Study the Current Market Scenario and the Future Prospect of Leather Chemical Industry of Bangladesh

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Study the Current Market Scenario and the Future Prospect of Leather Chemical Industry of Bangladesh

About The Organization

Company Profile at a Glance:

Company Name : Advanced Chemical Industries (ACI) Limited

Address : ACI Centre, 245, Tejgaon Industrial Area, Dhaka-1208.

Phone : +88-02-9885694

Fax : +00-02-9886029

E-mail : INFO@ACI-BD.COM

Web Page : WWW. ACI-BD. COM

Company Logo :

Strategic Business Units:

Pharmaceuticals

Consumer Brands

Agribusiness-

Crop Care and Public Health

Animal Health

Subsidiaries:

ACI Trading Limited

ACI Formulation Limited

Apex Leather crafts Limited

ACI Salt Limited

Executive Management:

Mr. M Anis-Us-Dowla Chairman

Dr. Arif-Dowla Managing Director

Mr. M Mohibuz Zaman Chief Operating Officer, Pharmaceuticals.

Dr. F H Ansarey Executive Director, Agribusiness.

Mr. Azmal Hossain Executive Director, Trade.

Mr. Syed Alamgir Executive Director, Consumer Brands.

Mr. Muallem A Choudhury Executive Director, Finance & Planning.

Mr. Towfiqur Rahman General Manager, Operation.

Mr. Priyatosh Datta General Manager, Quality Assurance.

Ms. Sheema Abed Rahman General Manager, Corporate Service.

Mr. Pradip Kar. Chowdhury Financial Controller

Financials (Year Ending December 2004):

Authorized Capital: Taka 500 Million.

Paid-Up Capital: Taka 161.70 Million.

Sales: Taka 2,558 Million.

Numbers of Employees: 2161

Background:

ACI was established as the subsidiary of Imperial Chemical Industries (ICI) in the East Pakistan in 1968. After independence the company has been incorporated in Bangladesh on the 24^th of January, 1973 as ICI Bangladesh Manufactures Limited and also as Public Limited Company. This Company also obtained listing with Dhaka Stock Exchange on 28.12.1976 and its first trading of share took place on 09.03.1994. Later on May 05, 1992, ICI Plc divested 70% of its shareholders to local management. Subsequently the company was registered in the name of Advanced Chemical Industries Limited. Listing with Chittagong Stock Exchange was making on 22 October, 1995.

Advanced Chemicals 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 five major businesses. Beside these, the company has a large list of international associates and partners with various trade and business agreements.

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:

To realize the mission ACI will

• Endeavor to attain a position of leadership in each category of it businesses.
• Attain a high level of productivity in all its operations through effective and efficient use of resources, adoption of appropriate technology and alignment with our core competencies.
• Develop its employees by encouraging empowerment and rewarding innovation.
• Promote an environment for learning and personal growth of its employees.
• Provide products and services of high and consistent quality, ensuring value for money to its customers.
• Encourage and assist in the qualitative improvement of the services of its suppliers and distributors.
• Establish harmonious relationship with the community and promote greater environmental responsibility within its sphere of influence.

Values:

Quality

Customer Focus

Fairness

Transparency

Continuous Improvement

Distribution Network:

The company maintains strategically located sales centers in 198 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 80 vehicles. The distribution system is capable of handling continuing volume of diverse range of products from the various businesses.

The company’s distribution centers are highly streamlined, computerized and automated. We are capable of maintaining a cold chain for some specialized range of products such as vaccines and insulin. The combination of this advanced function and multi dimensional capabilities make it possible to handle hundreds of products efficiently.

Business Units:

ACI Pharmaceuticals: In 2004, ACI Pharmaceuticals ranked 11^th in the Bangladesh pharmaceuticals industry. It provides the market with a wide selection of drugs across all major therapeutic classes, and also offers some specially medicines. ACI Pharmaceutical represents AstraZeneca, Eli Lily and UCB in Bangladesh.

