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National foods (nk) case study
- 1. ANALYSING THE FINANCIAL MANAGEMENT OF A PUBLIC LIMITED COMPANY IN PAKISTAN NATIONAL FOODS (NK)
- 2. GROUP MEMBERS: •AQSA SALAM 9782 •KALSOOM PARVEEN 9893 •MUHAMMAD UZAIR 11511 •SYED ASAAD NADEEM 11487 SUBMITTED TO: MISS ISMA ZAIGHAM
- 3. HISTORY OF NATIONAL FOODS • FOUNDED IN 1970, A SPICE COMPANY • IN 1988, CERTIFIED VENDOR OF MCCORMICK • ENGAGED IN THE MANUFACTURE AND SALE OF CONVENIENCE BASED FOOD PRODUCTS • LISTED ON KARACHI, LAHORE AND ISLAMABAD STOCK EXCHANGES.
- 4. CORPORATE NEWS OF NATIONAL FOODS: 9MFY15: NATIONAL FOODS’ EARNINGS UP 19% • COUNTRY’S BIGGEST MAKER OF SPICES AND PICKLES FOR OVER 30 YEARS • THE COMPANY REPORTED AN AFTER-TAX PROFIT OF DURING THE PERIOD RS519 MILLION OR RS5 PER SHARE (DURING THE FIRST NINE MONTHS OF FISCAL YEAR 2014) • RAISED TO RS618 MILLION OR RS6 PER SHARE • QUARTERLY RESULTS RS139 MILLION OR RS1.34 PER SHARE TO INCREASING BY 24% TO RS173 MILLION OR RS1.67 PER SHARE ( 2014 TO 2015) • IN FY13, TO RS8 BILLION NINE-MONTH PERIOD RS6.7 BILLION • IN FY13 , QUARTERLY BASIS RS2.5 BILLION IN JAN-MARCH 2015 TO RS2.1 BILLION
- 5. NATIONAL FOODS SEES PROFITS GROW 35% TO RS588M • REPORTED A PROFIT GROWTH OF 35% FOR THE FIRST NINE MONTHS OF FISCAL 2013 TO RS588 MILLION AS ITS LOCAL SALES WENT UP DESPITE • NO SUPPORT FROM EXPORTS BECAUSE GLOBAL RECESSION • 20/20 VISION, TO BOOST LOCAL AND EXPORT SALES THROUGH PROMOTIONAL EVENTS. NATIONAL FOODS AIMS TO BECOME AN RS50 BILLION COMPANY. • LOCAL SALES CLIMBED 14% TO RS5.53 BILLION , WHILE EXPORT REVENUES FELL MARGINALLY, WHICH MEANS THAT NATIONAL FOODS’ PROMOTIONAL CAMPAIGNS ARE ATTRACTIVE OVERALL • INVEST IN MUTUAL FUNDS, WHICH TURNED OUT A GREAT RETURN ON INVESTMENT OVER THE PERIOD, • OTHER INCOME JUMPED 91% TO RS53.24 MILLION.
- 6. NATIONAL FOODS GOOD IN CLEARING ITS DEBT • INITIAL SALE OF RS16,487 IN 1970 AND HAS NOW REACHED A LEVEL OF RS854 MILLION • INVENTORY TURNOVER IN 2012 WAS 2.9 TIMES AND IN 2013 IT WAS 3.2 TIMES • RECEIVABLES TURNOVER IS BECOMING WORSE AS IT WAS 24 TIMES IN 2012 AS COMPARED TO 2013 WHICH IS 18.16 TIMES. THIS SHOWED THE INEFFICIENCY • IN 2013 THE COMPANY PAID OFF ITS ENTIRE CREDITOR 21 TIMES AND IT TOOK 16 DAYS. IT IS MORE FAVORABLE • TOTAL ASSET TURNOVER IS CETERIS PARIBUS FOR THE PERIOD OF 2012-2013 WHICH IS 2.3 TIMES. IT SHOWED THAT THE COMPANY IS MANAGING ITS TOTAL ASSETS LESS EFFICIENTLY • . FIXED ASSET TURNOVER IN 2013 WAS 8.56 WHICH WERE HIGHER IN RESPECT OF 2012. IT MEANS THE COMPANY HAS LESS MONEY TIED UP IN FIXED ASSETS NOT OVER- INVESTED • NATIONAL FOODS CONVERTED ITS WORKING CAPITAL ONLY 13 TIMES INTO NET SALE AND 15 TIMES IN 2012. AN INCREASING WORKING CAPITAL TURNOVER IS USUALLY A POSITIVE SIGN FOR THE NATIONAL FOODS • COMPANY IS GOOD ENOUGH IN CLEARING ITS DEBT WHICH DOESN’T SPOIL ITS REPUTATION OR RELATIONSHIP WITH CREDITORS
- 7. 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1 2 3 4 5 6 7 Current Ratios
- 8. - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1 2 3 4 5 6 7 Working Capital Management
- 9. 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 1 2 3 4 5 6 7 Fixed Assets Turnover Ratio
- 10. 0.00 0.50 1.00 1.50 2.00 2.50 1 2 3 4 5 6 7 Total Assets Turnover Ratio
- 11. 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 1 2 3 4 5 6 7 Debt Ratio
- 12. 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 1 2 3 4 5 6 7 Debt Equity Ratio
- 13. 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 1 2 3 4 5 6 7 Operqating Margin
