FACULTY OF PLANTATION AND AGROTECHNOLOGY

UNIVERSITI TEKNOLOGI MARA (UITM) MELAKA, KAMPUS JASIN

FINANCIAL MANAGEMENT (FIN 430)

AN ANALYSIS OF CORPORATE FINANCIAL PERFORMANCE: A

TREND AND COMPARATIVE STUDY

(SIME DARBY PLANTATION & TH PLANTATIONS BERHAD)

NAME SUHADA BINTI MOHD JAJULI

STUDENT ID 2019722839

LECTURER NAME DR. IRFAH NAJIHAH BINTI BASIR MALAN

GROUP M3AT2206C

SUBMISSION DATE 31 MAY 2021

TABLE OF CONTENT

CONTENT PAGES
1.0 INTRODUCTION 1-4
2.0 INTRODUCTION OF COMPANY 5-6
3.0 TREND ANALYSIS 7-22
4.0 CROSS-SECTIONAL ANALYSIS COMPANY 23-26
5.0 RECOMMENDATION 27
6.0 CONCLUSION 28
7.0 REFFERENCES 29
8.0 APPENDICES 30-55
1.0 INTRODUCTION

To ensure the sustainable in a business of the company, good planning and effective financial
planning is very important. One of the useful tools that can help to improve the understanding and
managing of financial result, trend over the time and become the key indicator of performance in
organizational is by using ratio analysis. Each manager of the company can apply this ratio analysis
to identify the strength and weakness of the company and planning the strategies to combat the
weakness.

Funders also can use this analysis ratio to compare and measure of one company to other
company and make judgement about effectiveness in management and mission. The meaningful
and useful ratio must be meet several criteria which are:

➢ Referring and calculated using the accurate and reliable financial information
➢ Should calculate the data or information from period to period
➢ Make the comparison between the internal benchmark or use the comparison to other
company that in the same industry.
➢ Consider both single point in time and make it as signaling for broad trend and issues.
➢ Cautiously interpreted the data and context without ignoring other important factor that
contribute in identifying performance.

Ratios can be classified into four major categories which is liquidity ratio, debt ratio,
profitability ratio and activity ratio.

Liquidity Ratios:

The use of several ratios to analyze an organization's capacity to pay its debts on time is
referred to as liquidity ratio analysis. This analysis is particularly important for lenders and
borrowers who, prior to giving them credit, want to get a sense of the financial status of a
borrower or consumer. For this analysis, several ratios are available, all of which use the same
principle of comparing liquid assets with short-term liabilities. These ratios are:

i) Current ratio.
• To measure short term solvency or extend claims of s/t creditors are covered
by current asset

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 ii) Quick ratio

• To identify the firm capability to pay its short-term obligations without rely
with inventory and also prepayment.

Activity Ratios

Activity ratios are one of the type in financial ratios that assess the ability of a business to turn
various accounts into cash or sales within its balance sheets. Activity ratios are important in
determining if a company's management performs a good enough job of generating revenue and
cash from its resources. They measure a company's relative efficiency based on the usage of its
assets, leverage, or other related balance sheet elements. These ratios are:

Leverage Ratio
A leverage ratio is one of financial measures that identify how much capital comes in the form of
debt (loans) or analyze a company's ability to fulfil its financial obligations. The leverage ratio
category is important because businesses employ a combination of equity and debt to support their
operations and knowing how much debt a company has may assist determine whether it will pay
its bills on time.

i) Debt Ratio

• Debt ratio is a financial ratio that measures the extent of a company’s leverage. The debt
ratio is defined as the ratio of total debt to total assets, expressed as a decimal or percentage.
It can be interpreted as the proportion of a company’s assets that are financed by debt.
ii) Debt to Equity Ratio

• Debt ratio is a financial ratio that identify the extent of a company’s leverage. The debt
ratio is defined as the ratio of total debt to total assets, expressed as a decimal or percentage.
It can be interpreted as the proportion of a company’s assets that are financed by debt.

