Accounting final
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  • Our team analyzed 3 companies <br />
  • Morinaga-meiji-meg <br /> Established <br /> Main business is milk and confectionary <br /> Their main products are very popular in Japan <br /> Meiji is the top, morinaga-2nd, meg-3rd <br />
  • B/f analyzing each company, lets take a look at their market environment. <br /> There are lots of negative factors same as other industries. <br /> Japanese economy is depressed, foreign economy is also downturn, especially the earthquake brought critical issues for may companies. <br /> Especially, milk and food industry is susceptible from weather. <br /> For example, if summer is cold, the ice cream wont be sold well, if the summer is extremely hot, cows cannot produce milk. <br />
  • Morinaga-meiji-meg <br /> Established <br /> Main business is milk and confectionary <br /> Their main products are very popular in Japan <br /> Meiji is the top, morinaga-2nd, meg-3rd <br />
  • We calculated SAF2002, and they are quite similar among 3 companies <br />
  • Their position is like this. <br /> If we set the cut-off point as 0.68, all 3 companies are in very sever situation. <br /> So we analyzed their financial statements and tried to find out some solutions. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • Regarding morinaga-milk, we analyzed its financial numbers using decision tree. <br /> SAF composes of 4 elements, such as retained earnings to total assets, net income b/f tax to total assets, inventory turnover period, and interest expenses to sales. <br />
  • いまのところ、多角化に失敗してる。医療食と宅配事業が前年割れ。 <br /> でも流動食と海外事業を中期経営計画書の中心にそえてる。すでに流動食はクリニコという会社が傘下に入ってるし、海外ビジネスはアメリカ、オランダ、ドイツ、アジアに進出済み。 <br /> ということで、森永は、これらのビジネス基盤を強化するために、工場の統廃合と経費削減による利益確保が必要、みたいな。 <br />

Accounting final Accounting final Presentation Transcript

  • Bankruptcy prediction - Morinaga-milk, Meiji, Meg Milk -
  • Introduction • Method – To apply SAF model to three main companies in dairy industry • Objective – To find out the reason why the difference between them is observed If one of their SAF values is not good, we could suggest how they can improve it 2
  • Market Environment Customer demand Milk demand Demand is gradually decreasing because of the acceptance of the the taste Everyday per a week 5-6 3-4 1-2 Less than Drinking frequency of milk Japan Dairy Industry Association Milk and Food industry sensitivity Demand loss because of cold summer (ex. Ice-cream) Production loss because of an extremely hot weather (ex. Milk) Downturn in demand due to low birthrate and aging population 3
  • Companies’ Profile Morinagamilk Meiji Yukijirushi Meg-milk Logo Established Main business 1917 1917 2009 (1925) Milk Confectionery Milk Ice-cream Milk Food products ¥578,299 m ¥1,109,275 m ¥509,413 m Main product Sales(2011) Financial report 2012 4
  • Morinaga milk - Main business Morinaga milk (Sales ¥578,299m) Milk / Dairy / Ice cream / Others Chairman Akira Ohno President Michio Miyahara Employees 3,091 (as of March 31, 2012) Major Business Production and sales of milk, dailybased beverages, yogurt, custard, condensed milk, powdered milk, butter, cheese, ice cream, non-dairy beverages (juice, tea, coffee), clinical liquid diets, manufacture and sales of animal feed; design and construction of plant equipment Capital Sales branches Head office - Plants Tokyo Subsidiaries # of Consolidated companies 21,704 million yen (as of March 31, 2012) 9 16 30 75 Financial report 2012 Financial report 5
  • Meiji - Main business Meiji (Sales ¥1,109,275m) Milk / Dairy / Ice cream / Others Chairman Shigetaro Asano President Shigetaro Asano Employees 15,338 (as of March 31, 2012) 1. 2. Major Business 3. 4. Capital # of Consolidated companies Dairy: milk, condensed milk, powdered milk, butter, cheese, ice cream, daily-based beverages, nutrition, livestock products, etc. Confectionary: sugar, corn sweeteners Healthcare: healthcare products, drugs, management of sports club Pharmaceuticals: ethical pharmaceuticals, agricultural chemicals, veterinary drugs 30,000 million yen (as of March 31, 2012) 59 Financial report 6
