Acknowledgement First of all Thanks to ALLAH, the one testing us all at all time and making deci sions

about what we dont know and cant know. Today in the world, it is impossible for a common man to run a business especial ly in period of competition. This situation demand energetic, qualified ,experi enced business administrator who could meet the challenges of this age of modern ization .Department of business administration undertake to produce management specialist fully aware of ins and outs of business management, and capable of me eting the challenges of modern environment

Table of contents In this project we will discuss all the aspects of the company like 1) History 2) Hierarchy 3) Vertical analysis of balance sheet and income statement 4) Horizontal analysis of balance sheet and income statement 5) Ratio analysis * Liquidity ratio *Profitability ratio *Activity ratio *Leverage ratio *Market ratio 6) SWOT Analysis. 7) Interpretation

Executive Summary We worked on NESTLE company in Pakistan. In this project report we have worked o n the detail analysis of the company has been done and all the financial, manage rial, products and brands has been evaluated to analyze the current profit ratio s, debt ratio, market ratios and also the horizontal and vertical analysis of ba lance sheet and income statement and interpretation of all ratios and also expla ined about the SWOT analysis of company

History The Nestle story: Nestle, the present Switzerland based international food group originally cons ist of two companies and two products: 1) Henri Nestle and his baby food in vevey 2) Anglo-Swiss condensed Milk Company And its condense milk in Cham, both in Switzerland. In 1866 the page brothers from U.S set up a new industry in Cham, making condens e milk from a raw material that was available in abundance in the region .In 186 7 Henri NESTLE ,a chemist in vevey, create a milk cereal based food promptly saf e the life of a baby which its mother could not feed. The company completes vigo rously until 1905, when they merged and become the new starting point of present food group.

Dynamic expansion: Nestle purchased share in different countries in abroad. This enabled the compan y to broaden its range of products at the same time strengthening the economic f oundations of the company. Nestle, which does 98 percent of its business outside Switzerland, also has inte rest in nonfood sectors, in cosmetics (a large share holding in LOREAL) and ophth almic product (acquisitions of Alcon laboratories Inc.) while continue to give p riority to food products.

VISION STATEMENT The Nestl global vision is to be the leading Health, wellness and Nutrition Company in the World.

MISSION STATEMENT

Dedicated to providing the best food to the people, throughout their day, throughout their lives, through out the world.

Management Of Nestle Board of Directors Syed Yawar Ali Friedrich G. Mahler Syed Babar Ali M.W.O. Garrett Marcel Fischli D. Dupont Syed Hyder Ali Company secretary Philippe Blondiaux Management team Friedrich G.Mahler(Managing director) Philippe Blondiaux(finance $ Control Manager) Olivier Desponds(Marketing Manager) Nimal Koswanage(Factory Manager) Company Directory Registered and Corporate Office(308-Upper Mall, Lahore) Factories(Sheikhupura, Kabirwala) Auditors 1. A.F. Ferguson Co.(Chartered Accountants) Legal Advisors Cheema $Ibrahim(Advocates) Bankers Habib Bank Ltd. Standard Charted Bank. Muslim Commercial Bank Ltd.

NESTLE TODAY Nestle is the world largest food company. It is presented on all five continents , has an annual turnover of 74.7 billion Swiss francs, runs 5o9 factories in 83 countries and employees about 231,000 people the world over. The company owns its current status to the pioneering spirit inherited from its founders which continue to inspire it, to it concern with quality and to its con stant search for new ways of satisfying human nutrition needs. Wherever possible, it set up factories locally, employ personal from the country concern and relies on indigenous raw material. Its agriculture services provide assistant to improve quality and yield of the raw material it uses. Much attent ion is devoted to professional training of the company in its economic and socia l environment.

RESEARCH & DEVELOPMENT Nestle, the world largest food group, is also the global leader in the industry with regard to RESEARCH AND DEVELMNT, no other food company match the R&D presen ce of nestle with a worldwide network of centers in 17 locations on 4 continents , no other food company delicate so many human and financial resources to R&D; a n international staff of 3500 engaged in the search for innovating new products or renovating of the existing one. Year after year, Nestle invest some 800 milli on Swiss n francs into R&D as the major driving force of its double strategy to strength the companys brand worldwide and to continue to support future long term growth through innovating or renovating.

Brands of NESTLE IN pakistan The major brands include MILKPAK UHT, EVERYDAY, LACTOGEN, NESLAC, CERELAC, NESTL E PURE LIFE, NESCAFE, MAGGI and KITKAT. Nestle has been serving Pakistani consumers since 1988, when its parent company, the Switzerland-based Nestle SA, first acquired a share in Milk pack Ltd. Nestle Pakistan is headquartered in Lahore and operates four production faciliti es.