2
Profitability Ratios
Profitability ratios are statistics that are used to assess a company's capacity to generate profits.
These ratios are regarded favorable if they move along a trend line or are much better than those
of competitors. Profitability ratios are extracted from the distinction of sales and cost groupings
within the income statement. Profitability ratios are derived from the income statement's separation
of sales and cost categories. The main ratios are as follows:

i) Net profit margin

• Indicates how much net income a company makes with total sales achieved

ii) Return on total assets

• The return on total assets compares a company's earnings to the total assets it has invested.
The measure reveals whether management can successfully use assets to earn an acceptable
return for a company, without accounting for tax or financing concerns.

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Trend analysis description

Trend Analysis is a statistical tool that attempts to examine past patterns to assess a company's
potential movements. In other words, by analyzing previous ones, it is a strategy that seeks to
predict potential actions. When analyzing the financial statements of a company, trend analysis is
important, since financial analysts can see how company assets have risen over time. The issue of
asset growth is often prevalent in the competitive landscape, especially in industries requiring
significant upfront investment, such as oil and gas, mining and the military. Corporate analysts
can also say whether a company is properly managing its resources and spending it wisely by
analyzing performance patterns

Cross sectional analysis description

A cross-sectional study compares a firm to its industry peers and is used by investors, analysts,
and portfolio managers. Cross-sectional analysis can focus on a single firm for a head-to-head
comparison with its top competitors, or it can look at the industry as a whole to find businesses
with specific strengths. Cross-sectional analysis is frequently used to evaluate performance and
investment prospects utilizing data points other than the usual balance sheet figures.

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2.0 INTRODUCTION OF COMPANY

2.1 SIME DARBY PLANTATION

Sime Darby plantation has been detected establish as early as nineteenth century which is
when the pioneering English planter developed rubber plantation in Malaya. The person that play
important role and being this pioneer were Alexander Guthrie, Daniel &, Joseph Crosfield,
Willliam Sime, Smith Harrison and Henry d'Esterre & Herbert. All of this person is among the
founder of three big companies such as Golden Hope Plantation, Kumpulan Guthrie Berhad and
Sime Darby Berhad. Then they merged become Sime Darby Group at 2007.

As we well known, Sime Darby Plantation is the world largest producer that have Certified
Sustainable Palm Oil (CSPO) that produce CSPO at 2.097 million metric tons. Sime Darby
Plantation is a fully integrated global plantation that engage with wide range of activities across
the palm oil value chain especially in upstream plantation, downstream plantation, R&D, agro-
business and also renewables. Sime Darby Plantation operate their upstream activities in Malaysia,
Papua, Indonesia and Solomon Island.

Sime Darby Oils is the company's downstream division, which manufactures, sells, and
markets oils and fats products, oleochemicals, palm oil-based biodiesel, nutraceuticals, and other
palm oil derivatives in fourteen countries across the world. While Sime Darby's upstream activity
consists of around 71 mills and 254 estates, culminating in marketing and sales of these products
in around 17 countries. They have more than 85,000 employees that cover on operational
excellence, innovation, R&D and sustainability.

Sime Darby Plantation’s Malaysia have total landbank of 342408 ha including 298965 ha
planted area of oil palm (82.6% mature). In Malaysia, they own and operate 123 oil palm estate
that located in Peninsular Malaysia, Sabah and Sarawak. Sime Darby also have 12229 hectares of
rubber plantation scattered over the states in Peninsular Malaysia such as Perak, Johor, Negeri
Sembilan and Kedah.
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2.2 TH PLANTATIONS BERHAD

TH Plantation Berhad (THB) is one of the plantations branches of Lembaga Tabung Haji that
involved in the business operation of rubber and oil palm plantation in this country. THP first
established as Perbadanan Ladang-Ladang tabung Haji Sendirian Berhad in 1972 with their first
estate which is Ladang Sungai Mengah that comprising around 4054 hectares. TH Plantation
steadily enlarged their land bank over the years until now they have more than 97000 hectares.
THP believe that they have high potential to producing higher FFB and CPO output in the
upcoming years.

For the Malaysian market and consumption, THP primarily produces Fresh Fruit Bunches
(FFB), Palm Kernel (PK), and Crude Palm Oil (CPO). THP has delved into rubber plantations in
addition to oil palm crops.

Until todays, THP have run 31 oil palm estate with stable spread around Malaysia and also
have seven forestry plantations at Sabah state. THP now has plantations and mills in Peninsular
Malaysia's states which is Johor, Negeri Sembilan, Pahang and Terengganu, as well as Sabah and
Sarawak. THP has also bought a land bank in Kalimantan Timur, where development work is
underway.

