Financial Assessment of the Global Packaged Food Industry- Executive Summary

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Financial Assessment of the Global Packaged Food Industry NB40F1 November 2012 Financial Assessment Led by Ratio AnalysisA Holistic Perspective

Transcript of Financial Assessment of the Global Packaged Food Industry- Executive Summary

  • 1.Financial Assessment of the Global Packaged Food IndustryFinancial Assessment Led by Ratio AnalysisA Holistic PerspectiveNB40F1November 2012

2. Executive Summary In the current economic scenario, maintaining healthy financials plays a key role in determining a companys future prospects. This study analyzes the financial health of public companies in the global packaged foods industry, covering fifteen segments. Companies are ranked based on four broad categories of ratiosprofitability, activity (reflecting financial management) and liquidity, and solvency (reflecting risk management). Industry ratios such as gross margin, current ratio, etc. are computed for the public companies analyzed and top performers are identified by benchmarking their ratios with the industry. The study presents top performers by regions, by segments, and by revenue range. The study also includes insights into key business and financial risks/challenges faced by industry participants. Source: Frost & Sullivan analysis.NB40F12 3. Research Objective and ScopeResearch Objective To analyze the financials of public companies in the global packaged foods industry To rank companies based on their financial and risk management To identify key trends and challenges that can impact the performance of industry participants over the next 12 monthsGeographic Scope: Global Study Ratios Analyzed Profitability Activity (Turnover) Liquidity SolvencyGlobal Source: Frost & Sullivan analysis.NB40-F1 3 4. Research Objective and Scope (continued)Study periodCompanies Analyzed FY* 2010-2011 1057 publicly listed companies across the globeWho will benefit?Sources Frost & Sullivan in-house research expertise Companies operating in the global packaged Established business and financial databases, foods industry such as Capital IQ Private equity Company annual reports Venture capital investors Published news Fund managers Press releases Retail investors Sovereign wealth funds Hedge funds Insurance funds and other members of theNote: Financial data used for analysis is as of investing community12 October, 2012.* FY = Financial YearSource: Frost & Sullivan analysis. NB40-F1 4 5. Research Objective and Scope (continued) Europe166 companiesNorth America 90 companies Asia-Pacific642 companiesLatin Americaand Caribbean63 companies Middle East and Africa96 companies Source: Frost & Sullivan analysis.NB40F1 5 6. Research Objective and Scope (continued) Asia-Pacific: 642 companies Number of Number of Country Country Companies CompaniesAustralia 14 New Zealand 3Bangladesh2Pakistan 28China 99 Philippines12Hong Kong 17 Singapore17India141 South Korea38Indonesia 18 Sri Lanka24Japan108 Taiwan 20Kazakhstan2Thailand 28Malaysia42 Vietnam29 Source: Frost & Sullivan analysis.NB40-F1 6 7. Research Objective and Scope (continued)Europe: 166 companiesNumber ofNumber ofCountryCountryCompaniesCompaniesAustria 2 Luxembourg 1Belgium 4 Netherlands5Croatia 3 Norway15Cyprus6 Poland19Denmark 2 Romania5Estonia 1 Russia 6Finland 4 Serbia 2France 12 Slovenia 1Germany 7 Spain6Greece 15 Sweden 4Ireland 3 Switzerland 11Italy 5 Ukraine6Latvia1 United Kingdom16Lithuania 4 Source: Frost & Sullivan analysis.NB40-F1 7 8. Research Objective and Scope (continued)Middle East and Africa: 96 companiesNumber of Number ofCountryCountryCompanies CompaniesEgypt4 Oman12Ghana1 Qatar1Israel10 Reunion1Jordan 1 Saudi Arabia 6Kenya2 South Africa12Kuwait 2 Turkey19Malawi 1 United Arab Emirates 5Mauritius1 Zambia 2Morocco4 Zimbabwe 4Nigeria8Source: Frost & Sullivan analysis.NB40-F18 9. Research Objective and Scope (continued) North America: 90 companiesNumber ofCountryCompaniesCanada 22United States68Latin America and Caribbean: 63 companiesNumber ofCountryCompaniesArgentina7Brazil 16Chile15Colombia 2Jamaica2Mexico 9Peru 9Trinidad & Tobago3Source: Frost & Sullivan analysis.NB40-F19 10. Research Objective and Scope (continued)Packaged Food Industry: Sub-sectors Covered in the Study, Global, FY 20102011Establishments primarily engaged in manufacturing prepared feeds, feedAnimal Feedingredients, and adjuncts for animals and fowls.Establishments primarily