Business Review Milk Collection The core raw material of Nestle Milk pack is milk. Over the last twelve years, the Company s prime concern has been to improve the quality and Volume of milk for processing and for other milk based products. Driven by its commitment to quality and having realized that only self colcollection could eliminate its dependence on poor quality milk available from outside sources, the Company successfully established its own collection system and expanded its operations over a very large milk shed Area in Punjab. Owing to this tremendous growth in the volume of an extremely high quality raw milk, Nestle Milk pack now produces a superior Quality and better tasting milk, with longer shelf life. Today, Nestle Milk pack can boast of the largest milk collection network in The country, unmatched in size, productivity and efficiency. Milk is collected through a vast network of village milk centers (VMCs), sub-centers and centers. At these centers, chillers have been installed to lower milk temperature to 4C for preventing bacteria development during long hauls to the factories, which are undertaken by a large fleet of specially insulated tankers. In terms of quality, the milk collected by Nestle Milk pack is low in sodium, high in fat and solid-non-fats (SNF) and very low in Total Plate Count (TPC) which, stated simply, means the bacteria count. This was achieved through a comprehensive strategy and sustained efforts to overhaul the milk collection process, intensive education program for the farmers and the milk collection staff, up gradation of milk loading and transportation system, increase in the chilling capacity and above all, adherence to the highest acceptance standards at all milk collection Points, including the factories. As a service to farmers, Nestle Milk pack has established an Extension Service, staffed by qualified veterinary doctors, who assist them in vaccination and treatment of livestock, improved breeding, good animal Husbandry practices, provision of high yield fodder seed etc. By taking professional help and guidance to their doorsteps, which they otherwise find difficult to access, coupled with incentives and a good and prompt return for their milk, Nestle Milk pack has created a mutually beneficial relationship with the farmers, which translates into opportunities of Economic uplift for the rural population. To promote milk production, Nestle Milk pack is successfully promoting the use of molasses to enrich the fodder and has arranged its Distribution to farmers at cost.

Production As a consequence of joint venture arrangement between Nestle S.A. of Switzerland and Milk pack Ltd. in 1988, the existing production facility of Milk pack in She ikhupura Became a part of Nestle Milk pack. The Milk pack Sheikhupura factory commenced operations in 1981 as a producer of UHT milk. By 1988, it had expanded its operation and was also producing butter, cream, desi ghee - all under the brand name of MILKPAK and juice drinks under the brand Name FROST. To meet the demands of the large food market that Pakistan offered, Nestle Milk pack reorganized and reinforced the production of existing brands and gave shape to n ew Production lines. The first to come was a milk powder plant, which not only bega n producing NIDO in 1990 but was also critical to the production of several milk-b ased Products in the future. With the installation of the roller dryer in 1990, the f irst such Product to come was CERELAC - an internationally recognized brand of infant cere al. This was followed by LACTOGEN 1 & 2 in 1991. The year 1992 saw the introduction of tea whitener EVERYDAY and milk Powder in bulk packing named GLORIA. MILO and NESLAC came Under production in 1994 and MILO RTD in 1995. Local packing of imported coffee under the name of NESCAFE 3 in 1 commenced the same year. In 1996, Nestle Milk pack s first confectionery plant of POLO Mint was installed and the production of NESTLE PURE ORANGE JUICE commenced. Packaging of coffee under the brand name of NESCAFE CLASSIC was undertaken the same year. In 1997 NESTLE WHEAT and two variants of POLO viz. Strawberry and Orange were introduced. In 1998 a substantial capital investment was made to launch several products and install two new state-of-the-art technologies. SWEET TREETS were launched in early 1998. The addition of two flavors of POLO: Blackcurrant and Strong Mint, increased the number of POLO variants to five. A new variant Lemony was added to the range of popular FROST fruit drink flavors and a new 1-liter packing of FROST was introduced. Flavored milks under the brand FRESH & FRUITY came under production on the new Tetra Filling Machine equipped with the modern "slim" format. MILO RTD and UHT Cream were also shifted over to this new format. A new flexible confectionery line enabled the manufacture of a wide range of high and low boiled sweets and toffees, including TOFFO and two variants of SOOTHERS Menthol Eucalyptus and Honey Lemon. Nestle Milk pack also contracted to supply dairy mixes to McDonald s, for its popular soft serves and milk shakes. And to top it all, the most prestigious project, NESTLE PURE LIFE was also commissioned in December. Based on the latest water treatment and bottling technology, this marked the entry of Nestle Milk pack in the Pakistan water market and that of Nestle in the world water market.

The expansion of high boiled sweet line continued in 1999 with the introduction of Fruit Drops and BUTTERSCOTCH. The year 2000 saw the production of some exciting products. First came NESCAFE Fro the Original, followed by its two other flavors: Mocha and French Vanilla. NESCAFE Frappe RTD was to come next. The fruit juice range was expanded by the production of Mango and OrangeMango Mix. On the confectionery side, Tutti-frutti was added under the umbrella of POLO and Wild Cherry was added to the SOOTHERS range. The success of NESTLE PURE LIFE in PET bottles encouraged the commissioning of 5-gallon bottles production line for home and office in June. And the last product line of the year to be commissioned in November was that of NESTLE Plain Yogurt, a high quality product with special Stay-Fresh Seal. To meet the needs of safe and quality storage for the ever expanding product range and their volumes, a National Distribution Center (NDC) was completed and became functional in June, 2000. Spread over 6614 square meters, it has the capacity to store up to 8300 pallets (approximately 8000 tons). Kabirwala Factory In 1986 Milk pack Ltd. acquired the services of Kabirwala Dairy Ltd. For co-packing of UHT milk under the brand name MILKPAK. Nestle Milk pack acquired KDL in 1990 as a subsidiary and installed a MAGGI NOODLES plant, which became operational in 1992, producing three flavors: Chicken, Masala and Chatkhara. The second milk powder plant was commissioned in September 1996 and produces NIDO, GLORIA and skim milk powder. The UHT line was discontinued in June 1996 and the same year witnessed the launching of MAGGI YAKHNI. With the merger of this factory with Nestle Milk pack in April 1997, Kabirwala Factory, as it is now called, is a fully owned unit of Nestle Milk pack Ltd. The factory milk powder spray drying capacity was doubled in 1999 with the commissioning of the new evaporator. 1999 also saw the installation of a pouch-filling machine, making KWF self sufficient in the filling of full cream milk powder. A new continuous butter making line is under installation in the year 2000 that will produce very high quality cultured butter under Nestle branding. Marketing DAIRY PRODUCTS NESTLE MILKPAK UHT MILK Launched in 1981, it has become synonymous with quality milk. Backed by a very strong brand name, aggressive marketing and distribution plans, consistent quality and availability throughout the year, MILKPAK UHT has been extremely successful. In September 1999, MILKPAK UHT milk was launched as NESTLE MILKPAK UHT MILK. NESTLE MILKPAK UHT MILK is available in three pack sizes of 1000, 500 and 250 ml. MILKPAK BUTTER