Currently, THP also run and own six palm oil mill with capacity two hundred metric tonnes
per hour. TH Plantation is a publicly traded company listed on main Board of Bursa Malaysia
Securities Berhad with having RM500 million market capitalization detected in December 31,
2020.

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3.0 TREND ANALYSIS

3.1 SIME DARBY PLANTATION BERHAD

3.1.1 LIQUIDITY RATIO

a) Current Ratio

CURRENT RATIO

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2018 2019 2020

4918021 4443617 4678552
4253664 4258178 4491344
1.16 times 1.04 times 1.04 times

The current ratio for Sime Darby Plantation show the downward movement. In year 2018, Sime
Darby Plantation has the highest current ratio which is at 1.16 times compared to the year 2019
and 2020 that remain at 1.04 times. This result shows that Sime Darby Plantation Berhad has the
best ability to cover the current liabilities with the current assets in the year 2018 while has lower
ability to cover the current liabilities with current assets in the year 2019 and 2020. The company
need to make sure that the current ratio is high enough because low current ratio can cause a
problem to company by not able to cover their current liabilities with the current assets that they
had and lower risk of the company to be closed due to the bankruptcy. Higher the amount of
Current Ratio, it will show that this company is in a good condition. It is good to use its current
assets to pay its current liability.

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 b) Quick Ratio

QUICK RATIO

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠 − 𝑝𝑟𝑒𝑝𝑎𝑖𝑑 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2018 2019 2020

4918021 − 1681776 − 0 4443617 − 1498398 − 0 4678552 − 1569398 − 0
4253664 4258178 4491344

0.76 times 0.69 times 0.69 times

The quick ratio for Sime Darby Plantation Berhad for 2018 is 0.76 times, for 2019 is 0.69 times
and 2020 is remain at 0.69 times. The quick ratio performance of Sime Darby Plantation shows
the downward trend from 2018 until 2019 which is the drop is around 0.09 times and the quick
ratio for 2020 show no improvement compared to 2019. Therefore, the company is actually facing
bad condition because of the quick ratio is under 1 for the three-year period. Its bring mean that
Sime Darby Plantation company has lower ability or not able to pay their short-term obligation
and current liabilities with current asset without rely on their inventory

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3.1.2 ACTIVITY RATIO
a) Inventory Turnover Ratio

INVENTORY TURNOVER RATIO

𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑 𝑠𝑎𝑙𝑒𝑠

𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

2018 2019 2020

6185191 11651019 11573157
1681776 1498398 1569398
3.68 times 7.78 times 7.37 times

The inventory turnover ratio for Sime Darby Plantation in 2018 is 3.68 times, for 2019 is 7.78
times and 2020 is 7.37 times. It shows the high increasing trend from 2018 to 2019 where 2019
become the highest inventory turnover ratio among the three-years. While the difference amount
for year 2019 and 2020 is -0.41 times. The difference is not too contra and it can be managed well.
For the result, the inventory turnover ratio in 2018 show that company has poor activity of
performance which the company unable to manage the inventory efficiently and effectively during
that year. But for the year 2019 and 2020, Sime Darby Plantation Berhad have quite good
performance in managing inventory. We conclude that the firm very efficient to use its inventory
to generate income and sales at that year.

9
 b) Average Collection Period Ratio

AVERAGE COLLECTION PERIOD RATIO

𝑎𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
360

2018 2019 2020

2246482 1933597 2246482
13081128/360 12062266/360 13081128/360
62 days 58 days 62 days

Average Collection Period Ratio is a measure of average number of days taken to sell inventory.
It is an extension of inventory turnover and thus helps a firm to know the speed at which it sells
inventory or stock. The average collection period for 2018 is 62 days, for 2019 is 58 days and 2020
is 62 days. From the year 2018 until 2019, the average collection period decreasing from 62 days
to 58 days. While at 2020 the average collection period is increasing become 62 where the
difference is about 4 days. From this result, we can see that at year 2019 Sime Darby Plantation
have better collection period compared to year 2018 and 2020. It is because the company able to
collect its account receivables in shorter period of time. In conclusion for Average Collection
Period, the shorter the period, the better the organization manage the company.

