ACI earnings growth remains volatile

Six of the 11 business segments under the 15 subsidiaries of ACI Limited, a local business conglomerate, reported solid growth in net profit in the first quarter of 2021–22, while the remaining five showed negative growth.

The earnings growth of a publicly-traded company is highly volatile. But earnings per share (EPS) growth has been positive since the last quarter of FY 2019-20. Yearly EPS has also been in a positive trend, said the EBL Securities in a note.

The company, which was incorporated in 1973, operates through strategic business units such as pharmaceuticals, consumer brands, agribusinesses, and retail chains.

The conglomerate is engaged in the manufacturing of pharmaceuticals, consumer goods, and animal health care products, and marketing them along with fertilizer, seeds, and other agricultural items. ACI Logistics Limited, or Swapno, is a chain of super shop brands and is a subsidiary of ACI Ltd. “Shwapno” is the largest retail chain in the country.

The brokerage firm, in its analysis, said segment-wise business performance reveals that the pharma, motors, retail chain, and food segments contributed the most to the revenue of the conglomerate at 18.7 per cent, 17.4 per cent, 13.9 per cent, and 8.6 per cent respectively during the first 3 months of the current fiscal year.

However, the key positive contributors to profit (before tax) were pharma (94.60 per cent), motors (56 per cent), and salt (16.16 per cent), while the key negative contributors were healthcare (-53.60 per cent) and retail chain (-37.30 per cent).

ACI Healthcare has been a major negative contributor to the profit of the company. In the first quarter of FY22, revenue fell 6.8 percent.

However, profit before tax, despite being negative, has shown signs of improvement: Profit before tax in Q1 of FY22 stood at a negative Tk 43,89 crore, up from a negative Tk 45,934 crore in Q1 of FY21- a slight growth of 4 per cent.

The subsidiary, established to manufacture and market pharmaceutical products to the US, has focused on the Bangladeshi market as it awaits US FDA inspection and approval for its factory at Sonargaon. 

ACI Logistics Limited, or Swapno, a chain super shop brand, posted Tk 299 crore revenues and a Tk 30 crore net loss before tax during July to September of FY22 against Tk 296 crore in revenue and a Tk 34 crore loss before tax during the same period of the previous year, representing 1 per cent year-on-year (YoY) growth in revenue and 13 per cent YoY growth in profit before tax.

During FY2020-21, Swapno’s accumulated loss was recorded at Tk 1,374 crore. However, profit after tax, though still negative, has improved from negative TK 156 crore in FY20 to negative Tk 142 crore FY21.

At the onset of Covid-19, Shwapno introduced a telesales service that has brought in 11,000 monthly customers. Its presence on e-commerce platforms has brought in 30,000 monthly orders, while its physical stores bring in 14,000 visitors daily.

In FY21, Shwapno added 52 outlets. The increase in visitors, both online and retail, helped revenue increase by 18.7 per cent in Q1 FY22 on a year-on-year basis.

On a positive note, ACI Pharma and Motors, respectively, witnessed 28.3 per cent and 46.3 per cent YoY growth in revenue in the Jul-Sep’21 period. In addition, ACI Crop Care & Public Health subsidiary experienced robust YoY revenue growth of 28.10 percent and profit growth of 75 percent during the period.

Dividends per share (DPS) has been consistently decreasing over the years as earnings have taken a dip. DPS was Tk 11.5 per share in FY19, which declined to Tk 9 and Tk 8 per share in FY20 and FY21, respectively. However, with the increase in the company’s potential earnings, it can be expected that DPS will also increase.

The conglomerate is reducing its leveraged position. Interest expenses have been cut by 22 per cent. The debt-to-equity ratio fell from 666.1 percent to 336.4 percent during the same period, while the debt-to-asset ratio fell from 78.9 percent to 51.8 percent.

Operating expenses, as a percentage of revenue, have declined from 23.3 per cent to 21.6 per cent. These reductions in financial and operating expenses, combined with a 15% increase in sales, have helped the conglomerate’s profit margins. The ratios from annualized Q1 FY 2021-22 figures show the numbers have further improved, the analysis said.

On Monday, its share price increased 0.94 per cent to Tk 291.30 on the Dhaka bourse.