cream, Savlon Family Protection Soap and Savlon Femme Sanitary Napkin, Vanish Toilet Cleaner are also under this category. ACI Consumer brands also deals with products of internationally acclaimed company like Colgate Palmolive and Nivea. Recently ACI Electronics a sub unit of ACI Consumer Brands has launched Panasonic Audio visual items in the country.

Market Leader in Agricultural Segment


In agricultural segment, ACI has ve-business segments and one subsidiary namely ACI Formulation. ACI Agribusiness is

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ACI Limited
ACI Subsidiary Review

April 2012

Turnover Gross Prot Operating Prot Net Prot Interest Expense Equity Total Assets Total Debt Gross prot margin Operating prot margin Net prot margin Debt to capital ratio

ACI Logistics ACI Formulation 2010 2009 2010 2009 898.0 491.8 1924.4 2079.9 103.3 60.6 458.1 488.5 -426.6 -418.6 187.7 291.3 -578.3 -486.8 91.6 160.3 163.0 69.3 65.5 74.1 -797.8 -219.6 1581.9 948.3 1210.4 1156.2 2641.3 2086.0 769.0 642.8 807.9 826.9 Prot Margin and Leverage ratio 12% 12% 24% 23% -48% -85% 10% 14% -64% -99% 5% 8% (26.66) 1.52 0.34 0.47 ACI Pure Flour ACI Foods Limited Limited 2010 2009 2010 2009 2201.1 1373.9 347.2 250.1 221.5 160.7 46.0 36.5 97.7 76.1 -120.2 -121.9 57.8 26.2 -162.2 -159.5 475.5 59.2 63.9 48.1 65.7 29.9 -370.4 -208.2 632.6 530.7 345.2 328.4 335.2 391.5 340.0 197.6 Prot Margin and Leverage ratio 10.1% 11.7% 13% 15% 4.4% 5.5% -35% -49% 2.6% 1.9% -47% -64% 0.84 0.93 (11.19) (18.77) ACI salt Limited ACI Motors Limited 2010 2009 2010 2009 654.21 773.14 958.05 730.56 164.53 198.52 204.53 142.58 83.91 108.19 85.28 64.02 34.55 42.99 43.60 19.99 25.00 45.88 16.44 31.75 95.32 60.77 89.40 44.80 420.65 392.08 863.52 613.56 114.63 250.50 211.78 307.70 Prot Margin and Leverage ratio 25% 26% 21% 20% 13% 14% 9% 9% 5% 0.55 6% 0.80 5% 0.70 3% 0.87

the largest integrator in agricultural sector of Bangladesh. ACI Agribusiness deals with livestock and sheries, crop protections, seeds, fertilizer and agri-machineries. Moreover, they have another subsidiary is dealing with commodity buying, storing, preserving and selling. In 2010, they recorded sales around BDT 4059.3 million in agricultural segment, which comprised 27% of total turnover. However, the turnover has declined in 2010 than that of previous year. Agricultural business is highly volatile and mostly integrated with the critical environmental issue.

ACI Subsidiary Review


ACI has 11 subsidiaries, among them six major subsidiaries nancial prole have been analyzed. All the subsidiaries are contributing signicant amount of revenue in ACIs group turnover, but in terms of protability they are reducing the parent companys earning. Most of the subsidiaries businesses are highly leveraged. Fixed cost the business and nancial cost both are increasing, which is the main obstacle for the business in showing better protability in consolidated form. ACI logistics has commenced its commercial operation in 2009, in which ACI has holdings around 76%. This business wing has been developed to set up nationwide retail outlets using ACIs strong presence in agriculture and consumer products sector. In 2010, ACI logistics recorded signicant amount loss around BDT -578.3 Mn, though their turnover grew by 80% during this period. Insignicant gross prot margin (Only 10%), higher operating cost (47% of turnover) and nancial leverage are the major burden for ACI logistics to appear as a protable entity. Seemingly, it will more time to reach at breakeven. ACI Formulation is one of the listed subsidiaries of ACI, which recorded negative growth in turnover in 2010. Moreover, declining gross prot margin and increasing operating expense took toll on its protability. ACI Pure Flour Limited is third largest contributor in ACIs group revenue, in which ACI has shareholding around 95%. It has recorded 61% growth in Y-O-Y basis in 2010. But, prot margins are yet to reach at satisfactory level. Moreover, this business is highly leveraged as total debt accounts for 53% of its total assets. ACI Foods Limited is another loosing concern of ACI group, in which ACI has 95% shareholding. In 2010, they recorded loss around BDT -162.2 Mn, as against BDT -159.5 mn in 2009. Declining gross prot margin, higher operating and nancial leverage mainly attributed to the poor performance of this segment. On the other hand, ACI salt and ACI motors are the two protable entities of ACI, which have relatively higher gross and operating prot margin compared to other subsidiaries.

