GROUP NO: 68

GROUP MEMBERS:-

 ABDUR REHMAN ULLAH KHAN (40931)

 SYED JALAL UDDIN (45313)

COURSE NAME :- PRINCIPLES OF COURSE INSTRUCTORS:-

FINANCE SUMAIRA ASHRAF / SUNDUS
WAQAR

ASSIGNMENT :- RATIO ANALYSIS

 TABLE OF CONTENT
COMPANY’S FINANCIAL STATEMENT

THE PROFITABILITY, LIQUIDITY, LEVERAGE AND VALUATION RATIOS

COMPANY’S TREND AND COMMON SIZE ANALYSIS

THE COMPANY’S STRENGTHS, WEAKNESSES AND RECOMMENDATIONS

 COMPANY’S FINANCIAL STATEMENT

Income Statement
 

(Rupees in '000) 2016 2017 2018 2019

Net Sales 112,392,654 122,214,698 124,614,785 115,962,473

Less: Cost of sales (72,609,392) (77,458,749) (83,242,655) (82,613,501)
         
Gross Profit/ (Loss) 39,783,262 44,755,949 41,372,130 33,348,972
         
Selling and distribution costs (17,875,408) (18,406,725) (18,470,241) (14,656,501)
Administrative Expenses (2,760,186) (2,741,743) (2,926,471) (3,667,718)
   
Operating Profit/ (Loss) 19,147,668 23,607,481 19,975,418 15,024,753
         
Finance cost (959,005) (1,095,630) (1,818,650) (3,187,695)
Other Expenses (1,563,496) (1,837,203) (1,512,112) (1,390,138)
         
Other Income 394,753 313,857 255,308 268,790
         
Profit/ (Loss) before taxation 17,019,920 20,988,505 16,899,964 10,715,710
   
Taxation (5,172,947) (6,346,723) (5,355,382) (3,361,243)
         
Profit/ (Loss) for the year 11,846,973 14,641,782 11,544,582 7,354,467
 Balance Sheet

(Rupees in '000) 2016 2017 2018 2019

EQUITY AND LIABILITIES

Share capital and reserves
Authorised capital
75,000,000 ordinary shares of Rs. 10 each 750,000 750,000 750,000 750,000

Issued, subscribed and paid up capital 453,496 453,496 453,496 453,496

Share premium 249,527 249,527 249,527 249,527
General reserve 280,000 280,000 280,000 280,000
Hedging reserve (10,092) 8,357 - -
Accumulated profit 7,839,121 3,642,960 3,037,201 2,272,943
Total Equity 8,812,052 4,634,340 4,020,224 3,255,966

Long term finances 5,637,473 9,291,755 9,064,730 3,780,294

Lease liabilities - - 217,530 303,729
Deferred taxation 1,943,343 2,493,067 2,443,197 1,960,850
Retirement benefits 1,361,555 1,660,762 2,098,020 2,777,502
Total Non Current Liabilities 8,942,371 13,445,584 13,823,477 8,822,375

Current portion of non-current liabilities - 116,343 420,285 3,395,084

Short term borrowings 4,345,157 11,845,986 15,242,800 17,217,473
Short term running finance under mark-up arragements - secured 2,013,120 513,908 1,418,301 6,141,325
Customer securtiy deposits - interest free 240,843 260,369 195,431 192,724
Unclaimed dividend - 26,718 20,608 20,608
Trade and other payables 26,379,339 27,355,515 31,745,031 25,782,895
Interest and mark-up accrued 48,888 146,856 273,854 444,958
Current liabilities 33,027,347 40,265,695 49,316,310 53,195,067

Total Liabilities 41,969,718 53,711,279 63,139,787 62,017,442

External Financing Required - - -

Total Equity and Liability 50,781,770 58,345,619 67,160,011 65,273,408

ASSETS
Non-current assets
Property, plant and equipment 28,046,124 28,734,507 30,363,333 30,333,121
Capital work-in-progress 2,765,730 4,059,585 3,679,302 3,441,066
Intangible assets 31,600 23,532 15,464 7,396
Long term loans and advances 338,449 367,359 305,333 239,499
Long term deposits and prepayments 32,046 36,147 - -