engaged in manufacturing fresh bread and bread-Bread and Bakery Products type rolls, as well as fresh cakes, pies, pastries, and other similar perishablebakery products.Establishments primarily engaged in one or more of the following: roastingCoffee and Teacoffee; manufacturing coffee and tea concentrates (including instant andfreeze-dried); blending tea; and manufacturing herbal tea.Establishments primarily engaged in manufacturing candy and otherconfectionery products, manufacturing chocolate and cocoa products,Confectionery Productsmanufacturing chewing gum, and manufacturing salted and roasted nuts andseeds.Dairy Products and Eggs Establishments primarily engaged in production of dairy products and eggs.Establishments primarily engaged in manufacturing cooking oils and fats thatEdible Oilsare used in food preparation.Establishments primarily engaged in the production of cuisine belonging to aEthnic Foodsparticular region or a country; e.g., Mediterranean and Asian cuisine andKosher foods. Source: Capital IQ and Frost & Sullivan analysis.NB40F110 11. Research Objective and Scope (continued) Packaged Food Industry: Sub-sectors Covered in the Study, Global, FY 20102011Frozen FoodsEstablishments primarily engaged in the production of frozen foods.Establishments primarily engaged in manufacturing flour and other grain millGrain Mill Products products, manufacturing cereal breakfast foods, rice milling, manufacturingprepared flour mixes and doughs, and wet corn milling.Meats, Meat Processing, Establishments primarily engaged in the production/processing of meat and meatand Meat-related Products related products.Establishments primarily engaged in manufacturing foods grown without the use ofOrganic Foodssynthetic/chemical treatments.Prepared and PreservedEstablishments primarily engaged in manufacturing prepared and preserved foods,Foods such as snack food, desserts, soups and stews, pasta, jams, and jellies.Seafood, SeafoodEstablishments primarily engaged in the commercial catching and processing ofProcessing, and Seafoodsea animals/fishes.ProductsSeasonings andEstablishments primarily engaged in manufacturing seasonings and preservatives,Preservatives such as herbs, spices, cooking wines, sauces, and spreads.Establishments primarily engaged in the production of sweeteners, such as sugarSweetenersand syrup.Source: Capital IQ and Frost & Sullivan analysis.NB40F1 11 12. MethodologyPackaged Food Industry: Methodology Used for Financial Assessment, Global, FY 20102011Identify public companiesPublic companies in the global packaged foods industry are identified. Gather financial dataUsing secondary sources such as company annual reports, financial databases, and published news,financial data such as total revenue, interest expense, long-term debt, and inventory are gathered. This datais taken for both FY 2011 and FY 2010.Calculate ratiosUsing the financial data gathered, different ratios such as EBIT margin, debt to equity, and interest coverageare calculated for each company.Source: Frost & Sullivan analysis.NB40F112 13. Methodology (continued) Packaged Food Industry: Methodology Used for Financial Assessment, Global, FY 20102011 Classification of RatiosThe calculated ratios are classified under one of the four categories: profitability, activity, liquidity, andsolvency.Calculate scoresBased on the ratio analysis, for each company, a profitability score, activity score, liquidity score, solvencyscore, and overall score are computed. For this purpose, weights are assigned to individual ratios andindustry averages are also used. Overall RankingCompanies are ranked based on the overall score. Top performers are further analyzed and industry-specificratios are used wherever relevant.Source: Frost & Sullivan analysis.NB40F113 14. Ratios Used for AnalysisProfitability RatiosLiquidity Ratios Return on Total Assets Cash as Percentage of total Assets Return on Capital Employed Current Ratio Return on Equity Quick Ratio Return on Invested Capital Cash Ratio Gross Margin Average Cash Conversion Cycle Selling and General Administration Margin Cash from Operations to Current Liabilities EBITDA Margin Net Working Capital to Sales EBITA Margin Cash Flow to Revenue EBIT Margin Pre-tax Margin Solvency Ratios Earnings from Continuing Operations Margin Total Debt to Equity Net Income Margin Total Debt to Capital Cash Return on Equity Total Liabilities to Total Assets Cash Return on Assets EBIT to Interest Expenses EBITDA to Interest