Post on 19-Nov-2014
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REPORT ON
Analysis on Annual Report of ACI Limited
Article: “ACI provides 60% dividend”
BASED ON A 2008 STUDY OF ACI Ltd
Analysis on ACI Annual Report
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Executive Summary
You know Balance Sheet, Income Statement and Cash Flow Statement
are very important for a company. It lets the corporation to analyze their
past performance, evaluate its present level of performance, and determine
possible future expectation about a new venture. These allow a corporation
to evaluate its operation on a more measurable and attainable level.
Furthermore, it gives the corporation an estimated picture of any future
outcome of a product or service that they are trying to determine. In order
to improve performance and position in the market, the company must have
a ratio analysis. It shows what their product’s condition is in the market and
is there any scope to improve in future. There are lots of product line in ACI
and DATA answers what, why and how about those specific product.
Different kind of statement such as consolidated balance sheet,
consolidated income statement, consolidated shareholder equity, and
consolidated cash flow etc helps to identify the product condition
(success/failure), strengths/weakness, reason behind it, and solve those
types of problems. It will certainly help to go forward the company and get
gain to remain in the market as a successful one.
Methodology
A group of four had been formed. For analyzing ACI was chosen. The Annual
report of ACI has been used for this purpose. The analysis, which was mainly done
through group discussions, was made by integrating the many concepts we have
studied in the course.
Problems
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Some terminologies were not very clear to understand. However, by the help
of our course lecturer we were still able to work on it.
IntroductionWe preferred ACI Limited because ACI has been accepted as Founding Member of the Community of Global Growth Companies by the World Economy Forum which is the most prestigious business networking organization, the membership is a matter of pride for them.
Global Impact
The united nation Global Compact is a voluntary international initiatives that brings companies around the glob with UN agencies, labor and civil societies to support universal environment and social principles outline by the ten(10) principle of global compact which ACI endorsed in 2003. The ten principles are in the areas of:
1. Human Rights2. Labour3. Environment4. Anti-Corruption
Analysis on ACI Annual Report
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Article
ACI provided 60% dividend (2007)
Publicized: ………………………………………. “The Daily Star”
Date: …………………………………………………. June 27, 2007.
Page: ………………………………………………… 08
Column: ……………………………………………… 01
The financial result presented to the shareholders showed an increase
in sales turn over by 14% over the previous year. The gross profit also
increased by 22.88 % to TK 1176 million and profit after tax increased by
37% to TK 154 million over the previous year. The EPS (Earning per Share)
stood at TK 9.51 this year against TK 6.94 during the previous year.
Analysis:
Total number of share outstanding = 16,170,000
Par value of each share = 10 Taka
60% Dividend paid in June 27, 2007 = Taka 97,020,000
Net Income in 2007 = Taka 340,262,440
Retained Earnings = Taka 243,242,440
Opinion:
If the company can able to remain this dividend in future they will make more profit and shareholder equity.
Recommendation:
We think they should pay the same dividend in next year.
Analysis on ACI Annual Report
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A.Background:
1. Where is the company incorporated? Where are its primary locations?
Advanced Chemical Industries Limited is a public limited company which was incorporated on 24 January 1973 as ICI Bangladesh Manufacturers Limited. The principle activities of the company are to manufacture pharmaceuticals, consumer brand, public health and animal health products and to market them along with agro chemicals, seeds, and other consumer brand items.
The company is listed with Dhaka Stock Exchange Limited (DSE) and Chittagong Stock Exchange Limited (CSE).
2. Describe the nature of its business, primary products, etc.
ACI is a renowned pharmaceutical company which sells lots of other
renowned consumer products too. It has been enlisted in the Dhaka stock
Exchange for over 30 years nor and in the Chittagong Stock Exchange for
over 15 years. We selected this company because getting information on it
would be easy for us since one of the owners of ACI is a relative of one of
our group members and it’s a company that everyone knows of and one or
more of its products is used in almost every household of Bangladesh.
