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Analysis of Annual Report - Unilever

Analysis of Annual Report - Unilever

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Published by Umair Khizar
Analysis of Unilever's annual report
Analysis of Unilever's annual report

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Published by: Umair Khizar on Aug 05, 2012
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02/18/2015

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UNILEVER PAKISTAN LIMITED
PART - IEVALUATING RATIOS
1.
Comments on Liquidity Ratio
201120102009Current Ratio0.79x0.83x0.83xQuick Ratio0.31x0.40x0.32xa.Current Ratio for the year 2011 indicates that the liabilities of the firmhave increased as compared to the previous two years.b.Liquidity ratio is weak which indicates that the firm had difficulty torepay short-term creditors out of its total cash.2.
Comments on Inventory Turn Over 
201120102009Inventory Turn Over10.0x11.5x10.5xa.Unilever had poor control over its inventory in year 2011.b.It had old inventory due to which it could not retain turn over power ascompared to previous two years.c.With better control, firm can improve the turn over in year 2012.3.
Appraisal of DSO
201120102009DSO1.00.60.8a.Unlike western countries, Pakistan companies do not rely on creditingtheir sales. Therefore their accounts receivable remain within their manageable range.b.This not only benefits in keeping their cash flow higher but also helps toreduce their outstanding dues.
c.
 Above figures clearly indicate the Unilever’s motto to run the readycash business. That is why the company is able to receive the amountagainst the sold goods in lesser than one day time.
Analysis of Annual Report – Unilever 1
 
d.However, owing to business limitations their receivables increasedduring year 2011 due to which their DSO rose up to one day which waslower in 2009 and 2010 respectively.e.However, the figure is not alarming and is within the manageablerange.f.Unilever has an excellent credit policy.4.
Evaluating the FATO and TATO
201120102009FATO7.1x7.4x6.9xTATO3.2x3.3x3.3x
a.
Unilever had good turn over of its fixed assets in year 2010. However,same has reduced in 2011.
 b.
Though the company had higher sales in comparison to last two yearsbut still it had higher number of net fixed assets. Due to which its Fixed Assets Turn Over remained below the expectations. Which could havebeen higher owing to number of increased fixed assets.
c.
In a similar fashion, company’s sales increased but it did not match thenumber of total assets it had for running the business. Therefore, itsTotal Assets Turn Over remained below as compared to last two yearsturn over.d.Company needs to dish out its excessive current assets.5.
Appraisal of Debt Ratio and Times Earned Interest Ratio
201120102009D/A68.5 %73.5 %71.1 %TIE27.4 x26.2x11.6x
a.
Unilever had lowered its debt in 2011, therefore its debt ratio hasdecreased. This is a positive sign towards company’s uplift.b.Still it needs to lower its debt to a point where its debt ratio should notget higher that 50%.c.Since the interest is within the manageable range therefore the factoof interest is negligible.d.Company has prospered due to its commercial paper deeds or thelowering of interest through banks.
Analysis of Annual Report – Unilever 2
 
6.
Appraising Profitability with Operating Margin, Profit Margin and BasicEarning Power 
201120102009Operating Margin11.9 %11.1 %12.9 %Profit Margin7.9 %7.3 %8.0 %Basic Earning Power38.5 %36.8 %43.3 %
a.
Company’s operating margin has increased as compared to 2011 dueto higher earning.
 b.
Owing to financial crunch all over the country, the halt on business dueto countries involvement in war on terror and the normal lowebusiness trend has lowered the Unilever’s operating margin which wasvery good in year 2009.c.Though the overall business had its ups and downs in year 2011 butstill company managed to withstand its ranking in local market due toits policies and the higher profit margin.
d.
This shows that the despite higher profit margin, company couldmanage to have higher number of sales due to its good reputation.e.Though the basic earning power has increased in year 2011 but it isstill lacking the bench mark which it set in year 2009.7.
Evaluating the P/E and M/B Ratios
201120102009P/E5.6x4.5x5.7xM/B5.5x4.1x5.3xa.This shows that investors were willing to pay high in 2011 as comparedto 2010.8.
The Effect of DuPont Equation
PMTATOEMROE20117.9 %3.23.8 98.1%20107.3 %3.3 3.8 91.9 %20098.0 %3.3 3.5 92.8 %
a.
The above given figures of ROE indicate that the net income is closer to the value of equity. Therefore, company is maintaining a standardwhich is rear in other company profiles.
Analysis of Annual Report – Unilever 3

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