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3.1.3 LEVERAGE RATIO
a) Debt Ratio

DEBT RATIO

𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
× 100 %
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

2018 2019 2020

12880377 12647000 12050903
× 100 % × 100% × 100 %
28626302 28507722 28320651
44.99% 44.36% 42.55%

The debt ratio for Sime Darby Plantation Berhad for 2018 is 44.99%, for 2018 is 44.36% and for
2020 is 42.55%. The debt ratio of Sime Darby Plantation Berhad dropped dramatically from 2018
to 2019. Therefore, the company is under good condition because the debt ratio begins to decrease
every year. Its bring mean that the company very good in managing their debt and its indicate
lower financial risk which could prevent the company from the bankruptcy.

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 b) Debt to Equity Ratio

DEBT TO EQUITY RATIO

𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦

2018 2019 2020

12880377 12647000 12050903
15745925 15860722 16269748
0.82 times 0.80 times 0.74 times

The debt equity ratio for Sime Darby in 2018 is 0.82 times, for 2019 is 0.80 times and for 2020 is
0.74 times. It shows that the highest debt equity ratio is in 2018 at 0.82 and the lowest debt equity
ratio is in 2020 at 0.74. If the Debt to Equity Ratio is higher among others, it will indicate that the
company at that year unable to measure amount of debt being utilized relative to the capital
provided by owner. But for Sime Darby Plantation Berhad situation, the ratio of this company is
less than 1 for that 3 years and show the decreasing trend of debt equity ratio from 2018 until 2020.
It means that this company is conservative and have stable capital structure.

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3.1.4 PROFITABILITY RATIO
a) Net Profit Margin

NET PROFIT MARGIN

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥𝑒𝑠

× 100 %
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

2018 2019 2020

311795 − 46908 1362562
× 100 % × 100 % × 100 %
6542548 12062266 13081128
4.77 % -0.39 % 10.42 %

Net profit margin for Sime Darby Plantation Berhad in 2018 is 4.77%, for 2019 is -0.39% and
2020 is 10.42%. By referring this table, we can see that the good performance is in year 2020 and
the bad performance is at 2019. For the year 2018, the ratio is 4.77% which is gain profits but in
2019 this company facing net loss for (0.39%) which indicate the company unable to produce
income from their net sales and does not have better growth prospect. However, Sime Darby
Plantation successfully raising the ratio become positive and being the highest from the other years.
This proof that the company able to generate income from the net sale and have good growth
prospect.

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 b) Return On Total Assets (ROA)

RETURN ON TOTAL ASSETS

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥𝑒𝑠

× 100 %
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

2018 2019 2020

311795 − 46908 1362562
× 100 % × 100 % × 100 %
28626302 28507722 28320651
1.09 % -0.16 % 4.81 %

The return on total assets for Sime Darby Plantation in year 2018 is 1.09%, for 2019 is -0.16% and
for 2020 is 4.81%. By referring this result, the highest performance and gaining profit is in year
2020 which is 4.81%. The moderate performance is in 2018 at 1.09% that also gaining profit. This
indicate that the company able to control cost in its operation and provide more return. But in year
2019 the ratio is -0.16%, where this indicate that the company unable to control cost in its operation
and cannot gain more return. Return on investment or return on assets is a significant ratio as high
as ROA or ROI for the company would draw investors to invest in the company.

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3.2 TH PLANTATIONS BERHAD

3.2.1 LIQUIDITY RATIO

a) Current Ratio

CURRENT RATIO

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2018 2019 2020

912462 1174542 944952
310226 500375 479030
2.94 times 2.35 times 1.97 times

The current ratio for TH Plantation Berhad show the declining trend starting from 2018 to 2020.
At 2018, this company have highest current ratio at 2.94 times but showing the negative progress
for the next year which is 2019 at 2.35 times. TH plantation continue showing the bad current ratio
at 2020 at 1.97 times where the ratio is lowest during the three years. This company should ensure
that the current ratio is high enough and maintain it for the upcoming years because low current
ratio can cause a problem to company by not able to cover their current liabilities with the current
assets that they had and lower risk of the company to be closed due to the bankruptcy. But overall,
this company still able to meet their short-term commitment without any problem.