ACI was established as the subsidiary of Imperial Chemical Industries
(ICI) in the then East Pakistan in 1968. After independence the company
has been incorporated in Bangladesh on the 24th of January 1973 as ICI
Bangladesh Manufacturers Limited and also as Public Limited Company.
This Company also obtained listing with Dhaka Stock Exchange on 28
December, 1976 and its first trading of shares took place on 9 March, 1994.
Later on 5 May, 1992, ICI plc divested 70% of its shareholding to local
management. Subsequently the company was registered in the name of
Advanced Chemical Industries Limited. Listing with Chittagong Stock
Exchange was made on 22 October 1995.
Analysis on ACI Annual Report
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Advance Chemical Industries (ACI) Limited is one of the leading
conglomerates in Bangladesh, with a multinational image. ACI is a Public
Limited Company with a total number of 19,653 shareholders. Among these,
there are three foreign and fifty local institutional shareholders. The
company has diversified into three major businesses. Besides these, the
company has a large list of international associates and partners with
various trade and business agreements.
ACI has three separate manufacturing plants in the outskirts of Dhaka.
The Pharmaceuticals plant is located at Narayanganj; ACI Formulations has
been setup at Gazipur and the Tetley factory has been built at Konabari.
The company maintains strategically located sales centres in nineteen
different locations across the country. It has developed an advanced
distribution system through its more than 300 skilled and trained manpower
and a large fleet over eighty vehicles. The distribution system is capable of
handling continuing volume of diverse range of products from the various
businesses.
Pharmaceuticals
Consumer Brands & Commodity Products
Agribusinesses:
a. Crop Care and Public Health
b. Livestock & Fisheries
c. Fertilizer
d. Cropex
e. Seeds
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ACI has the following subsidiaries
ACI Formulations Limited
Apex Leathercrafts Limited
ACI Salt Limited
ACI Pure Flour Limited
ACI Foods Limited
Consolidated Chemicals Limited
Premiaflex Plastics Limited
Creative Communication Limited
ACI Motors Limited
ACI Logistics Limited
Renowned consumer products under ACI are ACI Aerosol Spray, Savlon,
ACI Salt, Pure Cooking Masala, etc.
Company Mission
ACI’s mission is to enrich the quality of life of people through
responsible application of knowledge, skills and technology. ACI is
committed to the pursuit of excellence through world-class products,
innovative processes and empowered employees to provide the highest level
of satisfaction to its customers
Company Vision
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Endeavour to attain a position of leadership in each category of its
businesses.
Attain a high level of productivity in all its operations through
effective and efficient use of resources, adoption of appropriate
technology and alignment with our core competencies.
Develop its employees by encouraging empowerment and rewarding
innovation.
Promote an environment for learning and personal growth of its
employees.
Provide products and services of high and consistent quality, ensuring
value for money to its customers.
Encourage and assist in the qualitative improvement of the services of
its suppliers and distributors.
Establish harmonious relationship with the community and promote
greater environmental responsibility within its sphere of influence.
3. What is primary focus of the company’s management letter in the current year?
ACI Limited try to manage the company with full consciousness to all their
stakeholders. They are seriously working towards the mission of improving the
quality of the people of Bangladesh.
ACI remains committed to providing customers with a broad range of quality
products from its business operation.
Analysis on ACI Annual Report
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B. Income Statement
1. Is this consolidated statement? Explain.
YES, ACI is a consolidated statement.
All significant subsidiaries are consolidated. All significant intercompany
transactions are eliminated. As used here in the term “ACI” company refers to ACI
Formulations Limited, ACI Salt, Limited, ACI Pure Flour Limited, Apex Leather
Craft Limited, Flyban Insecticides Limited, ACI Motors Limited, Premiaflex Plastic
Limited unless context indicates otherwise.