- 14. 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 1 2 3 4 5 6 7 Profit Margin
- 15. - 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 1 2 3 4 5 6 7 Return on Total Assets
- 16. - 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 1 2 3 4 5 6 7 Return On Common Equity
- 17. - 20.00 40.00 60.00 80.00 100.00 120.00 1 2 3 4 5 6 7 Price per Share
- 18. - 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 1 2 3 4 5 6 7 Marekt/ Book Ratio
- 19. 0 200000 400000 600000 800000 1000000 1200000 1 2 3 4 5 6 7 Total Book Assets Series1 Series2
- 20. 0 200000 400000 600000 800000 1000000 1200000 1400000 1 2 3 4 5 6 7 Total Debt Series1 Series2
- 21. 0 50000 100000 150000 200000 250000 300000 350000 400000 450000 500000 1 2 3 4 5 6 7 Sale , General & Administrative Expense Series1 Series2
- 22. 0.00 0.50 1.00 1.50 2.00 2.50 3.00 2016 2015 2014 2013 2012 2011 2010 Total Leverage Series1
- 23. 6.40 6.50 6.60 6.70 6.80 6.90 7.00 7.10 7.20 2016 2015 2014 2013 2012 2011 2010 Firm Size Series1
- 24. 1.77 1.86 1.85 1.80 1.76 1.84 1.64 1.50 1.55 1.60 1.65 1.70 1.75 1.80 1.85 1.90 2016 2015 2014 2013 2012 2011 2010 Tangibility Series1
- 25. • INVESTORS PERSPECTIVE: IF WE TALK ABOUT THE PROSPECTIVE OF ANY INVESTOR, IF AN INVESTOR WANTS TO INVEST IN NATIONAL FOODS THEN HE MUST HAVE TO SEE PORTFOLIO AND THE LAST PREVIOUS YEAR INFORMATION OF THE FIRM. THE NATIONAL FOODS HAVE A STRONG ASSETS FINANCING AND THERE IS NO DEBT FINANCING IN LAST 4 YEARS SO AN INVESTOR CAN EASILY INVEST IN THE NATIONAL FOODS BECAUSE IF HE OR SHE INVESTS IN THIS FIRM, HE OR SHE WILL GET BETTER RETURN AS COMPARE TO THE FIRMS WHO HAVE DEBT FINANCING.
Editor's Notes
- For the period- 2010- 2011: During the period from 2010 to 2011, company current ratio has increased that was due to the increase in current assets more than the current liabilities, indicating that company generating the sufficient assets to meet their current obligation For the period- 2011- 2012: During the period from 2011 to 2012, company current ratio has further increased that was due to the increase in current assets although current remained almost the same level. For the period- 2012- 2013: During the period from 2012 to 2013, company current ratio has decreased that was due to the increase in current liabilities which increased with significant amount. For the period- 2013- 2014: During the above mentioned period, current ratio has increased with the huge percentage that was due to the increased in both current asset as well as current liabilities. However, current assets was at high side as compared to current liabilities. For the period- 2014- 2015: During the above mentioned period, current ratio has increased further and reached to the highest level that was mainly due to the high level of current assets For the period- 2015- 2016: Current ratio is current assets divided by current liabilities, which help investors to evaluates the ability of the company to pay short term liabilities using current assets. In this case current ratio of the company is above “1” which indicates that company is maintaining sufficient current assets to meet the current liabilities and the past trends shows that company’s position in short run is bit questionable as current ratio in the current year of 2016 is lower than the past 6 years trend as average current ratio is 1.29x. the reduction is mainly due to increase in current liabilities.
