ACI upsets investors

ACI, a blue-chip stock, has been disappointing investors with its sliding earnings in the first three quarters of the financial year. 

The business group, which is one of the largest in the country with exposure in commodities to pharmaceuticals and logistics, reported a decline in earnings in every quarter of this financial year, which was well below the investors' expectations.

The company, however, reported revenue of Tk 1,627.23 crore for the three quarters, up nearly 19 percent year-on-year. In fact, the third quarter revenue also rose nearly 17 percent.

Earnings per share of ACI slumped about 72 percent year-on-year to Tk 0.96 only in the third quarter (January to March).

Share price of ACI continues to decline after the disappointing quarterly income results this year. Now a share of ACI is being traded at Tk 360, which is the lowest in a year.

A top executive of ACI said their sales turnover remains healthy, but high borrowing and import costs due to a rise in lending and exchange rates and massive duty reduction of rice have impacted the EPS of the company.

“Sales growth of ACI is quite healthy but the EPS has declined due to high borrowing and import costs,” said Pradip Kar Chowdhury, executive director (finance and planning) of ACI.

For example, Chowdhury said they had to pay an additional Tk 60 crore for an increase in bank interest rates, which have affected the company's earnings. Depreciation of local currency against the dollar by about 5 percent also pushed up the company's import bills for raw materials, he said, adding that the prices of raw materials also shot up in international markets in recent months.

“There was a 22 percent import duty on rice but the government brought it down to 2 percent, so our rice has become a loss-making product,” he added.

After the second quarter's significant fall in net profits, M Anis Ud Dowla, chairman of ACI, blamed it on slow growth in the company's agriculture segment.

“There are lots of opportunities -- we will do good business in the coming days,” he told The Daily Star, banking on the new investments it undertook in different fields.

In October last year, ACI announced investment of Tk 24.7 crore in its subsidiary ACI Foods. It will also invest Tk 4 crore in its joint venture with British beverage manufacturer Tetley. On the other hand, ACI imports 70 percent of its products from China, where these products' prices are soaring.

China decided to shut down thousands of its polluting factories and ACI sourced products from many of them. So, those products' prices have soared almost 22 percent.

“We shifted only 10-11 percent of the higher prices on to consumers, which weighed down our EPS despite registering 27 percent growth in sales,” said Chowdhury, also the chief financial officer of ACI.

Another shock on the EPS came from the food products. Quarterly report of ACI shows loss in the food subsidiaries increased 165 percent year-on-year to Tk 17.99. This year, EPS was hurt by the new subsidiaries also.

Quarterly report of ACI shows its supermarket chain Shwapno's losses are shrinking: it declined 7.14 percent year-on-year to Tk 88.03 crore.

ACI announced 115 percent cash and 10 percent stock dividends in 2017, which is the same as in the previous year.

Its net profit after tax for the financial year that ended on June 2017 was Tk 124.4 crore.