ACI Crop Care and Public Heath Division: This Division is holding the leadership position in the industries; Animal Health has experienced one of the highest growth rates in this sector. ACI Agribusiness has partnerships with several international conglomerates including Ceva Santhe Animale, Invesa, UCB, Isago Asia and Boreegaad Taicang Chemical Co. Ltd.sdx.

ACI Consumer Brands: This Divisionis a leading Fast Moving Consumer Goods (FMCG) company in Bangladesh. In the liquid antiseptic and mosquito repellant categories, this division is a very strong market leader. Foreign partners represented in by this division include Godrej Consumer Products (for hair care and skin care ), Parle Group (for Parle G biscuits), Beiersdorf, Germany (for Nivea range of Products) and Colgate Palmolive.

ACI has formed joint ventures with leading FMCG and agribusiness players in the region. These are:

Asian Consumer Care Private Ltd: Joint venture of ACI and Redrock Limited, for distribution of various ranges of Dabur products in Bangladesh. ACI holds 50% stake in the venture.

Tetly ACI Bangladesh Ltd: Joint venture of ACI and Tetley Group of United Kingdom for distribution of Tetley products in Bangladesh, with ACI having 50% shareholding.

Many ACI products have crossed our national boundary and are being successfully exported to various countries in Asia, the Middle East and the CIS region. The responsible of foreign consumers to our products has been encouraging.

Manufacturing Standards:

ACI has three separate manufacturing plants in the outskirts of Dhaka. The Pharmaceuticals plant is located at Narayanganj; ACI Formulations has been setup in Gazipur and the Tetley factory has been built at Konabari. ACI Limited is the first company in Bangladesh to have attained the ISO 9001 certification for Quality Management and ISO 14001 for Environment Management. The Trading subsidiary has also received ISO 9002 certificate. At our manufacturing facilities, we follow CGMP guidelines and standards recommended by World Health Organization (WHO) for pharmaceutical formulations.

Diversification into new industries:

ACI Limited is venturing into new areas of business, as part of its diversification initiatives. Two such businesses being set up are ACI Salt Ltd. And ACI Godrej Agrovet Private Limited.

ACI Salt Ltd: ACI has set up its salt plant in Rupganj, on the bands of the Shitalakhya river. The plant will produce refined iodized salt through Thermal Evaporation System. ACI has used technology from China Heavy Machineries Corporation (CHMC) in establishing the plant. The end product will be high quality, free-flowing salt with even, crystallized grains. The iodine content of ACI salt will have a stability of more than 6 months. The project has been undertaken at an approximate cost of Taka 32 crores.

ACI Godrej Agrovet Private Limited: Godrej is a pioneer in the packaged meat business in India. It is also the market leader in the poultry industry, and the owner of ‘Real Good’ brand. ACI and Godrej have a joint venture in Bangladesh to set up an Integrated Poultry Project. Under this project, ACI Godrej Agovet has already set up a feed mill at Sirajganj. This is fully automatic pellet poultry and fisheries feed mill, which uses technology from Jiangsu Muyang group of China. The company has also set up a hatchery at Joynabazar, on the Dhaka Mymenshingh road, with technology from Godrej. The plans for this project also include establishing Grand Parents and Parent Stock breeding farms. The investment in the project is Taka 8 crores, with ACI Limited having 50% shareholding of the company.

ACI Formulation Limited:

ACI Formulations Limited (ACI FL) is a subsidiary of ACI Limited, located at Gazipur, in the outskirt of Dhaka.

ACI FL manufactures majority of the products of ACI strategic Business Limited except for Pharmaceuticals division. The factory is equipped with the state-of-Art facilities for product formulations and process innovation. These include modern computerized equipment like HPLC and GLC.

The product range manufactured at ACI FL include Crop Protection Chemicals like insecticides, herbicides and fungicides in granular, powder and liquid forms, Mosquito Pesticides in the forms of aerosols, vaporizers and coils, and households chemicals like toilet cleaners and hand wash.

