Ratio analysis of Unilever

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  • Ratio analysis of Unilever

    1. 1. UNILEVER PAKISTAN LIMITED Ammara Abbas 014 Nasir Ali 078 Amir Ali 012
    2. 2. • Largest FMCG manufacturing company of Pakistan which is established fifty years ago • Town of Rahim Yar Khan was chosen to set up vegetable oil factory in 1948 • Its Head Office was shifted to Karachi from town of Rahim Yar Khan INTRODUCTION
    3. 3. We help people around the world meet every day needs for nutrition, hygiene and wellbeing, with brands that help people look good, feel good and get more out of life. VISION
    4. 4. Unilever's corporate mission – to add vitality to life – shows how clearly the business understands 21st century-consumers and their lives. But the spirit of this mission forms a thread that runs throughout our history. MISSION
    5. 5. • Unilever was created by Merger of British saop maker Lever Brothers and Dutch Margarine producer • Company grew historically through acquisitions, it merged with Lipton in 1989 and Brooke Bond in 1997 HISTORY Lever Brothers (UK) Margarine Unie (Netherlands)
    6. 6. • It became the largest ice-cream manufacturer in Pakistan through an amalgamation with Polka in May 1999 • The company operates through 4 regional offices • UPL is listed on all three stock exchanges of Pakistan CONT....
    7. 7. Home Care Products • Surf Excel • Sun Light • Clear • Close Up • Fair & Lovely • Lux • Ponds • Dove PRODUCTS & BRANDS OF UPL
    8. 8. Beverages • Brook Bond Supreme • Brook Bond A1 • Lipton CONT....
    9. 9. Ice Creams • Cornetto • Wall’s Desert • Wall’s HeartBrand • Wall’s Kid’s Range CONT....
    10. 10. Food Brands • Energile • Badami • Rafhan • Knorr CONT....
    11. 11. Spread • Blue Band CONT....
    12. 12. • Tells company’s ability to fulfil its short term liabilities • According to financial position of UPL, in 2012, company improves current ratio 0.3 times from previous year 2011. In recent 5 years company improves asset to liabilities ratio. • This ratio is very important for creditors and shareholders because it tells position in terms of short term obligations and shows firm has enough liquid assets. Liquidity Ratio Current Ratio = current asset/current liabilities Ratios Unit 2012 2011 2010 2009 2008 Current Ratio Times 0.82 0.79 0.83 0.78 0.69
    13. 13. • Tells company’s ability to fulfil its short term obligations more rigorously(accurately) • For 2012 and 2011 its remains same (0.3 times) • Creditors of the firm satisfied with company’s financial position and agreed to invest their capital in company. • financial manager can improve it in order to make liquidity position more batter. Quick Ratio Ratios Unit 2012 2011 2010 2009 2008 Quick (Acid-test) Ratio Times 0.30 0.30 0.40 0.27 0.19 = (current asset - inventory)/current liabilities
    14. 14. • Tells with which speed inventory of company convert into cash/sales • In 2012, This ratio improves 10 times as compare to previous year • Company should catch that inventory which was in 2008 (64 times). To meet with that ratio:  company should increase progress of plant  install higher efficiency plant  company’s HR manager should increase labour force. Activity Ratio Inventory turnover Ratio = COGS/ inventory Ratios Unit 2012 2011 2010 2009 2008 Inventory Turnover Times 59 49 46 58 64
    15. 15. • Tells in how many days company collects/receives cash • Soon collection is better. • Previous 5 years performance is satisfactory for financial managers • Company’s ACP is increased yearly due to growth of business Average collection period Ratios Unit 2012 2011 2010 2009 2008 Average collection period Days 6 5 4 4 3 Receivable amount / avg. sales per day
    16. 16. • Tells in how many days company paid their liabilities to creditors • In 2008, capital structure of the company changed from equity based towards more liability and debt factors. Average payment period Ratios Unit 2012 2011 2010 2009 2008 Average collection period Days 108 98 84 75 83 Payable amount / avg. purchase per day
    17. 17. • Reveals how efficiently total assets is utilized in making sales • fall in this ratio from year 2009 to 2011, which indicated that assets have not been used efficiently • Company maintain this downfall in year 2012 • This decline was mainly due to low demand in tea sector, the company closed down the factory at Karachi, which directly affected the turnover of the assets. Total Asset turnover Ratios Unit 2012 2011 2010 2009 2008 Total asset turnover Times 325 325 331 334 272 sales / Total assets
    18. 18. Activity Ratio 0 20 40 60 80 100 120 2008 2009 2010 2011 2012 Inventory Turnover Average collection period Average payment period
