Business Strategy

Term Paper on
Critical Strategy Analysis Of

Advanced Chemical Industries (ACI) Limited
Submitted to Dr. M. MasudRahman
Professor & Chairman
Department of Finance
University of Dhaka
Submitted by
Group -08
Date of Submission: 11th April 2015

CRITICAL STRATEGY ANALYSIS OF
ADVANCED CHEMICAL INDUSTRIES (ACI) LIMITED
Submitted to:
Dr. M. Masud Rahman
University of Dhaka
Submitted by:
ID Name Roll Remarks

1 Md. Ashruf Ullah 26-089
2 Md. Amir Kashem Khan 27-039
3 Md. Parvez Sharif 27-025
Date of submission: April 11, 2015

LETTER OF TRANSMITTAL
April 2, 2015
Dr. M. Masud Rahman
University of Dhaka
Subject: Submission of Term Paper

Dear Sir,
With due respect and unassuming submission we beg to draw your kind attention of the fact that
we are submitting our assigned term paper. We were assigned to prepare a critical analysis on
Critical Strategy Analysis of ACI Limited.
We tried our very best to prepare the paper to meet our assigned objectives. It is really a great
pleasure for us that report has been prepared under your competent supervision and we
respectfully acknowledge your guidance. We hope that it would demand for your heartiest
acceptance.
Sincerely Yours,
..
Md. Amir Kashem Khan
On behalf of Group-08
EXECUTIVE SUMMARY
Advanced Chemical Industry Limited (ACI) is a renowned chemical and pharmaceutical

company in Bangladesh It has been operating in the market from many years ago with name and
fame. It has been operating in the market with few categories of products like pharmaceutical,
agricultural, consumer brands and commodity products. It has also great reputation in the stock
exchange. The stock price of the company is decreasing for last few years. To find the reasons,
we have analyzed all the possible current and future economic condition of ACI limited by
making industry and company analysis with the help of various ratios, forecasted cash flows,
profit & loss, balance sheet, beta, strengths, weaknesses, opportunities & threats, risk analysis
both financial and business.
In the first chapter we discussed the origin of our report. We also explained the objective of our
study and the importance of our report. We have also explained the methodology regarding this
report. Both primary and secondary data and information have been used in preparing this report.
Like all study, this report has also certain limitations which were in some cases unavoidable.
In the second chapter we tried to highlight the organization and tried to mention the vision,
mission, strategies and future outlook of the company (ACI) along with a description of its
operation in a nutshell.
In the third chapter we highlighted the performance analysis of Advanced Chemical Industries
(ACI) Limited for five years (2005-2013). Here we have calculated internal liquidity ratios,
operating performance ratios, operating profitability ratios etc. Some other ratios have also been
calculated for measuring business risk as well as financial risk of the company. All the ratios are
interpreted with logical arguments for every year respectively. This give a clear view of position
of every year of the ACI limited. Graphical presentation of yearly performance has been shown
in this chapter. A trend of performance is found here. Forecasting for the next few years has been
shown here.
In chapter four, we have included an industry analysis of ACI limited. Here opportunities,
threats, strength and weakness of the company have been explained shortly with logical
assumptions and historical data. For better comparison BEXIMCO PHARMACUTICALS has
been taken as a best competitor of ACI limited and Statistical comparison has been presented
with graphs, charts. Curves etc.
Finally in the last chapter we have mentioned some findings that we have observed during our
course of internship in ACI limited. Based on these findings we have tried to make some
suggestions for the company which we think will make this company more competitive with
other competitors in the industry.
Table of Contents
TABLE OF CONTENTS
0.0 Statement of the problem
Chapter 1
Introduction
Contents
1.0 Introduction
1.1 Objective of the study
1.2 Methodology
1.3 Rationale of the study
1.4 Scopes & Limitations
Chapter 2
Literature Review
Contents
2.1 Financial performance analysis
2.2 Importance
2.3 Measurement
2.4 Methods
Chapter 3
Profile of the Organization
Contents
3.1 Historical Background
3.2 Corporate mission
3.3 Vision of the Company
3.4 Values of the Company
3.5 Organizational Hierarchy
3.6 Major Businesses
3.7 Subsidiaries of the company
3.8 International Alliances
Chapter 4
Industry Information
Pharmaceutical Industry in Bangladesh

Chapter 5
Analysis
5.1 Industry Analysis of ACI Limited

5.2 SWOT Analysis
5.3 Financial Analysis
5.3.1 Ratio analysis
For year 2005
For year 2006
For year 2007
For year 2008
For year 2009
For year 2010
5.3.2 Five Years Trend Analysis
5.3.3 Comparison with Beximco (2006-2010)
5.3.4 Off Balance Sheet Financing
5.3.5 Sustainable Growth Rate
5.3.6 Z-Score
Chapter 6
Findings, Recommendation and conclusion, Appendix and References
1.0Statement of the problem

The stock price of ACI Limited has been decreasing over last few years (2009-2013) as follows:
Particulars/Year 2009 2010 2011 2012 2013
Yearly closing price 446.90 372.50 205.60 141.20 171.50
Hence we need to identify the reason behind this decline. We considered 2013 as benchmark year
as data available till 2013.
1.0 Introduction
Pharmaceutical and chemical industry has grown in Bangladesh in the last two decades at a
considerable rate. Its healthy growth supports development of auxiliary industries for producing
glass bottles, plastic containers, aluminum collapsible tubes, aluminum PP caps, infusion sets,
disposable syringes, and corrugated cartons. Some of these products are also being exported.
Printing and packaging industries and even the advertising agencies consider pharmaceutical
industry as their major clients and a key driving force for their growth.Advanced Chemical
Industries (ACI) Limited is one of the leading conglomerates in Bangladesh, with a multinational
heritage. The 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. Its mission is to achieve business excellence through quality by
understanding, accepting, meeting and exceeding customer expectations. It follows International
Standards on Quality Management System to ensure consistent quality of products and services
to achieve customer satisfaction. It has a good reputation in the share market from the investors
point of view. We have conducted an analysis on this company to know their performance trend
for five years with different tools and have tried to display the result graphically. Based on the
result some recommendations has been provided to the company for their better performance.
1.1 Objectives of the study:

Every action has an objective. It depends differently on the nature of task. We started to work in
this report in several objectives in mind. The main objective to work with this topic is to gather
knowledge about performance of the company based on historical data and taking relevant
decision on it. The major objective of this study is to strategic analysis of financial performance
of firm. However, the specific objectives of the study may be described as follows:
To find out reasons behind stock price decline

To find accounting loophole in financial statements
To apply the techniques on financial statements of ACI Limited in the context of financial
analysis and control.
To know the current industry trend (pharmaceuticals) & Strategy of of ACI limited.
To compare company performance Of ACI limited with BEXIMCO Pharmaceuticals
within the same industry.
To identify the problems of the company relating to policies and functions.
To give a recommendation to the company authority for further reforming of the policies.
1.2 Methodology:
The study is performed based on the information extracted from different sources. So the paper is
fully based on secondary data. we took help from the annual report and website of ACI for
further information. To know about the industry we have collected some industry information
also. In the report, we have exercised several methodologies to execute the assigned task. The
following methodologies have been used.
1.2.1 Research Types

It is both descriptive & calculative research by nature.
1.2.2 Source of Data
Data collection is very important is preparing a report. In order to make the report more and
meaningful we have used two types of sources. These are -
Annual Reports of ACI.( 2009-2013)

Various Web sites related Pharmaceutical Industries in Bangladesh
1.2.3 Calculative Measurement
Industry Analysis (Porters 5-forces model)
Company Analysis (SWOT Analysis)
Ratio analysis
1.3Rationale of the study:

Financial performance Analysis is the method of accessing any financial institution by measuring
its profitability, viability, stability, growth etc. In order to get a trend of financial performance of
ACI limited both descriptive and analytical procedures has been used and the ultimate result can
be a favorable standard of realizing the trend as well as the actual position of the company in the
industry it belongs.
1.4 Scopes and Limitations:
We have been assigned to conduct a performance analysis and projection of Advanced Chemical
Industries (ACI) Limited. And this opportunity has given us the way to be familiarized with the
financial analysis and control environment for the first time indeed. This gives us an opportunity
to gather practical experience by working in the practical arena with our limited theoretical
knowledge and expertise.
In preparing the report, we have faced some limitations which create the impediment in the way
of report analysis. Some of these limitations have been overcome and some of them create some
predicament. We have tried our best to prepare a quality report even in that situation. These
limitations are-
Time has beaten us with its cruel hand.

