ACI in the red in FY23, weighed down by losses of 2 subsidiaries

Advanced Chemical Industries (ACI) endured a consolidated loss of Tk 493.96 million in FY23 as two subsidiaries wiped out the profit made by the parent company.

ACI Ltd bagged a profit of Tk 1.76 billion in FY23 out of its own operation, but ACI Health Care and ACI Logistics incurred a loss of Tk 2.24 billion and Tk 1.52 billion respectively in the year, dragging the company into the red.

Company insiders said higher finance costs of the two companies had contributed to the losses.

The parent company's equity investments in these subsidiaries are very low, making them highly reliant on borrowed funds. The bank loans borne by the subsidiaries amount to around Tk 28 billion, requiring interest payment at around 9 per cent.

One of the largest conglomerates in the country, ACI Ltd had seen losses in FY19 and FY20 for the same reason - loss burden of the two subsidiaries. The company for the years gave higher cash dividends from retained earnings than what it has recommended for FY23 as it is running short of liquidity, said a senior executive wishing not to be named.

He said shareholders would be benefitted when the operations of the subsidiaries would become viable.

The company secretary of ACI Ltd, Mohammad Mostafizur Rahman refused to speak in detail about the subsidiaries, but said, "Shareholders of ACI Ltd are also owners of the subsidiaries".

Insiders said ACI Health Care was yet to ensure utilisation of its capacity at a satisfactory level, with only 25 per cent of its operating strength put to use.

It is unable to boost production mainly because of a limited number of products in its basket, and their profit margins are thin too, they said.

Company officials said the organisation was trying to expand production by contract manufacturing.

Depreciation cost of plants, machinery and building played a big role behind the company's negative earnings in FY23. Around 85 per cent of the fiscal loss of ACI Health Care was caused by finance cost and depreciation cost.

ACI Logistics, which runs retail brand Shwapno, is also weighed down by interest burden against huge bank loans. Shwapno reportedly counted losses ranging between Tk 1.35 billion and Tk 1.60 billion from FY18 through FY22.

Meanwhile, the parent company experienced a year-on-year decline in profit, driven by high currency exchange rates.

A significant rise in energy expenses and borrowing cost also fueled the downward pressure on profit.

The consolidated loss reported by ACI Ltd. stands at Tk 6.48 per share for FY23 against consolidated earnings per share (EPS) of Tk 4.98 a year back.

ACI Ltd. has 13 more subsidiaries including ACI Formulations and ACI Salts.

ACI Formulations is also listed on the stock exchanges. Moreover, ACI has five joint ventures and one associate company.

ACI Ltd experienced a year-on-year decline in consolidated profit in Q1 and Q3, but the second quarter secured an increase in consolidated profit. Since the first three quarters had seen positive income, the company must have suffered a huge loss in the final quarter.

ACI's consolidated profit declined 38 per cent to Tk 185.98 million in the first quarter through September last year and 41 per cent to Tk 79.88 million in the third quarter through March this year.

But profit rose 18.41 per cent to Tk 365.31 million in the second quarter ended in December, compared to the same period a year ago.

The company reported a negative net operating cash flow per share (NOCFPS) of Tk 24.50 for FY23, which was Tk 4.04 for the previous fiscal year.

The NAV per share came down to Tk 113.67 for FY23 from Tk 135.22 reported for the previous fiscal year.

Meanwhile, the share price of ACI Ltd. has remained unmoved at the floor price of Tk 260.20 on the Dhaka Stock Exchange (DSE) since November 20 last year.

[email protected]