Total Non-current Assets 31,213,949 33,221,130 34,363,432 34,021,082

Current assets
Stores and spares 1,308,329 1,769,987 1,951,900 2,376,057
Stock in trade 11,207,230 15,358,288 19,711,784 18,876,441
Trade debts 564,460 781,116 3,116,948 2,164,888
Current portion of long term loans and advances 98,565 135,248 132,729 132,045
Sales Tax refundable - net 5,374,745 4,477,768 4,552,598 4,599,004
Advances, deposits, prepayments and other receivables 661,325 1,268,098 2,584,926 2,785,138
Cash and bank balances 353,167 1,333,984 745,694 318,753

Total current Assets 19,567,821 25,124,489 32,796,579 31,252,326

Total Assets 50,781,770 58,345,619 67,160,011 65,273,408

 Industry
Ratio Analysis 2016 2017 2018 2019
Averages

Liquidity Ratio

Current Ratio 0.59 0.62 0.67 0.59 1.32

Quick Ratio 0.59 0.35 0.35 0.22 0.55

Activity Ratios

Average Payment period(Days) 132.61 128.90 139.19 113.91 31.20

Average collection period (Days) 1.83 2.33 9.13 6.81 163.75
Inventory turnover (Times) 12.96 5.83 4.75 4.28 4.36
Asset turnover 2.21 2.09 1.86 1.78 1.77

Debt Ratios

Times interest earned ratio 19.97 21.55 10.98 4.71

Fixed Payment Coverage Ratio 9.92 4.39
Debt to equity ratio 4.76 11.59 15.71 19.05 0.83

Profitability Ratios

Gross profit margin 35.40% 36.62% 33.20% 28.76% 28.30%

operating profit margin 17.04% 19.32% 16.03% 12.96% 12.94%
net profit margin 10.54% 11.98% 9.26% 6.34% 7.70%
Return on capital employed( ROCE) 107.85% 130.57% 111.95% 124.39% 15.75%
Earnings per share 261.23 322.86 254.57 162.17 148.4
Return on Total Assets 23.33 25.09 17.19 11.27 20.3
Return on common equity 134.44% 315.94% 287.16% 225.88% 44.75%

Market Ratios

Price/ earnings ratio 34.45 35.62 35.35 58.57 34.98

Market/book ratio 765.96 1860.68 667.66 704.59
 Current Rati o
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00

Quick Rati o
Current Ratio Industry Average
0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

Quick Ratio Industry Average

 Return on common equity
1200.00%

1000.00%

800.00%

600.00%

400.00%

200.00%

0.00%

Return on Common Equity Industry Average

Operati ng Profi t Margin

600.00%

500.00%

400.00%

300.00%

200.00%

100.00%

0.00%

Operating Profit Margin Industry Average

 Balance Sheet Common Size Analysis
(Rupees in '000) 2016 Propotion 2017 Propotion 2018 Propotion 2019 Propotion

EQUITY AND LIABILITIES

Share capital and reserves
Authorised capital
75,000,000 ordinary shares of Rs. 10 each 750,000 1.48% 750,000 1.29% 750,000 1.12% 750,000 1.15%

Issued, subscribed and paid up capital 453,496 0.89% 453,496 0.78% 453,496 0.68% 453,496 0.69%
Share premium 249,527 0.49% 249,527 0.43% 249,527 0.37% 249,527 0.38%
General reserve 280,000 0.55% 280,000 0.48% 280,000 0.42% 280,000 0.43%
Hedging reserve (10,092) -0.02% 8,357 0.01% - -
Accumulated profit 7,839,121 15.44% 3,642,960 6.24% 3,037,201 4.52% 2,272,943 3.48%
Total Equity 8,812,052 17.35% 4,634,340 7.94% 4,020,224 5.99% 3,255,966 4.99%

Long term finances 5,637,473 11.10% 9,291,755 15.93% 9,064,730 13.50% 3,780,294 5.79%
Lease liabilities - - 217,530 0.32% 303,729 0.47%
Deferred taxation 1,943,343 3.83% 2,493,067 4.27% 2,443,197 3.64% 1,960,850 3.00%
Retirement benefits 1,361,555 2.68% 1,660,762 2.85% 2,098,020 3.12% 2,777,502 4.26%
Total Non Current Liabilities 8,942,371 17.61% 13,445,584 23.04% 13,823,477 20.58% 8,822,375 13.52%