Some numerical mistakes may prevail as to err in man.
2.1 Financial Analysis:
Financial analysis refers to an assessment of the viability, stability and profitability of a business,
It is performed by professionals who prepare reports using ratios that make use of information
taken from financial statements and other reports. These reports are usually presented to top
management as one of their bases in making business decision. (Elizabeth Ourers)
A historical financial performance engagement is an analysis of a companys past and current

financial performance and compares such performance to similar sized companies within its
industry providing insight into a companys historical growth, profitability, debt capacity and
overall liquidity. All such factors can be important indicators of a companys ultimate value. We
analyze the past five-year history of financial statements as well as financial information relative
to an industry. We calculate financial ratios (liquidity, coverage, leverage and operating) for the
company, prepare common size financial statements, and analyze the information on a trended
and composite basis. ( Stanley Block and Geoffery Hirt-2008)
2.2 Importance:
Identify financial strengths and weaknesses and evaluate financial performance in

relation to the industry performance as a whole, and acquire useful information
concerning competitors.
Historical financial ratio analysis can be used as an effective preliminary step in

preparing a budget or in making a forecast.
Evaluate past performance and set objectives for future performance. Also provides an
ongoing means to evaluate a companys performance financially.
Determine the financial strengths and weaknesses of the company.
A greater awareness of financial statements and their interrelationship can lead to

improved profitability or cash flow.
(Marquis Codjia-January 18,2011)
2.3 Measurement:
Past Performance - Across historical time periods for the same firm (the last 5 years for
example),
Future Performance - Using historical figures and certain mathematical and statistical
techniques, including present and future values, this extrapolation method is the main
source of errors in financial analysis as past statistics can be poor predictors of future
prospects.
Comparative Performance - Comparison between similar firms.
2.4: Methods:
1. Fundamental analysis maintains that markets may misprice a security in the short run
but that the "correct" price will eventually be reached. Profits can be made by trading the
mispriced security and then waiting for the market to recognize its "mistake" and reprise
the security. Fundamental Analysis includes Economic Analysis and Industry Analysis.
2. Technical analysis maintains that all information is reflected already in the stock price.
Investors' emotional responses to price movements lead to recognizable price chart
patterns. Technical analysis does not care what the value of a stock is. Their price
predictions are only extrapolations from historical price patterns.
3.1 Historical Background
ACI Limited was established as the subsidiary of Imperial Chemical Industries (ICI) in the then
East Pakistan in 1968. After independence, the company was incorporated in Bangladesh in 1973
as ICI Bangladesh Manufacturers limited as a Public Limited Company. In 1992, the company
was divested to local management and the name of the company changed to Advanced Chemical
Industries (ACI) Limited. ACI inherited the rich ICI culture of product quality, customer service
and social responsibility.
Initially in 1992, ACI started primarily with pharmaceutical business with a turnover of BDT 80
million only but later the new management brought about fundamental changes in the policies
and in the year 2008 turnover grew to over BDT 7,365 million. The Company has diversified
business interest in pharmaceuticals, agricultural including fishery & livestock and consumer
brands. At present, ACI has three Strategic business units along with 11 Subsidiaries, 3 Joint
ventures and 1 Associate.
ACI is a fast growing company that has substantial contribution in the econoour of Bangladesh.
In response to growing demands of the consumers of Bangladesh, ACI has diversified its
business to include wide range of products in its portfolio. ACI has started its expansion policy
by exploring and strengthening the pharmaceuticals wing further so that it can continue giving
reliable service to the consumers of Bangladesh.
ACI is the first company in Bangladesh to achieve ISO S001 in 1995 for quality management
and also the first company to achieve ISO 14000 in 2000 for environmental management system.
ACI is also the first company from Bangladesh to become the honorable member of United
Nation Global Compact. It is the only Bangladeshi company which was declared as a notable
COP (Communication on Progress) recognized by UNGC (United Nation Global Compact). ACI
has been accepted as a founding member of community of Global Growth Companies by the
World Economic Forum which is the most prestigious business networking organization in the
world.
3.2 Corporate Mission
A mission is a blueprint for success. A companys mission statement describes its present
business scope (where we are and what we do).ACIs 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
3.3 Vision of the Company
A vision maps out a companys future business scope (where we are going).To realize the
mission of ACI will:
Endeavor 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 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.
3.4 Values of the Company
Quality: ACI always strive to provide the best possible quality for their products and
services in order to meet and exceed customers expectation.
Customer Focus: ACIs main focus is always their customers. They are always to
provide the finest products and services to their customers in order to attract and retain
customers.
Fairness: ACI always attempts to maintain fairness in what they do and produce. This
helped them to gain customers faith and confidence and also to operate successfully in
the market with their competitors.
Transparency: ACI maintains transparencyby providingthe desired goods and services

to their customers and sharing their goals with their employees.
Continuous Improvement: ACI always attempts to make improvements in their

products and services in order to meet customers demands and cope with the current
trend. In this way, they are able to compete successfully in the market in comparison to
others providing the similar kind of products and services.
Innovation: ACI strongly believes in innovation. As a result, they go for frequent

research and development in order to improve and upgrade their product on a frequent
basis.
3.5 Organizational Hierarchy
Chairman
Managing Director
Chief Operating Officer, Pharma
Executive Director, Consumer

Brands
Executive Director, Agribusinesses
Director, Corporate Affairs

Chief Operating Officer, ACI Logistics
Director, Business
Head of Creative Communication
Department
Head of RMIA
Executive Director, Finance &
Planning
Manager, MIS
Secretarial Affairs
3.6 Major Businesses (Corporate Level Strategy)
ACI Limited is committed to providing customers with a broad range of quality products from its
business operations. It has diversified its business in various sectors such as the health care
division, consumers brands division, and agribusiness division. Besides its 3 major strategic
business units, it has 11 subsidiaries, 3 joint ventures and 1 associate
Pharmaceuticals:
ACI formulates and markets a comprehensive range of more than 400 products covering all
major therapeutic areas, which come in tablet, capsule, powder, liquid, cream, ointment, gel,
ophthalmic and injection forms. ACI also markets world-renowned branded pharmaceutical
products imported from world-class multinational companies like ASTRAZENECA, UK and
UCB, BELGIUM. ACI is actively engaged in introducing newer molecules and Novel Drug
Delivery Systems (NDDS) to meet the needs of present and future. ACI introduced the concept
of quality management system by being the first company in Bangladesh to achieve ISO 9001
certification in 1995 and follows the policy of continuous improvement in all its operations. ACI
maintains a congenial and supportive relationship with the healthcare community of Bangladesh,
with the belief that business excellence can only be achieved through pursuit of quality by
understanding, accepting, meeting and exceeding customer expectations.
Consumer Brands
This business segment has three major categories of product range- home care, air care and
hygiene care. Products under home care category include ACI Aerosol (having market share of
85%) and ACI Mosquito Coil. ACI has also very attractive product range in this Air Care
category. ACI has another very strong range of products in its Hygiene Product category. Savlon
Liquid Antiseptic (75% market share) is the highest selling antiseptics in the country. Products
like Savlon Antiseptic cream, Savlon Family Protection Soap and Savlon Femme Sanitary
Napkin, Vanish Toilet Cleaner are also under this category. ACI Consumer brands also deals with
products of internationally acclaimed company like Colgate Palmolive and Nivea.
Logistics (super shop chain store)
In sequence of this diversification of business, on December 2007, Mr. Asif Iqbal, joined ACI as
the COO of ACI Logistics Limited. ACI Logistics Limited is basically a new venture of ACI,
intending to try out new business ideas. Eventually it has grown and various new business ideas
have evolved. Currently, they are considering the prospects of several ideas, which include that
of a nationwide retail chain outlet, privately owned power generation plant, hospital chain, etc.
This department, with more than 800 employees, has developed into a strong unit.
Agribusiness
ACI Agribusiness is the largest integrator in agricultural sector of Bangladesh. ACI Agribusiness
deals with livestock and fisheries, crop protections, seeds, fertilizer and agri-machineries. Under
Agribusiness, the following business units are currently operating -
Crop Care & Public Health
Crop care & Public health is dealing with all type of crop protection items. It is providing a
complete range of cost effective products which can provide appropriate solutions for the farmers
through insecticides, herbicides, and fungicides. This business has been transferred to ACI
Formulations Limited form 1st January of this year.
Seeds
Seeds division is dealing with hybrid rice, vegetable and maize seeds. It has partnership with
renowned HYV seed companies of the world. ACI started the seed business in 2006. It has its
own research and development stations in Gazipur and Bangladesh Agricultural University,
Ourmensingh.
CROPEX
CROPEX is dealing with commodity buying, storing, preserving and selling. ACI Cropex is a
remarkable addition to the agricultural advancement in the country. The project assists the
farmers in various ways - exchanging their crops at the time of their necessity, providing them
with technological assistance and advisory services and so on.
Animal Health
This division is dealing with high quality nutritional, veterinary, poultry medicine and vaccines
including proposal for pisiculture, cattle rearing and cattle fattening. Integrated fisheries and
livestock project will be implemented soon.
Fertilizer
This unit is dealing mainly with micro continent and foliar fertilizer with a focus in basic
fertilizer. It launched micronutrient fertilizers like Zinc Sulphate, Magnesium Sulphate,
Ammonium Sulphate, Boron, Sulphur 90% and Sulphate of Potash. They are being imported
from China, U.S.A, Canada, Taiwan, Argentina, and Turkey etc. ACI Agribusiness strives for
providing one stop solution to farmers by providing all sorts of activities regarding agriculture.
3.7 Subsidiaries of the company:
Tetley ACI (Bangladesh) Limited