ExpenseActivity (Turnover) Ratios (EBITDA-CAPEX) to Interest Expense Leverage Ratio Total Asset Turnover CFO to Total Debt Fixed Asset Turnover FCFF to Total Debt Accounts Receivable Turnover EBITDA to Total Debt Inventory Turnover Cash to Total Debt Source: Frost & Sullivan analysis.NB40-F114 15. PricingA Key Driver of RevenueVolatile oil pricesshipping costsEnvironmental and safetyFocus on reducing water footprint Logistics-related standardsissuesCommodity futures pricing riskstransportationand storageIncreasing demand for organic rawmaterials, decreasing demand forsynthetic ingredientsPricingRaw material PressureMultiple industries fighting for the same scarcityraw material; for instance, Vitamin EIncreasing incidence of lifestyledisorders Health andFocus on eradicating the diseaseswellnessFocus onprevention is better than cure!marketing, awarenessRequires deeper understanding ofcreationconsumer perceptionsSource: Frost & Sullivan analysis.NB40F115 16. Industry Ratios: FY 2011Packaged Food Industry: Industry Ratios, Profitability, Activity, Liquidity, and Solvency, Global, FY 2011 #Profitability Ratios# Liquidity Ratios 1Return on Total Assets 5.1% 1 Current Ratio 1.25 2Return on Capital Employed13.7%2 Quick Ratio 0.65 3Return on Equity11.5%3 Cash Ratio0.25 4Return on Invested Capital9.00%Gross MarginAverage Days Inventory 529.2% 4 58.96Outstanding 6SG&A Margin 19.2% 7EBITDA Margin 11.3% Average Days Payable Outstanding5 51.30 8EBITA Margin 8.7% 9EBIT Margin 8.5%6 Average Days Sales Outstanding47.6710Pre-tax Margin9.5%Earnings from Continuing115.2%7 Average Cash Conversion Cycle 55.33Operations Margin12Net Income Margin 5.0%8 Net Working Capital to Sales6.9%#Activity Ratios# Liquidity Ratios1 Total Asset Turnover1.051 Total Debt/Equity 0.622 Fixed Asset Turnover1.632 Total Debt/Capital0.383 Accounts Receivable Turnover10.824 Inventory Turnover6.193 Total Liabilities/Total Assets0.55Ratios are based on analysis of financials of 1057 public companiesSource: Capital IQ and Frost & Sullivan analysis.NB40F116 17. Analysis by Average Revenue per CompanyPackaged Food Industry: Packaged Food Industry: Industry Concentration, Global, FY 20102011 Average Revenue per Company,Global, FY 20102011 450,000.0 422,711.3700 Average397,598.9Revenue per400,000.0642 600 RegionCompany350,000.0Revenue in $ millionRevenue in $ million(in $ million)286,307.0 500 300,000.0Asia-Pacific 658.4 250,000.0400Europe2,395.2200,000.0300Middle East150,000.0 395.3 166 98,779.3 200and Africa 100,000.0 9663 90 100Latin America 1,567.9 50,000.037,952.7United States0.0 03,181.2Asia-PacificEuropeMiddle East LatinUnitedand Canada and Africa America States andTotal 1,176.3CanadaRevenue of the public companies (LHS) # of public companies analyzed (RHS)Of the public companies analyzed, Asia-Pacific, with 642 public companies has an average revenue percompany of $658.4 million while North America, with 90 public companies has an average revenue percompany of $3,181.2 million. This huge difference in the average revenue per company is largely due to thefragmented Asia-Pacific market. This presents a bundle of opportunities for industry consolidation in the Asia-Pacific region in the packaged food industry. Source: Capital IQ and Frost & Sullivan analysis.NB40F117 18. Meats, Meat Processing, and Meat-related ProductsTop 10 Companies: Revenue Range: Less than $100 MillionPackaged Food Industry: Top Companies, Financial and Risk Management, Meats, Meat Processing, and Meat-related Products, Less than $100 M Revenue, Global, FY 20102011OverallCompany Name Segments Covered Rank Sen Yu International Holdings, Inc. 1 Meats, meat processing, and meat-related products (OTCBB:CSWG.E) Meats, meat processing, and meat-related products; prepared and preserved 9 Old Chang Kee Ltd (Catalist:5ML) foods; seafood, seafood processing, and seafood products Kee Song Bio-Technology HoldingsMeats, meat processing, and meat-related products; prepared and preserved 21 Limited (GTSM:1258) foods Bairaha Farms PLC (COSE:BFL-N- 30Animal feed; meats, meat processing, and meat-related products 0000) Armanino Foods of Distinction Inc.Frozen foods; meats, meat processing, and meat-related products; prepared 45 (OTCPK:AMNF)and preserved foods; seasonings and preservatives Meats, meat processing, and meat-related products; prepared and preserved 64Colcom Holdings Limited. foods Three Acre Farms PLC 80Meats, meat processing, and meat-related products (COSE:TAFL-N-0000) Dairy products and