Basis of Consolidation
»Subsidiaries
Subsidiaries are entities controlled by ACI Limited. Control exists
when ACI Limited has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing
control, potential voting rights that presently are exercisable are taken into
account. The financial statement of subsidiaries are included in the
consolidated financial statements from the date that control commences
until the date that control ceases. The accounting policies of subsidiaries
have been changed when necessary to align them with the policies adopted
by ACI Limited.
»Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized and
expenses arising from intra-group transactions, are eliminated in preparing
the consolidated financial statements. Unrealized gains arising from
transactions with associates are eliminated against the investment to the
extent of ACI Limited’s interest in the investee. Unrealized losses, if any, are
eliminated in the same way as unrealized gains, but only the extent there is
no evidence of impairment.
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2. Are there any extra ordinary items? Discontinued items? Cumulative effects of change in accounting principle(s)? If so, briefly discuss the nature of these items.
Irregular items fall into six categories
Discontinued operations.
Extraordinary items.
Unusual gains and losses.
Changes in accounting principle.
Changes in estimates.
Corrections of errors.
There are no extra ordinary items or even discontinued items in the Consolidated Income Statement. There are no Cumulative effects of change in accounting principles (Note: E-1).
3. What was profit margin percentage in the current year? In the prior year?
2007 2006
Net Income Tk. 340,262,440 Tk 165,585,859
Sales Tk. 5,756,817,829 Tk 4,237,856,136
Net Profit Margin 5.91% 3.90%
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Calculation:
2007,
= 5.91% for year 2007
2006,
= 3.907% for year 2006Interpretation of Net Profit Margin
» In 2006 ACI Limited had a net profit of 3 taka 91 paisa out of 100 taka sales. That means out 100 taka sales the profit was 3.907 taka and the rest was expense. In 2007, it was 5 taka 91 paisa profit out of 100 taka sales.
» it has increased in 2007 compare to year 2006.
» in 2007, the company’s net income and net sales was increased from 2006.
4. How much was earning per share?
2007
Number of shares outstanding 16170000
Monetary valuation of shares issued Tk. 340,216,800
» Earning Per Shares Tk. 21.04
Analysis on ACI Annual Report
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Calculation:
In 2007, Net Income = Tk. 340,262,440
Total number of share outstanding = 16170000
EPS = = 21.04
2006
Number of shares outstanding 16170000
Monetary valuation of shares issued Tk. 165,585,859
» Earning Per Shares Tk. 10.24
Calculation:
In 2007, Net Income = Tk. 165,585,859
Total number of share outstanding = 16170000
EPS = = 10.24
Interpretation:
» In 2007, ACI Limited’s share holders (13523) had a earning of 21 Taka 4 Paisa per share. In 2006, it was 10 Taka 24 Paisa earning per share.
» The earning per share had been increased double of 2006 in 2007.
» The reason is their net income increased in 2007.
Analysis on ACI Annual Report
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5. What was the percent of income tax expense to pretax income?
2007
Income Tax expenses Tk. 169224712
Profit before tax Tk. 531811467
The percent of income tax expense to pretax income
31.82%
2006
Income Tax expenses Tk. 122478216
Profit before tax Tk. 290355318
The percent of income tax expense to pretax income
42.18%
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C. Statement of Retained Earnings
1. For the current year, what amount was transferred from the income statement? For the prior year?
Net profit after tax in the year 2006 was 165,585,859 Taka and out this, dividend of 71,172,362 Taka was paid. Hence 165,585,859 - 71,172,362 = 94,413,497 Taka has been transferred to the Statement of Retained earnings in the year 2006.
In 2007, Net profit after tax and interest was, 340,262,440 Taka, and out of this, Dividend of Taka 95,201,895 was paid out and hence remaining was 340,262,440 - 95,201,895 = 245,060,545 Taka, which was transferred to the Statement of Retained Earnings.