ACI Ltd also has Joint Venture business with Tetley Tea of UK in the name of Tetley ACI
(Bangladesh) Limited. Tetley produces one of the finest qualities Tea in various pack sizes, both
in laminated pack and tea bags. Tetley tea has become a household name and demand of the
product is very high.
Apex Leather Crafts Limited
Apex Leather Craft Limited is a private limited company incorporated in 2007 with the registrar
of Joint Stock Companies, Dhaka Bangladesh Under companies Act 1994 having 100 %shares
by ACI limited.
ACI Salt ltd.
ACI Salt was launched in 2005. Within the very short period it has been enjoying the pride of the
Brand Leader. The best in its kind, ACI Salt is vacuum evaporated, free flowing and properly
iodized. It is also very porous and free flowing. Iodine is coated in every single grain which
makes it an essential product for the children; the absence of right quantity of iodine in their food
may cause mental disability to them. ACI Salt has won the "BEST BRAND OF BANGLADESH
AWARD 2008" for unparallel customer loyalty beating all the brands in Foods & Beverages
category.
ACI Pure Flour Ltd
ACI Pure Flour Ltd is the largest flour producing company in Bangladesh delivering cleanest,
healthiest and most hygienic flour by adopting state of the art technology. Coupled with double
digit growth and continuously producing pure product make 'Pure' brand a huge success & make
it a household product overnight. In a very short time 'Pure' is able to become consumers'
morning bell and snatched prestigious second position overtaking all other players in the market.
'Pure' flour is able to communicate to its consumers that ACI Pure is synonymous to Purity. Our
plant stands by the bank of Sitalaksha River with most advanced European technology coupling
with a well-equipped laboratory keeping in mind to provide the best quality flour to the
consumers.
Premiaflex Plastics Limited
Premiaflex Plastics Limited is a private Limited company incorporated in 2007 with the register
of Joint Stock Companies, Dhaka, Bangladesh under Companies Act 1994 having 80% shares by
ACI Limited. The principle activities of the company are manufacturing and marketing of plastic
products, flexible printing and other ancillary business associated with plastic and flexible
printing. The factory of the Company is located at Sreepur, Gazipur.
ACI Agribusinesses has launched a new subsidiary business, ACI Motors, from 6th November
2007 with an objective to market high quality farm machineries and light commercial vehicles.
ACI Agribusinesses now ensures complete solution to the farmers with the introduction of the
agri machineries.
ACI Logistics Limited
ACI Logistics Limited is a subsidiary of ACI Limited. The objective of this subsidiary is to
engage in the business of buying, selling, import and export of agro produces, FMCG products
and other commodities directly to consumers.
Asian Consumer Care (Pvt.) Ltd.
ACI Ltd has Joint Venture with one of the leading companies of India, Dabur India as Asian
Consumer Care Ltd. Dabur has a long range of food items which is distributed through the
channels of ACI Consumer Brands. These products are very popular in Bangladesh Market. The
food items are Dabur Honey, Dabur Chawanprush etc.
ACI Consumer Electronics
World renowned electronics company Panasonic and ACI Limited has joined together to bring
the Panasonic Audio Visual products to Bangladeshi consumers. The association was formally
announced on the 16th of April through the launching ceremony in Bangladesh China Friendship
Conference Center. Under this arrangement with Panasonic regional office
ACI Godrej Agrovet Private Limited
ACI Godrej Agrovet Private Limited is a joint venture company formed by a 50:50 stake of ACI
Limited, Bangladesh and Godrej Agrovet Limited, India. The company started its business in
Bangladesh at the end of the year 2004 with Poultry Feed. It started Hatchery and Breeding Farm
Operations in February 2007. The Company launched and started selling Fish Feed at the same
time.
3.9 International alliances
ACI represents Colgate Palmolive Company as exclusive marketing partner and distributor for
the territory of Bangladesh. Colgate is the worldwide leader of the oral care products category.
ACI was appointed as sole distributor and marketing partner of Beiersdorf AG, Germany; the
manufacturer of Nivea brand products. ACI represent Godrej Consumer Products Limited. ACI
consumer Brand is also selling low calorie sweetener products of Merisant for weight conscious
customers and also for them who want to avoid direct sugar. In additions to these, ACI represents
significant number of worlds reputed companies in Pharma and Agriculture sectors.
4.0 Pharmaceuticals industry in Bangladesh
The pharmaceutical industry develops, produces, and markets drugs licensed for use as
medications. Pharmaceutical companies can deal in generic and/or brand medications. They are
subject to a variety of laws and regulations regarding the patenting, testing and marketing of
drugs. The modern pharmaceutical industry is a highly competitive non-assembled global
industry.. The introduction and success of penicillin in the early forties and the relative success of
other innovative drugs, institutionalized research and development (R&D) efforts in the industry
Pharmaceutical and chemical Industry has grown in Bangladesh in the last two decades at a
significant rate. The national companies account for more than 65% of the pharmaceutical and
chemical business in Bangladesh (www.pharmabiz.com). Following the Drug (Control)
Ordinance of 1982, some of the local pharmaceutical companies improved range and quality of
their products considerably. Square, Beximco, Acme, Incepta, Opsonin, ACI, General Pharma,
Ibn Sina are quite strong and enjoying good market share. Square currently is the number one
company in the industry and enjoys over 12% market share. (www.pharmabiz.com). However,
among the top 20 companies of Bangladesh six are multinationals including GlaxoSmithKline,
Sanofi-aventis, Reckitt Benckiser and Novartis. Almost all the life saving imported products and
new innovative molecules are channeled-into and marketed in Bangladesh through these
multinational companies.
In Bangladesh, the production cost of drugs is much lower than that of large MNCs operating in
developed countries. This will give the local products a price advantage in developed markets as
well. On the other hand the multinationals are taking the advantages of insufficient
infrastructures, technological, financial and administrative base over domestic corporations of
pharmaceutical and chemical industry. Bangladeshs rapid expansion in pharmaceuticals and
chemicals was accompanied by huge investments mainly locally (Firdousi, 2005). Limited
foreign investments flowed in through the setup of various multinational Financial Performance
& Characteristics of Pharmaceutical & Chemical Industry in Bangladesh: MNC vs. DMC 2
pharmaceutical and chemical companies (MNCs) that have established a domineering presence
in the local market today. This is a favorable trend for Bangladesh since the multinationals have
not capitalized on the local market but have just enough influence to transfer their technology
and hire national employees creating jobs. The establishment of the multinationals is prospective
for Bangladesh. It gives the local companies the opportunity to create partnerships and mergers
with the MNCs. Since the local companies can produce drugs at a cheaper rate due to low
production costs, the MNCs can outsource their export drug production to the local companies.
This is an option that Bangladesh should consider in order to maximize its growth potential.
Therefore, the multinational and domestic or national pharmaceuticals and chemical companies
performances are playing different role for the econoour of Bangladesh. As a result, it is
important how multinational corporations (MNCs) and domestic or national corporations
(DMCs) are performing and differs from each other.
5.1 Industry analysis of ACI Limited
(Porter's Five Forces model):
Porter's Five Forces model is a framework provided by Michael Porter that models an industry as
being influenced by five forces. The strategic business manager seeking to develop an edge over
rival firms can use this model to better understand the industry context in which the firm
operates.
T h re a t B a r g a in in
of g pow er
s u b s t it of
B a r g a i nu it e S u p p l i eRr i v a l r y
ng am ong
pow er of e x is t n g
B u ye r T h re a t F ir m
of new
e n ta n c
e
Rivalry among existing firm: Rivalry among existing firm in chemical industries is very high
because competitors are highly reactive, Product is undifferentiated and the important factor is
in Bangladesh the chemical industry is growing.
Threat of new firm: For Chemical industries threats of new entrance is low because Product
is undifferentiated, capital requirement is high & research and development cost is high.
Threat of Substitutes: Threat of substitute is very low as substitute product is unavailable and
profitability of substitute products is very low.
Bargaining power of Buyers: Buyer power is low. Because buyers knowledge about the
product is low, they are not concentrated and they are not price sensitive.
Bargaining power of Suppliers: Supplier power is high because substitutes products are
unavailable, suppliers are concentrated and the criticality of product to buyer business is
moderate to high.
5.2 Company analysis (SWOT Analysis) of ACI Limited
SWOT analysis is a strategic planning method used to evaluate the strengths, weaknesses,
opportunities, and threats involved in a project or in a business venture. It involves specifying the
objective of the business venture or project and identifying the internal and external factors that
are favorable and unfavorable to achieve that objective.
Strengths: characteristics of the business or team that give it an advantage over