15
 b) Quick Ratio

QUICK RATIO

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠 − 𝑝𝑟𝑒𝑝𝑎𝑖𝑑 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2018 2019 2020

912462 − 19634 − 0 1174542 − 7902 − 0 944952 − 14244 − 0
310226 500375 479030

2.88 times 2.33 times 1.94 times

The quick ratio for TH Plantation Berhad show that 2020 has the lowest ratio at 1.94 times while
on 2018 has the highest ratio among the 3-year period where the ratio is 2.88 times. Other than
that, for the year 2019, it is the medium ratio where the ratio is 2.33 times. This result show that
in 2020, TH Plantation Berhad has low ability to cover its current liabilities with its current assets
without relying on the inventories that company had and for the zero amount of prepaid expenses.
For the year 2018, the company has the highest ability to cover their current liabilities with the
current assets that they had without relying on the inventories and prepaid expenses of the
company. This shows that the Quick Ratio of the current year 2018 will have lower tendency to
get into problem of paying their liabilities that can cause bankruptcy.

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3.2.2 ACTIVITY RATIO
a) Inventory Turnover Ratio

INVENTORY TURNOVER RATIO

𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑 𝑠𝑎𝑙𝑒𝑠

𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

2018 2019 2020

−484229 −414362 − 387651
19634 7902 14244
-24.66 times -52.44 times -27.22 times

The inventory turnover for TH Plantation Berhad in 2018 is -24.66 times, for 2019 is -52.44 times
and -27.22 time in 2020. Year 2019 show the lowest inventory ratio among the three years period.
But overall, since the result for the three years are all in negative number, we assume that TH
Plantation Berhad having very bad condition. The company having a difficulties and poor activity
performance that means the company unable to manage the inventory in a good condition. This
company unable to use their inventory to generate sale and income for the company especially in
2019.

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 b) Average Collection Period Ratio

AVERAGE COLLECTION PERIOD RATIO

𝑎𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
360

2018 2019 2020

36899 31375 26086
519324/360 493650/360 555097/360
26 days 23 days 17 days

The average collection period for TH Plantation Berhad in 2018 is 26 days, for 2019 is 23 days
and 2020 is 17 days. From the year 2018 until 2020, this company show the decreasing trend for
each year. Based on this result, we can see that at year 2020 that TH Plantation have better
collection period compared to year 2018 and 2019. It is because the company able to collect its
account receivables in shorter period of time. In conclusion for Average Collection Period, the
shorter the period, the better the organization manage the company.

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3.2.3 LEVERAGE RATIO
a) Debt Ratio

DEBT RATIO

𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
× 100 %
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

2018 2019 2020

1773208 1918798 1815124
× 100 % × 100% × 100 %
2868303 2736602 2665217
61.82 % 70.12 % 68.10 %

The debt ratio for TH Plantation Berhad was increasing for the 2018 to 2019 with 61.82% to
70.12%. The amount of increasing is about 8.3% from 2018 to 2019. But, fortunately the ratio is
decreasing in year 2020 at 68.10%. The difference between 2019 and 2020 is (2.02%). The lowest
Debt ratio is on 2018 with 61.82% while the highest ratio is 2019 at 70.12%. its mean that at 2019,
this company facing problem in managing financial company structure. For the next year which is
2020, the company manage to decreasing the debt ratio and its indicate lower financial risk which
could prevent the company from bankruptcy.

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 b) Debt to Equity Ratio

DEBT TO EQUITY RATIO

𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦

2018 2019 2020

1773208 1918798 1815124
1095095 817804 850093
1.62 times 2.35 times 2.14 times

The debt to equity ratio for TH Plantation berhad was increasing from year 2018 to 2019 with 1.62
times to 2.35 times. The increasing ties for this 2 years is about 0.73. Then, the ratio is going drop
to 2.14 times at 2020 which is lower than 2019. As we can see the lowest ratio among this 3 years
is in 2018 with 1.62 times and the highest at 2019 with 2.35 times. As the result we considered
that in 2018, TH Plantation Berhad having low debt to equity implies more stable business. And
for 2019, the company have higher debt to equity which is risky to creditor and inventors.
Companies leveraging large amount of debt are not able to make the payments. Fortunately, this
company can decrease the debt to equity ratio at year 2020.