  • Yukijirushi Meg-milk - Main business Yukijirushi Meg-milk (Sales ¥509,413m) Chairman President Yoshiharu Nakano Employees Milk / Dairy / Ice cream / Others Yoshiharu Nakano 4,989 (as of March 31, 2012) 1. Major Business 2. 3. Capital Dairy: milk, condensed milk, powdered milk, butter, cheese Beverages and Dessert: ice cream, daily-based beverages, Yogurt Feedstuff: Feedstuff 20,000 million yen (as of March 31, 2012) # of Consolidated companies 26 Financial report Each company have various different business segments, but we focus on the main segment which is common, dairy industry. 7
  • Companies’ financial statement based on SAF2002   Morinaga-milk   2009 X7: Retained earnings to total assets X10: Net income before tax to total assets 2010 Meiji 2011 2009 2010 Meg-milk 2011 19.25% 19.83% X37: Inventory turnover period 23.80 23.80 % % 3.03% 2.20% 2009 2.48% 1.99% 0.70 0.71 1.17 1.17 2010 16.43% 2011 20.04 % 3.28% 3.52% 0.85 0.82 X26: Interest expenses to sales 0.30% 0.32% 0.30% 0.23% 0.20% 0.18% 0.35% 0.24% 0.19% SAF2002   - 0.94 0.92   - 0.94 0.93   - 0.90 0.95 Rating  - BB BB  - BB BB   - BB BB 8
  • Comparison of SAF model • 3 companies are placed on higher level over cutoff point 0.68 of SAF model Why? How to improve? Meiji 0.93 Morinaga 0.92 Meg 0.95 9
  • Cause of Changes in Financial Position - Logic treeSAF 2002 Divided into each valuables to clarify the cause of changes Retained earnings to total assets Retained earnings Net income b/f tax to Total assets Inventory turnover period Interest expenses Total Assets Net income b/f tax Interest expenses to Sales Sales Total Assets Inventory Merchandises and Finished Goods Work In Process Raw Materials and Storage Inventory Sales 10
  • Cause of Changes in Financial Position - Logic TreeSAF 2002 Retained earnings to total assets Retained earnings Net income b/f tax to Total assets Inventory turnover period Interest expenses Total Assets Net income b/f tax Interest expenses to Sales Sales Total Assets Merchandises and Finished Goods Work In Process Raw Materials and Storage Inventory Sales 11
  • Cause of Changes in Financial Position - Logic TreeSAF 2002 Retained earnings to total assets Retained earnings Total Assets Net Sales Operation profit Ordinary profit Net income before tax Net income 12
  • Profit Analysis Morinaga-Milk unit: millions of yen In 2011, loss on inventory due to quality deterioration (172 million yen) lowered the ordinary profit. Retained earnings have been accumulated from positive net income. Meiji unit: millions of yen Net income is on the same trade as sales. Retained earnings have been accumulated from positive net income. Meg-milk unit: millions of yen In 2011, revaluation of land (3,542 million yen) was incorporated into retained earnings. 13
  • Cause of Changes in Financial Position - Logic TreeSAF 2002 Retained earnings to total assets Retained earnings Total Assets Total Asset Total non-current Asset Total current Asset Total tangible fixed asset Total intangible asset Investments and other assets 14
  • Cause of Changes in Financial Position Total assets are basically stable Morinaga-Milk unit: millions of yen Inventory is increasing from 2010 to 2011 due to slow demand after earthquake Meiji Meg-milk unit: millions of yen unit: millions of yen Inventory is increasing from 2010 to 2011 due to slow demand after earthquake. Buildings for leases were reclassified as other assets Inventory is increasing from 2010 to 2011 due to slow demand after earthquake 15
  • Cause of Changes in Financial Position - Logic TreeSAF 2002 Retained earnings to total assets Retained earnings Net income b/f tax to Total assets Inventory turnover period Interest expenses Total Assets Net income b/f tax Interest expenses to Sales Sales Total Assets Merchandises and Finished Goods Work In Process Raw Materials and Storage Inventory Sales 16