others in the industry.
Weaknesses: are characteristics that place the firm at a disadvantage relative to

others.
Opportunities: external chances to make greater sales or profits in the

environment.
Threats: external elements in the environment that could cause trouble for the
business.
The internal factors may be viewed as strengths or weaknesses depending upon their impact on
the organization's objectives. What may represent strengths with respect to one objective may be
weaknesses for another objective. The factors may include all of the 4P's; as well as personnel,
finance, manufacturing capabilities, and so on. The external factors may include macroeconomic
matters, technological change, legislation, and socio-cultural changes, as well as changes in the
marketplace or competitive position. The results are often presented in the form of a matrix.
Strengths
ACI has been able maintain its growth above the market growth
Market category of ACI is A.
ACI is the first company in Bangladesh to obtain certification of Quality Management
System in 1995.
High profitability
It uses modern technology to manufacture chemicals
Weaknesses
ROE is decreased in 2004 than the previous year

Lack of competitive strength
Opportunities
High potentiality in export sector

Bargaining power of suppliers and buyers is low
Technology development and innovation
Threats
The industry is highly competitive

Export may be reduced if world economy is affected
High rivalry among competitors
Environmental effects
Competitor intentions - reactive

Competitors Market demand - high
New technologies, services, ideas are also used by competitors
The most growing competitors are Beximco Pharmaceutical, Square Pharmaceutical,
General Pharmaceutical, and GSK Pharmaceutical
5.3 Financial analysis:
Explanation of assumptions in projected statements:

In preparing the projected income statement and balance sheet of ACI limited for the year 2011-
2014 We have to use some assumptions like sales growth, administration and sales, allowance for
bad debt, depreciation etc. there are some basic reasons regarding the percentage of the
assumptions and they are described below-
Assumption 1: Sales Growth Rate-21%
The sales growth rate of Advanced Chemical Industries is 21%. I got this information from
Management Discussion and Analysis in annual report 2008. Besides we found out the average
growth rate of sales is nearly 21%. So We have used sales growth rate as 21%.
Assumption 2: Admin & selling as % of sales-24%
Admin & selling expense is 24% of sales revenue. Here we have first calculated the percentage
of Admin & selling expense in respect of sales revenue for the year 2005-2009 and then taken
the average value. The average Admin & selling expense was 24.73% of its sales and We have
used 24% for better calculation.
Assumption 3: Allowance for bad debt-1.5%
We have calculated Allowance for bad debt in respect of trade receivables for the year 2005-
2009. Then We have done the average of the percentage which was nearly 1.5%. So We have
used Allowance for bad debt as 1.5% on trade receivables.
Assumption 4: Depreciation charged and grown @-10%
ACI limited uses 10% depreciation on its property, plant and equipment. The information is
taken from the Annual report of ACI Limited.
Assumption 5: Tax rate-28%
The company has a tax burden of 27.5% on Earning before Tax (EBT) income. The information
is derived from the financial statements of ACI Limited. For our better calculation and to use a
round figure We have used 28% tax burden for the company where the current tax is 25% and
deferred tax is 3%.
Assumption 6: Production cost and expenses as % of sales-67%
At first We have calculated the percentage of Production cost and expenses in respect of sales
from 2005 to 2009. Then We have taken the average value which is 67% of its respective sales.
Assumption 7: Average (Short +long term) Bank Interest Rate-16%
In the financial statements of ACI Limited, there was no separate interest rate or interest expense.
So We have divided the interest expense by (short +long term) bank loan. Then We have got an
interest rate for every year. After that We have made an average of the interest rates which is
slightly more than 16%. So We have taken bank interest rate as 16%
Income statement:
Net Income
2014 1413997674
2013 1299093301
2012 1185367775
2011 1075926441
2010 972662072
2009 986642683
2008 1075666883
2007 307769386
2006 153825615
2005 112270813
0
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
00
20
60
80
40
12
14
10
16
Figure: 1, Source: Annual report of ACI
From the above graph it can said that the net income is increasing over the years. Six years net
income is taken from company annual report and last four years net income is projected. The
projection is done based on the average sales growth that is 21%, cost of sales 67% of sales and
administrative and selling expense 24% of sales. One thing is that the Companies other income
from the sale of share is very high. This is the main reason for high net income of the company.
Although in the year of 2009 and 2010 there was a significant fall in net income of the company
from the next years it is expected to rise.
Balance sheet:
Total Asset
2014 27562611922
2013 12134058257
2012 16365940054
2011 12621233743
2010 9740690428
2009 7524887877
2008 6915104121
2007 4730813195
2006 2915188818
2005 2674494145
0 5000000000 10000000000 15000000000 20000000000 25000000000 30000000000
The total asset of the company in 2010 is 119105590928 Tk. which is actual and in 2014 it will
be Tk. 27562611922 which is our projection. From the analysis I found that the average growth
rate of asset of the company is 30% which is very high. So we have used the industry growth rate
by the instruction of supervisor and that is 13%. The companys number of shares outstanding
has increased from the year 2009 and we have used this figure for our calculation.
5.3.1 Ratio Analysis:

Purpose of ratio analysis of ACI:
1. Evaluating management performance in three areas-
Profitability
Efficiency
Risk
2. Ratios are more informative than raw numbers
3. Ratios provide meaningful relationships between individual values in financial statements
4. Financial ratios examine a firms performance relative to:

The aggregate econoour
Its industry or industries
Its major competitors within the industry
Its past performance(Time series Analysis)
Comparing to the aggregate contour:
Most firms are influenced by economic expansions and contractions in the business cycle
Analysis helps you estimate the future performance of the firm during subsequent
business cycle.
Comparing to a firms industry:
Most popular comparison.

Industries affect the firms within them differently but the relationship is always
significant.
The industry effect is stronger for industries with homogenous products.
Examine the industrys performance relative to aggregate economic activity.
Comparing to a firms major competitors:
Industry average may not be representative

Select a subset of competitors to compare using cross-sectional analysis, or
Construct a composite industry average from industries the firm operates in.
Comparing to a firms historical performance:
Determine whether it is progressing or declining