Turnover Gross Prot Operating Prot Net Prot Interest Expense Equity Total Assets Total Debt Gross prot margin Operating prot margin Net prot margin Debt to capital ratio

Turnover Gross Prot Operating Prot Net Prot Interest Expense Equity Total Assets Total Debt Gross prot margin Operating prot margin Net prot margin Debt to capital ratio

Financial Performance
In terms of revenue, ACI is one of the largest listed companies in Dhaka stock exchange. But confusion arises, if anyone notices its consolidated net prot (BDT 140 Mn), which is only 1% of total revenue. From nancial statement analysis, it has found

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ACI Limited
Revenue growth

April 2012

that they have diversied sources of revenue. Moreover, they had opened up new businesses over the last two to three years. But unfortunately, those business contribution in terms of protability was not that much enough. The following major points will outline the companys nancial performance:

Declining growth in revenue


The total turnover size of ACI group stood at BDT 14498 Mn in 2010, in which subsidiaries contribution was around 45%. Consolidated turnover of ACI group grew by 18%, whereas ACIs turnover grew by only 10%, as the pharmaceutical segment performing poorly in 2010. In spite of having diversied sources, they werent able to achieve signicant growth in terms of turnover. During 2011, ACIs pharmaceutical turnover grew by 21.92% (According to IMS Report), which might eventually increase the turnover of ACI.

Operating prot margin

Operating prot margin is very low


One of the downsides of ACIs business is that operating prot margin is very low. In 2010, ACIs operating prot margin was only 11.4%, while in consolidated business this margin was only 6.4%. Smaller gross prot margin and higher operating expense mainly contributed to this meager operating prot margin of ACI Group.

Financial leverage is very high


From analysis of companys nancial statements, it has notied that the company is highly leveraged. The total debt of ACI group stood at BDT 7007.0 Mn at the end of 2010, which was 49% of total assets. Therefore, it is little bit riskier for ACI, whereas nancial and operating leverage both are high.

Financial leverage

Meager net prot margin


Over the years, ACIs consolidated turnover increased, but net prot after tax moved in reverse trend. In 2010, their consolidated net prot was only BDT 140.39 Mn, while the turnover was BDT 14498 Mn. Net prot margin was only 1.07%. On the other hand, ACIs (parent company) recorded prot around BDT 590 Mn. Apparently, subsidiaries and associates business are reducing the total prot.

Quarterly Performance (2012)


Net prot margin Income Statement Particulars (BDT mn) 2012 (Q1) Revenue 5495.6 Gross prot 1421.3 Operating prot 407.4 Prot after-tax for the year -11.7 Prot after-tax & minority interest 2.4

2011 (Q1) 4031.6 1139.7 333.5 71.8 55.2

Growth 36% 25% 22% -116% -96%

In 1st quarter (2012), ACI has recorded 36% growth in sales and 22% growth in operating prot. Despite that, their consolidated earnings declined by 96% in 2012s rst quarter compared to previous year. Increasing nancial expense and declining prot from Associate and Joint ventures business were the main reasons to the immense downfall of net prot.

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ACI Limited

April 2012

2006 Revenue 3515.9 Cost of sales 2340.0 Gross prot 1175.9 Operating prot 291.4 Prot before 232.9 income tax Prot after-tax 153.8

Income statement (ACI) 2007 2008 4917.3 5958.9 3250.7 4017.4 1666.6 1941.4 431.5 616.9 431.8 1179.6 313.0 1072.7