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s working capital has increased with significant amount that was due to the increase in current assets more than the current liabilities, indicating that company generating the sufficient assets to meet their current obligation For the period- 2011- 2012: During the period from 2011 to 2012, company’s working capital has further increased that was due to the increase in current assets although current remained almost the same level. For the period- 2012- 2013: During the period from 2012 to 2013, company’s working capital has decreased that was due to the increase in current assets, however, current liabilities has increased with huge percentage, indicating company has sustaining substantial amount of current debts. For the period- 2013- 2014: During the above mentioned period, company’s working capital has increased with the huge percentage that was due to the increased in both current asset as well as current liabilities. However, current assets were at high side as compared to current liabilities. For the period- 2014- 2015: During the above mentioned period, company’s working capital remained at high side that was mainly due to the high amount of current assets which was created by company in the said period. For the period- 2015- 2016: The second most use ratio is the working capital, it indicates that how much excess or deficiency there is in their cash flow, after company meet its all current obligations. In case National Foods, current liabilities has increased with more percentage as compared to current assets, leading to decreases the working capital in the current year. The basic reason of this was the increase in short term liabilities in the head of “Current Liabilities”. This indicates that company is more relying on external financing than their own resources.
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s fixed assets turnover has increased with significant amount that was due to the increase in sales of the company, however, fixed assets did not increased with significant percentage, indicating that company generating the sufficient revenue from their assets. For the period- 2011- 2012: During the period from 2011 to 2012, company’s fixed assets turnover has increased little bit that was due to the increase in fixed assets as well as sales, however, increase in sales was more than fixed assets increase. For the period- 2012- 2013: During the period from 2012 to 2013, company’s fixed assets turnover has decreased with significant percentage that was due to the increase in fixed assets as well as sales, however, fixed assets increase with more percentage that indicates that company made heavy investment in the said period. For the period- 2013- 2014: During the above mentioned period, company’s fixed assets turnover has increased with the huge percentage and reached at the historical level that was due to the increased in sales of the company as company generated the high level of sales from their fixed assets. For the period- 2014- 2015: During the above mentioned period, company’s fixed assets turnover has increased little bit that was due to the increase in fixed assets as well as sales, however, increase in sales was more than fixed assets increase. For the period- 2015- 2016: The fixed assets turnover is the sales divided by fixed assets which indicates that how company is generating the sales while depending on their fixed assets i.e. assets of long term natures. The fixed assets turnover stood at the same level of 6.22x against the average of last 6 years i.e.6.11x. this indicates that company is maintaining the sufficient assets and generating the desirable sales while using their assets. Please note that company has been operating at the desirable capacity and maintaining the ratio of assets and sales in the same level during the reviewing year.
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s total assets turnover has increased with small amount that was due to the increase in sales of the company that was compensated by the increases in the total assets of the company, leading to increase the ratio with same percentage. For the period- 2011- 2012: During the period from 2011 to 2012, company’s total assets turnover has increased that was due to the increase in sales of the company more than total assets as current assets increase was not significant. For the period- 2012- 2013: During the period from 2012 to 2013, company’s total assets turnover has decreased with significant percentage that was due to the increase in total assets more than sales, indicates that company made heavy investment in the said period. For the period- 2013- 2014: During the above mentioned period, company’s total assets turnover has increased with the huge percentage and reached at the historical level that was due to the increased in sales of the company as company generated the high level of sales from their assets. For the period- 2014- 2015: During the above mentioned period, company’s total assets turnover has increased little bit that was due to the increase in fixed assets as well as sales, however, increase in sales was more than fixed assets increase. For the period- 2015- 2016: The total assets turnover is the sales divided by total assets which indicates that how company is generating the sales while using its assets efficiently. The impact of the efficient utilization of assets can be seen from comparison of total assets of current year that stood at 2.00x against the 1.75x average of last 6 years. This indicates that the impact of current assets on the overall sales of the company that company has been maintaining the adequate current assets while generating the sales for the given year.