Current portion of non-current liabilities - 116,343 0.20% 420,285 0.63% 3,395,084 5.20%
Short term borrowings 4,345,157 8.56% 11,845,986 20.30% 15,242,800 22.70% 17,217,473 26.38%
Short term running finance under mark-up arragements
2,013,120
- secured 3.96% 513,908 0.88% 1,418,301 2.11% 6,141,325 9.41%
Customer securtiy deposits - interest free 240,843 0.47% 260,369 0.45% 195,431 0.29% 192,724 0.30%
Unclaimed dividend - 26,718 0.05% 20,608 0.03% 20,608 0.03%
Trade and other payables 26,379,339 51.95% 27,355,515 46.89% 31,745,031 47.27% 25,782,895 39.50%
Interest and mark-up accrued 48,888 0.10% 146,856 0.25% 273,854 0.41% 444,958 0.68%
Current liabilities 33,027,347 65.04% 40,265,695 69.01% 49,316,310 73.43% 53,195,067 81.50%

Total Liabilities 41,969,718 82.65% 53,711,279 92.06% 63,139,787 94.01% 62,017,442 95.01%

Total Equity and Liability 50,781,770 100.00% 58,345,619 100.00% 67,160,011 100.00% 65,273,408 100.00%

ASSETS
Non-current assets
Property, plant and equipment 28,046,124 55.23% 28,734,507 49.25% 30,363,333 45.21% 30,333,121 46.47%
Capital work-in-progress 2,765,730 5.45% 4,059,585 6.96% 3,679,302 5.48% 3,441,066 5.27%
Intangible assets 31,600 0.06% 23,532 0.04% 15,464 0.02% 7,396 0.01%
Long term loans and advances 338,449 0.67% 367,359 0.63% 305,333 0.45% 239,499 0.37%
Long term deposits and prepayments 32,046 0.06% 36,147 0.06% - -
0.00%
Total Non-current Assets 31,213,949 61.47% 33,221,130 56.94% 34,363,432 51.17% 34,021,082 52.12%
0.00%
Current assets 0.00%
Stores and spares 1,308,329 2.58% 1,769,987 3.03% 1,951,900 2.91% 2,376,057 3.64%
Stock in trade 11,207,230 22.07% 15,358,288 26.32% 19,711,784 29.35% 18,876,441 28.92%
Trade debts 564,460 1.11% 781,116 1.34% 3,116,948 4.64% 2,164,888 3.32%
Current portion of long term loans and advances 98,565 0.19% 135,248 0.23% 132,729 0.20% 132,045 0.20%
Sales Tax refundable - net 5,374,745 10.58% 4,477,768 7.67% 4,552,598 6.78% 4,599,004 7.05%
Advances, deposits, prepayments and other receivables
661,325 1.30% 1,268,098 2.17% 2,584,926 3.85% 2,785,138 4.27%
Cash and bank balances 353,167 0.70% 1,333,984 2.29% 745,694 1.11% 318,753 0.49%

Total current Assets 19,567,821 38.53% 25,124,489 43.06% 32,796,579 48.83% 31,252,326 47.88%

Total Assets 50,781,770 100.00% 58,345,619 100.00% 67,160,011 100.00% 65,273,408 100.00%
 Asset turnover
2.50

2.00

1.50

1.00

0.50

0.00

Asset Turnover Industry Average

 Nestle Pakistan Limited
Income Statement Trend Analysis

(Rupees in '000) 2016 % Change 2017 % Change 2018 % Change 2019

Net Sales 112,392,654 8.74% 122,214,698 1.96% 124,614,785 -6.94% 115,962,473
Less: Cost of sales (72,609,392) 6.68% (77,458,749) 7.47% (83,242,655) -0.76% (82,613,501)

Gross Profit/ (Loss) 39,783,262 12.50% 44,755,949 -7.56% 41,372,130 -19.39% 33,348,972

Selling and distribution costs (17,875,408) 2.97% (18,406,725) 0.35% (18,470,241) -20.65% (14,656,501)
Administrative Expenses (2,760,186) -0.67% (2,741,743) 6.74% (2,926,471) 25.33% (3,667,718)