A continuous butter-making machine was commissioned at Kabirwala factory in the year 2000 to produce high quality cultured butter. This new butter was an improvement upon the earlier product and carries Nestle branding that endorses its superior quality. It has an excellent taste and aroma and is easy to spread. The new NESTLE BUTTER is available in two pack sizes of 200g and 100g in new attractive packaging. NESTLE PLAIN YOGURT Launched in November 2000 in Lahore, NESTLE Plain Yogurt is the latest addition to Nestle Milk pack s dairy family. Its unique Stay Fresh seal and a 21-day shelf life gives the brand a formidable competitive advantage. The brand provides valuable access to future product launches in the chilled product category through a dedicated chilled distribution. In a very short time the brand has gained a substantial Through future expansion into markets other than Lahore strong marketing and sales support, NESTLE Plain Yogurt undoubtedly grow into a strong brand and, in time, will status of market leader. market share. and a will achieve the

MILKPACK CREAM MILKPAK CREAM was introduced under the MILKPAK brand in 1986. It is available in 200-ml pack size in an attractive slim pack. The consumer trust in the brand name and the product has ensured its dominant share in the cream category. MILKPAK CREAM was also introduced in an economical 1000ml pack size in the year 2000. This SKU has been developed for Food Services to cover institutions using large quantities of fresh cream. MILKPAK DESl GHEE MILKPAK DESI GHEE was introduced in 1986 in tin packaging. The packaging was later changed to Tetra Pak. However, in line with the current market trend, MILKPAK DESI GHEE was relaunched in 1Kg tin packaging in the year 2000. The product was also introduced in 16kg tin packing to tap the huge potential of loose desi ghee. NESTLE EVERYDAY To target the massive potential offered by the tea-whitening segment, NESTLE EVERYDAY tea whitener was launched in 1992. Supported by aggressive marketing using multi-media activities, focused distribution with sampling drives and excellent consumer acceptance, the brand has shown strong growth and holds good promise for the future. NESTLE NIDO NESTLE NIDO has been present in the Pakistan market since early 70 s and on account of the consumer confidence in its quality it has become a pillar of Nestls success. Local production commenced in 1990 and within a short time the brand achieved market leader status in the full cream milk powder category. Made from very superior quality milk and with the addition of vitamins A and D, NESTLE

NIDO is the best quality milk for growing children. The brand has now launched a low unit priced SKU that offers half a liter of quality milk at a very affordable price. NESTLE NIDO is well on its way to becoming a mega brand. CHOCOLATE DRINKS MILO POWDER To provide convenience to consumers, NESTLE MILO was launched in its new 130gm. SKU in an attractive airtight jar in February 2000. This was done with a view to bring our packaging in line with the industry practice of making milk fortifiers and modifiers available in jars and tins and to reverse the trend of consumer preference for imported MILO or similar products over local MILO. Consumer response to the new initiative has been very positive. MILO RTD To cater for consumer convenience, MILO RTD (ready to drink) was launched in 1995 and is now available in an attractive 180ml slim pack. Popular with all age groups, specially among the growing segment of nutrition conscious consumers, it is an excellent substitute for cold drinks. COFFEE NESCAFE CLASSIC NESCAFE, Nestls international flagship brand, is locally repacked and marketed in 2gm. and 25gm. Sachet, 75gm. bottles and 500gm. Soft packs. The brand enjoys a special position in the country s coffee consuming segment. NESCAFE FROTHE NESCAFE Fro the (Original), a premix in 18gm. single serve sachet, was launched in January 2000. The product profile was developed through consumer research and was accordingly offered as a sweet, creamy and foamy coffee. Encouraged by extremely good consumer response to this cappuccino style coffee, French Vanilla and Mocha flavors were introduced in November to offer a wider choice and to enhance the young and fashionable image of this mixes category. NESCAFE FRAPPE To promote summer consumption of coffee and to change consumer perception that coffee is only a winter beverage, NESCAFE Frappe was launched in June 3000. This iced, creamy, ready-to-drink coffee in 180ml slim pack was positioned to appeal to the youth and gain a strong share from other summer beverages. The launch was extensively supported by promotional programs in major towns and the product is fast gaining in popularity. FRUIT DRINKS FROST A well-known brand, FROST was introduced in 1986 and has the largest share of the countrywide market. Positioned as a cold drink and alternate to cola drinks, its strength lies in the convenience attached to its u

