COMPARISON OF

THE FINANCIAL
STATEMENTS
Keels Foods VS Cargills
 COM-3341
Advanced Financial Accounting and Reporting
GROUP ASSIGNMENT REPORT

Name of the Group CPM No. % of Contribution for the

Member Report

J. M. H. L. Jayaweera 20673 10%

T. H. H. N. Vithanage 20529 10%

W. D. V. Ekanayake 20598 10%

C.G.D. S.S. Wijerathne 20700 10%

E.G.D.P. Rashmika 20510 10%

K.D.S.D.Wijerathna 20696 10%

K.D.C.N.Malshani 20635 10%

P. Hasini Navoda 20634 10%

R.A.C.M.Rupasinghe 20623 10%

Ishanka Wijewardhena 20708 10%

Total 100%

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 Table of Content

1. Introduction to the Organizations Selected 1

2. Analysis of the Business Operating Environment 2

2.1 External Business Operating Environment

2.2 Internal Business Operating Environment

3. Analysis of Operating Industry 5

4. Credit Rating Analysis of Keells Foods & Cargills Companies 8

5. Ratio Analysis, Comparison and Interpretation on both companies with the

Reasons 10

5.1 Profitability Ratios

5.2 Efficiency Ratios

5.3 Liquidity Ratios

5.4 Working Capital Management Ratios

5.5 Investor Ratios

5.6 Cash Flow Ratios

6. What are the Actions to Improve Financial Performance, Position and Cash

Flows in Cargills Ceylon PLC & Keells Food PLC 19

7. Summary 21

8. References 22

9. Appendices i-vi

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 1. Introduction to the Organizations Selected

We selected Keells Foods PLC and Cargills Ceylon PLC for this assessment. The introduction of
those organizations is shown below.

Keells Foods PLC

Keells Foods PLC is a Sri Lankan food manufacturing and distribution company, primarily
engaged in the production of processed foods and beverages. The company is a subsidiary of John
Keells Holdings, one of Sri Lanka's largest conglomerates.

Keells Foods produces a range of products including ready-to-eat meals, sauces, spices, snacks,
and beverages. It operates under several popular brands such as Elephant House, Krest, and Keells.
The company's products are widely available across Sri Lanka through its distribution network of
over 250,000 outlets.

Keells Foods is committed to sustainable and responsible business practices, sourcing raw
materials from local farmers and suppliers, and focusing on quality, safety, and innovation. It has
won several awards for its performance and products.

Keells Foods operates a chain of convenience stores under the brand name "Keells Super", offering
a range of products including groceries, household items, and personal care products.

Cargills Ceylon PLC

Cargills Ceylon PLC is a publicly listed company in Sri Lanka, engaged in the retail and FMCG
(Fast-Moving Consumer Goods) sectors. The company was founded in 1844 by William Miller
Cargill as a retail store in the city of Colombo, Sri Lanka.

Cargills Food City, Cargills Express, and Cargills Food Hall operate over 380 outlets across the
country, with a presence in the agriculture and processed food industries.

Cargills Ceylon PLC is recognized as one of Sri Lanka's largest retailers and is committed to
offering high-quality products to its customers while maintaining sustainable practices. Pursuing
innovation and food safety its manufacturing brands Cargills Goldi and Cargills Finest (processed
meats) Cargills Kist (processed fruits and vegetables) and Cargills Magic, Kotmale (ice cream and
dairy products) lead sectoral growth.

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 2. Analysis of the Business Operating Environment

The food industry in Sri Lanka has been experiencing steady growth in recent years, and two
prominent players in this market are Keells Food Products PLC and Cargills (Ceylon) PLC. Keells
Food Products PLC is a subsidiary of John Keells Holdings PLC and operates in the food and
beverage industry, while Cargills (Ceylon) PLC is a diversified conglomerate that has a presence
in the food and beverage, retail, and pharmaceutical industries. This section will compare the
external and internal business operating environments of these two companies using their annual
reports as a reference.

2.1. External Business Operating Environment

The factors from outside the corporation that have an impact on its operations are referred to as
the external business operating environment of a company. Political, economic, social,
technological, legal, and environmental factors are the external factors of the business operating
environment.

Political and Legal factors:

Although Sri Lanka's political situation is fairly constant, there are still several challenges that
could have an impact on the food business. For instance, restrictions placed by the government on
the import of particular items may raise the cost of production for the food industry. To continue
conducting business in the country, both Keels Foods PLC and Cargills Ceylon PLC must abide
by the rules and regulations set forth by the government.

Regulations related to employment, environmental protection, and food safety must all be followed
by both businesses. Failure to comply with these regulations can result in fines, lawsuits, and
damage to the reputation of the company. To avoid legal problems, both businesses must make
investments in risk management and compliance.

Environmental factors:

Environmental factors such as resource scarcity and climate change have an impact on the food
industry. To lessen their influence on the environment, Keels Foods PLC and Cargills Ceylon PLC
must both implement sustainable practices like waste reduction and the use of renewable resources.
As an example, Keells supermarket has adapted to use environmentally friendly reuse bags.