Quality Policy

ACI aims is to achieve business excellence through quality by understanding accepting, meeting and exceeding customer expectations.

ACI follows International Standards on Quality Management System to ensure consistent quality of products and services to achieve customer satisfaction. ACI also meets all national regulatory requirements relating to its current business and ensures that current Good Manufacturing Practices (CGMP) as recommended by World Health Organization is followed for its pharmaceutical operations.

The management of ACI commits itself to quality as the prime consideration in all its business decisions. All employees of ACI must follow documented procedures to ensure compliance with quality standards.

The pool of human resources of the company will be developed to their full potential and harnessed through regular training and their participation in seeking continuous improvement of work methods.

Business Performance and Growth Scenario of ACI Limited:

Figure No: 2.1

Figure No: 2.2

Figure No: 2.3

ACI Trading Limited

ACI Trading Ltd is one of the leading Trading Houses in Bangladesh. Originally it was ICI Pakistan Ltd established as the subsidiary of Imperial Chemical Industries (ICI) in the then East Pakistan. After independence of Bangladesh the operation continued as ICI Bangladesh Ltd. In July 1994 ACI Ltd another divested part of ICI PLC UK for Pharmaceuticals and Agrochemicals operation purchased ICI Bangladesh Ltd from ICI PLC and renamed it to ACI Trading Ltd.

ACI Trading Ltd has been accredited with ISO 9002 certification since June 1997 for its Quality System on indenting business. The Company is mainly involved in marketing and sales of various Industrial Chemicals, Petrochemicals, Plastics, Pharmaceuticals, Leather and Shoe finishes. Textile Dyes and Auxiliaries through Indent sales. It has four business divisions such as Chemicals, Textile, Leather and Water Pumps. To render technical service ACI Trading has two separate technical application laboratories for textile and leather businesses.

We represent ‘World Class Products’ in Bangladesh from ICI and some other multi-nationals like ExxonMobile, Solvay Interox, Enichem, Huntsman Tioxide, Magadi Soda Co., Stahl UK Ltd, Onga Australia Pte Ltd etc. We also represent some reputed Principals form Asian countries mostly from India, Singapore and Malaysia.

This is a 60% owned subsidiary. ICI, Zeneca, Exxon, Stahl are leaders in their respective fields and ACI have excellent market share of their products in Bangladesh.

The major responsibilities of ACI Trading are:

– Representing various international companies

– Procuring raw materials

Organogram – Business Management

Figure No: 2.4

Organogram – Business Support Functions

Figure No: 2.5

Organ gram of ACI Trading Limited (Focusing Leather Chemical Division)

Figure 2.6

Mission:

Want to be a leading trusted quality Trading Company to earn confidence of the customers. To establish a long-term business relation by offering quality products & services from World Class chemical companies in alignment with our core values.

Strategic Objective:

• To sustain and improve Market Share for the key products
• To offer World Class products from reputed sources
• Increase ability to compete in the industry by developing people
• To render superior service (technical & logistics) to customers
• To maintain & improve business relation with our Principals
• New Products Sourcing from reputed manufacturers
• Aggressively grow Ex-stock Trading with calculative risk
• To ensure stable earning through balanced product port-folio
• Taking care of our shareholders interest.

Indent Sales Growth from 2002-2005 & Budget 2006

Ex-stock Sales Growth from 2002-2005 & Budget 2006

Profit and Loss Budget 2006

SWOT Analysis of ACI Trading Limited

Strength

On going need base training of people (Management & Technical)

Well groomed Employees & Professional approach

Association of global famous brand (ExxonMobil, ICI)

Loyal customer base for World Class products

Quality perception of customer for products & services from ACI

Support of ACI conglomerate & its image

Weakness

Achievement depends on supplier’s own strategy

Much dependent on few major suppliers

Some major Raw Material suppliers absence in Portfolio

Uncompetitive price & longer lead-time (Europe vs. India/China)