sage. NESTLE JUICES Encouraged by the consumer response to NESTLE ORANGE JUICE that was launched in 1996, the category of NESTLE juices was expanded with the introduction of Mango-Orange and Mango flavors in the year 2000. This has further strengthened the position of Nestle as leader in the value added/premium drinks market. Consumer response to these new flavors has been very upbeat and is expected to gain further. DIETETIC & INFANT PRODUCTS LACTOGEN LACTOGEN 1 and LACTOGEN 2 are infant and follow-up formulae launched in 1991 and are available in two sizes. The brands provide both affordability and quality. CERELAC Launched in 1989, CERELAC is the dominant player in the growing infant cereal market. Available in 5 flavors, the brand provides balanced nutrition to infants from 4 months onwards. NESTLE RICE An affordable starter weaning cereal, NESTLE RICE offers the flexibility of preparation with a variety of meals. Gluten free, the brand is available in 125 gm. packs and is specially suited to the needs of infants from 4 months onwards. It was launched in 1994. NESTLE WHEAT NESTLE WHEAT is a wheat-based infant cereal without milk, for infants of 4 months and above. It was launched in 1997 and is available in packs of 125 and 250 gm.

NESLAC NESLAC is a growing-up milk, formulated specially for 1 to 4 year olds. It contains just the right balance of proteins, calcium, iron, vitamins and essential minerals in order to cater to the nutritional needs of a growing child during this special age. The product was launched in 1994. CULINARY PRODUCTS MAGGI 2-MINUTE NOODLES Fast to cook, good to eat - MAGGI 2-MINUTE NOODLES were launched with local production in 1992 and in doing so Nestle pioneered the category of instant noodles in Pakistan. MAGGI 2-MINUTE NOODLES have special appeal for children, are fun to eat and offer a range of interesting flavors, namely: Chicken, Masala, Chilli and Chatkhara. Affordably priced and backed by focused marketing activities, MAGGI NOODLES have shown good progress in 2000. MAGGI COLD SAUCES Nestle entered the Cold Sauces category in 1999 with the launch of MAGGI Ketchup, MAGGI Mirch Maza and MAGGI Khatti Meethi - the first Imli sauce in Pakistan. The innovative taste of Khatti Meethi together with the more traditional tastes of Ketchup and Mirch Maza, were received well by the consumers.

Ratio Analysis

1.Liquidity Ratio Liquidity is a companys ability to meet it short term obligation as they become d ue. There are two liquidity ratios i. Current ratio ii. Quick ratio Current ratio: This ratio measure the ability of enterprise to meet its current liabilities out of current assets. Current ratio= current asset Current liabilities Year C.R 2006 0.89% 2007 0.94% 2008 1.07% 2009 0.85% 2010 0.85%

The current ratio remained the same 0.85 in FY10 as in FY09 as the increase in c urrent assets was more than offset by the increase in current liabilities. Graph:

Quick ratio: This is define as ratio of current asset divided by current liabilities. Quick ratio=cash+ marketable securities +account receivable Current liabilities Year 2006 2007 2008 2009 2010 Q.R 0.46% 0.47% 0.45% 0.26% 0.28% Quick Ratio for Nestle Pakistan from 0.26 in FY09 to 0.28 in FY1 Graph: 2.Profitability ratio A companys ability to earn a satisfactory profit and return on investment is call ed profitability ratio. i. Gross profit margin ii. Profit margin iii. Return on total asset(ROA) iv. Return on common equity(ROE) Gross profit margin:

Gross profit margin reveals the percentage of each dollar left over after the bu siness has paid for its goods. Gross profit margin = gross profit net sales Gross profit= C.G.S-sales

YEAR G.P.M

2006 28.3%

2007 28.1%

2008 26.1%

2009 28.9%

2010 26.9%

The gross profit margin decreased from 28.91% in FY09 to 27% in FY10 but again t his was less than the industry s GPM, which stood at 30%. Graph Profit Margin: The ratio of net income to net sales is called profit margin. Profit margin= net income Sales Year P.M 2006 6.1% 2007 6.3% 2008 4.5% 2009 7.3% 2010 7.9%

The profit margin rose from 7.30% in FY09 to almost 8% in FY10. Graph: Return on total Asset(ROA) ROA indicates the efficiency with which management has used its available resour ces to generate income. ROA= net income Average total asset Year 2006 2007 2008 2009 2010 ROA 10.5% 11.4% 9.31% 16.1% 17.9% ROA increased to 17% in FY10 from 16.17% in FY09 5% rise in total assets between FY09 and FY10. and it is accompanied by 23.