Operating Profit/ (Loss) 19,147,668 23.29% 23,607,481 -15.39% 19,975,418 -24.78% 15,024,753

Finance cost (959,005) 14.25% (1,095,630) 65.99% (1,818,650) 75.28% (3,187,695)

Other Expenses (1,563,496) 17.51% (1,837,203) -17.69% (1,512,112) -8.07% (1,390,138)

Other Income 394,753 -20.49% 313,857 -18.65% 255,308 5.28% 268,790

Profit/ (Loss) before taxation 17,019,920 23.32% 20,988,505 -19.48% 16,899,964 -36.59% 10,715,710

Taxation (5,172,947) 22.69% (6,346,723) -15.62% (5,355,382) -37.24% (3,361,243)

Profit/ (Loss) for the year 11,846,973 23.59% 14,641,782 -21.15% 11,544,582 -36.30% 7,354,467

01
 Balance Sheet Trend Analysis
(Rupees in '000) 2016 % change 2017 % change 2018 % change 2019

EQUITY AND LIABILITIES

Share capital and reserves
Authorised capital
75,000,000 ordinary shares of Rs. 10 each 750,000 - 750,000 - 750,000 - 750,000

Issued, subscribed and paid up capital 453,496 0.00% 453,496 0.00% 453,496 0.00% 453,496
Share premium 249,527 0.00% 249,527 0.00% 249,527 0.00% 249,527
General reserve 280,000 0.00% 280,000 0.00% 280,000 0.00% 280,000
Hedging reserve (10,092) -182.81% 8,357 - -
Accumulated profit 7,839,121 -53.53% 3,642,960 -16.63% 3,037,201 -25.16% 2,272,943
Total Equity 8,812,052 -47.41% 4,634,340 -13.25% 4,020,224 -19.01% 3,255,966

Long term finances 5,637,473 64.82% 9,291,755 -2.44% 9,064,730 -58.30% 3,780,294
Lease liabilities - - 217,530 39.63% 303,729
Deferred taxation 1,943,343 28.29% 2,493,067 -2.00% 2,443,197 -19.74% 1,960,850
Retirement benefits 1,361,555 21.98% 1,660,762 26.33% 2,098,020 32.39% 2,777,502
Total Non Current Liabilities 8,942,371 50.36% 13,445,584 2.81% 13,823,477 -36.18% 8,822,375

Current portion of non-current liabilities - - 116,343 261.25% 420,285 707.81% 3,395,084

Short term borrowings 4,345,157 172.63% 11,845,986 28.67% 15,242,800 12.95% 17,217,473
Short term running finance under mark-up arragements
2,013,120
- secured -74.47% 513,908 175.98% 1,418,301 333.01% 6,141,325
Customer securtiy deposits - interest free 240,843 8.11% 260,369 -24.94% 195,431 -1.39% 192,724
Unclaimed dividend - 26,718 -22.87% 20,608 0.00% 20,608
Trade and other payables 26,379,339 3.70% 27,355,515 16.05% 31,745,031 -18.78% 25,782,895
Interest and mark-up accrued 48,888 200.39% 146,856 86.48% 273,854 62.48% 444,958
Current liabilities 33,027,347 21.92% 40,265,695 22.48% 49,316,310 7.87% 53,195,067

Total Liabilities 41,969,718 27.98% 53,711,279 17.55% 63,139,787 -1.78% 62,017,442

Total Equity and Liability 50,781,770 14.89% 58,345,619 15.11% 67,160,011 -2.81% 65,273,408

ASSETS
Non-current assets
Property, plant and equipment 28,046,124 2.45% 28,734,507 5.67% 30,363,333 -0.10% 30,333,121
Capital work-in-progress 2,765,730 46.78% 4,059,585 -9.37% 3,679,302 -6.48% 3,441,066
Intangible assets 31,600 -25.53% 23,532 -34.29% 15,464 -52.17% 7,396
Long term loans and advances 338,449 8.54% 367,359 -16.88% 305,333 -21.56% 239,499
Long term deposits and prepayments 32,046 12.80% 36,147 - -

Total Non-current Assets 31,213,949 6.43% 33,221,130 3.44% 34,363,432 -1.00% 34,021,082