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Economic factors:

Sri Lanka is facing an economic crisis and the country is experiencing high inflation, high interest
rates, and a declining currency. These factors have affected both Keells Foods PLC and Cargills
Ceylon PLC. Both companies have responded by implementing cost-cutting measures and
improving efficiency.

The food industry has been particularly affected by rising costs of raw materials and logistics, as
well as government regulations and policies. The COVID-19 epidemic has further exacerbated the
situation, causing supply chain interruptions and logistical difficulties.

Keells Food Products and Cargills Ceylon PLC have responded to these challenges by
implementing measures to optimize their operations and reduce costs. Both companies have
invested in digital initiatives to enhance customer engagement and streamline their operations.

Technological factors:

Technology is rapidly changing the food industry, and both companies have to adapt to stay ahead
in the market. For example, the rise of e-commerce and online ordering has made it necessary for
both companies to offer online ordering and delivery services to customers. Both Keells Food
Products PLC and Cargills Ceylon PLC have launched online ordering platforms and delivery
services to stay competitive.

Social factors:

The food industry is impacted by social factors such as changes in consumer behavior and
preferences. For example, the trend towards healthy eating and sustainability can impact the types
of products that both Keells Foods PLC and Cargills Ceylon PLC offer to consumers. Both
companies have to stay up to date with the latest trends and preferences to stay relevant in the
market.

2.2. Internal Business Operating Environment

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The internal business operating environment of a company refers to the factors inside the company
that affect its operations. The internal business operating environment factors include the
company's culture, structure, resources, and capabilities.

Culture and Structure:

The culture of a company can impacts its operations and performance. Both Keells Foods PLC
and Cargills Ceylon PLC have a strong culture of innovation, customer service, and quality. Both
companies invest in employee training and development to maintain a positive culture and improve
performance.

A company's operations and decision-making procedures may be impacted by its organizational

structure. Keells Foods PLC has a flat organizational structure, which allows for faster decision-
making and more efficient operations. Cargills Ceylon PLC has a more hierarchical structure,
which can make decision-making slower but also allows for it.

Keells Foods PLC has a decentralized structure that allows its business units to operate
independently. The company's culture is focused on customer service and innovation. Cargills
Ceylon PLC has a centralized structure that enables it to manage its diverse operations efficiently.
The company's culture is focused on teamwork and excellence.

Resources:

Keells Food Products PLC has invested heavily in research and development to develop new
products and improve existing ones. The company also has a strong distribution network that
allows it to reach customers in all parts of Sri Lanka. Cargills Ceylon PLC has invested in local
agriculture and manufacturing, which has helped it to reduce its costs and provide affordable
products to customers.

Systems:

Both Keells Food Products PLC and Cargills Ceylon PLC have sophisticated systems for supply
chain management, inventory control, and customer service. Keells Foods PLC has invested
heavily in its supply chain management systems, while Cargills Ceylon PLC has focused on its
logistics and delivery systems.

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 3. Analysis of Operating Industry
Operating Industry means all commercial activities which develop, produce, and/ or manufacture
material, information, and finance. This operating industry includes sub-industries. Retail
Industry, Service Industry, Food and Beverages Manufacturing Industry, Technology Industry,
Banking Industry, and Apparel Industry are some examples of this operating Industry. This topic
going to focus on describing and analysing the type of industry in which an entity operates.

In this assignment, our selected Public Listed Companies are keells food PLC and Cargills Ceylon
PLC. Both companies are food and beverage manufacturing companies in Sri Lanka. If we look at
these companies separately, keels food PLC is mostly focused to manufacture meat-related
products. Keels krest sausages, meatballs, chicken rolls, mini kievs, and cutlets are their main
products. When we consider Cargills Ceylon PLC they not only manufacture food they also
manufacture beverages. Kist Jam, cookies, Kist soft drinks, source products, and Milk Powders
are some examples of Cargills food manufacturers. Considering all these details we can say these
companies are included in Food and Beverages Manufacturing Industry.

This topic going to analyse the Food and Beverages Manufacturing Industry under the Growth of
the industry, export, revenue, and inflation criteria.

According to Sri Lankan (CSE), Food Industry Analysis this food industry growth is increased by
1.6% in the last 7 days, however, the industry going down 8.8% over the past year. But the earning
companies in the food industry have grown 128% per year over the last 3 years. It means that
more sales are being generated by these companies. Current situation of this food industry
investors are pessimistic about the Sri Lankan food industry, and they assume long-term growth
rates will be lower than they have historically. But analysts are most optimistic about this industry
they expect annual earnings growth of 43% over the next 5 years. and also, they forecast the
packaged foods and meats industry is expected to see its earnings growth by 43% per year over
the next few years.

Below chart shows that total market capital, earnings, and revenue of the food industry.

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When we consider exports of this Industry, it can present as follows under three years.

