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Nestle financial report analysis 2013 & 2014

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Nestle financial report analysis 2013 & 2014

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Nestle financial report analysis 2013 & 2014

  1. 1. RATIO ANALYSIS OFNESTLE PAKISTAM UVAS BUSINESS SCHOOL PRESENTED TO SIR SHAHID MEHMOOD PRESENTED BY ALI RAZA FAIZA GULAM RASOOL IQRA IHSAN RAMEELA SHAFIQUE NAILA JAMEEL SHAHRYAR AKRAM ATTIYA SHOUKAT
  2. 2. Introduction • Nestlé Pakistan Ltd is a subsidiary of Nestlé S.A. – – a company of Swiss origin headquartered in Vevey, Switzerland. • Operating in Pakistan since 1988 • Food processing company • Headquarter is in Lahore • Operates the biggest milk collection operation in Pakistan.
  3. 3. NESTLÉ’S FOUNDER, GERMAN-BORN PHARMACIST HENRI NESTLÉ, LAUNCHES HIS ‘FARINE LACTÉE’ (‘FLOUR WITH MILK’) IN VEVEY, SWITZERLAND. IT COMBINES COW’S MILK, WHEAT FLOUR AND SUGAR, AND NESTLÉ DEVELOPS IT FOR CONSUMPTION BY INFANTS WHO CANNOT BE BREASTFED, TO TACKLE HIGH MORTALITY RATES. AROUND THIS TIME HE STARTS USING THE NOW ICONIC ‘NEST’ LOGO. HISTORY In 1867
  4. 4. History • 1979 – MILKPAK Ltd. was founded by Syed Babar Ali • 1988 – Nestlé SA acquired 40 percent shares in MILKPAK Ltd. • 1992 – Nestlé took over the running of the company • 1996 – MILKPAK Ltd. was renamed Nestlé MILKPAK Ltd. • 2005 – Nestlé MILKPAK Ltd was renamed Nestlé Pakistan Ltd.
  5. 5. • It operates four production factories. • In Sheikhupura and Kabirwala – multi product factories • And in Islamabad and Karachi – produce water.
  6. 6. Products of Nestle Pakistan •
  7. 7. Ratios analysis is important for : • Analyzing Financial Statements • Judging Efficiency • Locating Weakness • Formulating Plans • Comparing Performance
  8. 8. Current Ratio (working capital Ratio ) Current assets Current liabilities Current Ratios •primary measure liquidity •Relates current assets to current liabilities •2:1 or higher is satisfactory
  9. 9. Current Ratio = 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑨𝑺𝑺𝑬𝑻𝑺 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺 = 𝟏𝟖𝟒𝟎𝟓𝟕𝟖𝟎 𝟐𝟕𝟕𝟕𝟕𝟐𝟒𝟎 =0.66 : 1 = 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑨𝑺𝑺𝑬𝑻𝑺 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺 = 𝟏𝟕𝟗𝟑𝟔𝟒𝟖𝟑 𝟏𝟖𝟎𝟎𝟎𝟗𝟖𝟗 =0.99 : 1
  10. 10. ACID TEST RATIO CURRENT ASSETS Current liabilities ACID TEST RATIO =Current Assets - inventory •more reliable test of short-term solvency • 1:1 is satisfactory •measures the ability to use liquid assets to pay current liabilities  STOCK AND SPARE • STOCK IN TRADE
  11. 11. 2014 = 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑨𝑺𝑺𝑬𝑻𝑺 𝑳𝑬𝑺𝑺 𝑰𝑵𝑽𝑬𝑵𝑻𝑶𝑹𝒀 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺 = 𝟏𝟖𝟒𝟎𝟓𝟕𝟖𝟎 − 𝟏𝟎𝟗𝟕𝟐𝟓𝟑𝟒 𝟐𝟕𝟕𝟕𝟕𝟐𝟒𝟎 = 0.26 : 1 2013 = 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑨𝑺𝑺𝑬𝑻𝑺 𝑳𝑬𝑺𝑺 𝑰𝑵𝑽𝑬𝑵𝑻𝑶𝑹𝒀 𝑪𝑼𝑹𝑹𝑬𝑵𝑻 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝑰𝑬𝑺 = 𝟏𝟕𝟗𝟑𝟔𝟒𝟖𝟑 − 𝟗𝟏𝟗𝟖𝟔𝟕𝟎 𝟏𝟖𝟎𝟎𝟎𝟗𝟖𝟗 =0.48 : 1
  12. 12. Long-term Solvency Ratios • Solvency ratios tells…….. • Some major solvency ratios are:- • 1) Gearing Ratio • 2) Interest Coverage Ratio • 3)Debt Ratio
  13. 13. 1)Gearing Ratio:- The gearing ratio is a general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds.