Helpful for estimating future performance
Consider trends as well as average over time.
Five categories of Financial Ratios:
Internal Liquidity(solvency)
Operating performance-
o Operating efficiency
o Operating profitability
Risk analysis-
o Business risk
o Financial risk
Growth analysis
External liquidity(Marketability)
Year-2005
Evaluating Internal Liquidity:
Current Ratio = Current Asset/Current Liabilities =1.0 times
Quick Ratio: =Cash+ Marketable Securities+ Receivables/ Current Liabilities = 0.4 times
Cash Ratio= Cash+ Marketable Securities/ Current Liabilities= 0.04 times
Receivable Turnover Ratio=Net Annual Sales/Average Receivables = 9.45
Inventory Turnover Ratio= Cost of goods sold/Average Inventory = 2.1 times
Liquidity ratios attempt to measure a companys ability to pay off its short-term debt obligations.
This is done by comparing a companys most liquid assets that can be easily converted into cash,
its short-term liabilities.
In general, the greater the coverage of liquid asset to short-term liabilities the better as it is a
clear signal that a company can pay its debt that are coming due in the near future and still fund
its ongoing operations. On the other hand, a company with a low coverage rate should raise a red
flag for investors as it may be a sign that the company will have difficulty meeting running its
operations, as well as meeting its obligations.
In December31,2005, with amounts expressed in millions, ACI limited had a current ratio of 1.0
times that means it has an ample margin of current assets over current liabilities.
The quick ratio or acid test ratio is a liquidity indicator that further refines the current ratio by
measuring the amount of the most liquid current assets there are to cover current liabilities. In
December31, 2005, the quick ratio of ACI was 0.4 times that was not so efficient sign.
The cash ratio is an indicator of a companys liquidity that further refines both the current ratio
and the quick ratio by measuring the amount of cash equivalents or invested funds there are in
current assets to cover current liabilities. In December31, 2005, the cash ratio of ACI limited was
0.04 that indicates a bad position of the company.
Inventory turnover ratio on December 31, 2005 was 2.1 times that is in a level of satisfactory
where receivables turnover ratio is 9.45 times that is in satisfactory level
Evaluating Operating Performance:
Operating Efficiency Analysis:
Total Asset Turnover = Net sales/Average Total Net Assets = 1.15
Fixed Asset Turnover = Net Sales/Average Net fixed Assets = 2.2 times
Operating Profitability Analysis:
Gross profit margin=Gross Profit/Net Sales=30.99%
Operating Profit margin= Operating Profit/Net Sales = 7.48%
Net Profit Margin=Net Income/Net Sales =3.63%
Return on Total Equity=Net Income/average Total Equity =10.8%
Return on Owners Equity
= Net Income - preferred Dividend/Average Common equity = 0.70%
The profitability ratios like operational ratios, give users a good understanding of how well the
company utilized its resources in generating profit and shareholder value. The long term
profitability of a company is vital for both the survivability of the company as well as the benefit
received by shareholders.
There are four levels of profit margins-gross profit, operating profit, pretax profit and net profit.
Profit margin analysis uses the percentage calculation to provide a comprehensive measure of a
companys profitability on a historical basis (1-5) years and in comparison to peer companies and
industry benchmarks.
In December 31, 2005 the gross profit margin was 30.99% that was in level of satisfactory.
Operating profit margin in the same day was 7.48% that is not so good. It indicates management
is not so efficient in controlling over operating expenses than its cost of sales outlay. On the same
day the net profit margin was3.63% that is a sign of inefficiency. As it behooves investors to take
a comprehensive look at a companys profit margins on a systematic basis the management
committee of ACI should focus seriously on it.
Return on total equity was 10.8% in year 2005 that was in satisfactory level but return on owners
equity was only 0.70% that was a matter of anxiety for the owner and it must be take under
consideration.
Risk Analysis:
Debt-Equity Ratio=Total Long Term Debt/Total Equity=1.95%
Debt-capital Ratio= Total Long Term Debt/Total long-term Capital=0.66%
Interest Coverage=EBIT/Debt Interest Charges (Interest expense) =3.13%
Debt-Equity ratio is a leverage ratio that compares a companys total liabilities to its total
shareholders equity. This is a measurement of how much suppliers, lenders, creditors and
obligors have committed to the company versus what the shareholders have committed. The
lower the percentage means that a company is using less leverage and has a stronger equity
position. On December 31, 2005 the percentage of debt to equity was 1.95% that is in
satisfactory level and risk is under minimum range. Here the percentage of debt- capital was only
0.66% and not in so risky position.
The interest coverage ratio is used to determine how easily a company can pay interest expenses
on outstanding debt. The lower the ratio the more the company is burdened by debt expenses.
When a companys interest coverage ratio is only 1.5 or low, its ability to meet interest expenses
may be questionable. On December 31, 2005 the interest coverage ratio of ACI limited was
3.13%. It states that the company is out of dander.
Year-2006
Current Ratio = Current Asset/Current Liabilities=1.0 times
Quick Ratio: =Cash+ Marketable Securities+ Receivables/ Current Liabilities= 0.4 times
Cash Ratio= Cash+ Marketable Securities/ Current Liabilities=0.02 times
Receivable Turnover Ratio=Net Annual Sales/Average Receivables= 8.57 times
Inventory Turnover Ratio= Cost of goods sold/Average Inventory= 2.2 times
In December 31, 2006, ACI limited had a current ratio of 1.0 time that means it has an ample
margin of current assets over current liabilities.
where receivables turnover ratio is 8.57 times that is in satisfactory level.
Total Asset Turnover = Net sales/Average Total Net Assets=1.21times
Gross profit margin=Gross Profit/Net Sales= 33.45%
Operating Profit margin= Operating Profit/Net Sales=8.29%
Net Profit Margin=Net Income/Net Sales = 4.38%
Return on Total Equity=Net Income/average Total Equity=14.7%
Return on Owners Equity= Net Income - preferred Dividend/Average Common equity=1.00%
equity was only 1.00%% that was a matter of anxiety for the owner and it must be take under
consideration.
Risk Analysis:
Debt-Equity Ratio=Total Long Term Debt/Total Equity = 1.95%
Debt-capital Ratio= Total Long Term Debt/Total long-term Capital = 0.66%
Interest Coverage=EBIT/Debt Interest Charges (Interest expense) = 4.01
Year-2007
Quick Ratio: =Cash+ Marketable Securities+ Receivables/ Current Liabilities=0.5 times
Cash Ratio = Cash+ Marketable Securities/ Current Liabilities=0.02 times

Receivable Turnover Ratio=Net Annual Sales/Average Receivables = 5.47 times
Inventory Turnover Ratio= Cost of goods sold/Average Inventory = 2.4times
In December 31,2007, with amounts expressed in millions, ACI limited had a current ratio of
0.90 times that means it has an ample margin of current assets over current liabilities. Liquidity
position is very bad.
December 31, 2007, the quick ratio of ACI was 0.5 times that was not so efficient sign.
Total Asset Turnover = Net sales/Average Total Net Assets =1.04 times
Gross profit margin=Gross Profit/Net Sales= 33.89%

Return on Total Equity=Net Income/average Total Equity=20.0%
Return on Owners Equity= Net Income - preferred Dividend/Average Common equity = 1.90%
consideration.
Risk Analysis:
Debt-Equity Ratio=Total Long Term Debt/Total Equity = 2.77%
Debt-capital Ratio= Total Long Term Debt/Total long-term Capital = 0.73%
Interest Coverage=EBIT/Debt Interest Charges (Interest expense) = 4.77

Year-2008
Current Ratio = Current Asset/Current Liabilities = 0.99 times
Cash Ratio= Cash+ Marketable Securities/ Current Liabilities = 0.05 times
Inventory Turnover Ratio= Cost of goods sold/Average Inventory=2.32 times
In December 31, 2008, ACI limited had a current ratio of 0.99 times that means it has scarcity of
an ample margin of current assets over current liabilities.
December31, 2008, the quick ratio of ACI was 0.47 times that was not so efficient sign rather in
risky position.
current assets to cover current liabilities. In December 31, 2007, the cash ratio of ACI limited
was 0.05 that indicates a bad position of the company.
Total Asset Turnover = Net sales/Average Total Net Assets=1.07 times
Fixed Asset Turnover = Net Sales/Average Net fixed Assets= 3.47 times
Gross profit margin=Gross Profit/Net Sales = 30.93%
Return on Total Equity=Net Income/average Total Equity = 34.76%
Return on Owners Equity= Net Income - preferred Dividend/Average Common equity =0.70%
Return on total equity was 34.76% in year 2008 that was in satisfactory level but return on
owners equity was only 0.70% that was a matter of anxiety for the owner and it must be take
under consideration.
Risk Analysis:
Debt-Equity Ratio=Total Long Term Debt/Total Equity =2.14%
Debt-capital Ratio= Total Long Term Debt/Total long-term Capital =0.68%
Interest Coverage=EBIT/Debt Interest Charges (Interest expense) = 5.89 times
Year-2009
Cash Ratio = Cash+ Marketable Securities/ Current Liabilities = 0.17times
Receivable Turnover Ratio=Net Annual Sales/Average Receivables= 6.22 times
Inventory Turnover Ratio= Cost of goods sold/Average Inventory= 3.14 times
1.07 times that means it has an ample margin of current assets over current liabilities.
Total Asset Turnover = Net sales/Average Total Net Assets=0.96 times
Fixed Asset Turnover = Net Sales/Average Net fixed Assets= 3.73 times
Operating Profit margin= Operating Profit/Net Sales= 8.99%
Net Profit Margin=Net Income/Net Sales= 13.65%
Return on Total Equity=Net Income/average Total Equity =18.95%
Return on Owners Equity= Net Income - preferred Dividend/Average Common equity= 5.10%
day the net profit margin was13.65% that is a sign of inefficiency. As it behooves investors to
take a comprehensive look at a companys profit margins on a systematic basis the management
Return on total equity was 18.95% in year 2009 that was in satisfactory level but return on
owners equity was only 5.10% that was a matter of anxiety for the owner and it must be take
under consideration.
Risk Analysis:
Debt-Equity Ratio=Total Long Term Debt/Total Equity=1.48%
Debt-capital Ratio= Total Long Term Debt/Total long-term Capital=0.60%
Interest Coverage= EBIT/Debt Interest Charges (Interest expense) =6.32 times
Year-2010
Current Ratio = Current Asset/Current Liabilities=1.42 times
Quick Ratio: =Cash+ Marketable Securities+ Receivables/ Current Liabilities = 1.00 times
Cash Ratio = Cash+ Marketable Securities/ Current Liabilities= 0.02 times
Inventory Turnover Ratio= Cost of goods sold/Average Inventory = 4.61 times
1.42 times that means it has an ample margin of current assets over current liabilities.
December31, 2010, the quick ratio of ACI was 1.00 times that is a sign of efficiency.
Total Asset Turnover = Net sales/Average Total Net Assets =0.82 times
Operating Profit margin= Operating Profit/Net Sales = 9 %

