Background of the Study

Primo Benzina AG which provides outstanding products and service to retail petrol customers
was founded by Otto Schooder in 2006. It offers variety of fuels including super premium,
premium, regular petrol and diesel as well as an in-store deli market which sold snacks, drinks,
grocery items and ready-to-eat meals and salads. Primo Benzina also operated as full-service
restaurants with a limited set section of breakfast, lunch and dinner menu items. Primos mission
is to be the best petrol, convenience and fresh food retailer in the eyes of their customers,
competitors, and employees.
From its humble beginnings of being a single retail station, Primo Benzina was able to expand up
to 24 stores in Germany and Switzerland by 2009. With its strategies of providing outstanding
service, spotlessly clean and well-lit service stations, high quality meals with outstanding sevice,
loyalty program and credit offer to customers, the company was able to have an excellent sales
performance. In spite of this, Primo Benzina had experienced a substantial decline in its cash
flows requiring to increase its credit limit and affecting the execution of expansion plans
including the construction of three new retail patrol stations in Germany.

Statement of the Problem

Would the new credit limit of $12 million from $10 million permit the company to execute its
expansion plans including the construction of three new petrol stations in Heilbronn, Germany?

Objective
To evaluate Primo Benzinas financial statement and analyze substantial effect to the profitability
of the company and to provide recommendation regarding its expansion plan.

Analysis

Strength
Outstanding service and high quality
meals
High quality gasoline from reliable
refineries
Weaknesses
Primo Benzina relies too heavily on
short-term loans
The rate at which their receivables
are converted to cash is really slow
It has too many debts, which it may
not be able to pay
At the rate its going, it could go
bankrupt in a couple of years
Opportunities
Competitors of the company in
premium segment did not provide
restaurants or laundry services.

Threats
It may not be able to push through
with its expansion plans, which
include the three new retail stations
in Germany.
Price where often higher than those
of its competitors.

Investors, shareholders are unwilling

to increase their investments and
commitments to the business.

Benchmarking (2009)
Primo Benzina
Zip AG
Days Receivables
75
35
Days Inventory
40
42
Days Payable
45
31
Financial Ratios
Gross Profit Percentage
27%
28%
Year
2006
2007
Return on Sales
8%
8%
Working Capital
343
805
Return on Invested Capital
7%
12.5%
Current Ratio
2.37
3.25
Return on Assets
6%
9%
Return on Equity
18%
23%
Year

Total Assets
Total Liabilities
Debt Ratio

Year

Schnell AG
32
39
35
26%
2008
10%
1184
14%
1.46
12%
19%

Sparpetrol AG
40
35
27
30%
2009
6%
2718
11%
1.21
10%
22%

2006

2007

2008

2009

1102
351
32%

2031
678
33%

6571
4169
63%

28678
19201
67%

2006

2007

2008

2009

28%
42%

28%
46%

22%
45%

10%
28%

Operating Margin
Petrol
Food, snacks, and drinks
Sales
Petrol
Food, Snacks, and Drinks
Total Sales
Operating Income

Income Statement
(in thousands)
for year end dec 31
Sales

1458
972
2430
410

2411
1477
3888
685

2006
2,430.0

2007
3,888.0

60%

7295
3592
10887
1604

180

2008
10,887.00

28197
9906
38103
2782

250

2009
38,103.0

0
Cost of
Goods
Sold

156%

(7,403.
00)
3,484.0
0

276
%
195
%

(27,815.
00)
10,288.0
0

138.00

304
%

557.00

(1,580.
00)

60%

Gross profit
Depreciati
on
expense
Other
operating
expenses
Operating
income
Interest
expense
Income before
income tax expense
Income
tax
expense

850.00

60%

(2,527.
00)
1,361.0
0

100.00

-46%

54.00

156%

340.00

83%

622.00

180%

410.00

67%

685.00

134%

150.00

-76%
150
%

36.00

353%

649.00

122%

162.00

122%

Net Income

195.00

487.00

122%

260.00
65.00

149
%
150
%

2009
Sales
Cost of Goods Sold

38,103.00
(27,815.00)

193%

1,742.0 294
0
%
1,604.0
0 79%
301
163.00
%
1,441.0
0 54%
360.00 54%
1,081.0
0 54%

6,859.00
2,872.00
653.00
2,219.00
555.00
1,664.00

Forecast
47628.75
(34,768.75)

Available Cash

(6,953.75)
3,136.00

Conclusion
In spite of its increasing sales, the company had experienced a substantial decline in its
cash flow, requiring it to request an increase in its credit limit from 10-12 mil Euros.
Weak Profitability
Increasing debt load

Recommendation
Heurman should tell Schroder not to push through with the expansion.
Reduce service stations, which cannot financially maintain.

PRIMO BENZINA AG
-GRAEME RANKINE,
THUNDERBIRD SCHOOL OF GLOBAL MANAGEMENT

dela Torre, Mary Aissel E.

Diwa, Airra Shaine S.
Marquina, Mary Crisel Y.
Padlan, Le-Anne C.
BSA-4D