    19. 19. • Calculated to assess the ability of the firm to meet its total liabilities • Financial structure of UPL shows that it heavily rely on long term debts to finance its business cash flows • important for creditors as well as shareholders along with the management because it measure the debt position of company. • Management should decrease its liabilities to increase worth of company. Debt Ratio Ratios Unit 2012 2011 2010 2009 2008 Debt Ratio % 71 74 74 71 80 Total liability / total assets
    20. 20. • Indicates how many times the interest charges are covered by the profits available to pay interest charges • Interest earned ratio is extraordinary in recent 5 years • It satisfies the lenders in respect of interest payment Interest earned Ratio Ratios Unit 2012 2011 2010 2009 2008 Interest Earned Ratio Times 130 124 34 20 18 EBIT / I
    21. 21. • Measures the margin available on sales • It reflects the efficiency with which a firm produces its products • In 2012, GP margin of the company has increased by 1% • Reason: • There was a growth in HPC and Ice cream Sector of 25% and 8% respectively. Gross profit ratio shows increase in performance of operation manager. Profitability Ratio GP margin Ratios Unit 2012 2011 2010 2009 2008 Gross Profit Margin % 36 35 33 35 35 GP / Sales
    22. 22. • Operating Profit margin just increased by 0.5 % and according to analysis recent 5 years ratios indicated that the operating profit percentage is increased in 2009 and decreased in 2010. • As operating ratio shows performance of Administration manager, analysis shows that administration manager performed well in 2011 and 012. Operating Profit Margin Ratios Unit 2012 2011 2010 2009 2008 Operating profit margin % 15 13 12 14 11 OP / Sales
    23. 23. • Net profit margin ratio is used to measure the overall profitability. Obviously, higher the ratio the better is the profitability. • The sales growth of the company was increased by 32% in 2008 but the profitability in relation to sales was not increased as much as expected. • The operating expense of the company has increased by 12% in 2008, this was due to aggressive advertising cost incurred in ice cream sector, the huge amount of expenditure was spend on innovations in the HPC sector. Net Profit Margin Ratios Unit 2012 2011 2010 2009 2008 Net profit margin % 9 8 7 8 6 EBIT / Sales
    24. 24. • Ratio tells the amount of net income returned as a percentage of shareholders equity. • Important to the shareholders, investors and management. • It indicates to the shareholders that how much profit is made available to pay dividend to them. • Increased by 7% in 2012 as compare with 2011 mainly due to increase in profit after tax. This shows a constructive growth in company. The growth in ROE is largely increased due to exceptional growth of 38% in HPC sector. Return on common equity (ROE) Ratios Unit 2012 2011 2010 2009 2008 Return on common equity (ROE) % 105 98 92 93 90 Earning available for com. Stockholder / common stock equity
    25. 25. 0 20 40 60 80 100 120 2008 2009 2010 2011 2012 Gross profit margin Operating profit margin Net profit margin Return on common equity (ROE)
    26. 26. • This ratio measures the profit available to the equity share holder on a per share basis. • Higher the ratio indicates that the company may pay dividend at a higher rate. • The Earning per share of the company was increased in 2012 by Rs.105 from previous year 2011. This was mainly due to increase in profit after tax. • It indicates that company have maximized the shareholder’s wealth and achieving a better return without issuing any new shares. Earning per share (EPS) Ratios Unit 2012 2011 2010 2009 2008 Earning per share (EPS) Rs. 413 308 246 230 149 Earning available for com. Stockholder / no. of share of com. Stock outstanding
    27. 27. 0 50 100 150 200 250 300 350 400 450 2008 2009 2010 2011 2012 Earning Per Share EPS
    28. 28. • Measures the investor’s confidence on the company • Willingness of investors to pay for each Rupees of company’s earning • As market ratio is increased every year in previous 5 years. Which shows that investors are highly willing to invest their money in company. • Investors are confident when they invest for company. Market Ratio Ratios Unit 2012 2011 2010 2009 2008 Price/earning (P/E) ratio Times 24 18 18 10 12 P/E RATIO = Market price per share of com. Stock / EPS
    29. 29. • In 2008, capital structure of the company changed from equity based towards more liability and debt factors. This was because of the expansion made in Ice Cream sector which in return affected the profit margins. • There were many factors which affected the company at large, still the company was able to maintain a strong position mainly due to stunning profits incurred by one of its main sector Home & Personal Care Conclusion
    30. 30. Reference: http://www.unilever.com.pk

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