Net Profit Margin=Net Income/Net Sales= 11.12%
Return on Owners Equity= Net Income - preferred Dividend/Average Common equity=13 %
In December 31, 2010 the gross profit margin was 33% that was in level of satisfactory.
Operating profit margin in the same day was 9% that is better than the previous year. It indicates
management is not so efficient in controlling over operating expenses than its cost of sales
outlay. On the same day the net profit margin was11.12% that is a sign of inefficiency. As it
behooves investors to take a comprehensive look at a companys profit margins on a systematic
basis the management committee of ACI should focus seriously on it.
Return on total equity was 13% in year 2010 that was in satisfactory level but return on owners
consideration.
Risk Analysis:
Debt-Equity Ratio=Total Long Term Debt/Total Equity =1.95%
Debt-capital Ratio= Total Long Term Debt/Total long-term Capital =0.60%
Interest Coverage= EBIT/Debt Interest Charges (Interest expense)=4.47 times
On December 31, 2010 the percentage of debt to equity was 1.95% that is in satisfactory level
and risk is under minimum range. Here the percentage of debt- capital was only 0.60% and not in
so risky position.
5.3.2 Five Years Performance
Liquidity Trend
Liquidity Ratios
6.45
4.77 4.97
4.52
3.70
0.68 0.60 0.49 0.47 0.45
2009 2010 2011 2012 2013

Current Ratio Quick Ratio
All of the liquidity ratios of ACI Ltd. were in decreasing trend. So the current asset holdings to
meet current liabilities are increasing gradually. Thats why we think the current ratios will
increase from 4.97 to 5.00 in the coming year. In case of quick ratio there is clear fluctuation of
value from year 2009 to 2013 then it will be 0.45 or around it. The cash was in decreasing mode
up to year 2008 but starting to increase from 2009 ratio will be 0.17 or around the value. So it
can be said that there is megative trend of performance in liquidity of ACI limited.
Leverage Trend
Leverage Trend
3.96
3.36
2.77 2.83
2.38 1.89
1.90 1.88
1.25 1.48
0.73 0.65 0.74 0.77 0.80
2009 2010 2011 2012 2013

Debt to Equity Ratio Debt to Total asset Ratio
Times Interest Earned (TIE)
The debt ratio was in a steady level from the year 2009 up to 2013 and it is assumed that it will
be same in preceding years. There is a decreasing trend in interest coverage ratio in previous
years. It was 2.38 in 2009 and 1.48 in 2013. And from our assumption we think this ratio will
decrease in coming years according to our projection. In case of debt to equity ratio there was
ups and downs and position was not so good but according to our projection it will be decreased
and around 1.5. So the company may turn to bankrupt at any time
Profitability Trend
Profitability Ratios
29.14% 29.76%
28.56% 27.69%
25.79%
17.64%
11.74%
8.79% 9.79%
7.87% 8.71%
8.31%
4.67%
6.30% 6.39% 7.17% 6.20%
4.53% 4.44% 2.56%
2.86%
0.99% 1.16% 0.51%
0.97% 1.07% -1.28% 0.47%
2009 2010 2011 -1.55%
2012 2013
-6.78%
Basic Earning Power Gross Margin Net Profit Margin

Operating Income Ratio ROA ROE
Operating profit margin of ACI Ltd is in a growing rate and the rate is gradual. So the rate may
be stable at 7% in future. ROA was in decreasing rate 2009.. From the projection we have found
that it may decrease in coming year also. ROE may increase in future as it was in increasing
mode in last two years before projection.
5.3.3 Comparison between ACI ltd. and BEXIMCO Pharma (2006-2010)

It would be a best one if the ratios of ACI are compared with the industry average ratios but it is
our limitation to get the industry information and thats why We have taken BEXIMCO as a
competitor of ACI within the same industry of pharmaceuticals and have tried to make a good
comparison between the two.
Liquidity:
Current Ratio
2.98
2.82
3
2.5
1.8
2 Beximco
1.33 1.42
1.5 ACI
1 1.10.99 1.07
0.9
1
0.5
0
2006 2007 2008 2009 2010
Cash ratio
1.53
1.6
1.4 1.23
1.2 1
1 Beximco
0.68 ACI
0.8
0.5 0.47
0.6 0.4
0.4 0.23
0.2 0.05 0.03
0
2006 2007 2008 2009 2010

Quick ratio
2 1.83
1.8 1.59
1.6
1.4
1.2 Quick ratio Beximco
1 Quick ratio ACI
0.8
0.6 0.36
0.4 0.22 0.17
0.2 0.04
0.02 0.02 0.05 0.02
0
2006 2007 2008 2009 2010
Interpretation:
The current ratio and quick ratio of ACI Ltd is lower than the BEXIMCO pharma. It indicates the
lower liquidity compared with BEXIMCO pharma. But the cash and collection period of ACI is
greater than BEXIMCO which indicates more efficient cash collection ability.
Capital structure and solvency:
Debt-Equity Ratio
82.73%
90.00%
80.00%
70.00%
60.00% 47.35% Beximco
44.87% 41.81%
50.00% ACI
40.00% 30.09%
30.00%
20.00%
1.95% 2.77% 2.14% 1.48% 1.95%
10.00%
0.00%
2006 2007 2008 2009 2010

Interest coverage ratio
7.00% 6.32%
5.61%
6.00% 5.29%
4.77% 4.84%
4.47%
5.00% 4.01% 4.00% 4.15% Beximco
4.00% ACI
2.65%
3.00%
2.00%
1.00%
0.00%
2006 2007 2008 2009 2010
Interpretation:
The Debt-Equity ratio of ACI Ltd is greater than BEXIMCO. As the company has more interest
paying ability, it uses more debt capital in its capital structure. In case of Interest Coverage ratio
BEXIMCO is higher than ACI that means it is much more efficient than ACI in case of interest
coverage. From the findings we can easily state that the capital structure of ACI needs more
reform to compete within the industry strongly
Operating performance ratio:
Operating Profit Margin

24.90%
25.00%
20.16% 20.57% 20.96%
18.20%
20.00%
Beximco
15.00% ACI
8.29% 8.67% 8.80% 8.90% 9.00%
10.00%
5.00%
0.00%
2006 2007 2008 2009 2010

Net profit margin
14.60% 14.78%
16.00% 13.60% 13.65%
14.00% 12.71%
11.12%
12.00% 9.82%
10.00% Beximco
6.26% ACI
8.00%
6.00% 4.38%
4.00%
2.00%
0.00%
2006 2007 2008 12.83%
2009 2010
Interpretation:
Operating profit margin of ACI Ltd is lower than BEXIMCO for the five years but the net profit
margin and operating profit margin ACI is greater. The reason is that higher revenue from sale of
shares increases the net income of ACI Ltd. But efficiency of profit margin depends on operating
performance and the company must focus on it.
Asset utilization:
Fixed asset turnover

3.73
4 3.47
3.5 3 3
2.8
3
2.5 2 2.04 Beximco
ACI
2
1.5
1
0.01 0.1 0.15
0.5
0
2006 2007 2008 2009 2010

Total asset turnover
1.4 1.21
1.04 1.07
1.2
0.96
1 0.82
Beximco
0.8 ACI
0.6
0.4
0.08 0.07 0.07 0.06
0.2 0.01
0
2006 2007 2008 2009 2010
Interpretation:
All the ratios for asset utilization like Inventory turn over, accounts receivable turnover, fixed
and total asset turnover of ACI are better than BEXIMCO. For an example only two are
presented here. So that the management of ACI Ltd is more efficient than BEXIMCO in this
scene.
Market measure:
Price earning ratio