Value in USD MN

2019 2020 2021

Quantity Value Quantity Value Quantity Value

Amount 534,538,891 369.9 341,653,619 351.36 436,609,399 443.98

Source Sri Lanka Custom

When studying this table, we can see export is decreasing year to year due to covid 19 and the
economic crisis in Sri Lanka. But Food and Beverage industry in 2022 January to march shows $
138.7 million in exports. It was a good achievement in the food and beverage industry. Most of
the exports are agricultural products.

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Revenue of the food industry reached US$740MN in 2022. But in 2023 they are projected to reach
US$437.40MN in 2023. And also, food and beverage industry revenue are expected to show an
annual growth rate (CAGR 2023-2027) of 21.33%.

In recent times, Sri Lankan food prices are increasing because of the Ukraine-Russia war, Covid
19 Pandemic, climate impacts, and the downturn of the global economy. Due to these reasons, Sri
Lanka recorded the highest food inflation in September 2022. It was 94.9%. according to the
Colombo Consumer price index, it averaged 9.39% during 2009-2022.

According to this industrial analysis, we can say the food and beverage industry is highly
contributing to the GDP. Due to Covid 19, the economic crisis, and climate impacted this industry
inflation last year. But normally the food and beverage industry is one of the best industries in Sri
Lanka and also in the Country.

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 4. Credit Rating Analysis of Keells Foods PLC & Cargills Ceylon
PLC

A credit rating represents a thoroughly considered, independent assessment of an entity's capacity

to punctually service the promised interest and principal payments. Credit ratings provide a
forward-looking and relative assessment of credit risk and how likely it is that investors will be
repaid in full and on time.

Here we selected Keells Food Products PLC and Cargills PLC. According to the fitch ratings, we
will compare those two PLCs. We will start with Keells Food Products PLC.

Fitch Ratings- Keells Food Products PLC

Keells Food Products PLC is a subsidiary of John Keells Holdings. The Fitch ratings have been
given only to the mother company (JKH). Since there are no ratings for Keells food products we
have decided to take the ratings of the mother company of Keells food products.

❑ The latest rate which is given by Fitch Ratings is “AAA.” It says that JKH has the highest
credit quality. The lowest credit risk assumption is indicated by a rating of AAA. They are
only assigned when there is a strong expectation that they will be able to meet their
financial obligations on time and when it is highly unlikely that unforeseeable occurrences
would negatively affect that expectation.

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Fitch Ratings- Cargills Ceylon PLC

We could be able to present the credit ratings of Cargills PLC as shown below.

❑ The latest rate which is given by Fitch Ratings for Cargills PLC is “A.” it says that Cargills
PLC has a high credit quality. That signifies that "A" ratings signify modest expectations
for credit risk. A strong ability is one that allows one to meet their financial responsibilities
on time. This capacity, meanwhile, might be more vulnerable to changes in economic
conditions than higher grades.
❑ Compared to last year it has been downgraded. In the last year, it was “A+." It says that
Cargills PLC has a high credit quality. It means that low credit risk expectations are
indicated by "A+" ratings. The ability to fulfill financial obligations on time is regarded as
strong. However, compared to higher ratings, this capacity may be more susceptible to
changes in economic situations.
❑ If we compare ratings from 2022 to 2023 the credit ratings which are given by the Fitch
ratings of Cargills PLC have been downgraded from A+ to A.
❑ If we consider the overall ratings, it is in an acceptable position to invest.

If we compare these two PLCs, Keells Food Products is in a better position than Cargills PLC.
Since these ratings are not directly linked with Keells Food Products PLC we are not able to give
an exact idea by comparing these two PLCs.

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 5. Ratio Analysis, Comparison, and Interpretation on Keells
Foods PLC and Cargills Ceylon PLC with the Reasons

Operating performance is widely accepted as a critical success factor for companies in many
industries. It is best described as the level at which all the business units of an organization work
together to achieve the basic business objectives. Accordingly, there are many different methods
for measuring the operational performance of the company. Therefore, the following methods have
been used to analyze the operational performance of Keells Foods PLC and Cargills Ceylon PLC.

1. Profitability ratios
2. Efficiency ratios
3. Liquidity ratios
4. Working Capital Management ratios
5. Investor ratios
6. Cash flow ratios

In our ratio analysis of the financial performance of the industry here, we have considered two
main companies in the relevant industry. They are Keells Foods PLC & Cargills Ceylon PLC
respectively.

1. Profitability Ratios

1.1 Gross Profit Margin

Keells Food PLC has reported gross profit margin as 27.5% in 2020/2021 and 24.8% in
2021/2022. Slight differences can be seen between the gross profit margins.
In here cost of sales lead to declining gross profit margin. Cost of sales were increasing
more than 2020/2021 in Keells foods PLC. Due to the current economic crisis in the
country, all the costs were increased. Cost of goods sold is what it directly costs the
company. Cost of sales also includes variable costs that change as production ramps up or
down. In here due to the increasing in cost of sales were decreased the gross profit margin
in 2021/2022.