2. What total Retained Earnings was reported on the Balance Sheet for the current year?
2006
(Taka)
2007
(Taka)
Net profit 165,585,859 340,262,440
Dividend 71,172,362 95,201,895
Retained Earning
94,413,497 245,060,545
Analysis on ACI Annual Report
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Analysis on ACI Annual Report
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D. Balance Sheet
1. What was the Net Book Value of the fixed asset at the end of the current year? At the end of the prior year?
Net Book Value of the fixed assets
Net Book Value = Cost – Accumulated Depreciation
2007 2006
Cost Tk. 2,610,354,214 Tk. 1,936,014,079
Accumulated Depreciation Tk. 660,423,664 Tk. 542,619,801
Net Book Value Tk. 1,949,930,550 Tk. 1,393,394,278
2. How many classes of common stock have been issued? Does the stock have a par value? Can the company issue any more stock?
There are three classes of share have been issued:
1. Ordinary
2. Right Share
3. Bonus Share
16170000 number of common stock have been issued.
The par value of the stock is Taka 10.
= 10 Taka per share Share premium
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This represents the amount received against issue of shares at premium in the years 1995 and 1998.
3. Where there any unpaid income tax at the end of the current year? How did this figure compare with income tax expense?
Taka 83680237 were unpaid or deferred tax income in 2007.
The company recognized deferred tax in accordance with the provision of
BAS 12: Income Taxes. Deferred tax arises due to temporary difference deductible
or taxable for the events or transaction recognized in the income statement. A
temporary difference is the difference between the tax base of an asset or liability
and its carrying amount/reported amount in the financial statement. Deferred tax
asset or liability is the amount of tax recoverable or payable in future period(s)
recognized in the current period. The deferred tax asset/income or
liability/expense does not create a legal liability/recoverability to and from the
income tax authority. Deferred tax also arises due to revaluation of property, plant
and equipment. The resulting impact of deferred tax assets/liabilities on
revaluation reserve in included in the statements of changes in equity.
Income tax comprises of both current and deferred tax.
Deferred tax liabilities
2007
Taka
2006
Taka
Deferred tax liability on revaluation reserve 126,386,419 92,629,381
Deferred tax liability on temporary differences 3,985,215 9,695,948
130,371,634 102,325,329
Analysis on ACI Annual Report
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4. Does company have any outstanding lease obligations? If so describe.
YES, ACI Limited has an outstanding lease obligation
Obligation under finance lease:
2007
Taka
2006
Taka
Payment due within one year 10,220,408 14,076,453
Payment due within 5 years but later than one year 8,082,683 15,336,353
Payment due after 5 years - -
Obligation under finance lease 18,303,091 29,412,806
5. Does the company have any outstanding pension and or postretirement benefit obligation? If so describe.
Yes, the company has pension or postretirement benefit obligation. It has mentioned in the Note 19(A) which is the part of the consolidated other creditors. In the note section, it says that they have two types of provident funds.
6. What is breakdown of their investment (e.g., investment in bond, investment in stocks or other marketable securities etc.)?
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2007 2006
No. of shares
Face value per share
Called and paid up capital
Share holding
Value Value
Taka Taka % Taka TakaInvestment valued at cost:Mutual Trust Bank Limited 332,640 100 100 3.33 20,000,000 29,375,000Central Depository Bangladesh Limited
2 1000000 1000000 0.58 2,000,000 2,000,000
Computer Technology Limited
200 100 100 40 20,000 20,000
ACI Agrochemicals Limited 18,00022,020,000 31,413,000
Investment valued under equity method:Tetley ACI (Bangladesh) Limited
450,000 100 100 50 (1,859,093) 1,881,200
Asian Consumer Care (Pvt.) Limited
1,079,445 10 10 24 907,018 (3,241,054)
ACI Godrej Agrovet (Pvt.) Limited
800,000 100 100 50 41,604,435 8,322,242
Stochastic Logic Limited 2,000 100 100 20 (627,168) (305,830) 40,025,192 6,656,558