Return on common equity(ROE) The return on common equity measure the rate of return on the common stockholders investment. ROE= earning available to common stockholder Average stock holder equity Or ROE= ROA X equity multiplier

Equity multiplier = total asset Common equity Year ROE 2006 53.8% 2007 43.9% 2008 35.3% 2009 67.8% 2010 73.6%

ROE statistics indicate an increase from 67.88% in FY09 to 73.68 in FY10 as the total equity increased by 26.1% in FY10. ROE for the industry was 82.65%. Graph:

Activity Ratio : This ratio are used to determine how quickly various accounts are converted into sales or cash. There are four types of activity ratios i. Inventory Turnover ii. Days Sales Outstanding iii. Operating cycle iv. Total Asset Turnover Inventory Turnover: This ratio evaluate companys inventory it determine that either a company should increase their inventory or not. Inventory Turnover=cost of good sold Average inventory Year 2006 2007 2008 2009 2010 ITO 36.5% 36.0% 34.6% 41.6% 36.5% The inventory turnover decreased from 42 days in FY09 to 39 days in FY10, which means it took Nestle Pakistan an average of 39 days to convert its inventories i nto cash ie 2 less days than in the previous year. Graph:

Days Sales Outstanding: DSO is the number of days a company take to collect its account receivable. DSO=365/account receivable turnover Year 2006 2007 2008 2009 2010 DSO 3.89% 4.39% 4.81% 2.11% 0.88% Day Sales Outstanding more than halved from 2.11 days in FY09 to 0.88 days in FY 10, indicating a tighter collection policy from the debtors. This was also lower than the industry average of 2.44 days. Graph: Operating cycle: The operating cycle of a business is the number of days it takes to convert inve ntory and receivables to cash. Operating cycle=DSO+ Average age of inventory years O.C 2006 40.4% 2007 40.4% 2008 39.4% 2009 43.7% 2010 40.4%

The operating cycle decrease from 43.7% to 40.4% Graph: Total Asset Turnover: The total asset turnover ratio is helpful in evaluating a companys ability to use its asset base efficiently to generate revenue. Total Asset Turnover= Net sales/Average total asset Year 2006 T.A.TO 1.70% 2007 1.78% 2008 2.05% 2009 2.21% 2010 2.24%

The Total Asset Turnover for Nestle Pakistan rose from 2.21 in FY09 to 2.24 in F Y10 indicating slightly higher profitability of the asset base employed by Nestle Pakistan.Total Asset Turnover for the industry was 2.62,which is slightly better.

graph:

4.Leverage: Leverage is a companys ability to meet its long-term obligation as they become du e. There are three types of leverage i. Debt ratio ii. Debt/equity ratio iii. Time interest earned Debt ratio The debt ratio compares total liabilities to total asset.It shows the percentage of total funds obtained from creditors. Debt ratio=Total liabilities/Total assets Year 2006 2007 2008 2009 2010 D.R 0.80% 0.74% 0.74% 0.76% 0.76% The debt to asset ratio stood at 0.76 in FY10 showing little change since FY07.

Graph: Debt/equity ratio The debt/equity ratio measure solvency of company to meet interest charges and p rincipal payment at maturity. Debt/equity ratio= Total liabilities/stockholders equity Year 2006 2007 2008 2009 2010

D/E.R

4.11%

2.85%

2.80%

3.20%

3.11%

The debt to equity ratio declined from 3.20 in FY09 to 3.11 in FY10 implying a s light shift from debt financing for assets of the company supported by increased interest rates in the economy and instability of the equity market. Graph:

Time interest earned The times interest earned ratio reflects the number of times before-tax earnings cover interest expense. Time interest earned ratio=earnings before interest and taxes(EBIT) Interest expense Year 2003 2004 2005 2006 2007 2008 2009 2010 TIE 19.7% 24.9% 10.0% 5.48% 5.36% 5.00% 10.4% 12.1%

The Times Interest Earned (TIE) ratio increased from 10.47 in FY09 to 12.10 owin g to the high EBIT in FY10.

Graph:

Market Ratio: It relates the firms stock price to its earnings per share. There are four market ratio Earning per share Price/earning ratio Book value per share Dividend ratio Earning per share EPS indicates the amount of earnings for each common share held. EPS=net income-preferred dividend Common stock outstanding Year 2006 2007 2008 2009 2010 EPS 30.06% 39.81% 34.24% 66.27% 90.96%

Market ratios for Nestle Pakistan indicate a 37% increase in Earnings per Share from Rs 66.27 in FY09 to Rs 90.69.The industrys EPS was much higher,standing at a n average of Rs 168.35.

Graph:

Price/earning ratio Price/earning ratio evalutes the enterprises relationship with its stockholders.A high P/E multiple is good because it indicates that the investing public consid ers the company in a favorable light. P/E=Market price per share Earnings per share

Year P/E

2006 2007 2008 2009 2010 34.76% 45.22% 38.96% 18.80% 26.19%

The rise in the P/E multiple indicates that the stock market has a favorable opi nion of the company.

Book Book ares Book Year B.V/S

value per share value per share is net asset available to common stockholders divided by sh outstanding where net asset is stockholder s equity minus preferred stock. value per share=Total stockholders equity-preferred stock Shares outstanding 2006 5.00 2007 10.0 2008 25.0 2009 20.0 2010 30.0

The Book Value per Share for Nestle Pakistan registered an increase from its val

ue of Rs 97.62 in FY09 to Rs 123.09 in FY10.

Graph: Dividend Ratio Many stockholders are primarily interested in receiving dividends.The two pertin ent ratio are i. Dividend yield ii. Dividend payout Dividend yield=dividends per share Market price per share Year 2006 2007 2008 2009 D.Y 0.11 0.39 0.73 0.54

2010 1.5

Dividend yeild increase from 0.54% to 1.5% because the no.of issued shares incr ease and also the market price of shares increase from Rs.1246 to Rs.2375 Graph:

Dividend payout: Dividend payout=dividends per share Earnings per share Year 2006 2007 2008 2009 D.P 0.16 0.25 0.73 0.30

2010 0.32

Dividend payout increase from 0.30% to 0.32% because dividend per share increase s from Rs.18.80 to Rs. 26.19.