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Cargills Ceylon PLC has reported gross profit margin as 3.57% in 2020/2021 and 1.65%
in 2021/2022.That means gross profit margin decreased by 1.92% in 2021/2022 than
2020/2021/. cost of sales has decreased and- also revenue decreased in the company. As a
result, gross profit margin was decreased.
During the year, mainly driven by slow economic growth in the country, negative effects
of poor governance in country and the unfavorable regulatory environment affected for
these things.
Keells Foods PLC (24.8%) has the highest gross profit margin more than Cargills Ceylon
PLC (1.65%) in 2021/2022. But we cannot conclude whether the financial performance is
good or bad from the gross profit margin. Because it contains only gross profit.

1.2 Net Profit Margin

The best measurement of the business's performance is the Net profit margin.
Keells Foods PLC has reported net profit margin as 8.95% in2020/2021, 8.5% in
2021/2022. Other operating income has increased more than in last year. But Selling and
distribution expenses, Administrative expenses, Other operating expenses, finance cost had
increased, and finance income had decreased. Therefore, the net profit margin has
decreased in 2021/2022.

Cargills Ceylon PLC has reported net profit margin as 4% in 2020/2021, 4.2% in
2021/2022.Other income has increased more than expenses and sales revenue decreased.
Therefore, the net profit margin has increased in 2021/2022.
Cargills Ceylon PLC has the highest net profit Margin more than Keells Foods PLC in
2021/2022.

1.3 ROCE
Keells Foods PLC’s ROCE in the year (2020-2021) is 13.3% while 2021/2022 ROCE is
15.4%. It implies that in the year (2021/2022) Keells benefits their capital providers rather
than in 2020/2021.

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 Cargills Ceylon PLC’s ROCE in the year (2020-2021) is 9.21% while 2021/2022 ROCE
is 8.6%. It implies that in the year (2021/2022) Cargills did not benefit their capital
providers rather than in 2020/2021.
In contrast in the year (2021/2022) Keells could be able to yield more than the Cargills
their capital holders per single rupee invested on the company.

2. Efficiency Ratios
An entity’s ability to generate revenue and profits from its assets or net assets.

2.1 Asset Turnover

Keells Foods PLC has maintained a rate of 1.48 (2020/2021) and 1.81 in 2021/2022.
Accordingly, Keells is more efficient in utilizing their assets in deriving the sales during
the 2021/2022 year rather than 2020/2021.
Cargills Ceylon PLC has maintained a rate of 5.7 (2020/2021) and 1.6 in 2021/2022. In
2021/2022 even though total assets have increased, Revenue has decreased. Accordingly,
the ratio in Cargills is not more efficient in utilizing their assets in deriving the sales during
the 2021/2022 year rather than 2020/2021.
Keells is more efficient in utilizing their assets in deriving the sales during the 2021/2022
year rather than Cargills.

2.2 Non – current Asset turnover

Keells Foods PLC has maintained a rate of 1.96 (2020/2021) and 2.53 in 2021/2022.
Accordingly, Keells is more efficient in utilizing their non – current assets in deriving the
sales during the 2021/2022 year rather than 2020/2021.
Cargills Ceylon PLC has maintained a rate of 4.7 (2020/2021) and 1.5 in 2021/2022. In
2021/2022 even though non – current assets have increased, Revenue has decreased.
Accordingly, the ratio in Cargills is not more efficient in utilizing their non -current assets
in deriving the sales during the 2021/2022 year rather than 2020/2021.

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 Keells is more efficient in utilizing their non – current assets in deriving the sales during
the 2021/2022 year rather than Cargills.

3. Liquidity Ratio

The liquidity ratios are calculated to identify the ability to settle an organization's different
types of current liabilities which are pretty much important to run the operations on a day-
to-day basis. This analysis is very important to organizations to identify whether the
organization can repay its short- term liabilities. There are two main types of liquidity
ratios, used by Keells Foods PLC and Cargills Ceylon PLC which can be named as current
ratio and quick ratio.

3.1 Current Ratio

The current ratio measures the company’s ability to meet its short-term liabilities as they
fall due. Generally, the current ratio of any company should be 1 or more than 1.
Considering the current ratio of Keells, in 2020/2021(1.99) and 2021/2022(1.8) have a
slightly higher current ratio. We can see that there is not much difference between the
current ratios in 2020/2021and 2021/2022. However, Keells has shown a decline in these
ratios from 2020/2021 to 2021/2022. Considering the current ratios of Keells for the last
two years, they are all around 1, which is a good position for the liquidity of Keells Foods
PLC. It means that they have the capital on hand to meet their short-term obligations if they
were all due at once.
Considering the current ratio of Cargills in 2020/2021(0.41) and 2021/2022(0.69) We can
see that there is not much difference between the current ratios in 2020/2021 and
2021/2022. However, Cargills has shown increase in these ratios from 2020/2021 to
2021/2022. Cargills has seen an increase in those ratios. But compared to other companies
in the industry, the current ratio of Cargills is relatively lower than those ratios. Since that
ratio is more than 1, it is a favorable situation for the company.
The current ratio of Keells is higher than the current ratios of Cargills in 2022.