  14. 14. Gearing Ratio:- • Description…… Long term debt Total capital Employed GEARING ratio Equity + LTD
  15. 15. Gearing Ratio:- • As described below in comparison ……… 2013 2014 (17464812/29323969)*100 =59.558% 6951459/19579084*100 =35.50%
  16. 16. 2) Interest coverage ratio:- • This ratio tells us about the ability of company to meet its interest payments…… • If it is increasing then it is good for business , • If it is decreasing then it is not good for business
  17. 17. Interest coverage ratio:-- PBFC & TAX FINANCIAL CHARGES Interest coverage ratio
  18. 18. Interest coverage ratio:- • Comparison over 2 years:- 2013: 2014: 11471270/2113096 = 5.4286 TIMES 14113463/2155637 = 6.547 TIMES
  19. 19. 3) DEBT Ratio:- • Debt ratio measures a firm’s total liabilities as a percentage of its total assets. • The higher percentage indicates more leverage and more risk.
  20. 20. DEBT Ratio:- TOTAL LIABILITIES Total ASSETS
  21. 21. DEBT Ratio:- • Comparison over 2 years:- 2013: 2014: (40430364/52289521 )*100= 77.3% (39103070/52289521)*100= 75.58%
  22. 22. EFFICIENCY The comparison of what is actually PRODUCED or performed with what can be achieved with the same CONSUMPTION of RESOURCES (MONEY, time, LABOUR etc.). IT is an important FACTOR in determination of PRODUCTIVITY. “Measures the Efficiency of the Business” TRADE RECEIVABLE COLLECTION PERIOD. TRADE PAYABLE PAYMENT PERIOD. INVENTORY PERIOD.
  23. 23. TRADE RECEIVABLE COLLECTION PERIOD TRADE RECEIVABLES 2013 = 𝟑𝟐𝟖𝟏𝟏𝟎 𝟖𝟔𝟐𝟐𝟔𝟖𝟔𝟗 ∗ 𝟑𝟔𝟓 =1.38 days 2014 = 𝟐𝟕𝟐𝟑𝟐𝟏 𝟗𝟔𝟒𝟓𝟕𝟕𝟒𝟑 ∗ 𝟑𝟔𝟓 = 1.03 days 365 (DAYS) SALES (CREDIT)
  24. 24. TRADE PAYABLES PAYMENT PERIOD The trade payables payment period ratio represents the time lag between a credit purchase and making payment to the supplier. As trade payables relate to credit purchases so credit purchases figure should be used in calculating this ratio. However as the amount of credit purchase is usually not separately available in the income statement so in that case total purchases could be used. = 𝑻𝑹𝑨𝑫𝑬 𝑷𝑨𝒀𝑨𝑩𝑳𝑬 𝑪𝑶𝑺𝑻 𝑶𝑭 𝑺𝑨𝑳𝑬𝑺 ∗ 𝟑𝟔𝟓 𝑫𝑨𝒀𝑺
  25. 25. TRADE PAYABLE PAYMENT PERIOD 2013 2014 = 𝟗𝟑𝟔𝟔𝟖𝟎𝟓 𝟔𝟐𝟎𝟔𝟔𝟎𝟕𝟐 ∗ 𝟑𝟔𝟓 = 55 days 2014 = 𝟏𝟒𝟑𝟔𝟏𝟗𝟏𝟑 𝟔𝟗𝟏𝟑𝟑𝟕𝟓𝟑 ∗ 𝟑𝟔𝟓 = 75 days
  26. 26. INVENTORY PERIOD In accounting, inventory period is a measure of the average number of days inventory is held, calculated by dividing the inventory by the average daily cost of goods sold. It is also called days in inventory. = 𝑰𝑵𝑽𝑬𝑵𝑻𝑶𝑹𝒀 𝑪𝑶𝑺𝑻 𝑶𝑭 𝑺𝑨𝑳𝑬𝑺 ∗ 𝟑𝟔𝟓 𝑫𝑨𝒀𝑺
  27. 27. Inventory Conversion Period INVENTORY COST OF SALES 2013 = 𝟕𝟗𝟐𝟓𝟏𝟑𝟐 𝟔𝟐𝟎𝟔𝟔𝟎𝟕𝟐 ∗ 𝟑𝟔𝟓 = 46 days 2014 = 𝟗𝟕𝟔𝟑𝟗𝟖𝟕 𝟔𝟗𝟏𝟑𝟑𝟕𝟓𝟑 ∗ 𝟑𝟔𝟓 = 51days 365
  28. 28. INVESTMENT RATIOS • DIVIDEND YIELD (%) • DIVIDEND PAYOUT(%) • EARNING PER SHARE • PRICE / EARNING RATIO • TOTAL SHARE HOLDER RETURN
  29. 29. DIVIDEND YIELD (%) ANNUAL DIVIDEND PAID PER SHARE MARKET PRICE PER SHARE DIVIDEND YIELD The dividend yield is a financial ratio that measures the amount of cash dividends distributed to common shareholders relative to the market value per share. DIVIDEND PAYMENT F TOTAL NUMBER OF SHARE OUTSTANDING
  30. 30. CALCULATION 2014 78/1700 =0.111*100 =11.1% 2013 =75/1700 =0.0441*100 =4.41%
  31. 31. DIVIDEND PAYOUT (%) TOTAL DIVIDEND PAID PROFIT AFTER TAX & PRFERENCE DIVEDEND DIVIDEND PAYOUT The dividend payout ratio measures the percentage of net income that is distributed to shareholders in the form of dividends during the year.
