REPORT ON

Analysis on Annual Report of ACI Limited

Article: “ACI provides 60% dividend”

BASED ON A 2008 STUDY OF ACI Ltd

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Analysis on ACI Annual Report

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
Some terminologies were not very clear to understand. However, by the help of our
course lecturer we were still able to work on it.
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Analysis on ACI Annual Report

Introduction
We 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 Rights

2. Labour

3. Environment

4. Anti-Corruption

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Analysis on ACI Annual Report

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.

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Analysis on ACI Annual Report

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
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October 1995.

Analysis on ACI Annual Report

 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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Analysis on ACI Annual Report

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

• 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
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our core competencies.

Analysis on ACI Annual Report

 • 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.

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Analysis on ACI Annual Report

 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
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there is no evidence of impairment.

Analysis on ACI Annual Report

 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?
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Analysis on ACI Annual Report

 2007 2006
Net Income Tk. Tk
340,262,440 165,585,859
Sales Tk. Tk
5,756,817,829 4,237,856,136
Net Profit 5.91% 3.90%
Margin

Calculation:

2007,

= 5.91% for year 2007

2006,

= 3.907% for year 2006

Interpretation 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.
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4. How much was earning per share?

Analysis on ACI Annual Report

 2007
Number of shares 16170000
outstanding

Monetary valuation of shares Tk.

issued 340,216,800

» Earning Per Shares Tk. 21.04

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 Tk.

issued 165,585,859

» Earning Per Shares Tk. 10.24

Calculation:

In 2007, Net Income = Tk. 165,585,859

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Total number of share outstanding = 16170000

Analysis on ACI Annual Report

 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.

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 31.82%

expense to pretax income

2006
 Income Tax expenses Tk. 122478216

 Profit before tax Tk. 290355318

 The percent of income tax 42.18%

expense to pretax income
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Analysis on ACI Annual Report

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 2007

(Taka) (Taka)
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Analysis on ACI Annual Report

 Net profit 165,585,8 340,262,440
59

Dividend 71,172,36 95,201,895

2

Retained Earning 94,413,49 245,060,545

7

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Analysis on ACI Annual Report

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 Tk. 660,423,664 Tk.

Depreciation 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.

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= 10 Taka per share

Analysis on ACI Annual Report

 Share premium

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 2006
Taka Taka
Deferred tax liability on revaluation 126,386,4 92,629,38
reserve 19 1
Deferred tax liability on temporary 3,985,2 9,695,94
differences 15 8
130,371,6 102,325,3
34 29
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Analysis on ACI Annual Report

 4. Does company have any outstanding lease obligations? If so
describe.

YES, ACI Limited has an outstanding lease obligation

Obligation under finance lease:

2007 2006

Taka Taka

Payment due within one year 10,220,40 14,076,453

8

Payment due within 5 years but later 8,082,683 15,336,353

than one year

Payment due after 5 years - -

Obligation under finance lease 18,303,09 29,412,806

1

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.
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Analysis on ACI Annual Report

 6. What is breakdown of their investment (e.g., investment in
bond, investment in stocks or other marketable securities
etc.)?

2007 2006
No. of Face Called Share Value Value
shares value and paid holdin
per up g
share capital
Taka Taka % Taka Taka
Investment valued at
cost:
Mutual Trust Bank 332,64 100 100 3.33 20,000,0 29,375,0
Limited 0 00 00
Central Depository 2 10000 100000 0.58 2,000,00 2,000,00
Bangladesh Limited 00 0 0 0
Computer 200 100 100 40 20,000 20,000
Technology Limited
ACI Agrochemicals 18,000
Limited
22,020,0 31,413,0
00 00

Investment valued
under equity
method:
Tetley ACI 450,00 100 100 50 (1,859,0 1,881,20
(Bangladesh) 0 93) 0
Limited
Asian Consumer Care 1,079,4 10 10 24 907,018 (3,241,0
(Pvt.) Limited 45 54)
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ACI Godrej Agrovet 800,00 100 100 50 41,604,4 8,322,24

(Pvt.) Limited 0 35 2

Analysis on ACI Annual Report

Stochastic Logic 2,000 100 100 20 (627,1 (305,8
Limited 68) 30)
40,025,1 6,656,5
92 58

Total carrying 62,045,1 38,069,5

amount of 92 58
Investment

7. Does the company have any long terms debt maturing in the
current year? Any major refinancing?

Long-term loan – current portion

2007 2006

Taka Taka

Standard Chartered Bank 58,021,6 -

01

The Hongkong and Shanghai Banking 4,483,0 -

Corporation Limited 01

62,504,6 -
02

Consolidated long term loan – current portion

2007 2006

Taka Taka

Standard Chartered Bank 58,021,60 -

1

The Hongkong and Shanghai Banking 46,943,02 46,247,3

Corporation Limited 1 11

Citibank, N.A. 49,840,07 _________

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Analysis on ACI Annual Report

 154,804,6 46,247,3
98 11

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Analysis on ACI Annual Report

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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Analysis on ACI Annual Report

 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 subsidiaries

1.1.1 ACI formulation Limited

1.1.2 ACI Salt Limited

1.1.3 ACI Foods Limited

1.1.4 ACI Pure Flour Limited

1.1.5 Apex Leather Craft Limited

1.1.6 Flyban Insecticides Limited

1.1.7 ACI Agrochemicals Limited

1.1.8 ACI Motors Limited

1.1.9 Creative Communication Limited

1.1.10 Premiaflex Plastic Limited

[The description is mentioned in the appendix]

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Analysis on ACI Annual Report

 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 2006

Taka Taka

Finished goods 644,727,561 539,313,374

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Work-in-process 36,229,138 37,007,215

Analysis on ACI Annual Report

 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

1,641,569,8 1,277,959,412
06

Less: Provision for slow 58,521,441 38,801,086

moving and damaged
goods

1,583,048,3 1,239,158,326
65

4. What depreciation methods are used?

In the Annual Report of ACI Limited, did not mention any method
regarding of depreciation which they used.

Particular Rate of depreciation

Land 0%
Building 2.5%
Plant & Machinary 10.0%
Furniture & Fixture 10.0%
Electrical and other office 10.0%
appliances
Office machinery 10.0%
Vehicles 20.0%
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
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products or services in within a particular economic environment (geographical segment), which

Analysis on ACI Annual Report

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.

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Analysis on ACI Annual Report

Appendi
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Analysis on ACI Annual Report