47.42 46.45
50
45 37.72
40
35
Beximco
30 23.7
21.04 ACI
25
20 13.06
15 8.87
6.78
10
5
0
2006 2007 2008 2009

Interpretation:
Price earnings and of ACI Ltd is lower than BEXIMCO. So the companys earning is lower in
respect of its market price. The company also pays a low amount of dividend. But the companys
market price and intrinsic value is nearly same.
5.3.4 Off Balance Sheet Financing

A form of financing in which large capital expenditures are kept off of a company's balance sheet
through various classification methods. Companies will often use off-balance-sheet financing to
keep their debt to equity (D/E) and leverage ratios low, especially if the inclusion of a large
expenditure would break negative debt covenants.
Ratios 2010 2011

Incremental Interest Rate 0.12% 17.75%
Interest Rate shown 13.70% 10.27%
ACI Limited used off balance sheet finance in 2012 and recovered in 2013.
5.3.5 Sustainable Growth Rate

D
p(1d )(1+ )
E
gs =
D
T ( p(1d )(1+ ))
E
Sustainable Growth Rate 2009 2010 2011 2012 2013

Net Profit Margin 4.53% 0.97% 1.07% -1.28% 0.47%
d (Dividend Pay-out ratio 0.3050 1.6575 0.8258 (1.4327) 1.4727
D/E 2.7734 1.8903 2.8330 3.3642 3.9628
T (Total Assets/Sales) 0.9684 0.9797 0.9207 0.8252 0.9046
Sustainable Growth Rate 13.97% -1.84% 0.78% -14.16% -1.19%
Forecast using
Sustainable Growth 2013 2014F 2015F 2016F 2017F 2018F
Rate
22,167,421,73
Sales 21,902,899,699 21,641,534,187 21,383,287,528 21,128,122,505 20,876,002,346
1
Net Profit 103,239,482 102,007,534 100,790,286 99,587,564 98,399,194 97,225,004
Dividend 152,035,703 150,221,473 148,428,893 146,657,703 144,907,648 143,178,477

Additions to retained (48,796,220.8
(48,213,939.49) (47,638,606.49) (47,070,138.89) (46,508,454.77) (45,953,473.18)
earning 1)
20,051,669,74
Total Asset 19,812,394,807 19,575,975,119 19,342,376,608 19,111,565,608 18,883,508,858
4
16,011,254,95
Total Liabilities 15,820,193,960 15,631,412,878 15,444,884,506 15,260,581,961 15,078,478,683
7
Common Stock 285,820,824 285,820,824 285,820,824 285,820,824 285,820,824 285,820,824
Capital Surplus 333,302,465 333,302,465 333,302,465 333,302,465 333,302,465 333,302,465

3,373,077,558.5 3,325,438,952.0 3,278,368,813.1 3,231,860,358.3 3,185,906,885.1
Retained earnings 3,421,291,498
1 2 3 6 8
20,051,669,74
Total L+E 19,812,394,807 19,575,975,119 19,342,376,608 19,111,565,608 18,883,508,858
4
Extra Financing
- - - - - -
needed
D/E 3.96 3.96 3.96 3.96 3.96 3.96
Sustainable growth rate is negative that may be known to investors.
5.3.6 ZETA Analysis

Zeta analysis is a term coined by Altman, Haldeman, and Narayanan to describe their model for
identifying the bankruptcy risk of corporations. Altmans model has five variables that cover
return on asset, cumulative profitability, capitalization, long-run profitability, size of the firm etc.
Z score= 1.2 X1+1.4 X2+3.3 X3+.6 X4+1.0X5
Bankruptcy prediction when Z is less than 1.2,
Z within the range between 1.2 and 2.9 is gray area.
Z above 3 is safe.
Co-
Variable Variable 2009 2010 2011 2012 2013
efficient
X1 Working capital/Total asset 1.2 0.05 0.03 (0.08) (0.12) (0.13)
X2 Retained Earnings/Total Assets 1.4 0.23 0.19 0.17 0.12 0.11
X3 EBIT/ Total Assets 3.3 0.39 0.26 0.29 0.29 0.32
X4 Market Value of Equity/ Book Value of Debt 0.6 0.59 0.47 0.20 0.14 0.18
X5 Sales/ Total asset 1 1.03 1.02 1.09 1.21 1.11
Z-Score 7.50 2.29 1.97 1.67 1.64 1.59
Here we have found that the z-score of ACI is 1.59 in 2013 that indicate that the company is in
gray area or zone of ignorance. There is high possibility of being bankrupt of the company. So it
can be said Advanced Chemical Industries (ACI) Limited is not so safe for the employees as well
as the investors for the year 2010. But they should consider score of previous years also for
better evaluation. This may also be known to investors.
6.1 Findings: Reasons for stock price decline

1. Negative sustainable growth rate (-1.19%)
2. Unfavorable Z score (1.59-Gray area)
3. Off balance financing in 2012 (30.99% incremental interest rate)
4. Net income of ACI was in increasing trend in year 2005 to 2008 but a dramatic fall has
been found in 2009 and 2010 that indicates a negative trend in profit of the company.
5. Current, Quick and cash ratio of ACI in previous 5 years was not in positive trend
although the rate is not so high. It indicates the liquidity position of the company was
not good.
6. AR Increased by 8.95% whereas sales increased by only 0.87%, credit sales increased
which indicates earnings management
7. High use of debt indicates probability of distress
8. Inventory piled up; Increased by 21.59% wheres sales gorwth was only 0.87% over
2012
9. The leverage ratio of the company is not in a satisfactory position as interest coverage
ratio is in a decreasing trend although degree of using debt is not so high that is
appositive sign. The company used less leverage in 2009 and 2010 but in case of debt to
equity ratio a fluctuations of the ratio has been noticed.
10. The profitability ratios such as profit margin return on total assets were good in 2006,
2007 and 2008. Because an increasing trend could be seen. But from 2009 decreased due
to bad performance in those years. Operating profit margin was almost in a steady
position
11. Inventory turnover ratio, fixed asset turnover ratio, total asset ratio and asset to equity
ratio. It had been seen that performance according to those ratios were fluctuating
throughout the five years.
12. Finally with the comparison between ACI and BEXIMCO with different ratios We have
found BEXIMCO as a better performer than ACI ltd. mostly.
6.2 Recommendation:
After evaluating the financial statements of ACI limited We have found that investment in this
company is not risky because it has good financial flexibility with underpriced share of the
company in the financial market. The company regularly conducts the AGM, GM and payment
of dividend. Although in previous years return on investments was in poor position it has already
been started to increase positively .From z-score We have found that the probability of being
bankrupt of this company cannot be denied that is surely a warning for the investor of the
company. Asset utilization rate is almost satisfactory but percentage of liquidity is very poor and
the authority must focus on it. The share of this company belongs to A category and the company
earns a huge amount from share market. Dividend payout ratio of the company is not in
satisfactory level. we recommend the company to increase earnings from operations rather
hanker after share market then it will prove their efficiency. There are some problems of financial
projections and assortment planning of the company. With proper investigation this problem
should be solved. There are some conglomerates of the company in our country with India and
UK that can be so profitable as well as a scope of strengthening international business. So the
authority should focus on it. Finally, although the company is now in positive trend of
performance it is not as high as the other competitors of the company. So they must try to cope
up with the modern trend with utmost responsibility and target.
6.3 Conclusion:
There is nothing in the world with eternal flow of blessing .In business every company has to
taste the five most important stages of company life cycle. From the performance evaluation of
Advanced Chemical Industries (ACI) Limited we have found some problems of management
inefficiency and projection of financials. In spite of those problems ACI Limited still is operating
holding a significant position among other companies within Pharmaceutical Industries. If they
can overcome the mentioned problems in analysis, findings and recommendation part they can
harvest a great performance in near future as well as get return of their previous reputation
References:
Kotharri,C.R (2001) Research Methodology: Methods and Techniques
William G Zikmund Business Research Methods

Joseph F Sinkey Commercial Bank Financial Management
S.P.Gupta, M.P.Gupta, Edition-Twelfth, Business Statistics

www.dse.bd.org
www.aci.bd
www.beximco.bd
Beta coefficient from- http://en.wikipedia.org/wiki/beta
Annual report (2005-13) ACI limited.
Annual report (2005-10) BEXIMCO PHARMA
Appendix:
Annual reports of ACI (2009-13)
Microsoft Excel worksheets