Technical support is based on suppliers’ priority

Opportunity

More Local & Export orientated industries coming up

Sourcing Chinese suppliers for some major RM

New business line expansion (API, PET, PS etc)

Value addition of products (Textile, Leather)

Increase Ex-stock Trading (existing & new)

Threat

Indian & Chinese cheaper RM suppliers

Local basic RM manufacturers coming up

Increase of competition taking advantage of IT

Business Strategy

To nourish the Strength

More need base training of people (Management & Technical)

Build more relation with major supplier

Exert Professional Behavior to maintain the reputation of ACI

Proactive approach to customers for relationship marketing

To turn Weaknesses to Strength

Find suppliers for some major Raw Material not in range

Update suppliers with market & competition on regular basis

Insist supplier for technical support showing business potentiality

To avail Opportunities

Increase customer base

Increase product base

Step for Value Addition

Increase trading of Ex-stock

To turn Threat to Opportunity

Take advantage of IT to form chemical data-base for new opportunity.

Try sourcing of RM from India & China

Key differentiating factors that attracts customers:

Quality, price, timely delivery with clean documents

Technical Assistance/Information to customers about int’l price

Proactive involvement in customers purchasing decision

Excellent relation with loyal customers

Highly professional & customers caring sales people

Products, Customers & Supplier Base Up to 2005

Major Development through initiative in 2005

• Re-start of Ex-stock sales of ExxonMobil Plastics
• Increased customer & Product base through trials for Textile Auxiliaries
• Introduction of C&TP from Stahl India
• Appointed a Retailer for Stahl Leather Chemical sales
• Irregularities caused by Sales Manager, Leather (Mr Mizan) mostly adjusted with customer satisfaction
• Sourcing PET from China
• Sourcing API from India & China
• Measurable & Comparable items Software development
• Weekly sales Meeting with all SBU with EDT
• Study on Textile Auxiliaries Market through Internee

Projects/Suppliers looked for

H2O2

Paints

Bulb & Tube Lights

Dry Cell Battery

Adhesive Tapes

Lady Napkin

Initiative to be taken in 2006

Value Addition – Textile Auxiliaries

ICI Paints India (J.V.)

Value Addition for Beam House Chemicals for leather

More trials of Text. & Leather Chemicals to increase customer & Product base

Dyes & Optical Brightener sourcing – India, China

Introduction more Traders for Textile Aux. credit sales

Recruit sales person for Chemical & Textile division

Implementation of Program for Measurable & Comparable items related to sales performance

Engage two Internee for Chemical & Leather Market Study

Interaction with knowledgeable & experienced persons from Faculties and Trade

Aggressive Plan to become a big Trading House by 2008

Leather Industry of Bangladesh

Leather Industry Background

The Leather Industry in Bangladesh

Tannery transforms raw hides and skins into leather for manufacturing articles like shoe-upper, bag, suitcase, belt, wallet and jacket. In the past, leather processing was done manually using certain indigenous chemicals.

The beginning of the Tannery

The first tannery in Bangladesh territory was set up at Narayanganj by RP Saha in the 1940s. It was later shifted to Hazaribag area of Dhaka, which turned into a location that now accommodates a large number of tannery units. During the period before Partition of Bengal (1947), almost all the raw hides and skins available in East Bengal were exported to west Bengal, particularly to Calcutta and processed there. In fact the tannery industry of Bangladesh originated after its relocation from Narayanganj to Hazaribagh in Dhaka in 1951.

At that time there were 54 tanneries in the country and out of those 30 belonged to the Pakistani owners. Development of tannery industry in East Pakistan started after the Partition with an influx of tanners displaced from India and subsequently, with the establishment of subsidiaries of some companies of West Pakistan. The tanning industry in East Pakistan and export of leather from the province were mainly in the hands of the non-Bengali people. A few tanning units, however, belonged to Bengali entrepreneurs but they were small and of cottage type and they used to process leather mainly for the domestic markets. Most non-Bengali tanners processed wet-blue and sent the product to West Pakistan where it was further processed and finished for producing different consumer goods. Till 1960, tanneries of East Pakistan used to process raw hides and skins applying salt and then drying them in the sun and the material thus developed was known as shaltu.