3.2 Quick Ratio (Acid Test Ratio)

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 This is similar- to the current ratio, but inventory is removed from the current assets due to
its poor liquidity in the short term. The high value of the quick ratio is better for the
company’s liquidity and financial health. The lower value of the quick ratio is more likely
for the company will struggle with paying debts.
Keells has more than 1 quick ratio for both 2021(1.08) and 2022(1.15) financial years.
However, data from the 2022 Financial Statements shows an increase in the quick ratio of
Keells compared to previous years. Of these, Keells represents a higher quick ratio for
2022. Generally, the quick ratio of a company should be 1 or more than one.
In 2021(0.4) and 2022(0.6), the quick ratio of Cargills which are considered were less than
1. It is not so good for company. Cargills had a quick ratio of less than 1 from 2021 to
2022. It means that they have no liquid assets to pay their current liabilities and should be
treated with caution. However, in the year 2022, this ratio 0.6, It has gone up than in 2021.
Keells has the highest quick ratio than Cargills I 2022.

4. Working Capital Management Ratios

The efficiency ratios are used to the management of an entity’s inventory, trade receivable,
trade payable and cash to ensure that the entity is able- to continue its operations and that
it has the ability- to satisfy short term debt and upcoming operational expenses.
Considering the last 2 recent reporting periods including the following ratios will be briefly
analyzed.
1.Inventory turnover period
2. Receivable collection period
3.Payable payment period

4.1 Inventory turnover period

According to the compared to 2020/2021(74.9 days), the inventory holding period in the
Keells 2021/2022 accounting period is very low. It is 61.7 days. It shows efficient inventory
control. But during the 2021/2022 accounting period, the inventory holding period of
Cargills Ceylon PLC has increased to 157 days. It shows inefficient inventory control.

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 Slowing economic growth, and the implementation of fiscal regulations to control inflation.
This has had a huge impact on the company's sales. Compare with the Cargills Ceylon
PLC, Keells Foods PLC 2021/2022 inventory turnover period is very low.
4.2 Receivable Collection Period

Receivable Collection Period indicates the average time taken to collect trade debt. It is
reducing period of time is an indicator of increasing efficiency. Comparing the years 2021
and 2022 of Cargills shows a low receivable collection period in 2021. Keells food PLC
also shows a lower receivable collection period in 2021 than 2022.

4.3 Payable Payment Period

Payable payment period measures the average number of days it takes a business to pay its
accounts payable.

In Cargills PLC shows a longer payable payment period in 2022 than in 2021. In Keells
food PLC also shows a higher payable payment period in 2022 than in 2021.

5. Investor Ratios

5.1 Dividend payout ratio

Dividend payout ratio is usually an entity with a high P/E ratio has a low dividend payout
ratio as the high growth entity needs to retain more resources in the entity. A more stable
entity needs to retain more resources in the entity. A more stable entity would have
relatively low P/E ratio and higher dividend payout ratio. Keells food PLC has reported
dividend payout ratio 0.55 in 2020/2021 and 0.71 in 2021/2022. Dividend payout ratio has
increased by 0.18 in 2022. That is good condition for the stable entity of the Keells food
PLC. Cargills PLC has reported dividend payout ratio 0.34 in 2021/2022 and it has
decreased by 0.03 over the previous year.

Accordingly, Keells food PLC dividend payout ratio is better than Cargills PLC.

5.2 Earning yield

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 Earning yield mean the market price will incorporate expectations of all buyers and sellers
of the entity's shares, and so this is an indication of the future earning, power of the entity.

Keells food PLC earnings yield ratio shows similar situation in 2020/2021 and 2021/2022.
Cargills PLC has reported earning yield ratio 0.057 in 2020/2021 and 0.096 in 2021/2022.
It has increased by 0.039 over the previous year.

So, this is an indication of the future earning power of the Cargills PLC.

5.3 Dividend Cover

Dividend Cover is relationship between available profits and the dividends payable out of
the profits the higher the dividend cover, the more likely it is that the current dividend level
can be sustained in the future.

Keells food PLC has reported 1.80 times of dividend cover in 2020/2021 and 1.36 times of
dividend cover in 2021/2022. The lower the dividend coverage than the previous year.
Maintaining that dividend level will affect the future. Cargills PLC has reported 2.64 times
of dividend cover in 2020/2021 and 2.89 times of dividend cover in 2021/2022. In Cargills
PLC has higher dividend coverage than the previous year. It is good situation and
maintaining that dividend level can be sustained in the future.

Accordingly, Cargills PLC dividend cover is better than Keells food PLC.

5.4 Earnings Per Share

Earnings Per Share is the monetary value of earnings per outstanding share of common
stock for company, it is a key measure of corporate profitability and is commonly used to
price stocks.