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s debt ratio has decreased with significant amount that was due to the increase in total assets of the company, indicating company generating sufficient asset from their own resources and not depending upon the outside resources. For the period- 2011- 2012: During the period from 2011 to 2012, company’s debt ratio has decreased with more percentage that was due to the increase in total assets of the company more than sales. For the period- 2012- 2013: During the period from 2012 to 2013, company’s debt ratio has increased that was due to the increase in total assets as well as sales, however, increase debt increased with more percentage as compared to assets. For the period- 2013- 2014: During the above mentioned period, company’s debt ratio has decreased that was due to the increased in total assets of the company, however, total debt increased with minor percentage. For the period- 2014- 2015: During the above mentioned period, company’s debt ratio has decreased significant that was due to the increase in assets however, debt of the company decreased with huge percentage, indicating that company was generating enough cash and made it debt. For the period- 2015- 2016: This ratio measures the portion of company assets that is being financed by debt and can be computed by dividing the total debt to total assets. Please note that company is not depending on the long term debt as for their all expansion and other expenditures, company depend on their own cash flow, however, company overall debt is consist of only short term borrowing which has been increased during the current financial year, has resulted into debt ratio stood at 0.20x in FY16 against the 0.24x average of last 6 years. This indicates that company has been maintaining the ratio at the same sustainable level during the last 6 years as during the 2 year period I.e. 2010 and 2011, company posted high leveraging which reduces in the later year, however, during the reviewing year (i.e. 2016) , this ratio has again increased which indicates that company due to some cash flow issues or may be uncertain economic condition, has to depend upon the external financing, leading to increases the overall debt of the company.
- This ratio helps to evaluate the capital structures of the company which can be calculated by dividing the total debt to total equity. Company’s debt to equity ratio stood at the 0.53x in FY16 as compared to the 0.70x average of last 6 years period. This indicates that company more depend upon the equity financing as compared to financing from other resources. This is the indication of sufficient amount of cash flow which has been transferred by company as retain earning as an indication that company has enough resources and generating the sufficient income.
- For the period- 2011- 2012: During the period from 2011 to 2012, company’s debt to equity ratio has decreased with more percentage that was due to the increase in equity of the company however, on the other side debt of the company reduced with more percentage. For the period- 2012- 2013: During the period from 2012 to 2013, company’s debt to equity ratio has increased that was due to the increase in debt of the company as well as due to equity For the period- 2013- 2014: During the above mentioned period, company’s debt to equity ratio has decreased that was due to the increased in equity of the company, indicating increase in retain earning of the company. For the period- 2014- 2015: During the above mentioned period, company’s debt ratio has decreased significant that was due to the increase in equity however, debt of the company decreased with huge percentage, indicating that company was generating enough cash and made it debt. For the period- 2015- 2016: This ratio help to evaluate the capital structures of the company which can be calculated by dividing the total debt to total equity. Company’s debt to equity ratio stood at the 0.53x in FY16 as compared to the 0.70x average of last 6 years period. This indicates that company more depend upon the equity financing as compared to financing from other resources. This is the indication of sufficient amount of cash flow which has been transferred by company as retain earning as an indication that company has enough resources and generating the sufficient income.
- For the period- 2011- 2012: During the period from 2011 to 2012, company’s net margin has increased with more percentage that was due to the net margin as well as sales of the company and both increase with significant percentage. For the period- 2012- 2013: During the period from 2012 to 2013, company’s net margin increase a bit that was due to the increase in net profit more than sale, indicating company cost did not increased with more amount For the period- 2013- 2014: During the above mentioned period, company’s net margin has decreased with small percentage that was due to the increased in sales of the company, however, net profit not increase with same amount, indicating company cost increased in this year For the period- 2014- 2015: During the above mentioned period, company’s net margin has increased that was due to the increased in sales of the company along with net profit that increase with same percentage. For the period- 2015- 2016: This ratio indicates how much company generates from their sales and this can be calculated by dividing net profit by sales of the company. Company has reported the net margin of 5.87% in FY16 against and other expenditures which is in line with increase in sales.
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s return on total assets has increased that was due to the margin of the company. For the period- 2011- 2012: During the period from 2011 to 2012, company’s return on total assets has increased with more percentage that was due to the net margin as well as assets of the company and both increase with significant percentage. For the period- 2012- 2013: During the period from 2012 to 2013, company’s return on total assets decreased a bit that was due to the increase in assets more than net profit. For the period- 2013- 2014: During the above mentioned period, company’s return on total assets has decreased with small percentage that was due to the increased in total assets of the company, indicating that company was making more investment in assets than generating sales. For the period- 2014- 2015: During the above mentioned period, company’s return on total assets has increased that was due to the increased in assets of the company along with net profit that increase with same percentage. For the period- 2015- 2016: This ratio measures the return on investment and used to evaluates the management’s efficiency in using assets to generate income. Company’s return on assets remained at the same level of 0.12 against the average of 0.13x reported during the last 6 year period. This indicates that company maintain to generates the sustainable return on their investment during the couple of years and utilizing the overall resources to generates income
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s return common equity has decreased that was due to the increase in amount of equity is more than increase in net margin of the company. For the period- 2011- 2012: During the period from 2011 to 2012, company’s return common equity has decreased with more percentage that was due to the increase in equity and net margin not increase with same amount. For the period- 2012- 2013: During the period from 2012 to 2013, company’s return common equity increased a bit that was due to the increase in net profit more than equity, indicating company generated more income. For the period- 2013- 2014: During the above mentioned period, company’s return common equity has decreased with small percentage that was due to the increased in equity is more than income, indicating company’s net worth was also increase along with profit. For the period- 2014- 2015: During the above mentioned period, company’s return common equity has decreased that was due to the increased in equity is more than income, indicating company’s net worth was also increase along with profit. For the period- 2015- 2016: This ratio measures the return on the shareholders that can be calculated by dividing the net income by the total equity/common stock holders. Company’s return on equity also remained at the same level of 2.65x against the average of 2.63x reported during the last 6 year period. This indicates that company maintain to generate the sustainable return for their shareholders during the couple of years.
