ANALYSIS & FINANCIAL STATEMENTS

Nestle’s fiscal year always ends in the end of December. The following results have been collected and
following graphs have been drawn and interpretations drawn:

1. ASSET GROWTH:

Assets Growth
35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0
Property & capital work Cash intagible Adv & other Stores and Stock in loan and sales tax
Equip assets recivables spares trade advances refundable

2016 2017 2018 2019

 TOTAL ASSETS:

YEAR 2016 2017 2018 2019

Total Assets 50,781,770.0 58,345,619.00 67,160,011.00 65,273,408.00

0
Percentage --------------- 14.89% 15.10% (2.80%)
Growth

YEAR 2016 as BASE 2017 2018 2019

YEAR

Total Assets 50,781,770.0 58,345,619.00 67,160,011.00 65,273,408.00

0
Percentage --------------- 14.89% 32.25% 28.53%
Growth
 The total assets (current and non-current) increased year by year as per company growth as
mention in the table above, while taking 2016 as base year as we can see that in 2017 company as
got up to by 14.89% and in 2018 company assets got 32.25% as compare to 2016 assets, and in
2019 company assets got up to 28.53%, which are far better but as we marked matched 2019
assets with the previous year, eventually company assets got decreased up to 2.80% which means
in just 2019 company assets got decreased in case if we compare them with the previous year
(2018) but as we matched 2019 assets with 2016, company assets got up high in the sky

 ASSETS STRUCTURE:

Assets Structure

80,000,000

70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

0
Total Assets

2016 2017 2018 2019

The current resources structure a noteworthy part of the complete resources as Nestle
organizations try not to have part of Non-Current resources. Inventories structure a significant
segment of the current resources throughout the years, adding is normal. Inventories are
esteemed at the lower of cost and net feasible worth. Cost is figured on a weighted normal
premise. The level of exchange receivables has been expanding slightly throughout the years
demonstrating the organization isn't giving much using a loan. In the non-current resources,
long haul credits have not changed altogether. Money and bank balance have been expanding
and squeezing on a normal of 60% to 55%.

2. TOTAL LIABILITIES:

YEAR 2016 2017 2018 2019

 Total Liabilities 50,781,770.00 58,345,619.0 67,160,011.00 65,273,408.00
0

Percentage Growth --------------- 14.89% 15.10% (2.80%)

Absolute Liabilities have diminished throughout the years demonstrating a development of

14.89% in the year finishing 2017 if we matched total liabilities with base year 2016. The
development has been increased by 0.21% for the year finishing 2018 as compared to previous
year 2017, but loss began to increased by (2.80%) before the finish of 2019 as compared to
2018.

 OWNERS EQUITY:

Equity Growth During Years

10
9
8
7
6
5
4
3
2
1
0
Owner Equity (MILLION)

2016 2017 2018 2019

 Absolute Equity has diminished throughout the years. Out of the liabilities and Equity, exchange
payables structure a significant part adding to over 2.1% throughout the years from 2016 to
2017, etc in 2018 till 2019 the payable obligations got increment and proprietors' value fall up to
0.4%, yet in the event that we allotted 2016 to 2017 proprietors' value and contrasted it with
2018 with 2019 proprietors' value and complete, the outcome would be certain that Nestle
control its proprietors value fall up to 1.7%. Long haul arrangements incorporate Provision for
representative advantages (annuity, clinical, remunerated nonattendances and others).
Arrangement for annual assessment (net of advance expense) and different arrangements
(counting for legal tolls and so forth.

3. FINANCIAL STRUCTURE ANALYSIS

 FINANCIAL STRUCTURE
35

30

25

20

15

10

0
Shares Fund Long Terms Debts Current Liabilities Payables

2016 2017 2018 2019

In the period 2016 – 2017, Nestle Shareholders fund got decreased, debts got increased, and
current liabilities and payables got decreased in compare with previous year 2016, which
denotes its weak financial stability. Nestle is able to finance its operations with both Current &
Other Current Liabilities but in the main form of Trade Payables. The company made provisions
for Long term under Long term Provisions.
 In the period 2018, Nestle Shareholders fund got increased, but also debts, current liabilities
and payables got increased in compare with previous year 2017, which makes Nestle company
more unstable and devasted its financial structure.

In the period 2019, Nestle Shareholders fund got decreased, but also debts, & payables got
decreased in compare with previous year 2018, which makes Nestle company slightly stable in
its financial structure, but during the period current liabilities increased, but somehow NESTLE
potentially successfully demolished its previous position in which they fall into weak position.

4. PROFIT AND LOSS RATIOS:

 INCOME STATEMENT GROWTH:
 INCOME GROWTH
140,000,000

120,000,000

100,000,000

80,000,000

60,000,000

40,000,000

20,000,000

0
Sales Net Income Gross Profit Income After Tax Cost Of Goods

2016 2017 2018 2019

 REVENUE:
During the analysed period the amount of Total Revenues increased successively till 2019 in
base year of 2016, which showed a positive trend but there was a sharp decline in 2019 and
2018 if we compare both of them with previous year markup. The net sales increase was high in
2017 which was 5% and there after it followed a slower increase growth of 1%, 2.5%, to
negative.
 COST OF GOODS SOLD:
The COGS growth was 2.5% in 2017 & till 2019 the growth was very sufficient and effective; the
growth was 15% and then gained up to more positive 25% in 2019 which is mainly because of
consumers attention over sales. Means, company’s sales going upwards in market during
periods of 4 years.

 GROSS INCOME:

The Gross income was high initially in 2017 which was 2.5% and then the growth was less and
went low in 2018 which was only 3% and finally followed a similar pattern of Revenues & COGS
and declined to 2.5% in 2019 in compare of 2018.

