Profitability & Growth Analysis of SPL & OPL

MASTER OF PROFESSIONAL FINANCE (MPF) UNIVERSITY OF DHAKA

ASSIGNMENT ON FINANCIAL STATEMENT ANALYSIS OF

PROFITABILITY & GROWTH

PF-603

SUBMITTED BY

Debabrata Barman ID: FIN-02-16-063 Semester: Jan-June 2016 Master of Professional Finance (MPF) Program

SUBMITTED TO

Dr. Mahmood Osman Imam Professor Department of Finance, Business Faculty University of Dhaka

Letter of Transmittal 01st July, 2016 To Dr. Mahmood Osman Imam Professor Department of Finance, Business Faculty, University of Dhaka. Subject: Submission of Financial Statement Analysis report on “Analysis of Profitability and Analysis of Growth of SPL and OPL.” Dear Sir, This is my great pleasure to submit the report of my six months long 1st Semester MPF program in the Square Pharmaceutical Ltd (SPL) and Orion Pharmaceutical Ltd (OPL), under the Finance Department. The title of the report is “Financial Statement Analysis of Profitability and Growth Analysis of SPL and OPL”. This report has been prepared to fulfill the requirement of my 1st Semester, MPF program at my assigned organization, SPL and OPL. I have put my best effort to make this report a successful one. It has been joyful & enlightening experience for me to work in the organization & prepare this report. However this has been obviously a great source of learning for me to conduct similar types of studies in the future.

I would like to express my sincere gratitude to you for your kind guidance & suggestions in preparing the report. It would be my immense pleasure if you find this report useful & informative to have an apparent perspective on the issue. I shall be happy to provide any further explanation regarding this report if required & please do not hesitate to call me if you have any query on this report or any other relevant matters.

Thanks and best regards,

Debabrata Barman ID: Fin-02-16-063

Acknowledgement This report is an accumulation of many people’s endeavor. But at the beginning I would like

to convey my sincere appreciation to the almighty GOD for giving me the strength & the

ability to finish the task within the planned time. Then I like to express my sincere gratitude

to everyone who contributed towards preparing & making this study successfully.

First of all I would like to express my Sincere & immense gratitude to our honorable MPF

program teacher, Dr. Mahmood Osman Imam, Professor, Department of Finance, University

of Dhaka. I am deeply indebted to her whole hearted supervision to me during the Period. Her

valuable suggestions & guideline helped me a lot to prepare the report in a well organized

manner.

I would also like to thank the authority of Square Pharmaceutical Limited and Orion

Pharmaceutical Limited for giving me the opportunity to access and use their website and

supplying me necessary information and published papers.

I am also grateful to the other officials of MPF program & my all MPF program friends who

helped me while preparing the report by giving their suggestions, assistance & supply of

information, which were valuable to me. Finally, I want to keep my thanks to my parent who

gave special attention to me from the very beginning and during the preparation of report &

the internship program.

Executive Summary

The financial statement analysis report is made on financial profitability and growth analysis

of Square Pharmaceutical Ltd (SPL) and Orion Pharmaceutical Ltd (OPL), the report

includes the process of reviewing and evaluating the company’s financial statements because

without this the profitability and growth analysis cannot be done. Profitability and Growth

analysis mainly calculates the statistical relationships between data. The profitability and

growth analysis helps an organization to understand that on the last fiscal year, how their

performance and it was also helps them to take decisions in future.

This topic is selected by our honorable MPF Program teacher as per Financial Statement

Analysis & Reporting course module. The beginning part of my report contains the brief

introduction of the selected company and the objectives, scope, methodology and limitations

of the study.

In the second part, I have covered the detailed background of the company such as the

history, global network, mission & strategy, the organizational structure, market position and

an overview of its products and operations.

Then starts the main analysis part of my report where I have analyzed horizontal and vertical

financial statements analysis and ratios of consecutive five years. Here I have presented the

result and according the result, I have interpreted the financial condition of SPL and OPL.

In the next part, Profitability and Growth analysis is the most important where I have

discussed my findings about the financial performance of SPL and OPL and based on the

findings I have given some recommendations that will help SPL and OPL to strengthen their

financial base more.

Lastly I have come with a brief conclusion and then presented appendix and necessary

references.

TABLE OF CONTENT

Executive Summary

Chapter One: Introduction

1.1: Introduction……………………………………………………………………..1-2

1.2: Objective of the Study…………………………………………………………..2

1.3: Scope…………………………………………………………………………… 2

1.4: Methodology ……………………………………………………………………2

1.5: Limitations……………………………………………………………………....2-3

Chapter Two: Organizational Over View

2.1: Square Pharmaceutical Ltd. at a Glance...............................................................3-4

2.2: Orion Pharmaceutical Ltd. at a Glance.................................................................4-6

2.3: Share Holding Status.............................................................................................6-7

Chapter Three: Financial Analysis

3.1: Horizontal analysis................................................................................................8

3.2: Horizontal Analysis: Graphical presentation.........................................................9

3.3: Vertical analysis.....................................................................................................10

3.4: Vertical Analysis: Graphical presentation..............................................................11

Chapter Four: Ratio analysis

4.1: Profitability ratio

4.1.1 Net Profit Margin..........................................................................................12

4.1.2 Return on Equity...........................................................................................12-13

4.2: Liquidity ratio

4.2.1 Current Ratio.................................................................................................13

4.2.2 Quick Ratio...................................................................................................13-14

4.3: Activity/Efficiency Ratio

4.3.1 Inventory Turnover ratio...............................................................................14

4.3.2 Total Asset Turnover ratio............................................................................14

4.4: Solvency ratio/leverage ratio

4.4.1 Debt - Equity Ratio.......................................................................................15

4.4.2 Debt - Total Asset Ratio................................................................................15

Chapter Five: Analysis of Profitability

5.1: Square Pharmaceutical Limited (Last Five Years)...............................................16

5.2: Orion Pharmaceutical Limited (Last Four Years).................................................17

5.3: Graphically presentation of Profitability Analysis................................................18-24

Chapter Six: Analysis of Growth

6.1: Analysis of growth of Square Pharmaceutical Ltd. (Last Five Years)..................25

6.2: Analysis of growth of Orion Pharmaceutical Ltd. (Last Four Years)...................25-26

6.3: Graphically Growth Analysis of SPL and OPL................................................................26

Chapter Seven: Conclusion........................................................................................27

Chapter Eight: Appendix

8.1: Financial Statements

8.1.1 Balance Sheet of SPL (Last Five Years)......................................................28-29

8.1.2 Balance Sheet of OPL (Last Four Years).....................................................29-30

8.1.3 Income Statement of SPL (Last Five Years)................................................30-31

8.1.4 Income Statement of OPL (Last Four Years)...............................................31-32

8.2: Reformulation Financial Statements

8.2.1 Reformulated Balance Sheet of SPL (Last Five Years)...............................33

8.2.2 Reformulated Balance Sheet of OPL (Last Four Years)..............................34

8.2.3 Reformulated Income Statement of SPL (Last Five Years).........................35

8.2.4 Reformulated Income Statement of OPL (Last Four Years)........................36

Chapter Nine: References.........................................................................................37

of 37

CHAPTER ONE

1.1 Introduction

Square Pharmaceutical Ltd.

SQUARE today symbolizes a name – a state of mind. But its journey to the growth and prosperity has been no bed of roses. From the inception in 1958, it has today burgeoned into one of the top line conglomerates in Bangladesh. Square Pharmaceuticals Ltd., the flagship company, is holding the strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a high performance global player.

