Zurab Kazalikashvili ------------------------------CASE STUDY about Our Daily Bread

a) Financial Analysis

About business performance we can use some profitability ratios and such kind of metrics for getting
clear information about business’s performance(financial performance). So by gross profit the company
increased its gross profit by 2 percent, because of increase in sales 2006, then in 2005. Also the demand
was increased and superstores increased their purchaises, so the cost of materials raze as well.

After this the EBITDA decreased by 14 percent because of increase in administrative and general
expenses and also for EBIT the depreciation and amortization increased we got EBIT lower by 57%. Also
there was increase in interest expense and interest income was less. And after taxes we had Net Profit
less by 47% then it was in 2005.

Its interesting how ROA and ROE has changed. So the ROA has been 10.3% in 2005 and in 2006 it was
4.9% and the ROE was 19.2% in 2005 and in 2006 was 9.4%. by this information we can see that earning
has decreased in 1 year so much and performance has decreased.

2) SWOT

Strengths –

Wide range of products of bakery

Has delivery servise

Is expanding pruction lines and creating new products

Has large portion of market segment

Has competition advantage

Has new Quality controls

Have partnerships and stable suppliers

Weaknesses –

Preparation duration

Has hight transportation costs

Hes working only with stores

Dosnt has flexible prices

Opportunities –
Entering new markets

Can easily improve delivery system

Expand new production lines and create new products

Can get new segments

Threats –

Prices are rising

New regulations

Hight competition in market

Possible bankruptcy

Economic situation in market

3)

Oper. activities

Net income -47

Dep -795
Inventories -28
Receivables -124
Cash 678
Operating Liab. 116
Net cash -200
-400

Investing

Fixed assets -10

Net cash -10
-20

Financing

Shareholders eq 555
div -48
 Long term debt 79
Net cash 581
1167

So there was increase in cash by 371

Working capital of 2005 = curr assets- curr liabilities = 5872-2363=3509

Working capital of 2006 = 6402-3818=3818

Working capital requirement of 2005= inventory + acc receivable – acc payable = 582+3851-325 = 4108
Working capital requirement of 2006= 742+4594-492=4844

Net cash surplus of 2005 = cash receipts – cash disbursements = 371

Net cash deficit of 2006 = -683

the ownership was distributed as follows: Mr. Zuikov and his wife owned 85%, majority of the
company’s common stock. Mr. Soloviov held 5% and Mr. Amarkhalidi was promised 10% of the capital
by the end of 2010, subject to improvement in profitability.

For increasing production capacity, diversify the offer and provide better delivery service in south-
western region, Zuikov family opened a plant called “Zavadskoi” in 1999 under the name of Khleb N.N.-s
subsidiary. This 3,500 sq. meter factory is fully automated (including for packaging) and specializes in
pre-cooked frozen bread. It has 18 employees and produces 5000 baguettes an hour.

Nowadays represents one of the main suppliers of frozen bread dough in both the Vladivastok and part
of the far east region of Russia.

Product lines of the company are:

Backing – 78%

Sweet breads – 18%

Pastries – 3%

Delicatessen – 1%
The Company operates in breadmaking industry. Market is supplied both by traditional bakers and
pastry makers and by the agri-foods industry and the industrial breadmaking industry is highly
concentrated.

The 10 companies with 500 or more employees generate over 30% of the industry’s sales. In parallel,
the smallest companies with 20 to 49 employees represent only 4.9% of sales. Although most of its
competitors are larger this company but they are less competitive then this company in this region
cause it has more production ficilities.

the Management of the company is represented by founder, Mr. and Mrs. Zuikov itself, Mr. Soloviv as
sales director and Mr. Amarkhalidi as Managing director. The production is in two places, the first one is
Vladivostok which is head office

in factory there is 3 automatic production lines for traditional bread, 1 semi-automatic line for special
breads and 1 manual line for sweet breads. In factory is working 38 employees

the second factory is in south western side of region and has 18 employees.

The company in Vladivostok is performing good in region as the company is the biggest supplier of bread
and drought and it is increasing its sales year by year. The demand is increasing as well and company is
trying to establish new product lines and products. Even company has ability to go to international and
go for exports.