ACI's earnings sinking

Earnings of ACI, a blue-chip stock known to have a very stable growth rate, have been on the slide for the last four quarters and in the process wiped out investors' money.

ACI's earnings per share (EPS) for the October-December quarter stood at Tk 0.78 in the negative, in contrast to Tk 5.44 a year earlier, according to financials posted on the Dhaka Stock Exchange's website last week.

This is the first time since 2012 that the company's earnings became negative.

ACI blamed currency devaluation, interest rate increase, decrease in profit from joint ventures and associates, purchase rate variance due to international price hike and high income tax expenses for the de-growth.

“Interest rate on bank loans rose during the quarter in comparison to last year,” said Pradip Kar Chowdhury, chief financial officer of ACI.

When ACI took the loan the interest rate was 7 to 8 percent. Now, it is about 10 percent.

“We are in a growth phase, so we have huge amounts of loans,” he said, adding that lower economic activities centring on the polls also impacted ACI's business.

The business group, which is one of the largest in the country with exposure from commodities to pharmaceuticals, reported a decline in earnings in the last few quarters as well, which was well below investors' expectations.

As a result, the EPS of ACI slumped about 94 percent year-on-year to Tk 0.44 for the first half of fiscal 2018-19.

One of the ACI high officials said on condition of anonymity the company has huge bank loans, so higher interest rate affects its earnings mostly.

The company's short-term bank loans increased to Tk 2,138.52 crore from Tk 1,836.72 crore in a span of six months.

At the same time, long-term loans decreased to Tk 789.95 crore from Tk 797.23 crore, according to the financial statement.

The statement also shows that ACI incurred higher losses for animal health, consumer brands, retail chain and the food segment.

Pure flour, salt and premiaflex plastic unit witnessed lower profit when compared with the numbers from 2017's first half.

However, the pharmaceutical segment made huge profit. Its profit was up 28.28 percent to Tk 101.63 crore.

Stock market analysts said the company has very rare experience of logging in losses in the recent past. But, it may come back to profitability as it follows good corporate governance.

ACI's share price has been declining in the last one year in line with declining earnings. Now, a share of ACI is trading at Tk 302, down from Tk 430 a year ago.

The company disbursed 115 percent cash and 3.5 percent stock dividend to its shareholder last year.