SQUARE Pharmaceuticals Limited is the largest pharmaceutical company in Bangladesh and it has been continuously in the 1st position among all national and multinational companies since 1985. It was established in 1958, converted into a public limited company in 1991 and listed with stock exchanges in 1995. The turnover of Square Pharma was Taka 30.28 Billion (US$ 385.22 million) with about 18.64% market share having a growth rate of about 25.36% (April 2014– March 2015).

SQUARE Pharmaceuticals Limited has extended its range of services towards the highway of global market. It pioneered exports of medicines from Bangladesh in 1987 and has been exporting antibiotics and other pharmaceutical products. Present export market covers 36 countries. This extension in business and services has manifested the credibility of Square Pharmaceuticals Limited.

Orion Pharmaceutical Ltd.

Orion Pharma a member of Orion Group was founded as a pharmaceutical manufacturing company in 1965. With the mission to serve the ailing humanity around the globe Orion pharma started its operation nearly four decades ago, and after a great run of success the company today has proliferated out into one of the leading pharmaceutical companies in Bangladesh. It has already established itself to the doctor's community, other health care professionals, chemists and patients as a provider of quality medicines and health care services through 50 brands and 51 presentations of various formulations.

With the mission to serve the ailing humanity around the globe, Orion Pharma has proliferated into one of the leading pharmaceutical companies in Bangladesh manufacturing and marketing general drugs. It has already established itself to the doctor's community, other healthcare professionals, chemists and patients as a provider of quality medicines and healthcare services through 115 brands and 250 presentations of various formulations complying Good Manufacturing Practices (GMP) and the guidelines of ISO-9001: 2008 Quality Management System. Orion Pharma manufactures and markets a wide array of dosage forms including tablet, capsule, syrup, suspension, injection, dry powder for syrup/suspension, cream/ointments in

of 37

different therapeutic groups like anticancer, antibiotics, anti diabetics, anxiolytics, diuretics, cardiovascular drugs etc.

The global landscape of pharmaceutical market is changing continuously with the rapid pace of innovation in terms of pharmaceutical technology, regulatory requirements and treatment options. To cope up with these changes, Orion Pharma Ltd. is currently implementing one of the finest facilities for pharmaceutical finished products in south-east Asia. The facilities will follow the 'Current Good Manufacturing Practices' standards of international regulatory authorities like USFDA, UK MHRA, Health Canada, and Australian TGA etc. This new facility is going to be the biggest in the pharmaceutical sector of Bangladesh in terms of investment, covered area, number of varieties of dosage forms to be produced as well as superb in terms of pharmaceutical technology, waste management, monitoring system and eco-friendliness.

1.2 Objective of the Study Primary objective of the study entails the Profitability and Growth Analysis of Square Pharmaceutical Limited and Orion Pharmaceutical Limited in order to assess the performance and financial condition of the company. Secondary objective is to fulfill my internship requirement. 1.3 Scope of the Study Defining the scope of the study is a broad aspect to be described. Definitely Finance department of Master of Professional Finance (MPF) Program helped me a lot to prepare the report but still there were some limitations as confidentiality is strictly maintained in Square Pharmaceutical Ltd. and Orion Pharmaceutical Ltd. 1.4 Methodology of the Study

In order to complete the study, two types of data have been used-

Data Collection

Primary Data

Secondary Data

Primary Data was collected through our course teacher of the MPF program of Finance Department, University of Dhaka.

Secondary Data was collected mainly through the website of Square Pharmaceutical Limited and Orion Pharmaceutical Limited. Besides these, I also studied some published reports and organizational documents. 1.5 Limitations of the Study

of 37

Their security concern about revealing the information was one of the biggest challenges for me. For ensuring confidentiality SPL and OPL authority was unwilling to share some information which was really needed to prepare the report. Their official website also contains a limited amount of information required for making a report; I mainly covered the information from annual reports and through the primary sources of data. Then the time duration for preparing the report was not enough. Lastly, due to the work load I also got limited time to prepare the report. As the PMF Program was first practical experience for me, so it was possible for me to understand the whole and actual financial performance of SPL and OPL. Based on the annual reports’ data I have used my understanding about finance to find out the Profitability and Growth analysis and interpret the situation. So, the statements, recommendations and conclusions are made according to my knowledge and level of understanding.

In spite of having much difficulties and limitations, I have given my best effort to accomplish the report successfully. CHAPTER TWO

Organizational Over View: 2.1 Square Pharmaceutical Ltd. at a Glance

SQUARE today symbolizes a name – a state of mind. But its journey to the growth and prosperity has been no bed of roses. From the inception in 1958, it has today burgeoned into one of the top line conglomerates in Bangladesh. Square Pharmaceuticals Ltd., the flagship company, is holding the strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a high performance global player.

of 37

Year of Establishment (Initially as a Partnership) : 1958 Incorporated as a Private Limited Company : 1964 Technical Collaboration Agreement with Janssen Pharmaceuticals of Belgium (A subsidiary of Johnson & Johnson International Ltd.)

: 1974

Technical Collaboration Agreement with F. Hoffman-La Roche & Co. Ltd. : 1982 Converted into Public Limited Company : 1991 Initially Public Offering (IPO) of shares of SQUARE Pharmaceuticals Ltd. : 1994 Stock Exchange Listing (Dhaka & Chittagong) : 1995 Agreement with M/s. Bovis Tanvec Ltd. of UK for implementation of Dhaka Plant : 1996 Awarded ISO-9001 Certificate : 1998 SQUARE Pharmaceuticals Ltd., Dhaka Unit gets the UK MHRA approval : 2007 Awarded TGA Certificate : 2012 Awarded “AA+” rating in the long term and ”ST-1” rating in short term by CRISL : 2013 PAI (Pre Approval Inspection) by US FDA was successful for Dhaka Site’s solid dosage unit and WHO approved Square’s GMP

: 2015

Business Lines : Manufacturing and Marketing of Pharmaceutical Finished Products, Basic Chemicals, Agro Vet Products and Pesticide Products

Authorized Capital : Tk. 10,000 Million Paid-up Capital : Tk. 6,235 million

Number of Employees : 6,710 Subsidiary Company: Square Formulations Ltd. Associate Company : Square Textiles Ltd. Square Fashions Ltd. Square Hospitals Ltd.

2.2 Orion Pharmaceutical Ltd. at a Glance:

Orion Pharma Limited is one of the Premier Pharmaceutical Companies of Bangladesh which has been contributing to improving the human health care of the Country by providing quality branded-generic pharmaceuticals. We, at Orion Pharma Limited, always believe in 'Quality Never ends' and refuse to settle for anything until it exceeds the existing standard. Consequently, Orion Pharma Limited has been superseding the market growth consistently by wide margin in last few years. The company has been awarded with the ISO-9001: 2000 Certificate in January 2003 for serving its valued customers with products of excellent quality. Having four decades of vast experience imbibed with technical and professional expertise, Orion Pharma Limited now levers a wide array of therapeutic areas including life saving anti-cancer drugs and injectables having more than 110 generics and 220 presentations of Capsule, PFS, ampoule, cephalosporin injectables, and cream and ointment products of different therapeutic group.

The global landscape of pharmaceutical market is changing continuously with the rapid pace of innovation in terms of pharmaceutical technology, regulatory requirements and treatment options. To cope up with these changes Orion Pharma, is going to build one of the finest

of 37

facilities for pharmaceutical finished products in South-East Asia. The facilities will be created in accordance with the "Current Good Manufacturing Practices" and standards of international regulatory authorities like USFDA, UK MHRA, Australian TGA etc.