  32. 32. CALCULATION TOTAL DIVIDEND PAID PROFIT AFTER TAX & PRFERENCE DIVEDEND 2014 = 𝟕𝟎𝟑𝟐𝟓𝟖𝟏 𝟕𝟗𝟐𝟗𝟐𝟕𝟏 =0.89 =89% 2013 = 𝟓𝟒𝟑𝟗𝟕𝟖𝟗 𝟓𝟖𝟔𝟔𝟕𝟔𝟑 = 0 .92 =92%
  33. 33. EARNING PER SHARE Definition: “This ratio tells us about earning on “1” share”.
  34. 34. EARNING PER SHARE =5866763000 / 45349584 = 129.36 =7929271000 / 45349584 = 174.8 =Profit after tax / no. of share outstandi ng
  35. 35. Definition of 'Price / Earnings Ratio - P/E Ratio' A valuation ratio of a company's current share price compared to its per-share earnings.
  36. 36. PRICE EARNING RATIO =Market price per share earning per share =1700/127.36 =13.34 TIMES =1700/174.8 =9.7 TIMES
  37. 37. TOTAL SHARE HOLDER RETURN • The internal rate of return of all cash flows to an investor during the holding period of an investment. • 𝑪𝑨𝑷𝑰𝑻𝑨𝑳 𝑮𝑨𝑰𝑵 𝑶𝑹 𝑳𝑶𝑺𝑺 𝑰𝑵 𝑷𝑬𝑹𝑰𝑶𝑫+𝑫𝑰𝑽𝑰𝑫𝑬𝑵𝑫 𝑺𝑯𝑨𝑹𝑬 𝑷𝑹𝑰𝑪𝑬 𝑨𝑻 𝑩𝑬𝑮𝑰𝑵𝑰𝑵𝑮 𝑶𝑭 𝑷𝑬𝑹𝑰𝑶𝑫
  38. 38. TOTAL SHAREHOLDER RETURN • Comparison over 2 years:- 2013: 2014: =5439789+249527/10 = 5464741 =7032581+249527/10 =7057533.7
  39. 39. Return on total capital employed (ROCE) % A ratio that indicates the efficiency and profitability of a company's capital investments. = 𝑷𝑹𝑶𝑭𝑰𝑻 𝑩𝑬𝑭𝑶𝑹𝑬 𝑭𝑰𝑵𝑨𝑵𝑪𝑬 & 𝑇𝐴𝑋 𝑻𝑶𝑻𝑨𝑳 𝑪𝑨𝑷𝑰𝑻𝑨𝑳 𝑬𝑴𝑷𝑳𝑶𝒀𝑬𝑫 ∗ 𝟏𝟎𝟎
  40. 40. Ways to calculate = 𝑷𝑹𝑶𝑭𝑰𝑻 𝑩𝑬𝑭𝑶𝑹𝑬 𝑭𝑰𝑵𝑨𝑵𝑪𝑬 & 𝑇𝐴𝑋 𝑻𝑶𝑻𝑨𝑳 𝑪𝑨𝑷𝑰𝑻𝑨𝑳 𝑬𝑴𝑷𝑳𝑶𝒀𝑬𝑫 ∗ 𝟏𝟎𝟎 OR = 𝑷𝑹𝑶𝑭𝑰𝑻 𝑴𝑨𝑹𝑮𝑰𝑵 ∗ 𝑨𝑺𝑺𝑬𝑻𝑺 𝑻𝑼𝑹𝑵 𝑶𝑽𝑬𝑹 PROFIT MARGIN = 𝑷𝑹𝑶𝑭𝑰𝑻 𝑩𝑬𝑭𝑶𝑹𝑬 𝑭𝑰𝑵𝑨𝑵𝑪𝑬 & 𝑻𝑨𝑿 𝑺𝑨𝑳𝑬𝑺 ASSETS TURN OVER = 𝑹𝑬𝑽𝑬𝑵𝑼𝑬 𝑻𝑶𝑻𝑨𝑳 𝑪𝑨𝑷𝑰𝑻𝑨𝑳 𝑬𝑴𝑷𝑳𝑶𝒀𝑬𝑫
  41. 41. Capital employed EQUITY + LONG TERM DEBTS OF COMPANY =11859157+22429375 =34288532 =11325830+12627625 =23953455
  42. 42. ROCE % 2014 = 𝟏𝟒𝟏𝟏𝟑𝟒𝟔𝟑 𝟐𝟑𝟗𝟓𝟑𝟒𝟓𝟓 ∗ 𝟏𝟎𝟎 =58.9% 2013 = 𝟏𝟏𝟒𝟕𝟏𝟐𝟕𝟎 𝟑𝟒𝟐𝟖𝟖𝟓𝟑𝟐 ∗ 𝟏𝟎𝟎 =33.45%
