Investors upset as Active Fine Chemicals offers 2pc dividend

Investors holding the stocks of Active Fine Chemicals have been left disappointed after the pharmaceuticals ingredient company decided to share only 6 percent of its annual profit with them.

The firm has set aside 94 percent of the profits as reserve, but it did not explain to the shareholders why it needs to keep the money in reserve when it is already sitting on a cash of Tk 135 crore.

On December 1, the board of directors declared 2 percent (20 paisa) dividend for the fiscal year that ended on June 30, 2019 after booking earnings per share (EPS) of Tk 2.93.

“I invested into the stock seeing its high EPS. However, I am shocked to see only 2 percent dividend,” said Forhad Ahmed, a frustrated investor.

He had assumed that Active Fine Chemicals would announce 20-25 percent dividend as its earnings were enough to afford such payout.

Active Fine declared 20 percent stock dividend in 2018 when its EPS was Tk 3.44. It gave 25 percent dividend in 2017, 35 percent in 2016, which included 5 percent cash dividend, and 20 percent in 2014.

Had it provided 20 percent dividend, it still could have a reserve of Tk 0.93 for per share, Ahmed pointed out.

He urged the stock market regulator to look into why the company has not shared a fair share of the profits with the shareholders.

Market analysts say a company can conserve its cash resources, but it should have a plan in place outlining what it wants to do with the money.

According to a directive of the Bangladesh Securities and Exchange Commission (BSEC), all companies must explain if they announce stock dividend or retain profits in reserves.

However, Active Fine Chemicals has not come up with such explanation.

Minhaz Mannan Emon, a director of the Dhaka Stock Exchange (DSE), said when a company retains huge amount of profits without explaining the reason, it creates suspicion among investors.

“Investors don’t know whether the company has any plan to make further investment or it has any ill intention to manipulate stocks. Had it explained the reason, this confusion would not have created.”

Emon said such a low dividend despite making higher profits impacts investors’ confidence.

Prof Abu Ahmed, a market analyst, also said the company should explain the reasons behind the further accumulation of the reserve.

He said the sponsors of Active Fine Chemicals have very minimum shareholding in the company. So, they will not pay higher dividend and it is normal. The directors’ shareholding was 12.04 percent as on November 30, 2019, DSE data showed. The rest is held by investors.

Ahmed, also a former chairman of the economics department of the University of Dhaka, said when a company’s directors hold very minimum shares, they deprive stock investors. “So, the stock market regulator should bring in some directors who hold more shares.”

When contacted, Md Zia Uddin, chairman of Active Fine Chemicals, told The Daily Star on Tuesday that the company’s Chief Financial Officer AKM Akramuzzaman would be able to talk about it better. He even shared the CFO’s mobile phone number.

On the same day, Akramuzzaman said he was out of office and would talk later. On Wednesday, he said he was now the CFO of the company’s health division and couldn’t comment. Contacted again, Zia Uddin said on Wednesday that he would make comments after talking to company officials. But he hasn’t received phone calls since then.

Active Fine Chemicals’ stock fell steeply after the dividend declaration. Since then, it dropped 22.68 percent to Tk 15 when the benchmark index of the DSE shed 4.90 percent.