This new facility will be one of the biggest in the pharmaceutical sector of Bangladesh in terms of investment, covered area, number of varieties of dosage forms to be produced as well as superb in terms of pharmaceutical technology, waste management, monitoring system and eco-friendliness. It will be built in approximately 27 Acres of land at Siddhirganj, Narayanganj. The production facilities will include Oncology, Hormone, Ophthalmic and General Formulation. The construction of this facility is going on in full swing and will be completed very soon.

Incorporated as a Private Limited Company (earlier known as Orion Laboratories Limited)

21st June, 1965

Date of Commercial Operation 25th November, 1966 Converted into Public Limited Company 24th June, 2010 Name changed into Orion Pharma Limited 15th October, 2010 Initial Public Offering (IPO) of shares of Orion Pharma Limited 2012

Listing with both Dhaka & Chittagong Stock Exchanges 2013

Business Lines

Manufacturing and Marketing of Pharmaceutical Finished Products, branded-generic primary and chronic care medicines, maintaining strict compliance of WHO & CGMP standards.

Authorized Capital Tk. 5,000 Million

of 37

Paid-up Capital Tk. 2,340 Million Number of Employees 2,063

Subsidiary Company Orion Power Meghnaghat Limited Dutch Bangla Power & Associates Limited

Associate Company Orion Infusion Limited Orion Infrastructure Limited

2.3 Share Holding Status Square Pharmaceutical Ltd.

Share holdings structure (in %) for the year ended 31 March 2015:

of 37

Orion Pharmaceutical Ltd.

of 37

CHAPTER THREE

Financial Analysis

3.1 Horizontal analysis:

Exhibit-1: Horizontal Analysis (Trend/Index) for last four years:

Broad Heading of Income Statement & Balance Sheet

(All Figures are BDT Million)

Particulars Regular Index (%)

2011 2012 2013 2014 2011 2012 2013 2014 Square Pharmaceutical Ltd: Revenue 16,975 19,798 20,202 23,268 100% 117% 119% 137% Gross Profit 6,691 7,890 8,797 10,308 100% 118% 131% 154% Profit before Income Taxes 3,770 4,350 4,863 5,912 100% 115% 129% 157% Profit after taxes 2,831 3,125 3,553 4,251 100% 110% 126% 150% Current Assets 8,454 8,249 6,946 7,499 100% 98% 82% 89% Total Assets 22,520 24,377 27,257 31,046 100% 108% 121% 138% Total Owners Equity 15,970 19,127 22,378 26,749 100% 120% 140% 167% Current Liabilities 5,522 4,315 3,275 2,395 100% 78% 59% 43% Total Liability 6,551 5,249 4,879 4,297 100% 80% 74% 66%

Orion Pharmaceutical Ltd: Revenue 7,026 9,546 11,012 10,707 100% 136% 157% 152% Gross Profit 2,086 3,046 2,896 2,714 100% 146% 139% 130% Profit before Income Taxes 1,285 1,288 1,073 1,147 100% 100% 84% 89% Profit after taxes 967 1,069 981 1,050 100% 111% 101% 109% Current Assets 2,974 3,601 3,987 6,897 100% 121% 134% 232% Total Assets 23,466 25,330 25,754 26,092 100% 108% 110% 111% Total Owners Equity 12,263 13,207 15,875 16,552 100% 108% 129% 135% Current Liabilities 3,589 4,718 5,027 3,196 100% 131% 140% 89% Total Liability 11,203 12,122 9,879 9,540 100% 108% 88% 85%

of 37

3.2 Horizontal Analysis: Graphical presentation

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Rev GP EBIT EAIT CA TA EQ CL TL

Square Pharmaceutical Ltd (In Million BDT)

2013 2014

-

5,000

10,000

15,000

20,000

25,000

30,000

Rev GP EBIT EAIT CA TA EQ CL TL

Orion Pharmaceutical Ltd (In Million BDT)

2013 2014

of 37

3.3 Vertical analysis:

Exhibit-2: Vertical Analysis (Trend/Index) for last three years: Broad Heading of Income Statement & Balance Sheet

(All Figures are BDT Million)

Particulars Regular (Million BDT) Index (%)

2011 2012 2013 2014 2011 2012 2013 2014 Square Pharmaceutical Ltd: Revenue 16,975 19,798 20,202 23,268 100% 100% 100% 100% COGS 10,284 11,908 11,405 12,961 61% 60% 56% 56%

Gross Profit 6,691 7,890 8,797 10,308 39% 40% 44% 44% Current Assets 8,454 8,249 6,946 7,499 38% 34% 25% 24% Non - Current Assets 14,066 16,128 20,310 23,547 62% 66% 75% 76% Total Assets 22,520 24,377 27,257 31,046 100% 100% 100% 100% Current Liabilities 5,522 4,315 3,275 2,395 25% 18% 12% 8% Non-Current Liabilities 1,029 934 1,603 1,903 5% 4% 6% 6% Shareholder's Equity 15,970 19,127 22,378 26,749 71% 78% 82% 86%

Total Liability & Equity 22,520 24,377 27,257 31,046 100% 100% 100% 100%

Orion Pharmaceutical Ltd: Revenue 7,026 9,546 11,012 10,707 100% 100% 100% 100% COGS 4,941 6,500 8,116 7,992 70% 68% 74% 75% Gross Profit 2,086 3,046 2,896 2,714 30% 32% 26% 25% Current Assets 2,974 3,601 3,987 6,897 13% 14% 15% 26% Non - Current Assets 20,492 21,728 21,767 19,196 87% 86% 85% 74% Total Assets 23,466 25,330 25,754 26,092 100% 100% 100% 100% Current Liabilities 3,589 4,718 5,027 3,196 15% 19% 20% 12% Non-Current Liabilities 7,613 7,404 4,852 6,344 32% 29% 19% 24% Shareholder's Equity 12,263 13,207 15,875 16,552 52% 52% 62% 63% Total Liability & Equity 23,466 25,330 25,754 26,092 100% 100% 100% 100%

of 37

3.4 Vertical Analysis: Graphical presentation

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Rev

COGS

GP

CA

NCA

TA

CL

NCL

EQ

TL&EQ

Square Pharmaceutical Ltd. (In Million BDT)

2014 2013

- 5,000 10,000 15,000 20,000 25,000 30,000

Rev

COGS

GP

CA

NCA

TA

CL

NCL

EQ

TL&EQ

Orion Pharmaceutical Ltd. (In Million BDT)

2014 2013

of 37

CHAPTER FOUR

Ratio analysis:

There are few types of ratio analysis are discussed below:

4.1 Profitability ratio:

Net Profit X 100 4.1.1 Net Profit Margin=

Sale

Calculation :( Amount in Million BDT.) Year Net Profit Sale Ratio Square Pharma Ltd.

2013 4129 x 100 20202 20.44% 2014 4946 x 100 23268 21.57%

Orion Pharma Ltd.

2013 1001 x 100 11012 9.09% 2014 992 x 100 10707 9.26%

Comment: The profit margin in 2014 is a bit higher than the previous year. It represents the company is

getting efficient in sales as well as operational cost management. A higher profit margin

indicates a more profitable company that has better control over its costs. So, Square

Pharmaceutical Ltd. more profitable company than Orion Pharmaceutical Ltd due to higher

profit margin.

Net Profit X 100 4.1.2 Return on Equity=

Owner's Equity (OE)

Calculation: (Amount in Million BDT.) Year Net Profit Owner’s Equity Ratio Square Pharma Ltd.

2013 4129 x 100 22,378 18.45% 2014 4946 x 100 26,749 18.49%

Orion Pharma Ltd.