Graph:

No.of share issued: Year 2006 2007 Share 45349 45349 Graph:

2008 45349

2009 45349

2010 45350

The price of Nestle Pakistan s shares on 31st December 2010 rose from Rs 1246 to Rs 2375, which is a significant increase of 90.61%. Future outlook Nestle Pakistan has maintained a firm position in the Pakistani foods market wit h the leading position in several categories and is expected to continue its str ong operations on the basis of its current and past performance. Nestle Pakistan s future operations seem promising with several projects and inv estments already in line. The company plans to approximately Rs 8 billion in 2011 for milk collection fiel d development, upgrading of existing production facilities and increase in produ ction capacity. The company also plans to continue with its Corporate Social Responsibility effo rts in the coming year.

AN LIMITED BALANCE SHEET From the year 2006 to 2010 2010 2009 2008 2007 2006 .. (Rupees in thousands).. EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 75,000,000 of Rs. 10 each 750,000 750,000 750,000

Issued, and paid up capital 453,496 453,496 453,496 453,496 453,496 Share Premium 249,527 249,527 249,527 249,527 249,527 General Reserve 280,000 280,000 00 280,000 280,000 Accumulated profit 4,598,850 3,443,932 3,405,824 3,128,682 1,548,057 5,581,873 4,426,955 4,388,847 11,705 2,531,080 NON-CURRENT LIABILITIES Long term finances 5,573,750 4,028,700 3,963,700 Deffered Taxation 1,705,508 1,371,675 942,858 Retirement Benefits 229,114 351,968 238,370 subjtect to Finance Lease 4,210,750 1,531,945 234,305 55,415 118,275 5,139,875 1,319,333 215,925

NESTLE PAKIST

750,000 750,000

280,0

4,1

177,582 58,347 7,563,787 5,172,334

119,602 6,076,895

31,471 6,988,758

5,7

CURRENT LIABILITIES Current portion of liabites 57,786 1,322,442 54,042 29,863 300,000 Current portion of finance lease 8,392 Short term borrowing 2,143,750 2,105,375 300,000 1,035,000 700,000 Short Runing finance 2,780,843 756,362 1,924,287 1,637,799 1,817,711 Customer security deposits 128,857 105,686 127,884 124,572 102,307 Trade and other payables 4,633,932 3,746,286 2,798,185 3,062,027 2,197,529 Interest and markup accrued 61,404 46,979 102,173 89,261 98,549 9,806,572 8,083,130 5,306,571 5,9 78,522 5,224,488 8,574 22,952,232 12,927,902 18,586,980 16,684,176 15,84

2010

2009

2008 2007 2006 ..(Rupees in thousands)..

ASSETS TENGIBLE AND FIXED ASSETS Property, plant and equip. 11,370,611 10,700,874 9,464,373 9,074,428 6,941,332 Assets on finance lease 44,717 Capital work in progress 3,076,472 914,956 1 ,382,401 971,183 1,107,052 14,447,083 11,615,830 10,846,774 10,04 5,611 8,093,101 Intangible Assets 16,735 7,106 49,774 92,382 135,020 Long term loans, advances 125,674 113,490 98,544 80,670 66,008 Long term security deposits 9,817 5,026 5,036 6,088 6,088 CURRENT ASSETS Stores and spares 1,050,804 868,984 804,6 47 436,573 329,346 Stock-in-trade 4,602,019 3,895,038 2,488,573 2,393,306 1,907,300 Trade debts 126,499 241,715 456,813 344,053 238,291 Current portion of long term loans 19,149 21,01 2 26,615 21,279 8,771 Advances, prepayments and others receivables 2,048,936 1,503,009 1,488,103 2,022,387 2,109,314 Cash and bank balances 505,516 315,770 419,327 406,225 34,663

23,823 8,574

8,352,923 4,627,685 22,952,232 12,927,902

6,845,528 18,586,980

5,684,078 16,684,206

5,6 15,84

NESTLE PAKISTAN LIMITED BALANCE SHEET HOREZONTAL ANALYSIS 2006 2007 2008 2009 2010 ..(Amounts in Percentage).. EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 75,000,000 of Rs. 10 each 100 100 100 Issued, and paid up capital 100 100 100 Share Premium 100 100 100 General Reserve 100 100 100 Accumulated profit 100 202 222 297 100 162 221 NON-CURRENT LIABILITIES Long term finances 100 102 106 141 Deffered Taxation 100 145 162 181 Retirement Benefits 100 102 92 98 Liabilities against assetes subject to Finance Lease 100 376 176 100 111 146 CURRENT LIABILITIES Current portion of liabites 100 18 441 19 Current portion of finance lease 100 Short term borrowing 100 148 301 306 Short Running finance 100 90 42 153 Customer security deposits 100

100 100 100 100 220 173 130 140 150 380 135 10 43

100 100 100 100

175

564 117

106 122 125

103 126 Trade and other payables 170 211 Interest and markup accrued 91 100 188 100 178