Profit & Loss Account
Profit & Loss 2009 2010 2011 2012 2013

Account (Year) (Year) (Year) (Year) (Year)
22,167,421,73
Turnover 12,299,717,849 14,498,060,264 17,460,120,785 21,976,300,877
1
15,569,844,14
Cost of goods sold 8,715,307,150 10,357,630,780 12,625,298,947 16,308,219,125
8
Gross profit 3,584,410,699 4,140,429,484 4,834,821,838 5,668,081,752 6,597,577,583
Operating expenses 2,809,082,179 3,213,291,747 3,583,609,676 4,306,094,665 4,754,846,786
Selling and
2,809,082,179 3,213,291,747 3,583,609,676 4,306,094,665 --
distribution expenses
Profit from
775,328,520 927,137,737 1,251,212,162 1,361,987,087 1,842,730,797
operations
Other income 56,119,657 98,161,945 103,912,840 142,891,806 64,333,022
Profit from sale of
568,498,542
share
Share of profit of
equity accounted -2,048,586 92,928,389 57,750,693 75,072,171 56,856,441
investees
EBIT 1,397,898,133 1,118,228,071 1,412,875,695 1,579,951,064 1,963,920,260
Financial expenses 588,106,840 589,903,974 752,697,387 1,263,471,933 1,326,814,390
Net profit before
809,791,293 528,324,097 660,178,308 166,334,789 637,105,870
WPPF
Allocation for WPPF 40,366,177 56,940,974 67,253,862 62,600,804 77,151,122
Net profit before tax 769,425,116 471,383,123 592,924,446 103,733,985 559,954,748
Provision for income
-187,091,812 -271,947,590 -330,868,745 385,549,657 456,715,266
tax
Provision for deferred
-25,660,063 -59,047,083 -75,986,155 -- --
income tax
Net profit after tax 556,673,241 140,388,450 186,069,546 -281,815,672 103,239,482
Balance Sheet
2009 2010 2011 2012 2013

Balance Sheet
(Year) (Year) (Year) (Year) (Year)
Non Current Assets 4,271,260,463 6,612,988,938 7,590,170,536 8,207,490,614 8,557,087,504
Property, Plant and Equipment 3,301,159,166 4,767,462,060 5,443,537,897 6,490,124,557 6,954,435,068
Capital work in progress 453,323,211 875,065,530 1,295,296,242 916,027,131 761,926,602
Investment in long term assets 400,463,971 908,344,759 769,517,554 723,502,440 766,291,205
Intangible assets 116,314,115 62,116,589 81,818,843 77,836,486 74,434,629
Current Assets: 7,639,330,466 7,591,024,612 8,485,700,409 9,927,388,375 11,494,582,240
Inventories 2,773,719,245 3,284,059,034 3,734,176,456 4,431,807,359 5,388,656,883
Trade Debtors & Other
2,635,022,416 2,641,478,336 3,162,788,969 3,434,948,414 3,742,236,951
Receivables
Advance, Deposits and
901,792,169 836,251,046 713,391,611 718,665,643 712,315,774
Prepayments
Cash and Cash equivalents 847,873,412 276,053,818 419,074,206 767,514,218 667,974,553
Others Receivable 80,050,148 149,058,590 150,235,143 126,331,164 172,000,920
Advance Income Tax 387,574,948 389,792,767 291,909,295 431,426,787 793,071,986
Inter-company receivables 13,298,128 14,331,021 14,124,729 16,694,790 18,325,173
Total Assets 11,910,590,929 14,204,013,550 16,075,870,945 18,134,878,989 20,051,669,744
Shareholders' Equity 3,156,439,749 4,914,447,794 4,194,087,869 4,155,380,482 4,040,414,787
Share Capital 194,040,000 194,040,000 197,147,560 237,738,330 285,820,824
Share Premium 250,022,474 250,022,474 298,788,486 321,892,801 333,302,465
General Reserve -- -- -- 1,671,386 111,330,089
Revaluation Reserve 589,529,448 1,515,899,388 1,515,015,779 1,513,778,354 1,511,620,310
Capital Reserve 1,671,386 1,671,386 1,671,386 -- 1,671,386
Other Reserve and surplus 192,699,784 424,872,936 237,767,126 140,860,043
Retained Earnings 1,928,476,657 1,941,277,922 1,943,697,532 1,580,925,170 1,548,580,887
Non Controlling Interest 403,965,284 586,663,688 494,270,382 358,514,398 248,088,826
Non Current Liabilities 1,184,704,920 2,051,896,252 1,780,536,322 2,196,381,211 2,312,497,899
Long term loans secured 1,184,704,920 1,833,530,714 1,506,974,165 1,863,440,780 1,996,152,839
Deferred tax liability -- 218,365,538 273,562,157 332,940,431 316,345,060
Current Liabilities 7,165,480,978 7,237,669,503 9,606,976,372 11,783,117,304 13,698,757,058
Creditors for goods 780,935,277 649,079,203 936,929,700 915,148,765 1,262,614,382
Short term borrowing 3,109,281,460 3,911,060,043 5,154,801,386 6,446,311,725 7,996,384,252
Bank Overdraft 709,318,981 387,540,323 1,116,708,457 1,603,593,173 1,024,269,722
Income Tax Payable 523,698,557 508,197,976 358,735,798 405,999,710 872,345,959
Long term borrowings Current
397,336,001 600,988,955 690,766,349 1,141,573,149 1,084,139,980
maturity
Lease Finance Current
1,839,803 523,990 652,878 9,885,219 11,638,647
Maturity
Others Liabilities 1,643,070,899 1,180,279,013 1,348,381,804 1,260,605,563 1,447,364,116
Book Value Per Share 162.67 253.27 212.74 174.79 141.36
Total Liabilities &
11,910,590,931 14,204,013,549 16,075,870,945 18,134,878,997 20,051,669,744
Shareholders Equity

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Term Paper on

Critical Strategy Analysis Of

Submitted to Dr. M. MasudRahman

Professor & Chairman

Date of Submission: 11th April 2015

ADVANCED CHEMICAL INDUSTRIES (ACI) LIMITED

Dr. M. Masud Rahman

Professor & Chairman

ID Name Roll Remarks

Date of submission: April 11, 2015

Subject: Submission of Term Paper

Advanced Chemical Industry Limited (ACI) is a renowned chemical and pharmaceutical

0.0 Statement of the problem

Profile of the Organization

Pharmaceutical Industry in Bangladesh

5.1 Industry Analysis of ACI Limited

Findings, Recommendation and conclusion, Appendix and References

1.0Statement of the problem

1.1 Objectives of the study:

To find out reasons behind stock price decline

1.2.1 Research Types

1.2.2 Source of Data

Annual Reports of ACI.( 2009-2013)

1.2.3 Calculative Measurement

Industry Analysis (Porters 5-forces model)

Company Analysis (SWOT Analysis)

1.3Rationale of the study:

Time has beaten us with its cruel hand.

A historical financial performance engagement is an analysis of a companys past and current

Identify financial strengths and weaknesses and evaluate financial performance in

Historical financial ratio analysis can be used as an effective preliminary step in

Determine the financial strengths and weaknesses of the company.

A greater awareness of financial statements and their interrelationship can lead to

Comparative Performance - Comparison between similar firms.

3.1 Historical Background

3.2 Corporate Mission

Endeavor to attain a position of leadership in each category of its businesses.

Develop its employees by encouraging empowerment and rewarding innovation.

Promote an environment for learning and personal growth of its employees.

Establish harmonious relationship with the community and promote greater

3.4 Values of the Company

Transparency: ACI maintains transparencyby providingthe desired goods and services

Continuous Improvement: ACI always attempts to make improvements in their

Innovation: ACI strongly believes in innovation. As a result, they go for frequent

3.5 Organizational Hierarchy

Chief Operating Officer, Pharma

Executive Director, Consumer

Director, Corporate Affairs

3.6 Major Businesses (Corporate Level Strategy)

Logistics (super shop chain store)

Crop Care & Public Health

3.7 Subsidiaries of the company:

Tetley ACI (Bangladesh) Limited

Apex Leather Crafts Limited

ACI Salt ltd.

ACI Pure Flour Ltd

Premiaflex Plastics Limited

ACI Logistics Limited

Asian Consumer Care (Pvt.) Ltd.

ACI Consumer Electronics

ACI Godrej Agrovet Private Limited

3.9 International alliances

4.0 Pharmaceuticals industry in Bangladesh