2009 7228.3 4862.6 2365.7 646.5 1107.6 989.6

2010 7915.4 5094.6 2820.8 901.2 808.0 591.6

Consolidated Income statement (ACI GROUP) 2006 2007 2008 2009 Revenue 4237.9 5756.8 10341.4 12299.7 Cost of sales 2770.6 3749.1 7289.4 8715.3 Gross prot 1467.2 2007.7 3052.0 3584.4 Operating prot 452.6 615.5 947.5 775.3 Prot before 290.4 531.8 1094.6 769.4 income tax Prot after-tax 167.9 362.6 932.9 556.7 Consolidated Balance sheet (ACI Group) 2006 2007 2008 2009 Non-current assets 1575.50 2684.14 3483.21 4271.26 Current Asset 2140.81 3228.22 5926.12 7639.33 Total Assets 3716.31 5912.36 9409.33 11910.59 Total equity 1212.25 1794.87 2812.03 3560.41 Long term 370.12 635.55 625.75 1184.70 liabilities Current 2133.81 3481.94 5971.55 7165.48 liabilities Total equity 3716.18 5912.36 9409.33 11910.59 and liabilities Financial Performance Analysis (ACI GROUP) 2007 2008 2009 Liquidity Ratio Current Ratio 0.93 0.99 1.07 Quick Ratio 1.04 0.88 1.75 Cash ratio 0.02 0.04 0.12 Activity Ratio Inventory Processing Period 135 117 122 Average Collection Period 42 48 66 Average Payment Period 12 15 26 Cash Conversion Cycle 166 150 162 Total Assets Turnover 1.20 1.35 1.15 Equity Turnover 3.83 4.49 3.86 Fixed Assets Turnover 2.7030 3.3536 3.1723 Protability Ratio Gross Prot Margin 34.9% 29.5% 29.1% Operating prot margin 10.7% 9.2% 6.3% Net Prot Margin 6.3% 9.0% 4.5% ROA 7.5% 12.2% 5.2% ROE 24.1% 40.5% 17.5% Solvency Ratio Debt to Capital Ratio 0.60 0.57 0.57 Debt to Equity Ratio 1.51 1.33 1.32 Interest coverage Ratio 3.17 1.94 1.41 Growth Analysis Sales Growth 36% 80% 19% Earnings Growth 116% 157% -40% Assets Growth 59% 59% 27% Equity Growth 51% 47% 26% Fixed Assets Growth 70% 30% 23%

2010 14498.1 10357.6 4140.4 927.1 471.4 140.4

2006 Non-current assets 1160.14 Current Asset 1755.05 Total Assets 2915.19 Total equity 974.07 Long term 200.08 liabilities Current 1741.04 liabilities Total equity 2915.19 and liabilities

Balance sheet of ACI 2007 2008 1609.92 1925.94 3120.89 4989.16 4730.81 6915.10 1272.10 2204.66 325.17 309.66 3133.55 4730.81 4400.78 6915.10

2009 2373.29 5368.96 7742.25 3241.61 320.51 4180.12 7742.25

2010 3885.15 5801.12 9686.27 4458.18 1140.93 4087.16 9686.27

2010 6668.41 7591.02 14259.43 4914.45 2107.31 7237.67 14259.43

Financial Performance Analysis (ACI) 2007 2008 2009 Liquidity Ratio Current Ratio 1.00 1.13 1.28 Quick Ratio 1.86 1.71 2.36 Cash ratio 0.02 0.05 0.17 Activity Ratio Inventory Processing Period 101.22 131.28 127.17 Average Collection Period 47.92 49.44 47.30 Average Payment Period 11.73 20.51 26.01 Cash Conversion Cycle 137.41 160.21 148.45 Total Assets Turnover 1.29 1.02 0.99 Equity Turnover 4.38 3.43 2.65 Fixed Assets Turnover 3.55 3.37 3.36 Protability Ratio Gross Prot Margin 34% 33% 33% Operating prot margin 9% 10% 9% Net Prot Margin 6% 18% 14% ROA 8% 18% 14% ROE 28% 62% 36% Solvency Ratio Debt to Capital Ratio 0.55 0.50 0.41 Debt to Equity Ratio 1.20 1.01 0.69 Interest coverage Ratio 3.82 2.67 3.24 Growth Analysis Sales Growth 40% 21% 21% Earnings Growth 104% 243% -8% Assets Growth 62% 46% 12% Equity Growth 31% 73% 47% Fixed Assets Growth 39% 20% 23%

2010 1.42 2.38 0.04 117.04 49.55 20.81 145.78 0.91 2.06 2.53 36% 11% 7% 7% 15% 0.45 0.83 7.22 10% -40% 25% 38% 64%

2010 1.05 1.31 0.04 105 66 25 146 1.11 3.42 2.6505 28.6% 6.4% 1.0% 1.1% 3.3% 0.57 1.35 1.74 18% -75% 20% 37% 56%

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