eggs; edible oils; meats, meat processing, and meat-related 82Ovostar Union NV (WSE:OVO) products Keells Food Products PLCMeats, meat processing, and meat-related products; seafood, seafood 97 (COSE:KFP-N-0000) processing, and seafood products Tianli Agritech, Inc.100Meats, meat processing, and meat-related products (NasdaqGM:OINK)Source: Capital IQ and Frost & Sullivan analysis.NB40F1 18 19. Meats, Meat Processing, and Meat-related ProductsTop 10Companies: Revenue Range: $100 Million to $1,000 MillionPackaged Food Industry: Top Companies, Financial and Risk Management, Meats, Meat Processing, and Meat-related Products, $100 M to $1,000 M Revenue, Global, FY 20102011Overall Company NameSegments Covered Rank HB Global LimitedFrozen foods; meats, meat processing, and meat-related products; prepared and 6 (KLSE:HBGLOB)preserved foods Shandong Yisheng Livestock &Animal feed; dairy products and eggs; meats, meat processing, and meat-related33 Poultry Breeding Co., Ltd.products (SZSE:002458) Kakiyasu Honten Co., Ltd.51Meats, meat processing, and meat-related products (JASDAQ:2294) Sumpo Food Holdings LimitedAnimal feed; meats, meat processing, and meat-related products; seafood, seafood58 (SEHK:1089)processing, and seafood products CCK Consolidated Holdings BhdMeats, meat processing, and meat-related products; seafood, seafood processing,60 (KLSE:CCK) and seafood products Shenguan Holdings (Group) Ltd.70Meats, meat processing, and meat-related products (SEHK:829) Ajinomoto Malaysia Bhd Meats, meat processing, and meat-related products; prepared and preserved foods;78 (KLSE:AJI) seasonings and preservatives; sweeteners Qi County Jiajia Foodstuff Co., Ltd. Edible oils; meats, meat processing, and meat-related products; seasonings and88 (SZSE:002650)preservativesBread and bakery products; confectionery products; meats, meat processing, and Neto ME Holdings Ltd.127 meat-related products; prepared and preserved foods; seafood, seafood (TASE:NTO)processing, and seafood products Livestock Improvement143 Meats, meat processing, and meat-related products Corporation Limited (NZSE:LIC) Source: Capital IQ and Frost & Sullivan analysis. NB40F1 19 20. Meats, Meat Processing, and Meat-related ProductsTop 10 Companies: Revenue Range: Greater than $1 BillionPackaged Food Industry: Top Companies, Financial and Risk Management, Meats, Meat Processing, andMeat-related Products, Greater than $1 B, Global, FY 20102011Overall Company Name Segments Covered RankVietnam Dairy Products Joint Bread and bakery products; coffee and tea; dairy products and eggs; grain mill products;13Stock Company (HOSE:VNM) meats, meat processing, and meat-related products; prepared and preserved foods Bread and bakery products; frozen foods; meats, meat processing, and meat-relatedHormel Foods Corp.55 products; prepared and preserved foods; seafood, seafood processing, and seafood(NYSE:HRL) products; seasonings and preservatives; sweeteners137 Astral Foods Ltd. (JSE:ARL)Animal feed; frozen foods; meats, meat processing, and meat-related products Animal feed; bread and bakery products; coffee and tea; frozen foods; grain millOsem Investments Ltd.145products; meats, meat processing, and meat-related products; prepared and preserved(TASE:OSEM) foods; seasonings and preservativesHilton Food Group plc146Meats, meat processing, and meat-related products(LSE:HFG)Peoples Food Holdings Ltd.148Meats, meat processing, and meat-related products(SGX:P05)Henan Shuanghui Investment &153 Development Co. Ltd. Meats, meat processing, and meat-related products(SZSE:000895) Bread and bakery products; coffee and tea; confectionery products; dairy products andKraft Foods Group, Inc.166eggs; meats, meat processing, and meat-related products; prepared and preserved(NasdaqGS:KRFT) foods; seasonings and preservatives184 Minerva S.A (BOVESPA:BEEF3)Frozen foods; meats, meat processing, and meat-related products Edible oils; frozen foods; grain mill products; meats, meat processing, and meat-relatedOttogi Corporation186products; prepared and preserved foods; seafood, seafood processing, and seafood(KOSE:A007310) products; seasonings and preservativesSource: Capital IQ and Frost & Sullivan analysis.NB40F120 21. Legal Disclaimer Frost & Sullivan takes no responsibility for any incorrect information supplied to us by manufacturers or users. Quantitative market information is based primarily on interviews and therefore is subject to fluctuation. 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