Post Liberation Period

During the war of liberation in 1971 the non-Bengali tanners of Bangladesh left the country abandoning about 30 tannery units owned by them. After the war, the new government of Bangladesh vested the management of these units on a newly formed Tannery Corporation, which was expected to convert them into finished leather manufacture units. Unfortunately, the corporation did not serve the purpose because of lack of experience and other reasons including corrupt practices. Later, the government relinquished the Tannery Corporation and handed over the management of most of these tanneries to Bangladesh Chemical Industries Corporation (BCIC). Three of them were given to Bangladesh freedom fighters welfare trust. Both the authorities had miserably failed to manage the tanneries. In 1982, the government transferred them to private entrepreneurs in pursuance of its general policy of disinvestments, which had allowed some enterprising Bengalis with little or no experience in the industry to start wet-blue production.

Present Condition

At present, the leather sector of Bangladesh has 220 processing units located at different parts of the country (mainly in Dhaka) as follows: –

Dhaka (Hazaribag) – 194 units

Dhaka (Dhamrai/Savar) – 3 ”

Gazipur (Kaliakoir) – 1 ”

Jessore (Noapara) – 1 ”

Chittagong – 18 ”

Jamalpur – 1 ”

Rangpur – 1 ”

Khulna – 1 ”

Total : 220 units

Only about 50% of the above units are well equipped for processing crust and finished leather. But only 28 tanneries are in operation, among them 20 are operating in crust section and 8 are in finishing section.

According to the records of the Bangladesh Tanners Association, about 3,000 workers are employed in the tanning industry. Besides, there are about 100 qualified technologists including foreign nationals who are working in different tanneries. Total capital invested in the tannery industry is estimated at Tk 2.5 billion, of which government/bank finance is about Tk 1.2 billion. About 1,500 persons are involved in the process of collecting raw hides and skins and making them available at tannery units. About 100 organizations import chemicals for use in tannery industry. Some reputed tanneries of Bangladesh are Dhaka Leather, Apex Tannery, Lexco, Karim Leather, Samata Tannery and Bay Tannery.

Production

Leather Sector in the Economy of Bangladesh

The Leather sector plays a significant role in the economy of Bangladesh in terms of its contribution to export and domestic market. Bangladesh currently produces about 20.0 million sq. meters of leather and leather goods per year. The total production of leather and leather goods shows an increasing trend over the years. Beginning with the 1993/94, the production increased from 14.60 in 1993/94 million sq. meters to 15.90 million sq. meters in 1995/96. It fell to 11.95 million sq. meters in 1996/97. Since 1996/97, there has been a steady increase in the production of leather and leather goods that reached 19.91 million sq. meters in 2000/2001. The following table shows the production of leather and leather goods in the country.

Leather sector is perceived to be one of the important economic sectors in Bangladesh. As a single sector of the economy, the sector contributes modestly to the country’s GDP. Contribution of leather sector (hide &skin, leather and leather goods, and footwear except rubber) to GDP is 0.31 (at constant price) in FY 2003.

Table 4.1: Production of Leather & Leather Goods

Source: Bangladesh Economic Survey, Ministry of Finance, 2002

*Leather Sector Census Study, LSBPC, 2005

**Approximate Data from LSBPC

The quantum index of leather and leather goods production increased to 131 in 1998/99 compared to the base year (1988/89=100) and that of leather footwear production rose to 193 for the same period. It is therefore evident that leather is increasingly being used in the production of footwear. The following table shows the trend of production of leather and leather footwear during the 1990/91 through 1998/99 period.

