Nestle financial report analysis 2013 & 2014
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Transcript of Nestle financial report analysis 2013 & 2014
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RATIO ANALYSIS OFNESTLE PAKISTAM
UVAS BUSINESS SCHOOLPRESENTED TO
SIR SHAHID MEHMOODPRESENTED BY
ALI RAZA FAIZA GULAM RASOOLIQRA IHSANRAMEELA SHAFIQUENAILA JAMEEL SHAHRYAR AKRAMATTIYA SHOUKAT
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Ratio Analysis
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Introduction• Nestlé Pakistan Ltd is a subsidiary of
Nestlé S.A. – – a company of Swiss origin
headquartered in Vevey, Switzerland. • Operating in Pakistan since 1988• Food processing company• Headquarter is in Lahore• Operates the biggest milk collection
operation in Pakistan.
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NESTLÉ’S FOUNDER, GERMAN-BORN PHARMACIST HENRI NESTLÉ, LAUNCHES HIS ‘FARINE LACTÉE’ (‘FLOUR WITH MILK’) IN VEVEY, SWITZERLAND. IT COMBINES COW’S MILK, WHEAT FLOUR AND SUGAR, AND NESTLÉ DEVELOPS IT FOR CONSUMPTION BY INFANTS WHO CANNOT BE BREASTFED, TO TACKLE HIGH MORTALITY RATES. AROUND THIS TIME HE STARTS USING THE NOW ICONIC ‘NEST’ LOGO.
HISTORYIn1867
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History• 1979
– MILKPAK Ltd. was founded by Syed Babar Ali• 1988
– Nestlé SA acquired 40 percent shares in MILKPAK Ltd.• 1992
– Nestlé took over the running of the company• 1996
– MILKPAK Ltd. was renamed Nestlé MILKPAK Ltd.• 2005
– Nestlé MILKPAK Ltd was renamed Nestlé Pakistan Ltd.
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Nestle Pakistan• It operates four production
factories. • In Sheikhupura and Kabirwala
– multi product factories• And in Islamabad and Karachi
– produce water.
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Products of Nestle Pakistan
•
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Ratios Analysis
Ratios analysis is important for :• Analyzing Financial Statements• Judging Efficiency• Locating Weakness• Formulating Plans• Comparing Performance
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Current Ratio(working capital Ratio )
Current assets
Current liabilities
Current Ratios
•primary measure liquidity•Relates current assets to current liabilities•2:1 or higher is satisfactory
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Current Ratio
2014
=0.66 : 1
2013
=0.99 : 1
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ACID TEST RATIO
CURRENT ASSETS
Current liabilities
ACID TEST
RATIO
=Current Assets - inventory
•more reliable test of short-term solvency• 1:1 is satisfactory•measures the ability to use liquid assets to pay current liabilities
STOCK AND SPARE
• STOCK IN TRADE
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ACID TEST RATIO
2014
= 0.26 : 1
2013
=0.48 : 1
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Long-term Solvency Ratios• Solvency ratios tells……..
• Some major solvency ratios are:-
• 1) Gearing Ratio• 2) Interest Coverage Ratio• 3)Debt Ratio
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1)Gearing Ratio:-The gearing ratio is a general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds.
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Gearing Ratio:-• Description……
Long term debt
Total capital
EmployedGEARING
ratio
Equity + LTD
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Gearing Ratio:-
• As described below in comparison ………
2013 2014
(17464812/29323969)*100
=59.558%6951459/19579084*100
=35.50%
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2) Interest coverage ratio:-• This ratio tells us about the ability of
company to meet its interest payments……
• If it is increasing then it is good for business ,
• If it is decreasing then it is not good for business
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Interest coverage ratio:--
PBFC & TAX FINANCIAL CHARGES
Interest coverage
ratio
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Interest coverage ratio:-• Comparison over 2 years:-
2013: 2014:
11471270/2113096 = 5.4286 TIMES
14113463/2155637 = 6.547 TIMES
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3) DEBT Ratio:-• Debt ratio measures a firm’s totalliabilities as a percentage of its total assets.• The higher percentage indicates
more leverage and more risk.
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DEBT Ratio:-
TOTAL LIABILITIES
Total ASSETS
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DEBT Ratio:-• Comparison over 2 years:-
2013: 2014:
(40430364/52289521 )*100=
77.3%
(39103070/52289521)*100= 75.58%
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EFFICIENCY The comparison of what is actually PRODUCED or performed with what can be achieved with the same CONSUMPTION of RESOURCES (MONEY, time, LABOUR etc.). IT is an important FACTOR in determination of PRODUCTIVITY.
“Measures the Efficiency of the Business”
TRADE RECEIVABLE COLLECTION PERIOD.TRADE PAYABLE PAYMENT PERIOD. INVENTORY PERIOD.