Total carrying amount of Investment
62,045,192 38,069,558
7. Does the company have any long terms debt maturing in the current year? Any major refinancing?
Long-term loan – current portion
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2007
Taka
2006
Taka
Standard Chartered Bank 58,021,601 -
The Hongkong and Shanghai Banking Corporation Limited 4,483,001 -
62,504,602 -
Consolidated long term loan – current portion
2007
Taka
2006
Taka
Standard Chartered Bank 58,021,601 -
The Hongkong and Shanghai Banking Corporation Limited 46,943,021 46,247,311
Citibank, N.A. 49,840,076 _________
154,804,698 46,247,311
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E. Notes to the Statements
1. What accounting principle makes it necessary to have these notes to the financial statements?
The accounting policies set out below have been applied consistently to all periods presented in these financial statements.
Basis of Consolidation
Subsidiaries
Transaction eliminated on consolidation
Property, plant and equipment
Recognition and measurement
Depreciation
Subsequent cost
Goodwill
Trade and other receivables
Advance, deposits and prepayments
Cash and cash equivalent
Provision
Contingencies
Income tax expenses
Current tax
Deferred tax
And so on.
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2. What is subject of the first note?
The subject of the first note is Reporting Entity which has been described below.
1. Reporting entity
Advanced Chemical Industries Limited is a public limited company which was incorporated on 24 January 1973 as ICI Bangladesh Manufacturers Limited. The principle activities of the company are to manufacture pharmaceuticals, consumer brand, public health and animal health products and to market them along with agro chemicals, seeds, and other consumer brand items.
The company is listed with Dhaka Stock Exchange Limited (DSE) and Chittagong Stock Exchange Limited (CSE).
1.1 Description of subsidiaries1.1.1 ACI formulation Limited1.1.2 ACI Salt Limited1.1.3 ACI Foods Limited1.1.4 ACI Pure Flour Limited1.1.5 Apex Leather Craft Limited1.1.6 Flyban Insecticides Limited1.1.7 ACI Agrochemicals Limited1.1.8 ACI Motors Limited1.1.9 Creative Communication Limited1.1.10 Premiaflex Plastic Limited
[The description is mentioned in the appendix]
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3. How are the inventories stated?
Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operation capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Stock in transit represents the cost incurred up to the date of the balance sheet for the items that were not received till to the date of balance sheet. Inventory losses and abnormal losses were recognized as expenses.
Consolidated Inventory
2007
Taka
2006
Taka
Finished goods 644,727,561 539,313,374
Work-in-process 36,229,138 37,007,215
Raw materials 602,323,616 427,780,936
Packing materials 141,316,259 136,025,682
Stores and spares 13,998,250 6,285,159
Stock in transit 197,259,809 125,354,620
Others 5,715,173 6,192,426
1,641,569,806 1,277,959,412
Less: Provision for slow moving and damaged goods
58,521,441 38,801,086
1,583,048,365 1,239,158,326
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4. What depreciation methods are used?
In the Annual Report of ACI Limited, did not mention any method regarding of depreciation which they used.
5. Are there any other footnotes that are unusual and/or distinctive to this company?
A segment is a distinguishable component of ACI Limited and its
subsidiaries that is engaged either in providing related products or services
(business segment), or in providing products or services in within a particular
economic environment (geographical segment), which is subject to risks and
rewards that are different from those of other segments. ACI Limited and its
subsidiaries’ primary format for segment is based on business segments. Segment
information is presented only on the basis of the consolidated financial statements.
Analysis on ACI Annual Report
Particular Rate of depreciation
Land 0%Building 2.5%Plant & Machinary 10.0%Furniture & Fixture 10.0%Electrical and other office appliances
10.0%
Office machinery 10.0%Vehicles 20.0%
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Appendix
Analysis on ACI Annual Report