2013 1001 x 100 15,875 6.31% 2014 992 x 100 16,552 6.00%

Comment:

of 37

In 2014, Square can earn 18.49% return on its equity and in 2013, can earn 18.45% on its equity

that mean utilization of equity management is better in 2014 than 2013. Whereas Orion can earn

6.00% return on its equity and in 2013, can earn 6.13% on its equity.

4.2 Liquidity ratio:

Current Assets (CA) 4.2.1 Current Ratio =

Current Liabilities (CL)

Calculation: (Amount in Million BDT.) Year Current Assets (CA) Current Liability (CL) Ratio Square Pharma Ltd.

2013 6946 3275 2.12 2014 7499 2395 3.31

Orion Pharma Ltd.

2013 3987 5027 0.79 2014 6897 3196 2.16

Comment: In 2014, Square Pharma has current assets of Tk.3.31 against Tk.1.00 current liabilities and in

2013, has current assets of Tk.2.12 against Tk.1.00 current liabilities. Square is in the increasing

position in 2014 because higher value of currents assets than that of previous year. On the other

hand Orion Pharma also 2.16 (2014) and 0.79 (2013) but lower than of Square Pharma.

CA - Inventory 4.2.2 Quick Ratio =

Current Liabilities (CL)

Calculation: (Amount in Million BDT.) Year CA - Inventory Current Liability (CL) Ratio Square Pharma Ltd.

2013 6946 – 3091 3275 1.18 2014 7499 – 2737 2395 1.99

Orion Pharma Ltd.

2013 3987 – 455 5027 0.70 2014 6897 - 443 3196 2.02

Comment: In 2014, Square Pharma has 1.99 times quick assets over current liabilities and in 2013, has 1.18 times quick assets over current liabilities. The trend leads to an increasing position in comparison to the last year. It represents the liquidity position is getting higher day by day. Company is able to pay liabilities out of its Quick Asset. In case of Orion Pharma it has 2.02 (2014) and 0.70 (2013) also

of 37

increasing position in comparison to the last year. It means Company is able to pay liabilities out of its quick assets. 4.3 Activity/Efficiency Ratio

COGS 4.3.1 Inventory Turnover ratio =

Avg Inventory

Calculation: (Amount in Million BDT.) Year COGS Avg. Inventory Ratio Square Pharma Ltd.

2013 11405 3135 3.64 2014 12961 2914 4.45

Orion Pharma Ltd.

2013 715 456 1.57 2014 728 449 1.62

Comment: It measures the company’s ability to convert the inventory into sale. In 2013, Square Pharma can sale its inventory 3.64 times in a year and in 2014 it is 4.45 times. In 2014, Square Pharma is in a better position in terms of sales of inventory in a year. In case of Orion Pharma it has 1.62 (2014) and 1.57 (2013).

Net Sales 4.3.2 Total Asset Turnover ratio =

Avg. Total Assets Calculation: (Amount in Million BDT.) Year Net Sale Avg. Total Assets Ratio Square Pharma Ltd.

2013 20202 25817 0.78 2014 23268 29152 0.80

Orion Pharma Ltd.

2013 11012 25542 0.43 2014 10707 25923 0.41

Comment: In 2013, Square Pharma generates sales of BDT 0.78 by using assets of BDT 1.00 and in 2014, generates sales of BDT 0.80 by using assets of BDT 1.00. That means, productivity of assets/asset utilization is more in 2014 than 2013 where as in Orion Pharma is more 2013 (0.43) than 2014 (0.41).

of 37

4.4 Solvency ratio/leverage ratio:

Total Liability/Debt 4.4.1 Debt - Equity Ratio =

Total Equity

Calculation: (Amount in Million BDT) Year Total Liability Total Equity Ratio Square Pharma Ltd.

2013 4878 22378 0.22 2014 4298 26749 0.16

Orion Pharma Ltd.

2013 9879 15875 0.62 2014 9540 16552 0.58

Comment:

In 2013, Square Pharma has liability of BDT 0.22 against equity of BDT 1.00 and in

2014, has liability of BDT 0.16 against equity of BDT 1.00 million. In terms of debt

management, the company is in good position in 2014. On the other hand Orion Pharma has

BDT 0.62 (2013) and BDT 0.58 (2014) against equity of BDT 1.00 million.

Total Liability

4.4.2 Debt - Total Asset Ratio = Total Asset

Calculation: (Amount in Million BDT.) Year Total Liability Total Assets Ratio Square Pharma Ltd.

2013 4878 27257 0.18 2014 4298 31046 0.14

Orion Pharma Ltd.

2013 9879 25754 0.38 2014 9540 26092 0.37

Comment: In 2014, Square Pharma 14.00% of assets are financed by debt and in 2013, 18.00% of assets are financed by debt. The higher the ratio, the more leveraged of the company represents the greater financial risk. In terms of financial risk, the company is in better position in 2014. Whereas Orion Pharma 37.00% (2014) and 38.00% (2013) but lower position than Square Pharma.

of 37

CHAPTER FIVE Analysis of profitability: 5.1 Square Pharmaceutical Limited (Last Five Years)

Square Pharmaceuticals Limited (SPL)

Analysis of Profitability

(All figures are in million BDT) 2011 2012 2013 2014 2015

CI Net Income after Tax to Common Shareholders

2831 3125 3553 4251 5186

CSE Equity 15970 19127 22378 26749 31092 OI Total Operating Income (After Tax) 3063 3459 3814 4378 5305 NOA Net Operating Assets 16348 18914 22392 24209 26100

NFO (Net Financing Assets) /Net Financial Obligation 378 -214 14 -2540 -4992

NFE/(NFI) Net Financial Expenses after tax 233 334 261 127 118 OA Total Operating Assets 18741 20939 24322 26730 29283 OL Total Operating Liabilities 2393 2026 1930 2521 3183 STBR Short Term Borrowing Rate After Tax 5% 5% 5% 5% 5%

Implicit Cost on OL 119.6 101.3 96.5 126.0 159.2

Particulars 2011 2012 2013 2014 2015

First Level

RNOA = OI/NOA 18.7% 18.3% 17.0% 18.1% 20.3% FLEV=NFO/CSE 0.024 -0.011 0.001 -0.095 -0.161 NBC=NFE/NFO or RNFA=NFI/NFA 61.51% -156.10% 1841.56% -5.01% -2.37% Spread=(RNOA-NBC) -42.8% 174.4% -1824.5% 23.1% 22.7% FLEV*Spread -1.01% -1.95% -1.16% -2.19% -3.64% ROCE=RNOA + (FLEV x SPREAD) 17.73% 16.34% 15.88% 15.89% 16.68%

ROE/ROCE = CI/CSE 17.73% 16.34% 15.88% 15.89% 16.68% Particulars 2011 2012 2013 2014 2015

First Level

ROOA = OI+Implicit Cost/OA 16.99% 17.00% 16.08% 16.85% 18.66% OPLLEV = OL/NOA 0.146 0.107 0.086 0.104 0.122 STBR 5% 5% 5% 5% 5% Opspread 11.99% 12.00% 11.08% 11.85% 13.66% OPLLEV*Opspread 1.75% 1.29% 0.95% 1.23% 1.67% RNOA=ROOA+OPLLEV*Opspread 18.7% 18.3% 17.0% 18.1% 20.3%

RNOA = OI/NOA 18.7% 18.3% 17.0% 18.1% 20.3% NET TURNOVER 16975 19798 20202 23268 26685 Net Operating Assets 16348 18914 22392 24209 26100