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TRADE RECEIVABLE COLLECTION PERIOD
TRADE RECEIVABLES
2013
=1.38 days
2014
= 1.03 days
365 (DAYS)SALES (CREDIT)
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TRADE PAYABLES PAYMENT PERIODThe trade payables payment period ratio represents the time lag between a credit purchase and making payment to the supplier. As trade payables relate to credit purchases so credit purchases figure should be used in calculating this ratio. However as the amount of credit purchase is usually not separately available in the income statement so in that case total purchases could be used.
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TRADE PAYABLE PAYMENT PERIOD
2013 2014
= 55 days
2014
= 75 days
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INVENTORY PERIODIn accounting, inventory period is a measure of the average number of days inventory is
held, calculated by dividing the inventory by the average daily cost of goods sold. It is
also called days in inventory.
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Inventory Conversion Period
INVENTORY COST OF SALES
2013
= 46 days
2014
= 51days
365
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INVESTMENT RATIOS
• DIVIDEND YIELD (%)• DIVIDEND PAYOUT(%)• EARNING PER SHARE• PRICE / EARNING RATIO• TOTAL SHARE HOLDER RETURN
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DIVIDEND YIELD (%)
ANNUAL DIVIDEND PAID PER
SHARE
MARKET PRICE PER
SHARE
DIVIDEND YIELD
The dividend yield is a financial ratio that measures the amount of cash dividends distributed to common shareholders relative to the market value per share.
DIVIDEND PAYMENT FTOTAL NUMBER OF
SHARE OUTSTANDING
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CALCULATION
2014
78/1700
=0.111*100
=11.1%
2013
=75/1700
=0.0441*100
=4.41%
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DIVIDEND PAYOUT (%)
TOTAL DIVIDEND
PAID
PROFIT AFTER TAX & PRFERENCE DIVEDEND
DIVIDEND PAYOUT
The dividend payout ratio measures the percentage of net income that is distributed to shareholders in the form of dividends during the year.
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CALCULATION
TOTAL DIVIDEND PAID
PROFIT AFTER TAX & PRFERENCE DIVEDEND
2014
=
=89%
2013
= 0 .92
=92%
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EARNING PER SHARE
Definition:“This ratio tells us about earning on “1” share”.
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EARNING PER SHARE
=5866763000 / 45349584= 129.36
=7929271000 / 45349584= 174.8
2013
2014
=Profit after tax /
no. of share
outstanding
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Definition of 'Price / Earnings Ratio - P/E Ratio'
A valuation ratio of a company's current share price compared to its per-share earnings.
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PRICE EARNING RATIO
=Market price per
share\ earning
per share
=1700/127.36=13.34 TIMES
=1700/174.8=9.7 TIMES
2013
2014
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TOTAL SHARE HOLDER RETURN
• The internal rate of return of all cash flows to an investor during the holding period of an investment.
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TOTAL SHAREHOLDER RETURN
• Comparison over 2 years:-
2013: 2014:
=5439789+249527/10= 5464741
=7032581+249527/10=7057533.7
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Return on total capital employed (ROCE) %
A ratio that indicates the efficiency and profitability of a company's capital investments.
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Ways to calculate
OR
PROFIT MARGIN
ASSETS TURN OVER
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Capital employed
EQUITY
+LONG TERM
DEBTS OF COMPANY
=11859157+22429375=34288532
=11325830+12627625=23953455
2013
2014
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ROCE %
2014
=58.9%
2013
=33.45%
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ROCE
Profit margin= EBIT / SLAES
Assets turn over=sales / capital employed
ROCE= profit
assets turn
over
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PROFIT MARGIN %
201311471270/86226869
=0.13303591
201414113463/96457743
=0.146317574
PROFIT MARGIN=EBIT / SALES
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ASSETS TURNOVER
2014=96457743/23953455
=4.02688226
SALES /
CAPITAL
EMPLOYED
2013=86226869/34288532
=2.514743676
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ROCE %
ROCE= PROFIT
ASSETS TURNOVE
=0.133*2.514=33.45%
=0.1463*4.0268= 58.9 %
2013
2014
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Return On Equity
“Desired to work out the profitability of the company”
Formula:
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RETURN ON EQUITY
Net profit /
equity
=49.4%2013
2014=62.79%
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GROSS PROFIT RATIO
“Ratio of gross profit to Net sales”
Formula
Net sales= Sales –Returns Inward
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Gross profit margin %
2014
=62.79%
Gross profit
/Sales*100
2013
=49.4%
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Operating expense %
100salesOperating expense
Operating expense
ratio
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Operating expense
2014
=13.69%
2013
=14.71%
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Operating Profit Ratio
“Calculated by dividing the Operating Net Profit by Sales”
Formula:(Operating Profit/Net sales)*100
Determined the Ability Of
the Management
in Running the Business
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Operating Profit Ratio
2013=11471270/86226869*100
=13%
2014 14113463/96457743
=14%
(Operating
Profit/Net
Sales)*100
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CONCLUSIONThe company performance not bad and still nestle is the market leader in Pakistan . But the company have more chance to increase its growth and market share.So we can say company performance is satisfactory.
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