Keells food PLC has reported EPS as Rs. 12.59 in 2020/2021 and Rs. 12.92 in 2021/2022.
The reason for this situation EPS in 2020 is the increase in profit after tax by 3%. Cargills
PLC has reported EPS as Rs. 13.51 in 2020/2021 and Rs. 17.63 in 2021/2022. EPS has
increased by 4.12 in 2022 over 2021. It is good situation for Cargills PLC.

Accordingly, Cargills PLC shows a better condition than Keells PLC.

5.5 Price/Earnings (P/E) ratio

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 Price earnings ratio is representing the market view of the future prospects of share. High
P/E suggests that high growth is expected. It may also mean that the stock is overvalued.
Lower P/E ratio lower the expected future growth.

Keells food PLC has reported P/E ratio as 12.91 times in 2020/2021 and 2021/2022 has 12.
87. P/E ratio difference is 0.04. It means that will impact to future growth. Cargills PLC
has reported P/E ratio in 17.39 times in 2020/2021 and 10.35 times in 2021/2022. P/E ratio
difference is 7.04. It means that will lower the expected future growth.

Both companies indicate lower future growth, while Cargills shows lower future growth
than Keells food PLC.

5.6 Dividend Yield

Dividend Yield can be compared to the yield available on other investment possibilities.
The lower the dividend yield more the market is expecting further growth in the dividend
and vice versa.

Keells food PLC has reported dividend yield 0.43 in 2020/2021 and 0.057 in 2021/2022.
In 2022 dividend yield is higher than in 2021. It leads to decrease in the future growth of
the company.

Cargills PLC has reported dividend yield 0.021 in 2020/2021 and 0.033 in 2021/2022.

In 2022 dividend yield is higher than in 2021. Also, it leads to decrease in the future growth
the company.

6. Cash Flow Ratios

6.1 Current Liability Coverage Ratio

Current liability coverage ratio measures a company’s ability to pay its short-term financial
debts or obligations In 2022 this ratio has increased compared to this ratio in 2021 of
Cargills company, because operating activities are higher in 2022 than in 2021. When it
takes to the Keells company in 2022 this ratio has decreased.

When comparing these two companies together, it appears that Cargills is not good.

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6.2 Cash flow Coverage ratio

Cash flow coverage ratio is a liquidity formula that shows the relationship between a
company’s total debt and operating cash flow. It shows how well a company can pay its
debts using cash from operations. In the years of 2021 and 2022 of Cargills, this ratio is
less than one. It indicates that Cargills has not generated enough cash to cover its current
liabilities. In the years of 2021 and 2022 of Keells, this ratio is greater than one. It indicates
that Keells has generated more cash in a period than what is needed to pay off its current
liabilities.

When comparing these two companies together, it appears that Keells is in a better position
than Cargills

6.3 Operating Cash Flow ratio

The operating cash flow ratio is a measure of the number of times a company can pay off
current debts with cash generated within the same period. In the years 2021 and 2022 of
Cargills, this ratio is less than one. It indicates that Cargills hasn’t generated more cash in
a period than is needed to pay off its current liabilities. Keells also shows these ratios to be
less than one in 2021 and 2022.

When comparing these two institutions together, it appears that both these institutions are
not in a favorable position regarding this ratio.

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6. What are the Actions to Improve Financial Performance,
Position and Cash Flows in Cargills Ceylon PLC & Keells Foods
PLC
Cargills Ceylon PLC and Keells Food PLC are global food and agriculture companies operating
in various industries such as animal nutrition, agriculture, food and financial services. Cargills
Ceylon PLC and Keells Food PLC are large and complex companies with a diversified portfolio
of businesses. Therefore, the actions to improve financial performance, position, and cash flows
will depend on the specific circumstances and challenges facing each of its business units.
However, some general actions that Cargills Ceylon PLC and Keells PLC could take to improve
its financial performance, position, and cash flows are.

1. Review the company's financial statements: The first step to improving financial
performance and financial position is to review the company's financial statements,
including the income statement, balance sheet, and cash flow statement. These financial
statements reviewing is helps to identify areas where the company is performing well and
can improve.
2. Reducing Operating Costs: One of the most effective ways to improve financial
performance and financial position is to reduce operating costs in both organizations. This
can be done by implementing cost saving measures such as improving supply chain
efficiency, reducing waste during operation tasks and optimizing production processes.
3. Increase Income: Increasing income is another way to improve financial performance and
position. This can be done by expanding into new markets and new market structures,
launching new products and service or increasing marketing efforts to increase sales. Take
Promotional decisions to increasing organizations sales income.
4. Improving Working Capital Management: Effective management of working capital is
critical to maintaining positive cash flows. This can be achieved by optimizing inventory
levels and maintain optimal inventory level during the operation, improving accounts
receivable management and try to maintain good connection with suppliers and negotiating
better payment terms with suppliers.