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s Price earnings ratio has decreased that was due to the increase in price per share is more than increase in EPS of the company. For the period- 2011- 2012: During the period from 2011 to 2012, company’s Price earnings ratio has increased that was due to the increase in price per share is less than increase in EPS of the company. Please note both EPS and price per share increase in the said year, indicating company’s profitability as well as market standing increased in the same year For the period- 2012- 2013: During the period from 2012 to 2013, company’s Price earnings ratio has increased that was due to the increase in price per share is less than increase in EPS of the company. Please note both EPS and price per share increase in the said year, indicating company’s profitability as well as market standing increased in the same year For the period- 2013- 2014: During the above mentioned period, company’s Price earnings ratio has increased with more percentage that was due to the increase in price per share is more than increase in EPS of the company For the period- 2014- 2015: During the above mentioned period, company’s Price earnings ratio has decreased with more percentage that was due to the decrease in price per share is more than increase in EPS of the company For the period- 2015- 2016: The price earning is equal to earning per shares divided by price per share. Company’s price earning ratio stood at 40.16x in FY16 against the average of 35.46x reported during the 6 year period. This indicates that company’ shares is overvalued and expect can invest in the company in view of the high growth potential.
- For the period- 2010- 2011: During the period from 2010 to 2011, company’s Market/Book ratio has increased that was due to the increase in book value is more than increase in market value of the company. For the period- 2011- 2012: During the period from 2011 to 2012, company’s Market/Book ratio has increased with more percentage that was due to the increase in price per share is more than increase in book value of the company and book value decreased with more amount. For the period- 2012- 2013: During the period from 2012 to 2013, company’s Market/Book ratio has decreased with more percentage that was due to the increase in book value is more than increase in market value of the company For the period- 2013- 2014: During the above mentioned period, company’s Market/Book ratio has increased with more percentage that was due to the increase in market value is more than increase in book value of the company, indicating company’s profitability as well as value of assets increased in the same year For the period- 2014- 2015: During the above mentioned period, company’s Market/Book ratio has decreased with more percentage that was due to the decrease in market value, however, book value increase in the given year. For the period- 2015- 2016: The Market/book ratio is equal to market price per shares divided by book value per share. Company’s market/book ratio stood at 60.00x in FY16 against the average of 46.88x reported during the 6 year period. This ratio indicates that the investors are willing to pay more for the company than its net assets are worth. This could indicate that the company has healthy future profit projections and the investors are willing to pay a premium for that possibility.
- There has been continuous increase in the net book value of assets which has increased by 38% in the current financial year and reach to PKR 1,129 Million in FY16. Please note that company has increased its assets and its impact can be seen from their high turnover ratios and indicates that company utilizing their resources and generating enough income.
- Company’s total debt has been increased in the current year that was due to increase in short term borrowing as company’s total debt of the company is consist of only short term borrowing and increase in current year, indication of more working capital requirement of the company that is being required to fulfill daily expenditures need. The value of total debts has been increased by 241% in the current year as compared to last year.
- This value indicates that the sales, general and administrative expenses related to the firm size. This value shows that firm size is fulfilling the sales, general & administrative expenses.
- This value indicates that amount of value of book value which is the historical value of assets available to pay off the debt of the company. This ratio has been increased in the current year to 1.16 indicates that company book value of assets has increased but the amount of debt has been increased with more percentage, leading to increases the debt burden of the company
- The socially optimal firm size is the size for a company in a given industry at a given time which results in the lowest production costs per unit of output. This value indicates the size of the firm that how organization is growing in the market.
- It is the percentage of plant, property and equipment in the total assets as the amount of fixed assets indicates that how much company has been invested in the long run to generate the income and this ratio stood at 1.77 in FY16 as compared to 1.79 in the last 6 years period, indicating that company maintain the percentage of its fixed assets in the last couple of years.