100 100 104 114 123 48

139

127 62

102 129

155 144

2006 2007 2008 2009 ..(Amounts in percentage).. ASSETS TENGIBLE AND FIXED ASSETS Property, plant and equip. 154 164 Assets on finance lease Capital work in progress 125 83 100 179 Intangible Assets 5 Long term loans, advances 172 190 Long term security deposits 83 CURRENT ASSETS Stores and spares 264 319 Stock-in-trade 100 241 Trade debts 100 53 Current portion of long term loans 303 240 Advances, prepayments and other receivables 71 Cash and bank balances 911 1,458 100 180 100 178 100 100

2010

131 -

136

100 278 124 100 12 100 100 161 100 125 144 100 218 100 97 100 122 123 1,172 96 133 68

88 134 144 37 122 100 149 83

244 130 192 243 71 1,210 123 129 148 144 204 101

NESTLE PAKISTAN LIMI TED PROFIT AND LOSS ACCOUNT From the year 2006 to 2010

Sales - net 28,2 35,393 22,030,958 Cost of goods sold (37,608,733) (29,256,902) (25,231,532) (20,285,142) (15,778,330) Gross profit 13,878,569 11,898,920 8,952,315 7,950,251 6,252,628 Distribution and selling exp (5,709,078) (5,238,488) (3,890,352) (3,538,284) (2,925,118) Administration expenses (1,311,637) (1,085,121) (956,816) (900,822) (687,092) Operating profit 6,857,854 5,575,311 4,105,147 3,511,145 2,640,418 Finance cost (513,081) (442,050) (557,325) (584,434) (447,774) Other operating expenses (819,084) (1,091,149) (1,3 82,138) (442,914) (263,921) (1,332,165) (1,533,199) (1,939,463) (1,0 27,348) (711,695) Other operating income 170,491 144,145 61,800 65,959 76,732 Profit before taxation 5,696,180 4,186,257 2 ,227,484 2,549,756 2,005,455 Taxation (1,583,331) (1,181,124) (674,590 ) (744,544) (642,165) Profit after taxation 4,112,849 3,005,133 1,552,894 1,805,212 1,363,290 Earnings per share 90.69 66.27 34.24 39.81 30.06

2010 2009 2008 2007 2006 ..(Rupees in thousands).. 51,487,302 41,155,822 34,183,847

NESTLE PAKISTAN LIMITED PROFIT AND LOSS ACCOUNT HORIZONTAL ANALYSIS 2006 2007 2008 2009 2010 ..(Amounts in percentage).. 100 128 100 100 100 100 100 100 100 100 215 187 144 131 168 273 131 133 124 524 127 121 139 155 129 143 133

Sales - net 187 234 Cost of goods sold 185 238 Gross profit 190 222 Distribution and selling exp 179 195 Administration expenses 158 191 Operating profit 211 260 Finance cost 99 115 Other operating expenses 413 310

155 160

Other operating income 188 Profit before taxation 209 284 Taxation 184 Profit after taxation 220

100 222 100 100 247 100 302

86 127 116 132 111 105 114

81

NESTLE PAKISTAN LIMITED PROFIT AND LOSS ACCOUNT VERTICLE ANALYSIS 2006 2007 2008 2009 2010 ..(Amounts in percentage).. 100 100 (71.84) 28.16 (12.53) (3.19) 12.44 (2.07) (1.57) (3.64) 0.23 9.03 (2.64) 6.39 (5.67) 0.18 6.52 (1.97) 4.54 (1.63) (4.04) 26.19 (11.38) (2.80) 12.01

Sales - net 100 100 Cost of goods sold (71.62) (71.09) (73.04) Gross profit 28.38 28.91 26.96 Distribution and selling exp (13.28) (12.73) (11.09) Administration expenses (3.12) (2.64) (2.55) Operating profit 11.99 13.55 13.32 Finance cost (2.03) (1.07) (1.00) Other operating expenses (1.20) (2.65) (1.59) (3.23) (3.73) (2.59) Other operating income 0.35 0.35 0.33 Profit before taxation 9.10 10.17 11.06 Taxation (2.91) (2.87) (3.08) Profit after taxation 6.19 7.30 7.99 SWOT ANALYSIS

100 (73.81)

Where there is a company in operation it has to work in two kinds of environment i.e. the external environment and the internal environment of the company. For a company to avail maximum and avoid maximum, it has to know what it has to avail and what it has to avoid. The external environment has to be scanned by th e management for any arising opportunities or any critical threats. The resource s of a company constitute its strengths and weaknesses. External factors are broadly categorized into; Economic forces Social, cultural, demographic, and environmental forces Political, governmental and legal forces

 Technological forces Competitive forces etc Internal factors are; Marketing strength of firm Financial/Accounting resources Management Computer information system Production/operations etc BENEFITS OF SWOT ANALYSIS A SWOT Analysis is conducted by the company so that it is able to position itsel f to take advantage of particular opportunities in the environment and to avoid or minimize environmental threats. In doing so, the organization attempts to emp hasize its strengths and moderate the impact of weaknesses. The analysis is also useful for uncovering strengths that have not been fully utilized and in identi fying weaknesses that can be corrected. Matching information about the environme nt with the organization s capabilities enables management to formulate realisti c strategies for attaining its goals. A SWOT Analysis of Nestl Milk pack is as follows: INTERNAL ANALYSIS STRENGTHS Socially Responsible company. NMLs products enjoy strong brand image and market pull. Innovative and constantly growing product line. NML launched 17 new products, in cluding variants of existing products in recent past. Sales force is the major resource strength in terms of physical resources of the company. Marketing strategies established by the company are innovative and lure customer s. Financial, marketing and sales strategies are formulated by gauging the customer demands. Periodic research carried out to judge market trends. It is a large scale organization, with abundant funds and has the capability of acquiring weaker firms by throwing them out of competition. The recent acquisiti on of the water brands Aqua and Fontalia provide an example for this strength of the company. Multinational. Growing Sales and profits. Major shareholder in the food industry of Pakistan. Aggressive Marketing. Efficient Distribution networks throughout the country. Quality Products. Environment Friendly.