  43. 43. ROCE Profit margin = EBIT / SLAES Assets turn over =sales / capital employed ROCE = profit assets turn over
  44. 44. PROFIT MARGIN % 2013 11471270/86226869 =0.13303591 2014 14113463/96457743 =0.146317574
  45. 45. ASSETS TURNOVER 2014 =96457743/23953455 =4.02688226 2013 =86226869/34288532 =2.514743676
  46. 46. ROCE % ROCE = PROFIT ASSETS TURNOVE =0.133*2.514 =33.45% =0.1463*4.0268 = 58.9 %
  47. 47. Return On Equity “Desired to work out the profitability of the company” Formula: = 𝑷𝑹𝑶𝑭𝑰𝑻 𝑨𝑭𝑻𝑬𝑹 𝑭𝑰𝑵𝑨𝑵𝑪𝑬 𝑪𝑯𝑨𝑹𝑮𝑬𝑺 & 𝑻𝑨𝑿 𝑬𝑸𝑼𝑰𝑻𝒀 ∗ 𝟏𝟎𝟎
  48. 48. RETURN ON EQUITY Net profit / equity = 𝟓𝟖𝟔𝟔𝟕𝟔𝟑 𝟏𝟏𝟖𝟓𝟗𝟏𝟓𝟕 ∗ 𝟏𝟎𝟎 =49.4% 2013 2014 = 𝟕𝟗𝟐𝟗𝟐𝟕𝟏 𝟏𝟐𝟔𝟐𝟕𝟔𝟐𝟓 ∗ 𝟏𝟎𝟎 =62.79%
  49. 49. GROSS PROFIT RATIO “Ratio of gross profit to Net sales” Formula = 𝑮𝑹𝑶𝑺𝑺 𝑷𝑹𝑶𝑭𝑰𝑻 𝑺𝑨𝑳𝑬𝑺 ∗ 𝟏𝟎𝟎 Net sales = Sales – Returns Inward
  50. 50. Gross profit margin % 2014 = 𝟐𝟕𝟑𝟐𝟑𝟗𝟗𝟎 𝟗𝟔𝟒𝟓𝟕𝟕𝟒𝟑 ∗ 𝟏𝟎𝟎 =62.79% 2013 = 𝟐𝟒𝟏𝟔𝟎𝟕𝟗𝟕 𝟖𝟔𝟐𝟐𝟔𝟖𝟔𝟗 ∗ 𝟏𝟎𝟎 =49.4%
  51. 51. Operating expense % 100sales Operating expense Operating expense ratio
  52. 52. Operating expense = 𝟏𝟑𝟐𝟏𝟎𝟓𝟐𝟕 𝟗𝟔𝟒𝟓𝟕𝟕𝟒𝟑 ∗ 𝟏𝟎𝟎 =13.69% = 𝟏𝟐𝟔𝟖𝟗𝟓𝟐𝟕 𝟖𝟔𝟐𝟐𝟔𝟖𝟔𝟗 ∗ 𝟏𝟎𝟎 =14.71%
  53. 53. Operating Profit Ratio “Calculated by dividing the Operating Net Profit by Sales” Formula: (Operating Profit/Net sales)*100 Determined the Ability Of the Management in Running the Business
  54. 54. Operating Profit Ratio 2013 =11471270/86226869*100 =13% 2014 14113463/96457743 =14%
  55. 55. CONCLUSION The company performance not bad and still nestle is the market leader in Pakistan . But the company have more chance to increase its growth and market share. So we can say company performance is satisfactory.

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