Second Level

RNOA=PM*ATO RNOA 18.7% 18.3% 17.0% 18.1% 20.3% Profit Margin 18.0% 17.5% 18.9% 18.8% 19.9% Asset Turnover 1.038 1.047 0.902 0.961 1.022

of 37

5.2 Orion Pharmaceutical Limited (Last Four Years)

Orion Pharmaceuticals Limited (OPL)

Analysis of Profitability (All figures are in million BDT) 2011 2012 2013 2014

CI Net Income after Tax to Common Shareholders

967 1069 981 1050

CSE Equity 12263 13207 15875 16552 OI Total Operating Income (After Tax) 1406 2210 2187 2025 NOA Net Operating Assets 9981 13478 16233 18040

NFO (Net Financing Assets) /Net Financial Obligation -2282 271 357 1488

NFE/(NFI) Net Financial Expenses after tax -439 -1141 -1206 -975 OA Total Operating Assets 18770 22006 21887 25174 OL Total Operating Liabilities 8789 8528 5654 7134 STBR Short Term Borrowing Rate After Tax 5% 5% 5% 5%

Implicit Cost on OL 439.4 426.4 282.7 356.7

Particulars 2011 2012 2013 2014

First Level

RNOA = OI/NOA 14.1% 16.4% 13.5% 11.2% FLEV=NFO/CSE -0.186 0.021 0.023 0.090 NBC=NFE/NFO or RNFA=NFI/NFA -19.2% 421.0% 337.4% 65.5% Spread=(RNOA-NBC) 33.3% -404.6% -323.9% -54.3% FLEV*Spread -6.198% -8.302% -7.293% -4.882% ROCE=RNOA + (FLEV x SPREAD) 7.9% 8.1% 6.2% 6.3%

ROE/ROCE = CI/CSE 7.9% 8.1% 6.2% 6.3%

First Level

ROOA = OI+Implicit Cost/OA 9.8% 12.0% 11.3% 9.5% OPLLEV = OL/NOA 0.881 0.633 0.348 0.395 STBR 5% 5% 5% 5% Opspread 4.8% 7.0% 6.3% 4.5% OPLLEV*Opspread 4.253% 4.416% 2.188% 1.764% RNOA=ROOA+OPLLEV*Opspread 14.1% 16.4% 13.5% 11.2%

RNOA = OI/NOA 14.1% 16.4% 13.5% 11.2%

Net Sales Revenue 7026 9546 11012 10707 Net Operating Assets 9981 13478 16233 18040

Second Level

RNOA=PM*ATO RNOA 14.1% 16.4% 13.5% 11.2%

Profit Margin 20.0% 23.2% 19.9% 18.9% Asset Turnover 0.704 0.708 0.678 0.593

of 37

5.3 Graphical presentation of Profitability Analysis

5.3.1 Net Income after Tax

5.3.2 Equity (CSE)

5.3.3 Operating Income after Tax

Comments:

SPL is more market dominated in pharmaceutical business due to high growth rate of net income after tax is 19.65% (2014) where as OPL is 7.03% (2014).

Comments:

SPL is increasing equity growth rate is 19.53% (2014) where as OPL is 4.26% (2014).

Comments:

SPL is increasing operating income after tax growth rate is 14.79% (2014) where as OPL is -7.41% (2014).

of 37

5.3.4 Net Operating Assets (NOA)

5.3.5 Net Financial Obligation - NFO / (Net Financial Assets – NFA)

5.3.6 Net Financial Expense – NFE / (Net Financial Income – NFI)

Comments:

SPL is increasing Net Operating Assets growth rate is 8.11% (2014) where as OPL is 11.13% (2014).

Comments:

In SPL Net Financial Assets shows in year 2012 & 2014 that means SPL is Cash Cow Company (Cash Generating). In OPL NFA shows in year 2011 but in year 2014 it shows net financial obligation (NFO).

Comments:

In SPL shows Net Financial Expense (NFE) year 2011 to 2014. In OPL shows Net Financial Income (NFI) from year 2011 to 2014.

of 37

5.3.7 Total Operating Asset (OA)

5.3.8 Total Operating Liability (OL)

5.3.9 Return on Net Operating Assets (RNOA)

Comments:

SPL is increasing Operating Assets growth rate is 9.90% (2014) where as OPL is 15.02% (2014).

Comments:

In SPL properly manage its assets so its operating liability is lower 9.43% (2014) of OA. In OPL is indicate higher OL, means asset manage not proper way 9.90% (2014) where as OPL is 15.02% (2014).

Comments:

In SPL Return on Net Operating Assets 17.0% (2013) and 18.1% (2014) where as OPL decrease RNOA 13.5% (2013) and 11.2% (2014)

of 37

5.3.10 Financial Leverage (FINLEV)

5.3.11 Net Borrowing Cost (NBC)

5.3.12 Spread

Comments:

In SPL Financial Leverage is 0.001% (2013) and -0.095% (2014) where as OPL decrease RNOA 0.023% (2013) and 0.090% (2014)

Comments:

In SPL Return on Net Operating Assets 17.0% (2013) and 18.1% (2014) where as OPL decrease RNOA 13.5% (2013) and 11.2% (2014)

Comments:

In SPL Net Borrowing Cost (NBC) is highest 1841.56% (2013) and -5.01% (2014) where as OPL 337.4% (2013) and 65.5% (2014)

Comments:

In SPL Spread -1824.5% (2013) and 23.1% (2014) where as OPL -323.9% (2013) and -54.3% (2014)

of 37

5.3.13 FINLEV*Spread

5.3.14 Return on Equity (ROCE)

5.3.15 Return on Operating Assets (ROOA)

Comments:

In SPL FINLEV*Spread -1.16% (2013) and -2.19% (2014) where as OPL –7.29% (2013) and -4.88% (2014)

Comments:

In SPL, ROCE is 15.88 % (2013) and 15.89% (2014) where as OPL 6.2% (2013) and 6.3% (2014). SPL is highest ROCE than OPL.

Comments:

In SPL, ROOA is 16.08 % (2013) and 16.85% (2014) where as OPL 11.3% (2013) and 9.5% (2014). SPL is highest ROOA than OPL.

of 37

5.3.16 OPLLEV

5.3.17 OPSpread

5.3.18 OPLLEV*OPSpread

Comments:

In SPL, OPLLEV is 0.086 % (2013) and 0.104% (2014) where as OPL 0.348% (2013) and 0.395% (2014).

Comments:

In SPL, OPSpread is 11.08 % (2013) and 11.85% (2014) where as OPL 6.3% (2013) and 4.5% (2014).

Comments:

In SPL, OPLLEV*OPSpread is 0.95 % (2013) and 1.23% (2014) where as OPL 2.19% (2013) and 1.76% (2014).

of 37

5.3.19 Profit Margin (PM)

5.3.20 Assets Turnover (ATO)

0.0000.2000.4000.6000.8001.0001.200

2011 2012 2013 2014SPL 1.038 1.047 0.902 0.961

OPL 0.704 0.708 0.678 0.593

Assets Turnover (ATO) (Times)

SPL OPL

Comments:

In SPL, profit margin (PM) is 18.9 % (2013) and 18.8% (2014) where as OPL 19.9% (2013) and 18.9% (2014).