19
5. Optimize Capital Structure: Optimizing the capital structure of the companies helps in
improving the financial position. This can be done by reducing debt levels, refinancing
existing debt or companies try to be raising the equity capital.
6. Explore strategic partnerships and acquisitions: Strategic partnerships and acquisitions
help to both companies expand their business and improve their financial performance.
This can be achieved by identifying potential partners or acquisition targets that
complement the company's existing operations.
7. Improving financial reporting and transparency: Improving financial reporting and
transparency can help build investor confidence and improve a company's financial
position. It's also help attracting to potential investors. This can be achieved by
implementing strong financial reporting systems, providing timely and accurate financial
information and maintaining strong relationships with investors and analysts.

8. Financial restructuring: Cargills Ceylon PLC and Keells Food PLC can also consider
financial restructuring to improve their financial position. This can involve refinancing
existing debt, raising new capital, or divesting non-core assets. Both companies can try to
increase their capital by using various effective ways.

9. Risk management: Cargills Ceylon PLC and Keells Food PLC can manage financial risks
by identifying and mitigating potential risks that could impact their financial performance
and position. This can involve hedging against commodity price volatility, business risk
during their operation tasks, managing foreign exchange risks, and reducing exposure to
credit risk.

10. Increase Profit Margins: Cargills Ceylon PLC and Keells Food PLC could increase their
profit margins by introducing more value-added products, negotiating better prices for raw
materials with material suppliers, organizations try to reducing operation costs, and
improving pricing strategies.

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 7. Summary

This report is about comparison of the Financial Statements of Keells Foods & Cargills which
are Sri Lankan public listed companies in same sector. Both Companies are Food manufacturing
and Distribution companies, and they also have convenience stores named, Cargills Food City,
Keells Super all over the Country. In the first half of the report, it has a proper SWOT analysis of
these two companies followed by credit rating analysis using rating such as fitch rating. Then we
can see the Ratio Analysis, Comparison, and Interpretation on both companies with the Reasons
in the Middle part of the Report. The following methods such as Profitability ratios, Efficiency
ratios, Liquidity ratios, Working Capital Management ratios, Investor ratios, Cash flow ratios are
used to analyze the operational performance of Keells Foods PLC and Cargills Ceylon PLC.
After all these comparisons and analyses we have suggested what are the Actions to Improve
Financial Performance, Position and Cash Flows in Cargills Ceylon PLC & Keells Food PLC.

21
8. References

1. REVIVAL Keells Food Products PLC. (n.d.).

https://cdn.cse.lk/cmt/upload_report_file/483_1653016808455.pdf
2. Sri Lankan (CSE) Food Industry Analysis. (n.d.). Simply Wall St.
https://simplywall.st/markets/lk/consumer-staples/food
3. Sri Lanka Trade | WITS | Text. (n.d.). Wits.worldbank.org.
https://wits.worldbank.org/CountrySnapshot/en/LKA/textview#:~:text=Sri%20
Lanka%2C%20Imports%20of%20goods
4. Current Food Inflation in Sri Lanka: Causes, Consequences and Way Forward.
(n.d.). Advocata Institute | Sri Lanka | Independent Policy Think Tank.
https://www.advocata.org/commentary-archives/2022/10/23/current-food-
inflation-in-sri-lanka-causes-consequences-and-way-
forward#:~:text=These%20have%20played%20a%20part
5. (2023). Fitchratings.com. https://www.fitchratings.com/research/corporate-
finance/fitch-affirms-john-keells-holdings-at-aaa-lka-stable-19-08-2013
6. Fitch Ratings. (2022, October 30). Wikipedia.
https://en.m.wikipedia.org/wiki/Fitch_Ratings
7. Cargills (Ceylon) PLC. (n.d.).
https://cdn.cse.lk/cmt/upload_report_file/457_1622802553979.pdf

22
 9. Appendices.

1.Calculation of Profitability Ratios of Keells Foods PLC

Gross Profit Margin Gross Profit *100 2020/2021 2021/2022
Sales Revenue
1005,188 *100 1,141,336 *100
3651,421 4,601,230
=27.5% =24.8%
Net Profit Margin Profit for the year*100 2020/2021 2021/2022
Revenue
327,159 *100 391,356 *100
3,651,421 4,601,230
=8.95% =8.5%
ROCE Profit *100 2020/2021 2021/2022
Capital Employed
327,159 *100 391,356 *100
2,453,090 2,540,793
=13.3% =15.4%

Calculation of Profitability Ratios of Cargills Ceylon PLC

Gross Profit Margin Gross Profit *100 2020/2021 2021/2022
Sales Revenue
2,820 *100 511 *100
78,935 31,013
=3.57% =1.64%
Net Profit Margin Profit for the year*100 2020/2021 2021/2022
Revenue
4,527,659 *100 5,818,434 *100
112,607,06 136,691,993

i
 =4% =4.2%
ROCE Profit *100 2020/2021 2021/2022
Capital Employed
1,271,976 *100 1,637,028 *100
13,806,427 18,882,459
=9.21% =8.6%