 EARNING AFTER TAXES:

Earnings After Interest, Taxes, Depreciation and Amortization increased from 2010 till 2019 with
slower growth rate but declined tremendously in 2019 which went above in 2016 from
11,846,973 million to 2017 from 14,641,782 million, and in 2018 earning fall and come on the
level of 11,611,599 million, and in 2019 earnings after tax of nestle was 7,354,467 million.

 TOTAL NET INCOME AND GROWTH:

The total growth and income of the company goes upwards and downwards during the
periods of four years as mentions in the chart above, as the sales of the company keep
gaining positive position in the market, but on the other hand company profit gain 25%
more in 2017 in compare of previous year 2016, but eventually after 2017, the ahead
year of 2018 and 2019 companies sales gone down in compare of 2017 but as we
compare sales with the base year 2016, the sales of the company were still in profit.
Which shows company stability in product line market.

Because of sales graph gone down from up, the gross profit of the company also got
effected, and the chart of gross profit goes negative after the year of excellence 2017.
And so on everything of the company got effected if we calculate net income of the 4
years. Only in 2017 company was in good position, but so on afterwards company face
huge loss/debt and its profit graph got devasted, but have some little stable position
cause of sales.
Strength:
1) Brand Image:
Nestle is one the oldest brands which is immensely known all around the world. Nestle
was founded in 1866 and over the span of time it has created it’s name in the market. The
strong brand image gives the brand power to be competitive in the market and since it’s a
well known brand most of the consumers will consider a nestle product over a newly
launched brand. It’s effective marketing strategies has enabled it to create an image
worldwide.

2) Quality:
Nestle has designed their products with highest quality and in accordance with the
international safety standards. It has created a name for itself over the time by providing
the consumers with the best quality products they can trust and buy without a second
thought. From complying with internal and external food safety to controlling pests and
preventing anti bodies from entering the products nestle has taken every possible step to
ensure the safety and quality.
3) Renowned company:
It is one of the world’s most valuable brand with respect to market value, highest
revenue, assets and profits.
4) Strong portfolio:
Nestle has a diverse product portfolio with 2000 brands globally and 8000 products it is
one the biggest companies in the world. It has one of the world’s biggest brands under
it’s name like Kitkat, Gerber, Nescafe, Friskies, Milo and Maggi. The consumers are
very familiar with all these brands. Due to the diversity of the portfolio nestle has
successfully entered urban as well as rural markets.
5) Research and Development:
The main focus of the company has been selling s and making healthier products
to the consumers from the beginning keeping what the needs of the consumers in mind.
Nestle owns the largest and the most effective research organization. It has more than
5000 highly skilled employees in the Research and development department. The
capacity of research and development is very competitive. They focus on understanding
and improving the health. It globally has 21 research centres.

6) Environmental sustainability efforts:

Nestle has taken multiple steps in manufacturing units. Energy, water and Greenhouse gas
outflows are the major environmental pointers for manufacturing department. Nestlé deals
with these in its activities and continues improving its performance every year.
Multiple steps were taken by nestle to sustain greenhouse gas emissions, water pumping
was reduced to 10%, from 2018 the energy usage was optimised and reduced to 3%.
 Weaknesses:
1) Price changes
Nestle products are sold almost everywhere but mainly nestle earns from huge retailers
like Walmart, target etc, so if they increase the prices of the products it will have an
impact on nestle sales. Most of the sales depend on few well-known brands of nestle
which makes the company vulnerable to any change in the consumer behaviour.

2) Controversial Maggi case:

Maggi was banned in India after they found out about maggi having additives which
are dangerous to consume. The packaging clearly says NO ADDED MSG on the maggi
packets and after testing 1000 more lead was found.
3) Matrix Structure:
Since nestle is organized in a matrix structure a lot of brands come under nestle and
managing so many brands and keeping up the standards can be a challenging and
managing number of brands can sometimes lead to conflicts between employees or
departments.

4) Illegal pumping:
The company has rights to extract 8.5 million gallons of water from San Bernardino
National Forest but they extracted approximately 62.5 million gallons of water and they
do not have permit to do this. Nestle is also accused of pumping millions of litres of
water from 6 nations which are deprived of water.

5) Technology:
Investing in technology doesn’t seem to be the vision of the company at the moment
but the increase in competition in the market it needs to invest in technology as nestle
continues to expand in different geographies and to keep up with the market it needs
advanced technologies.

6) Financial Planning:
The current asset ratio and liquid asset ratio suggest that the company at present needs
to use the cash more efficiently.
7) Advertising:
The company seems to attract it’s costumers through advertising to find out about the
consumer’s interest which may result in high marketing costs.
Recommendations

Inventory Days:
The inventory days is showing increased trend in 2016 to 2018. This is probably due to increase
in cost of goods sold perhaps, purchases during the period 2016 and 2018 However, the trend
seem better in 2019 where Cost of goods sold has been slightly increased by 0.89% as compared
to 2016-2017 being 6.68%.

The company should more focus on increasing sale so that inventory days is improvised.

Receivable Days:
There is a sharp increase in receivable days from 2017 to 2018. It is probably due to increase in
trade debts from 2017 to 2018 overall an increase by 300%. On the other hand the Trade debts
have decreased by 30% (2018 to 2019) resulting in improvised receivable days.

This shows company is managing/collecting its receivables in a better way. Further, Company
should seek to improvised its collection period.

Net Profit Margin:

It is to be noted that Net profit margin was better in 2016-2018 being increased by 23.6%. It has
been drastically decreased by (36%) in 2018-2019. The main reason being the increase in finance
cost by 72% in 2018-2019.

This shows that company is heavily dependant on loans on which it pays huge interest. Company
should seek other alternative ways to raise finance possibly by using equity method