Comments:

In SPL, Assets Turnover (ATO) is 0.90 times (2013) and 0.96 times (2014) where as OPL 0.67 times (2013) and 0.59 times (2014).

of 37

CHAPTER SIX

Analysis of Growth: 6.1 Analysis of growth of Square Pharmaceutical Ltd. (Last Five Years) Square Pharmaceutical Ltd (SPL) Analysis of Growth (All figures are in million BDT) 2011 2012 2013 2014 2015

Sales Revenue

16,975

19,798

20,202

23,268

26,685 Sales Growth Rate 30.87% 16.63% 2.04% 15.18% 14.68%

Common Equity

15,970

19,127

22,378

26,749

31,092

Earnings

2,831

3,125

3,553

4,251

5,186 ROCE 17.73% 16.34% 15.88% 15.89% 16.68%

Residual Earnings

1,721.94

1,774.34

1,935.70

2,357.89

2,924.05

Abnormal Earnings Growth

-

52.40

161.36

422.19

566.16

Square Pharmaceutical Ltd. is to maintain the increasing Residual Earning growth of the year 2011 to 2015. Sales continue to growth from the year 2011 to 2015 and the positive or high sales growth translated to higher earnings. Significantly ROCE constant on higher growing equity investment, leading to positive Residual Earnings and positive Abnormal Earnings Growth. The growth company from year 2011 to 2015.

Calculation of Required Rate of Return: (Using CAPM Model)

Risk-free rate

5.29%

Square Pharmaceutical Ltd. 0.569815225

Risk Premium

5.56%

Cost of Equity 0.084578516

Required Rate of Return 8.46%

6.2 Analysis of growth of Orion Pharmaceutical Ltd. (Last Four Years)

Orion Pharmaceutical Ltd (OPL) Analysis of Growth

(All figures are in million BDT) 2011 2012 2013 2014 2015

Sales Revenue

7,026

9,546

11,012

10,707 Sales Growth Rate 16.15% 35.87% 15.35% -2.77%

Common Equity

12,263

13,207

15,875

16,552

of 37

Earnings

967

1,069

981

1,050 ROCE 7.88% 8.09% 6.18% 6.34%

Residual Earnings

(491)

(545)

(757)

(1,039)

Abnormal Earnings Growth

-

(54)

(213)

(282)

Up to 2014, Orion Pharmaceutical Ltd maintained a high growth in sales but shows lower earnings in the year 2011 & 2013. After 2013, the company came back to higher earning and shows a high growth in earning in the following year. Significantly ROCE was declined in 2013 and later on it was increased in 2014 followed by the increased earnings. But the Residual Earnings of the company become negative whereas the Abnormal Earning growth shows negative declining from year 2012 to 2014. Thus the company is a no growth company.

Calculation of Required Rate of Return: (Using CAPM Model)

Risk-free rate

5.29%

Orion Pharmaceutical Ltd. 1.415529077

Risk Premium

5.56%

Cost of Equity 0.131595441

Required Rate of Return 13.16%

6.3 Graphically Growth Analysis of SPL and OPL:

of 37

CHAPTER SEVEN

Conclusion Profitability analysis and Growth analysis is a part of financial statement analysis and through these we can have knowledge about the company’s past and present performance. Most importantly it gives us an idea that what can be the company’s performance in the future. Profitability analysis and Growth analysis involves the calculation of statistical relationship between data and it is a very popular technique of financial statement analysis. Throughout my analysis, I came to know about the financial strength, operational efficacy and management efficacy of Square Pharmaceutical Limited (SPL) and Orion Pharmaceutical Limited (OPL). I have realized that SPL and OPL is performing well, it is financially solvents but there some threats which are increasing recently. If the risks or threats can be handled properly then definitely SPL and OPL can survive successfully as like the previous years.

of 37

CHAPTER EIGHT

Appendix

8.1 Financial Statement:

8.1.1 Balance Sheet of SPL (Last Five Years)

SQUARE PHARMACEUTICALS LTD. BALANCE SHEET

As at 31 March 2011, 2012, 2013, 2014, 2015 (All figures are in million BDT)

Particulars 2011 2012 2013 2014 2015 ASSETS: Non-Current Assets: 14,066 16,128 20,310 23,547 25,459 Property, Plant and Equipment-Carrying Value 8,059 9,172 9,613 13,934 18,009 Deferred Tax Assets - - - - 75 Capital Work-in-Progress 888 1,274 4,907 3,257 208 Investment - Associates Undertaking 4,274 4,709 4,915 5,364 6,036 Pre-Operating/Preliminary Expense 0.07 1 31 - - Investment - Long Term (at Cost) 229 168 158 148 252 Investment in Marketable Securities (Fair Value)

616 805 687 844 879

Current Assets: 8,454 8,249 6,946 7,499 9,732 Inventories 3,179 3,179 3,091 2,737 3,310 Trade Debtors 1,422 819 813 767 895 Advances, Deposits and Prepayments 598 695 952 672 750 Margin against BTB Letter of Credit 321 1,091 - - - Short Term Loan 2,505 1,717 1,109 1,161 885 Cash and Cash Equivalents 429 748 981 2,163 3,892 TOTAL ASSETS 22,520 24,377 27,257 31,046 35,191 SHAREHOLDERS' EQUITY AND LIABILITIES:

Shareholders' Equity: 15,970 19,127 22,378 26,749 31,092 Share Capital 1,962 2,648 3,708 4,820 5,543 Share Premium 2,035 2,035 2,035 2,035 2,035 General Reserve 106 106 106 106 106 Tax Holiday Reserve 1,533 450 406 406 - Gain on Marketable Securities (Unrealized) 294 420 314 449 265 Retained Earnings 10,033 13,460 15,801 18,923 23,144 Non Controlling Interest 6 7 8 9 (2)

of 37

Total Liabilities 6,551 5,249 4,879 4,297 4,100 Non-Current Liabilities: 1,029 934 1,603 1,903 1,551 Long Term Loans - Secured 726 509 1,106 1,184 659 Deferred Tax Liability 303 425 497 719 891 Current Liabilities: 5,522 4,315 3,275 2,395 2,549 Short Term Bank Loans 2,914 2,237 1,302 131 - Long Term Loans - Current Portion 518 477 540 461 257 Trade Creditors 1,208 531 7 218 255 Liabilities for Expenses 90 115 173 21 43 Liabilities for Other Finance 791 955 1,253 1,564 1,994 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES

22520 24377 27257 31046 35191

Divided by 1000000 1000000 1000000 1000000 1000000

8.1.2 Balance Sheet of OPL (Last Four Years)

ORION PHARMACEUTICALS LTD. BALANCE SHEET

As at 31 December 2011, 2012, 2013, 2014 (All figures are in million BDT)

Particulars 2011 2012 2013 2014 ASSETS: Non-Current Assets: 20,492.3 21,728.5 21,767.4 19,195.7 Property, Plant and Equipment-Carrying Value 15,737.6 15,982.2 15,325.3 14,906.5 Construction work in progress 125.1 343.9 944.0 1,210.7 Investment in Associates 362.2 2,798.2 2,838.6 2,917.6 Intangible assets 1.65 2.64 2.64 2.11 Other Investment 4265.85 2601.54 2656.84 158.89 Current Assets: 2973.78 3601.08 3986.77 6896.61 Inventories 367.49 455.67 454.60 442.94 Trade and other receivables 1678.89 1758.91 1940.17 5326.68 Advances, Deposits and Prepayments 496.90 664.39 381.97 367.64 Fixed Deposit with banks 345.73 372.11 573.43 370.82 Cash and Cash Equivalents 84.77 350.00 636.60 388.53 TOTAL ASSETS 23466.12 25329.58 25754.20 26092.33 SHAREHOLDERS' EQUITY AND LIABILITIES:

of 37

Shareholders' Equity: 12263.32 13207.38 15875.47 16551.94 Share Capital 1550.00 1550.00 2340.00 2340.00 Share Premium 6547.50 6547.50 8016.89 8016.89 General Reserve 2788.23 2599.59 2137.08 2013.78 Retained Earnings 1029.63 2008.22 2770.09 3423.24 Non Controlling Interest 347.96 502.07 611.41 758.02 Total Liabilities 11202.80 12122.20 9878.73 9540.39 Non-Current Liabilities: 7613.30 7404.33 4852.13 6344.13 Redeemable Preference Share 500.00 1000.00 1000.00 1000.00 Noncurrent portion of term loan 6573.49 6172.63 3642.35 5131.93 Provision for decommissioning of assets 0.00 92.69 104.74 121.98 Advance against salary 470.00 0.00 0.00 0.00 Employee benefit payable 54.06 54.69 18.93 16.80 Deferred tax liability 15.75 84.32 86.11 73.42 Current Liabilities: 3589.50 4717.87 5026.60 3196.26 Short term loan 531.89 668.82 529.47 1406.63 Current portion of term loan 1382.34 1925.80 2694.83 0.00 Trade and Other payable 708.24 976.25 613.54 715.99 Accrued Expense 967.03 1146.99 1188.77 1073.64 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES