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3.2.4 PROFATABILITY RATIO
a) Net Profit Margin

NET PROFIT MARGIN

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥𝑒𝑠

× 100 %
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

2018 2019 2020

−658382 −273134 27460
× 100 % × 100 % × 100 %
519324 493650 555097
-126.78% -55.33 % 4.95 %

Net profit margin for TH Plantation Berhad in 2018 is -126.78%, for 2019 is -55.33% and for 2020
is 4.95%. The highest net profit margin for this 3 years is in 2020 which is 4.95% and the lowest
is in 2018 at -126.78%. As we can see, this company suffering net loss and facing very bad
performance in 2018 that indicate the company unable to produce income from their net sale also
not having good growth prospect. When entering year of 2019, TH Plantation also face net profit
loss at -55.33% but they able to reducing the losses. While, for the year 2020, this company able
to gain profit at 4.95% which bring mean that this company always improving their sale every year
to ensure the better growth,

21
 b) Return On Total Assets (ROA)

RETURN ON TOTAL ASSETS

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥𝑒𝑠

× 100 %
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

2018 2019 2020

−658382 − 273134 27460
× 100 % × 100 % × 100 %
2868303 2736602 2665217
-22.95 % -9.98 % 1.03 %

Return on total assets for TH Plantation Berhad in 2018 is -22.95%, for 2019 is -9.98% and for
2020 is 1.03%. Actually, this company show the better improvement year by year. In 2018, TH
Plantation Berhad facing bad performance at -22.95% where the company unable to control cost
in its operation and did not provide more return to the company. For year 2019, the company still
facing bad performance where unable to provide return but showing the positive improvement
from the previous year. For the year 2020, TH Plantation quiet good performance which is at
1.03% which is gain profit and the company able to control cost in its operation and provide the
return to company.

22
4.0 CROSS-SECTIONAL ANALYSIS COMPANY

4.1 LIQUIDITY RATIO

CURRENT RATIO
YEAR 2020
COMPANY Sime Darby Plantation Berhad TH Plantation Berhad
VALUE 1.04 times 1.97 times

By referring to the result, the current ratio for Sime Darby Plantation Berhad is 1.04 times while
the current ratio for TH Plantation Berhad is 1.97 times in year 2020. This indicate that TH
Plantation Berhad have good performance in current ratio compared to Sime Darby because TH
Plantation Berhad has high ability to meet the short-term obligation in the future, while Sime Darby
Plantation Berhad having low ability to meet it short term onligation in future. Based on this result,
it can be said that TH Plantation Berhad more liquidity performance than Sime Darby Plantation
and can meet short term obligation.

QUICK RATIO
YEAR 2020
COMPANY Sime Darby Plantation Berhad TH Plantation Berhad
VALUE 0.69 times 1.94 times

By referring to the result, the quick ratio for the Sime Darby Plantation company is 0.69 times and
the quick ratio for TH Plantation company is 1.94 times. This indicate that the TH Plantation shows
good performance compare to Sime Darby Plantation because TH Plantation company able to pay
its short-term obligation without having rely on illiquid current assets while the Sime Darby
Plantation company unable to pay its short-term obligation without having rely on illiquid current
assets. Inventory is the least liquidity because sellers must mind buyers to sell their stock. This
result can be said that the TH Plantation company is more liquidity than the Sime Darby Plantation
company because the company are able to meet their current obligations as come due.

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4.2 ACTIVITY RATIO

INVENTORY TURNOVER RATIO

YEAR 2020
COMPANY Sime Darby Plantation TH Plantations Berhad
Berhad
VALUE 7.37 times -27.22 times

By referring this result, inventory turnover ratio of Sime Darby Plantation Berhad shows good
activity performance compared to the TH Plantations Berhad with the ratio of 7.37 times to -27.22
times. Based on this result, Sime Darby Plantations Berhad has high inventory turnover that
indicate the efficient operation of the company. But, for TH Plantation Berhad is slightly low
inventory turnover ratio compared to Sime Darby Plantations Berhad that bring mean of poor
inventories management and less efficient and effective.