Table 4.2 : Quantum Index of Leather and Leather Goods and Leather Footwear

(Base: 1988/89=100)

Source: Statistical Year Book of Bangladesh 2002, Bangladesh Bureau of Statistics

Source: Leather Sector Census Study, LSBPC, 2005

Table 4.4: Leather Production of the renowned Tanneries of Bangladesh:

Source: Shajedul Alam, Internship Report, June 19, 2004, Institute of Business Administration, University of Dhaka;

Source: Magazine, Dhaka International Leather Fair 2005

Leather Export

Leather Export Performance of Bangladesh: The ever highest export performance was achieved in 2000-2001 due to the mad cow disease in EU but after 11^th September incident, the declining trend cannot be prevented due to the less value addition capability and non-sustainable nature of the leather sector industry of Bangladesh. The export performance of Bangladesh after 1999 is shown in table4.1. The Leather export is almost 2.5 percent to the total export of Bangladesh. Table 4.2 shows how the percentage of leather export to the total export is decreasing year after year.

Table 5.1: Export performance: From July 1999

Source: Export Promotion Bureau of Bangladesh.

Table 5.2: Percentage of the Leather Export to the Total export of Bangladesh:

(Value in million dollar)

Source: Export Promotion Bureau of Bangladesh (EPB)*Export Target

Hong Kong, Korea Rep., Italy, Japan are the main export destinations of the leather goods of Bangladesh. Though the Leather export performance of Bangladesh is decreasing day by day but still some countries like China, Taiwan, Vietnam are showing their interest to import more leather goods from Bangladesh. In comparison to India and Pakistan the export performance of Bangladesh shows a very uncomfortable figure. The main reason for that is the infrastructure of the sector. Although the RMG sector of Bangladesh is booming even after the post MFA era, foreign investors are not showing interests to invest in the leather sector of Bangladesh. Even the local investors are not interested to invest in leather sector, though there are lots of places Bangladeshi investors can invest easily.

Table 5.3: Country Wise Export of leather and Leather Goods during the period of July2004 – March 2005:

Value in ‘000’ US$

Source: Foreign Trade Statistics of Bangladesh, 2001-200

Table 5.4: Export of Leather, Leather Footwear and Leather Goods

Million US$

Bangladesh Export Promotion Bureau

Sales and Exports of Leather sector Enterprises/Firms

Table show that during January-December 2003, the collective sales of the leather sector firms stood at Tk.23045 million. Of the total sales of the firms, over 75 percent are sold outside the country. Leather processing units exported most of their products that accounted for about 85 percent of their total sales revenue during 2003. Footwear manufacturing firms’ sales revenue from exports accounted for about 40 percent of their total revenue. Leather goods manufacturing firms exported its entire volume of production during 2003.

Sales and Exports: Leather Processing

Leather processing firms’ sales value stood at about Tk.18470 million during January-December, 2003 (Table 4.7). Exports revenue accounted for about 88 percent from the crust leather and over 97 percent from the finished leather produced by the leather processing enterprises. Except for an insignificant volume, most wet-blue leather is locally used for the production of crust/finished leather. The survey data show that as a whole about 85 percent products of the leather processing firms are exported and total export value stood at Tk. 15622 million (during January-December 2003).

Source: Leather Sector Census Study, LSBPC, 2005

Sales and Exports: Footwear

Still over 50 percent of the footwear manufacturing enterprises’ production is locally consumed. Total local sales stood at Tk.2456 million for the period January-December 2003. Export sales of the footwear firms for the period were Tk.1682 million.

Sales and Exports: Leather Goods

All leather goods manufacturing firms (covered under census) are export oriented. Their total sales volume, which is same as their exports, stood at Tk.437 million during the period January-December 2003.

Table 4.3 showed the country wise export figure of Bangladesh and the Table 4.13 shows how country wise export figure changed during 2000-2003 to 2003-2004.

Table 5.13: Country wise changes in Export of Leather:

(Value in `000’ US$)