2.Calculation of Efficiency Ratios of Keells Foods PLC

Asset turnover Revenue 2020/2021 2021/2022
Capital employed
3,651,421 4,601,230
2,453,090 2,540,793
=1.48 =1.81
Non- current asset Revenue 2020/2021 2021/2022
turnover
Non-current assets
3,651,421 4,601,230
1,855,739 1,817,614
=1.96 =2.53

Calculation of Efficiency Ratios of Cargills Ceylon PLC

Asset turnover Revenue 2020/2021 2021/2022
Capital employed
78,935 31,013
13,806,427 18,882,459
=5.7 =1.6
Non- current asset Revenue 2020/2021 2021/2022
turnover
Non-current assets
78,935 31,013
16,727,901 20,158,404

ii
 =4.7 =1.5

3.Calculation of Liquidity Ratios of Keells Foods PLC

Current Ratio Current assets 2020/2021 2021/2022
Current liabilities
1,213,702 1,620,806
616,351 897,627
=1.99 =1.8
Quick Ratio Current assets-inventories 2020/2021 2021/2022
Current Liabilities
1,213,702 - 543,139 1,620,806 – 585,727
616,351 897,627
=1.08 =1.15
Calculation of Liquidity Ratios of Cargills Ceylon PLC
Current Ratio Current assets 2020/2021 2021/2022
Current liabilities
2,076,341 2,923,751
4,997,815 4,199,696
=0.41 =0.69
Quick Ratio Current assets-inventories 2020/2021 2021/2022
Current Liabilities
2,076,341 - 903 2,923,751- 13,162
4,997,815 4,199,696
=0.4 =0.6

4.Calculation of Working capital management Ratios of Keells Foods PLC

Inventory turnover Inventories *365 2020/2021 2021/2022
period
Cost of sales 543,139 *365 585,727 *365
2,646,053 3,459,894

iii
 =75 =62
Receivable collection Trade receivable * 365 2020/2021 2021/2022
period Revenue

445,262 *365 602 411 *365

3 651 241 4 601 230
=45 =48
Payable Payment Trade Payable *365 2020/2021 2021/2022
Period
Cost of sales
184 591 *365 353 346 *365
2 646 053 3 459 894
=25 =37

Calculation of Working capital management Ratios of Cargills Ceylon PLC

Inventory turnover Inventories *365 2020/2021 2021/2022
period
Cost of sales
903 *365 13,162 *365
76,115 30,502
=4 =157
Receivable collection Trade receivable * 365 2020/2021 2021/2022
period Revenue

6,057,689 * 365 7,438,085*365

112,607,061 136,691,993
=20 =20
Payable Payment Trade Payable *365 2020/2021 2021/2022
Period
Cost of sales
12,424 *365 20,171 *365
76,115 30,502
=60 =241

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 Calculation of Investor Ratio

INVESTOR RATIO
Keells Food PLC Cargills Ceylon PLC

2020/2021 2021/2022 2020/2021 2021/2022

Earnings Per Share
(EPS) Profit after tax 320 980 000 329 573 000 3 483 639 000 4 538 720 000
Weighted average
number of shares 25 500 000 25 500 000 257 677 731 257 677 731

12.59 12.92 13.51 17.63

Price/Earnings(P/E)
Ratio Current share price 162.5 166.25 235 182.5
EPS 12.59 12.95 13.51 17.63

times 12.91 times 12.87 times 17.39 times 10.35

Dividend yield dividend per share 7 9.5 5.1 6.1

current share price 162.5 166.25 235 182.5

0.043 0.057 0.021 0.033

Dividend cover EPS 12.59 12.92 13.51 17.63

Dividend per share 7 9.5 5.1 6.1

times 1.8 times 1.36 times 2.64 times 2.89

Dividend Payout ratio Dividend per share 7 9.5 5.1 6.1

EPS 12.57 12.92 13.51 17.63

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 0.55 0.73 0.37 0.34
Earning yield EPS 12.57 12.92 13.51 17.63
current share 162.5 166.25 235 182.5

0.077 0.077 0.057 0.096

Calculation of Cash Flow Ratio

Cash Flow Ratio

Keells Food PLC Cargills Ceylon PLC

2020/2021 2021/2022 2020/2021 2021/2022

Current liability Cash flow operating
coverage ratio activity (CFO) 369 849.0 476 503 1 271 976 1 637 028
average current
liabilities 308 175.5 448 813.5 2 498 907.5 2 099 848

1.2 1.061 0.51 0.78

Cash flow coverage Net cash flow from

ratio operations 312 331 409 400 251 537 (846 072)
total debt 138 884 94 359 4686 730 8 645 515

2.24 4.338 0.053 -0.098

Operating cash Cash flow operating
flow ratio activity (CFO) 369 849 476 503 1271 976 1637 028
liabilities 990 107 1 241 959 6370 756 10 480 415

0.373 0.383 0.199 0.156

vi