AVERAGE COLLECTION PERIOD RATIO

YEAR 2020
COMPANY Sime Darby Plantation TH Plantations Berhad
Berhad
VALUE 62 days 17 days

Average collection period of TH Plantation Berhad shows a good activity performance compared
to Sime Darby Plantation Berhad which is only took 17 days to collect its account receivable from
net sales and able to collect their account receivable in shorter time efficiently compared to Sime
Darby Plantation berhad. While, Sime Darby Plantation Berhad have a bad performance compared
to TH Plantation where took about 62 days to collect its account receivable. Basically, it is a huge
different compared to TH Plantation Berhad of average collection period ratio.

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4.3 LEVERAGE RATIO

DEBT RATIO
YEAR 2020
COMPANY Sime Darby Plantation Berhad TH Plantation Berhad
VALUE 42.55% 68.10%

Total debt is debt that comprise current liabilities with long term liabilities or debt. Sime Darby
Plantation Berhad is the lowest ratio with the percentage is 42.55% while the TH Plantation Berhad
debt ratio is at 68.10%. This shows that Sime Darby Plantation has ability to using its total
liabilities to finance its total assets with the lowest risk for the lower percentage compare to TH
Plantations Berhad. Since TH Plantation Berhad has higher debt ratio that is showing poor leverage
performance compared to Sime Darby Plantation Berhad, the company using more debt amount
in financing its company in order to produce more products. TH Plantations Berhad has higher risk
to cover its debt compared to Sime Darby Berhad and that means the company has high ability to
pay debts within one year. But for both company has ability not to use the total liabilities is in the
year 2020 to finance its total assets and might able getting into the company risk of bankruptcy.

DEBT TO EQUITY RATIO

YEAR 2020
COMPANY Sime Darby Plantation Berhad TH Plantation Berhad
VALUE 0.74 times 2.14 times
By referring to the result, the debt to equity ratios for Sime Darby Plantation is 0.74 times and the
debt to equity ratios for TH Plantation Berhad is 2.14 times. TH Plantation with a higher debt to
equity ratios which is over than 1 times indicate that the more creditors finance such as bank loans
is used than the investor financing until can give dangerous to the company and can lead to
bankruptcy. Sime Darby Plantation company with a lower debt to equity implies more stable
business and manage to utilized debt lower than capital compared to TH Plantation Berhad.
Company that are leveraging large amount of debt are not able to make the payments.

25
4.4 PROFITABILITY RATIO

NET PROFIT MARGIN

YEAR 2020
COMPANY Sime Darby Plantation TH Plantation Berhad
Berhad
VALUE 10.42 % 4.95 %

By referring to the result, the net profit margin ratios for Sime Darby Plantation is 10.42% which
gain profit, and the net profit margin for TH Plantation company is 4.95% also gain profit. This
indicate the two company has a better growth prospect and able to generate net earnings to
shareholders (earn more ringgit). However, Sime Darby Plantation company gain more profit more
than the TH Plantation Berhad company thus is very good performance for the company in term
of profitability. Thus, the higher the income the more effective the company at cost control.

RETURN ON TOTAL ASSETS (ROA)

YEAR 2020
COMPANY Sime Darby Plantation TH Plantation Berhad
Berhad
VALUE 4.81% 3.3 %

By referring to the result, the return on total assets ratios for Sime Darby Plantation company is
4.81% and the return on total assets for the TH Plantation Berhad company is 1.03%. This indicate
that the two company have good performance as they able to control costs in its operation (Asset
are productive) and provide more return. However, Sime Darby Plantation company gain higher
of Return on total assets as will affect investor to invest in the company. The high the ROA or ROI
will cause the high probability for investor to invest into the company.

26
5.0 RECOMMENDATION

For the recommendation, after viewing the overall performance of the company by using
the ratio analysis, we can identify the company's strength and weakness and what recommendation
we should make. As we can see both company gain net profit, but not too high so the
recommendation is both companies should reduce the unneeded cost that can reduce the profits of
the company. Besides, Sime Darby Plantation berhad and TH Plantation Berhad company can
make an improvement in its management if they want to keep running the business and to attract
more investor in its company. Furthermore, both companies can increase their sales to generate
more income, increase their promotion on their service, product, technology to gain more customer
and also increase their Product to gain more sales. Moreover, the both companies can create some
innovation to their services which can attract many customers to strength their financial status.