  • Cause of Changes in Financial Position - Logic TreeSAF 2002 Net income b/f tax to Total assets Net income b/f tax Total Assets -26.5% Net Sales Operation profit Ordinary profit Net income before tax Net income +5.1% Total Asset Total non-current Asset Total current Asset Total tangible fixed asset Total intangible asset Investments and other assets Decrease of net sales Extra ordinary loss due to earthquake Decrease of loss of securities for investment Same as previous slides 17
  • Cause of Changes in Financial Position - Logic treeSAF 2002 Retained earnings to total assets Retained earnings Net income b/f tax to Total assets Inventory turnover period Interest expenses Total Assets Net income b/f tax These 3 criteria are inventory. Interest expenses to Sales Sales Total Assets Merchandises and Finished Goods Work In Process Raw Materials and Storage Inventory Sales 18
  • Cause of Changes in Financial Position - Inventory Turnover PeriodMorinaga-Milk 0.70→0.71 unit: millions of yen Even though the sales was decreased and inventory was increased, they kept inventory turnover period as 0.71. That means they controlled the inventory very well. (right scale) (left scale) Meiji 1.17→1.17 unit: millions of yen They kept inventory turnover period as 1.17. That means they controlled the inventory very well. But due to their pharmaceutical business, the period is longer than other competitors. Unit: million yen Meg-milk 0.85→0.82 unit: millions of yen The inventory was increased, but the sales remained stable due to their diversified product line-up. They improved the inventory turnover period. (left scale) (left scale) 19 Financial report
  • Cause of Changes in Financial Position - Logic Tree SAF 2002 Retained earnings to total assets Retained earnings Net income b/f tax to Total assets Inventory turnover period Interest expenses to Sales Interest expenses Total Assets Net income b/f tax These 3 criteria are interest bearing liabilities. Short term loan Long term loan matured within 1 year Long term loan Total Assets Merchandises and Finished Goods Sales Work In Process Raw Materials and Storage Inventory Sales 20
  • Cause of Changes in Financial Position -Interest Expenses to SalesMorinaga-Milk 0.30→0.32→0.30% unit: millions of yen Even though the interest bearing debt was decreased, the interest expenses was increased from 2009 to 2010 because their financial situation became worse. They borrowed the liabilities which has higher interest rate. (right scale) (left scale) Meiji 0.23→0.20→0.18% unit: millions of yen Even though the interest bearing debt was decreased, the interest expenses was remained from 2009 to 2010 because Meiji’s rating is very good. (left scale) Unit: million yen Meg-milk 0.35→0.24→0.19% unit: millions of yen The interest bearing debt was decreased and interest expenses was kept very small, that means their financial situation is stable. 21 Financial report
  • Conclusion • SAF values for 3 companies are below cut-off point of 0.68. They need counter-measure to improve their business performance. • Meiji (worst SAF value : 0.63) is trying to expand their business through capturing Asian market. However, since SAF value indicated, they are not healthy company and have possibilities to go bankrupt. • We suggest following measures before expanding their businesses to new fields. – Reduce inventory turnover period to at least competitors’ level – Increase profit by capturing demand with before earthquake level by strengthening brand of products. – Limit dividend payments to increase retained earnings for earthquake recovery. 22
  • Appendix A: Morinaga milk - History Morinaga milk and Morinaga confectionary are not related company at the moment. Morinaga confectionary was originally found as “Morinaga syouten” in 1910, and Morinaga milk was originally found as “Morinaga rennyu” in 1917. They merged in 1920, and again they separated in 1949. Milk Confectionary 1917 Nihon rennyu Co, 1920 1910 Morinaga syouten Merger “Morinaga confectionary” 1949 Morinaga milk 1949 Morinaga confectionary Financial report 23
  • Appendix B: Morinaga milk - Main factors - Financial report 24
  • Appendix B: Meiji - Main factors - Financial report 25
  • Appendix B: Yukijirushi Meg-milk - Main factors - Financial report 26