Current assets
Stores and spares 1,308,329 35.29% 1,769,987 10.28% 1,951,900 21.73% 2,376,057
Stock in trade 11,207,230 37.04% 15,358,288 28.35% 19,711,784 -4.24% 18,876,441
Trade debts 564,460 38.38% 781,116 299.04% 3,116,948 -30.54% 2,164,888
Current portion of long term loans and advances 98,565 37.22% 135,248 -1.86% 132,729 -0.52% 132,045
Sales Tax refundable - net 5,374,745 -16.69% 4,477,768 1.67% 4,552,598 1.02% 4,599,004
Advances, deposits, prepayments and other receivables
661,325 91.75% 1,268,098 103.84% 2,584,926 7.75% 2,785,138
Cash and bank balances 353,167 277.72% 1,333,984 -44.10% 745,694 -57.25% 318,753

Total current Assets 19,567,821 28.40% 25,124,489 30.54% 32,796,579 -4.71% 31,252,326

Total Assets 50,781,770 14.89% 58,345,619 15.11% 67,160,011 -2.81% 65,273,408

 Nestle Pakistan Limited
Income Statement Common Size Analysis

(Rupees in '000) 2016 Propotion 2017 Propotion 2018 Propotion 2019 Propotion
Net Sales 112,392,654 100.00% 122,214,698 100.00% 124,614,785 100.00% 115,962,473 100.00%
Less: Cost of sales (72,609,392) -64.60% (77,458,749) -63.38% (83,242,655) -66.80% (82,613,501) -71.24%

Gross Profit/ (Loss) 39,783,262 35.40% 44,755,949 36.62% 41,372,130 33.20% 33,348,972 28.76%

Selling and distribution costs (17,875,408) -15.90% (18,406,725) -15.06% (18,470,241) -14.82% (14,656,501) -12.64%
Administrative Expenses (2,760,186) -2.46% (2,741,743) -2.24% (2,926,471) -2.35% (3,667,718) -3.16%

Operating Profit/ (Loss) 19,147,668 17.04% 23,607,481 19.32% 19,975,418 16.03% 15,024,753 12.96%

Finance cost (959,005) -0.85% (1,095,630) -0.90% (1,818,650) -1.46% (3,187,695) -2.75%
Other Expenses (1,563,496) -1.39% (1,837,203) -1.50% (1,512,112) -1.21% (1,390,138) -1.20%

Other Income 394,753 0.35% 313,857 0.26% 255,308 0.20% 268,790 0.23%

Profit/ (Loss) before taxation 17,019,920 15.14% 20,988,505 17.17% 16,899,964 13.56% 10,715,710 9.24%

Taxation (5,172,947) -4.60% (6,346,723) -5.19% (5,355,382) -4.30% (3,361,243) -2.90%

Profit/ (Loss) for the year 11,846,973 10.54% 14,641,782 11.98% 11,544,582 9.26% 7,354,467 6.34%
 Strengths
1. Unmatched research and development capability
2. Strong geographic presence, with one of the best geographically diversified revenue sources
3. Unrivaled product and brand portfolio
4. Environmental sustainability efforts
5. Ownership of some of the most recognizable brands in the world

Weaknesses
1. Criticism over high water usage, selling contaminated food, anti-unionism, forced child labor and using
other unethical practices
2. Contaminated food recall

Opportunities
1. Clear and accurate labelling indicating of any harmful products
2. Transparency in material sourcing
3. Growing number of small Silicon Valley based food startups
4. Growing ready-to-drink (RTD) tea and RTD coffee markets

Threats
1. Poor quality water and its scarcity
2. Increased competition in the beverage and food industries
3. The price of coffee beans could significantly rise due to major weather disasters

Recommendation
Nestlé’s R&D capabilities also stem from its R&D network. The company has the largest R&D centers’
network of any food or beverage company in the world, with 34 R&D facilities and over 5000 people
working in them

Nestlé’s superiority in R&D against its rivals provides a sustainable competitive advantage and long-term
success.

Nestlé operates and sells its products in 189 countries, reaching almost the entire world. The company has
divided its operating segments into 3 geographic areas: The Americas (AMS), Europe, Middle East and
North Africa (EMENA) and Asia, Oceania and sub-Saharan Africa (AOA). None of the regions earn over 50%
of the total revenue.”