Next, as the TH Plantation Berhad has a higher debt ratio and debt to equity ratio relative
to the Sime Darby company. This company should minimize its debt by increasing its sales revenue
in future years. The higher debt ratio would lead to more risk for the company and could lead to
bankruptcy. In addition, the business can also increase more investment and decrease creditors'
financing. In addition, the organization can handle its inventory well too. To assess how effectively
inventory is handled, the organization may analyze regular inventory transactions. Then the
organization will rework their business budget to help in reduce their debt ratio and debt to equity
ratio.

Other than that, for both companies to raise liquidity levels, both companies can bargain for
longer payment cycles, get rid of useless assets, and manage operating costs as well. But the most
significant thing is to achieve the maximum amount of output by using lower production costs.
Sales will then grow and profits will be earned. Then the company will have good performance.

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6.0 CONCLUSION

The overall performance between Sime Darby Plantation and TH Plantation Berhad.

The liquidity ratio of Sime Darby Plantation Berhad are in quite stable and only have small
differences from year 2018 to 2020 since the current ratio are show the small decreasing from year
to year. While the quick ratio is declining and theres small difference. Meanwhile, TH Plantation
Berhad have unstable and declining inliquidity ratio but they managed to meet short term
obligation. For the current ratio, the trend is fluctuating for the year 2018 to 2020. And for the
quick ratio trend is went down from year to year. Liquidity ratio is to measure the short-term
solvency. As we can see from the result, TH Plantations Berhad have high tendency in liquidity
ratio of its company assets in covering its short-term obligations.

Next, the Sime Darby Plantation Berhad shows dip and unstable trends from 2018 until 2020 for
average collection period and it is bad result for the company. However, for inventory turnover
ratio, the result shows positive and efficient trends. As for TH Plantation Berhad, inventory
turnover ratio is in fluctuated trends for the company and having bad condition of inventory
turnover ratio while the trends for average collection period is in climbing order. As a result, we
can see that Sime Darby Plantation Berhad is good on activity ratio compare to TH Plantation
Berhad.

The leverage ratio for Sime Darby Plantation Berhad and TH Plantation Berhad is fluctuating. But
we can see that Sime Darby Plantation have better performance in term of both equity ratio and
debt to equity ratio in three years compared to TH Plantation. Sime Darby Plantation is good in
meeting their interest payment obligation.

Sime Darby Plantation have quite good profitability ratio compared to TH Plantation. At the first
place Sime Darby facing fluctuation trend but successfully increase their profit margin and return
on total asset ratio. For the TH Plantation Berhad, this company have very poor profitability from
2018 until 2020 compared to Sime Darby Plantation. Net profit margin and return on total asset
for this company appear in negative value and only successful to gain low profit in 2020. With this
result, we can see that the company is in not good situation.

In conclusion, Sime Darby Plantation Berhad financial statement from the year 2018 to 2020 show
much profit gain and good activity performance compared to the TH Plantation

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7.0 REFFERENCES

Company Announcements. (2019). Retrieved May 30, 2021, from Bursamalaysia.com website:
https://www.bursamalaysia.com/market_information/announcements/company_announce
ment

AGM & Annual Reports. (2017, November 24). Retrieved May 30, 2021, from Sime Darby
Plantation website: https://www.simedarbyplantation.com/agm2021

TH Plantations Berhad - report. (2019). Retrieved May 30, 2021, from Chartnexus.com website:
http://ir.chartnexus.com/thplantation/report.php

History. (2020). Retrieved May 31, 2021, from Sime Darby Plantation website:
https://www.simedarbyplantation.com/corporate/history/2000--
2099#:~:text=Sime%20Darby%20Plantation%20can%20trace,established%20rubber%20p
lantations%20in%20Malaya.

TH Plantation Berhad. (2021). Retrieved May 31, 2021, from Thplantations.my website:
http://www.thplantations.my/about_us.php

29
8.0 APPENDICES

SIME DARBY PLANTATION (2018)

30
31
32
33
SIME DARBY PLANTATION (2019)

34
35
36
37
SIME DARBY PLANTATION (2020)

38
39
40
41
TH PLANTATION BERHAD (2018)

42
43
44
45
TH PLANTATION BERHAD (2019)

46
47
48
49
TH PLANTATION BERHAD (2020)

50
51
52
53