23466.12 25329.58 25754.20 26092.33

Divided by 1000000 1000000 1000000 1000000

8.1.3 Income Statement of SPL (Last Five Years)

SQUARE PHARMACEUTICALS LTD. INCOME STATEMENT

For the Year Ended 31 March 2011, 2012, 2013, 2014, 2015 (All figures are in million BDT)

Particulars 2011 2012 2013 2014 2015 GROSS TURNOVER 19366 22655 23360 26946 30834 Less: Value Added Tax -2391 -2857 -3158 -3677 -4149 NET TURNOVER 16975 19798 20202 23268 26685 COST OF GOODS SOLD -10284 -11908 -11405 -12961 -14943 GROSS PROFIT 6691 7890 8797 10308 11742 Operating Expenses: -2874 -3275 -3708 -4163 -4533 Selling and Distribution Expenses -2230 -2553 -2966 -3432 -3758 Administrative Expenses -643 -722 -742 -731 -776

of 37

PROFIT FROM OPERATIONS 3817 4616 5089 6145 7208 Other Operating Income 454 420 378 245 294 Financial Expenses -310 -465 -357 -177 -159 NET PROFIT BEFORE WPPF 3961 4571 5110 6213 7343 Allocation for WPPF -191 -220 -247 -300 -380 NET PROFIT BEFORE TAX 3770 4350 4863 5912 6964 Provision for Income Tax -862 -1103 -1238 -1519 -1680 Provision for Deferred Income Tax -77 -122 -72 -143 -172 Deferred Tax Assets 0 0 0 0 75

Tax -939 -1225 -1310 -1662 -1777 NET PROFIT AFTER TAX 2831 3125 3553 4251 5186 Profit/(Loss) From Associates Undertaking 428 495 576 696 795

PROFIT FOR THE YEAR 3259 3620 4129 4946 5982 Other Comphrehensive Income: Gain/(Loss) on Marketable Securities (Unrealized) 127 126 -107 136 -184 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3387 3746 4022 5082 5798 Earnings Per Share (EPS) 12.30 9.76 11.13 8.92 10.80 Number of Shares used to compute EPS 265 371 371 554 554 Divided by 1000000 1000000 1000000 1000000 1000000 Effective Tax Rate 24.9% 28.2% 26.9% 28.1% 25.5%

8.1.4 Income Statement of OPL (Last Four Years)

ORION PHARMACEUTICALS LTD. INCOME STATEMENT

For the Year Ended 31 December 2011, 2012, 2013, 2014 (All figures are in million BDT)

Particulars 2011 2012 2013 2014 Net Sales Revenue 7026 9546 11012 10707 Cost of Goods Sold -4941 -6500 -8116 -7992 GROSS PROFIT 2086 3046 2896 2714 Operating Expenses: -619 -665 -660 -673 Administrative Expenses -185 -193 -230 -255 Selling, Marketing and Distribution Expenses -434 -472 -430 -418 PROFIT FROM OPERATIONS 1467 2382 2236 2041 Other Income 444 308 177 193 Finance cost -583 -1374 -1320 -1066 NET PROFIT BEFORE WPPF 1328 1316 1093 1169 Contribution to Workers' Profit Participation/ Welfare Funds -43 -28 -20 -21 NET PROFIT BEFORE TAX 1285 1288 1073 1147

of 37

Income Tax Expense -318 -219 -93 -98 Current Tax -312 -220 -97 -97 Deferred Tax Income/(Expense) -6 1 4 0 NET PROFIT AFTER TAX 967 1069 981 1050 Share of Profit from Associate 8 18 75 92 Net Profit 975 1087 1056 1142 Less: Non Controlling Interest (Share of operating profit) -55 -154 -147 -148 Less: Pre Acquisition Profit -57 0 0 Net Profit After Tax Attributable to Ordinary Share Holder

863 933 909 994

Add: Other Comprehensive Income 2279 -98 92 -2 Total Comprehensive Income Attributable to Ordinary Share Holder

3142 835 1001 992

Earnings Per Share (EPS) 5.56 6.02 4.06 4.25 Divided by 1000000 1000000 1000000 1000000 Effective Tax Rate 24.8% 17.0% 8.6% 8.5%

of 37

8.2 Reformulation Financial Statements: 8.2.1 Reformulated Balance Sheet of SPL (Last Five Years)

Reformulated Balance Sheet Square Pharmaceuticals Limited Classification (All figures are in million BDT) 2011 2012 2013 2014 2015

Operating Assets OA1 Property, Plant and Equipment-Carrying Value 8059.5 9171.8 9613.1 13933.7 18009.2 OA2 Deferred Tax Assets 0.0 0.0 0.0 0.0 75.2 OA3 Capital Work-in-Progress 887.6 1274.4 4907.0 3256.8 207.6 OA4 Investment - Associates Undertaking 4273.6 4709.1 4915.0 5364.2 6036.1 OA5 Pre-Operating/Preliminary Expense 0.1 0.5 30.6 0.0 0.0 OA6 Inventories 3179.0 3178.7 3091.3 2737.1 3310.1 OA7 Trade Debtors 1421.6 819.0 812.7 766.6 894.5 OA8 Advances, Deposits and Prepayments 598.0 694.8 952.4 671.7 750.2 OA9 Margin against BTB Letter of Credit 321.5 1091.1 0.0 0.0 0.0

Total Operating Assets 18740.7 20939.5 24322.1 26730.1 29282.9

Operating Liabilities

OL1 Deferred Tax Liability 302.9 425.2 497.0 719.0 891.4 OL2 Trade Creditors 1208.1 531.3 7.0 217.9 254.8 OL3 Liabilities for Expenses 90.5 114.5 173.3 20.5 43.0 OL4 Liabilities for Other Finance 791.5 954.9 1252.6 1563.6 1994.1

Total Operating Liabilities 2392.9 2025.9 1930.0 2521.0 3183.2

Net Operating Assets 16347.7 18913.5 22392.1 24209.2 26099.7

Financial Obligations

FO1 Long Term Loans - Secured 725.6 508.8 1106.3 1183.6 659.1 FO2 Short Term Bank Loans 2914.1 2237.5 1302.0 131.1 0.0 FO3 Long Term Loans - Current Portion 518.2 477.1 540.4 461.4 257.2

Total Financial Obligations 4158.0 3223.4 2948.8 1776.2 916.3

Financial Assets FA1 Investment - Long Term (at Cost) 229.3 167.7 157.7 147.7 251.6