WEAKNESSES Selective investment due to uncertain economic and political conditions. Feasibility of new products needs to be analyzed, e.g. Nestea was launched some years back but it failed because no customer demand for it existed. The plant installed for Magi Noodles has a higher capacity than the actual deman d of the product, resulting in higher overhead costs for the product. Relatively a new company in comparison to its rivals e.g. Lever Brothers. Low levels of inventory maintained can be dangerous. No credit sales. Low sales margins due to highly value added products.

 They cannot launch many of its expensive international brands due to the lower i ncome groups. EXTERNAL ANALYSIS OPPORTUNITIES Pakistan is the seventh largest producer of milk in the world with annual output of over 22 billion liters. There are substantial growth opportunities considering the average yield of Paki stani animals at only 1,100 liters/annum as compared to 6,000 liters/annum for a nimals in Europe and USA. There are nearly 20 million milk producing animals in the country, mostly in Punjab (80%). The overall milk market in Pakistan is 20 billion liters, out of which processed milk contributes only 3 million liters. Nestl Milk pack along with other process ed milk businesses contributes only 2% to this large market. Nestl Milk pack has expanded its product range by entering the cold dairy market recently by launching Nestl plain yogurt and now fruit yogurt is also added to it . To expand the cold dairy products range, Nestl fruit yogurt is the latest additio n to this group. The cold dairy market offers many opportunities for the company which can capita lize these products by banking on its superior quality milk. The coffee brand also offers many opportunities for the company to expand by tun ing the taste of the masses towards coffee. Credit policy can be adopted to increase sales. THREATS Price fluctuations due to rupee devaluation as raw material is imported. The uncertainty of economic conditions poses a great threat as the major funds i nvested in the country come from outside Pakistan. The present economic crisis in the world, led to the withdrawal of foreign manag ement from the company and the investment has come to a halt. Competition with Nestls owns smuggled brands. Effect of Seasonalitys upon sales. Imported raw material, in some of the companys products. NESTLE PAKISTAN LIMITED BALANCE SHEET VERTICLE ANALYSIS 2006 2007 2008 2009 ..(Amounts in Percentage).. EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 75,000,000 of Rs. 10 each 4.50 4.04 2010

5.80 3.27

4.73 2.86

Issued, and paid up capital 3.51 2.72 2.44 1.98 Share Premium 1.93 1.57 1.50 1.34 1.09 General Reserve 2.17 1.77 1.68 1.51 1.22 Accumulated profit 11.97 19.74 20.41 18.53 20.04 19.58 25.94 31 23.82 24.32

26.

NON-CURRENT LIABILITIES Long term finances 30.66 25.42 30.81 22.65 24.28 Deffered Taxation 7.29 8.65 7.91 8.24 7.43 Retirement Benefits 1.81 1.50 2.11 1.16 1.00 Liabilities against asstes subjtect to Finance Lease 0.24 0.75 1.06 0.64 0.24 Current portion of liabites 2.32 0.19 0.32 7.11 0.25 Current portion of finance lease 0.06 Short term borrowing 5.41 6.53 1.80 11.33 9.34 Short Runing finance 14.06 10.33 11.53 4.07 12.12 Customer security deposits 0.79 0.79 0.77 0.57 0.56 Trade and other payables 17.00 19.32 16.77 20.16 20.19 Interest and markup accrued 0.76 0.56 0.61 0.25 0.27 40.41 37.72 31. 81 43.49 42.73 100.00 0 100.00 100.00 2010 100.00 100.0

2006 2007 2008 2009 ..(Amounts in Percentage).. ASSETS TENGIBLE AND FIXED ASSETS Property, plant and equip. 56.73 Assets on finance lease Capital work in progress 8.29 62.60 01 62.49 Intengible Assets 0.30 Long term loans, advances 0.51 0.61 Long term security deposits 0.03 CURRENT ASSETS Stores and spares 4.82 Stock-in-trade

53.69 57.57 0.35 8.56 4.92 63.38 62.94 1.04 0.04 0.51 0.55 0.05 0.03 2.55 4.68 14.75 4.58 15.10 0.04 2.75 0.07 0.59 0.58 13.40 49.54 -

57.26

6.13 65.

0.04

14.

92 20.96 20.05 Trade debts 1.84 2.17 2.74 1.30 0.55 Current portion of long term loans 0.07 0.13 0.16 0.11 Advances, prepayments and othere receivables 16.32 12.76 8.92 8.09 8.93 Cash and bank balances 0.27 2.56 2.51 1.70 2.20 35.80 35.48 07 36.83 36.39 100.00 0 100.00 100.00 100.00

0.08 -

34. 100.0