FA2 Investment in Marketable Securities (Fair Value) 616.3 804.6 687.0 844.4 879.2

FA3 Short Term Loan 2504.8 1717.3 1108.8 1161.2 885.2 FA4 Cash and Cash Equivalents 429.3 747.6 981.2 2162.7 3892.2

Total Financial Assets 3779.8 3437.2 2934.6 4316.0 5908.2

(Net Financing Assets) /Net Financial Obligation 378.2 -213.8 14.2 -2539.8 -4991.9

Equity 15970 19127 22378 26749 31092

OK OK OK OK OK

of 37

8.2.2 Reformulated Balance Sheet of OPL (Last Four Years)

Reformulated Balance Sheet Orion Pharmaceuticals Limited Classification (All figures are in million BDT) 2011 2012 2013 2014

Operating Assets OA1 Property, Plant and Equipment-Carrying Value 15737.6 15982.2 15325.3 14906.5 OA2 Construction work in progress 125.1 343.9 944.0 1210.7 OA3 Investment in Associates 362.2 2798.2 2838.6 2917.6 OA4 Intangible assets 1.7 2.6 2.6 2.1 OA5 Inventories 367.5 455.7 454.6 442.9 OA6 Trade and other receivables 1678.9 1758.9 1940.2 5326.7 OA7 Advances, Deposits and Prepayments 496.9 664.4 382.0 367.6

Total Operating Assets 18769.8 22005.9 21887.3 25174.1

Operating Liabilities OL1 Non-current portion of term loan 6573.5 6172.6 3642.3 5131.9 OL2 Provision for decommissioning of assets 0.0 92.7 104.7 122.0 OL3 Advance against salary 470.0 0.0 0.0 0.0 OL4 Employee benefit payable 54.1 54.7 18.9 16.8 OL5 Deferred tax liability 15.8 84.3 86.1 73.4 OL6 Trade and Other payable 708.2 976.3 613.5 716.0 OL7 Accrued Expense 967.0 1147.0 1188.8 1073.6

Total Operating Liabilities 8788.6 8527.6 5654.4 7133.8

Net Operating Assets 9981.2 13478.4 16232.9 18040.3

Financial Obligations FO1 Redeemable Preference Share 500.0 1000.0 1000.0 1000.0 FO2 Short term loan 531.9 668.8 529.5 1406.6 FO3 Current portion of term loan 1382.3 1925.8 2694.8 0.0

Total Financial Obligations 2414.2 3594.6 4224.3 2406.6

Financial Assets FA1 Other Investment 4265.8 2601.5 2656.8 158.9 FA2 Fixed Deposit with banks 345.7 372.1 573.4 370.8 FA3 Cash and Cash Equivalents 84.8 350.0 636.6 388.5

Total Financial Assets 4696.3 3323.6 3866.9 918.2

(Net Financing Assets) /Net Financial Obligation -2282.1 271.0 357.4 1488.4

Equity 12263.3 13207.4 15875.5 16551.9

OK OK OK OK

of 37

8.2.3 Reformulated Income Statement of SPL (Last Five Years)

Reformulated Income Statement Square Pharmaceuticals Limited Classification (All figures are in million BDT) 2011 2012 2013 2014 2015

OI1 NET TURNOVER 16974.7 19798.1 20202.0 23268.4 26684.6 OE1 COST OF GOODS SOLD -10283.8 -11907.8 -11404.6 -12960.7 -14942.9

Gross Profit 6690.9 7890.3 8797.4 10307.7 11741.7

OE2 Selling and Distribution Expenses -2230.2 -2552.8 -2965.9 -3431.9 -3757.8 OE3 Administrative Expenses -643.5 -722.0 -742.3 -731.0 -775.6 OE4 Allocation for WPPF -191.1 -220.5 -246.7 -300.4 -379.8

Total Operating Expenses -3064.8 -3495.3 -3955.0 -4463.3 -4913.3

Core Operating Income from Sales (before tax)

3626.1 4395.1 4842.5 5844.3 6828.4

Tax on Operating Income from Sales

RepTax Tax as reported -939.3 -1225.1 -1309.7 -1661.8 -1777.1

Tax allocated to other operating income 113.1 118.2 101.8 68.9 75.0

Tax benefit from net financial expenses -77.2 -130.8 -96.2 -49.8 -40.5

Tax on Operating Income from Sales -903.4 -1237.7 -1304.1 -1642.7 -1742.6

Core Operating Income from Sales (after tax)

2722.7 3157.3 3538.3 4201.7 5085.8

Other operating income / (expense) before Tax

OOI1 Other Operating Income 453.9 419.6 377.8 245.1 293.7

Total Other Operating Income before tax 453.9 419.6 377.8 245.1 293.7

Tax on other Operating Income 113.1 118.2 101.8 68.9 75.0

Other Operating Income (After Tax) 340.8 301.5 276.1 176.2 218.8

Total Operating Income (After Tax) 3063.5 3458.8 3814.4 4377.9 5304.6

Financial Expenses (Income)

FE1 Financial Expenses -310 -465 -357 -177 -159

Net Financial Expenses before tax -310 -465 -357 -177 -159

Tax benefit from net financial expenses 77 131 96 50 40

Net Financial Expenses after tax -233 -334 -261 -127 -118

Net Income after Tax to Common Shareholders

2831 3125 3553 4251 5186

Check Correct Correct Correct Correct Correct

of 37

Reformulated Income Statement Orion Pharmaceuticals Limited Classification (All figures are in million BDT) 2011 2012 2013 2014

OI1 Net Sales Revenue 7026 9546 11012 10707 OE1 Cost of Goods Sold -4941 -6500 -8116 -7992

Gross Profit 2086 3046 2896 2714

OE2 Administrative Expenses -185 -193 -230 -255 OE3 Selling, Marketing and Distribution Expenses -434 -472 -430 -418

OE4 Contribution to Workers' Profit Participation/ Welfare Funds -43 -28 -20 -21

Total Operating Expenses -661 -693 -680 -694

Core Operating Income from Sales (before tax) 1424 2354 2216 2020

Tax on Operating Income from Sales

Rep Tax Income Tax Expense -318 -219 -93 -98

Tax benefit from net financial expenses -144.4 -233.3 -113.9 -90.6

Tax on other Operating Income 109.9 52.3 15.3 16.4

Tax on Operating Income from Sales -353 -400 -191 -172

Core Operating Income from Sales (after tax) 1072 1954 2025 1848

Other operating income / (expense) before Tax

OOI1 Other Income 443.8 308 177 193

Total Other Operating Income before tax 443.8 308 177 193

Tax on other Operating Income 109.9 52.3 15.3 16.4

Other Operating Income (After Tax) 334.0 255.8 161.9 176.5

Total Operating Income (After Tax) 1405.7 2210.0 2186.7 2024.8

Financial Expenses (Income) FE1 Finance cost -583 -1374 -1320 -1066

Tax benefit from net financial expenses 144.4 233.3 113.9 90.6

Net Financial Expenses after tax -439 -1141 -1206 -975

Net Income after Tax to Common Shareholders 966.9 1069.1 980.8 1049.7

Correct Correct Correct Correct

8.2.4 Reformulated Income Statement of OPL (Last Four Years)

of 37

CHAPTER NINE

References

1. http://www.squarepharma.com.bd/

2. http://www.orionpharmabd.com/

3. http://www.dsebd.org/

4. Financial Statement Analysis and Security Valuation by Stephen H. Penman(9th edition)

Profitability & Growth Analysis of SPL & OPL

Documents

Transcript of Profitability & Growth Analysis of SPL & OPL