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1.0 Introduction
1.1 Purpose of assignment....................................................................................3
1.2 Definition of profitability ratios……………………………………………..3
2.0 Company 1 : Cocoaland Holdings Berhad
2.1 Company overview………………………………………………………….3
2.2 Financial statement………………………………………………………….5
2.3 Profitability ratios……………………………………………………………9
3.0 Company 2 : Lam Soon Malaysia Berhad
3.1 Company overview…………………………………………………………16
3.2 Financial statement…………………………………………………………16
3.3 Profitability ratios…………………………………………………….…….19
4.0 Conclusion.............................................................................................................24
5.0 Reference...............................................................................................................25
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1.0 Introduction
1.1 Purpose of assignment
The purpose of assignment is to determine the companies’ performance of two
listed companies of Bursa Malaysia from the Consumer Products sector by analysing
their profitability ratios for the years 2011 and 2012, based on their published financial
statements. Cocoaland Holdings Berhad and Lam Soon Malaysia were the two
subjects that chosen to be analyzed.
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located in Rawang, Selangor Darul Ehsan, is the primary trading arm and is
responsible for export market of the Cocoaland Holding Group. B Plus Q Sdn. Bhd.
which is located in Kampar, Perak Darul Ridzuan, mainly manufactures soft drinks,
wafer rolls, peas, nuts, jelly cups, snacks and cracker. Mite Food Enterprise Sdn. Bhd.,
which is a wholly-own subsidiary of B Plus Q, is the trading and distribution arm for B
Plus Q Sdn. Bhd. and operates from the same premises as B Plus Q Snd. Bhd.
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2.2 Financial statement for the Year Ended 31 December 2012 and 2011
(a) Financial highlights for years 2012 and 2011
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(b) Profit after income tax for year 2012
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(c) Profit after income tax for year 2011
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(e) Balance Sheet for year 2011
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(f) Income statement for years 2012 and 2011
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2.3 Profitability ratio
2.3.1 Gross Profit Margin
Gross profit margin measures the profit for each ringgit of sales that can
be used to pay the sales and administration expenditures. The higher the gross
profit margin, the better the status of the company as this shows lower
expenditures or costs involved in implementing sales activities. Gross profit
margin can be obtained by dividing the gross profit with sales. It shows the
balance percentage for each ringgit of sales after the company had paid all the
costs of goods.
For year 2012, gross profit margin of 24% is lower compared to the industry
average of 30%. This shows that the purchasing management and cost of the
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company are lower as compared to the industry average. The company generates
24.0 cents gross profit after deducting all costs of goods for each ringgit of sale.
For year 2011, gross profit margin of 24.9% is lower compared to the industry
average of 30%. This also shows that the purchasing management and cost of the
company are lower as compared to the industry average. The company generates
24.9cents gross profit after deducting all costs of goods for each ringgit of sale.
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For year 2012, the net profit margin for the company of 9.5% is higher
compared to the Industry’s performance of 6.4%. This shows that the
management of purchasing and related purchasing costs is better compared to the
industry average. The company had managed to generate 9.5cents net profit for
each ringgit of sale compared to the industry average that only managed to
generate 6.4 cents for each ringgit of sale.
For year 2011, the net profit margin for the company of 11.0% is higher
compared to the Industry’s performance of 6.4%. This shows that the
management of purchasing and related purchasing costs are better compared to
the industry average. The company had managed to generate 11.0 cents net profit
for each ringgit of sale compared to the industry average that only managed to
generate 6.4 cents for each ringgit of sale.
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The operating profit margin measures the efficiency of operations in reducing
costs and increasing returns before interest and tax. A higher operating profit
margin is better as it indicates that the company is able to operate efficiently. The
operating profit margin of Cocoaland Holdings Berhad is:
For year 2012, the operating profit margin of Cocoaland Holdings Berhad is
better compared to the industry average which is 12.5%. This shows that the
company is more efficient in its operations and control of its operating
expenditures to generate higher earnings before interest and tax.
For year 2011, the operating profit margin of Cocoaland Holdings Berhad is
almost the reach the industry average which is 9.7%. This shows that the
company is efficient in its operations and control of its operating expenditures to
generate higher earnings before interest and tax.
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Return on Assets = Profit after tax x 100
(2012) Total Asset
= RM 21218139 x 100
RM 237320735
= 8.9%
Industry average = 4.8%
For year 2012, return on assets of the company is better compared to the
industry average that contributes 8.9%. This shows that the company is better in
managing its assets to generate profit compared to the other companies in the
industry.
For year 2011, return on assets of the company is better compared to the
industry average that contributes 8.8%. This shows that the company is better in
managing its assets to generate profit compared to the other companies in the
industry.
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Return on equity measures the efficiency of the company in generating profit
for its ordinary shareholders. The higher the ratio, the better as the company is
able to generate high profit for its owners.
For year 2012, return on equity of the company is 10.8 % and this is more
satisfactory compared to 8% for the industry average. This shows that the
management of the company is more efficient compared to the industry average.
For year 2011, return on equity of the company is 10.2% and this is more
satisfactory compared to 8% for the industry average. This shows that the
management of the company is more efficient compared to the industry average.
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Earnings per share calculate the net profit that is generated from each ordinary
share. This information is often given priority by the management and investors as
it is regarded as an important indication of the company’s success. Therefore, the
bigger the value of this ratio, the better the status of the shareholders. Earnings per
share is obtained by dividing the net profit with the number of shares issued.
= RM 21218000
42436000
= RM0.50
Industry average = RM0.26
For year 2012, the company obtained RM 0.50 for each unit of shares issued
compared to the industry average of only RM0.26. The value of this difference is
big and in practice, this value represents the actual amount that will be
distributed to the shareholders.
= RM13470590
134759
= RM 0.50
Industry average = RM0.26
For year 2011, the company obtained RM0.50 for each unit of shares issued
compared to the industry average of only RM0.26. The value of this difference is
big and in practice, this value represents the actual amount that will be
distributed to the shareholders.
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3.0 Company 2 : Lam Soon Malaysia Berhad Annual Report 2012
3.1 Company overview
Lam Soon Group business activities comprise of plantation or milling, refining of
cooking oil to the manufacturing of margarine, specialty fats, soap and detergent and
olechemicals. Example of products were ‘Buruh’ cooking oil, ‘Drinho’ and ‘Antabax’.
3.2 Financial statement for the Year Ended 31 December 2011 and 2012
(a) Financial highlights
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(b) Balance Sheet for years 2012 and 2011
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(c) Income statement for years 2012 and 2011
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3.3 Profitability ratio
2.3.1 Gross Profit Margin
For year 2012, gross profit margin of 15.1% is low compared to the industry
average of 30%. This shows that the purchasing management and cost of the
company are poor compared to the industry average. The company generate 15.1
cents loss after deducting all costs of goods for each ringgit of sale.
For year 2011, gross profit margin of 15.5% is low compared to the industry
average of 30%. This shows that the purchasing management and cost of the
company are poor compared to the industry average. The company generates
15.5cents gross profit after deducting all costs of goods for each ringgit of sale.
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For year 2012, the net profit margin for the company of 3.6% is low compared
to the Industry’s performance of 6.4%. This shows that the management of
purchasing and related purchasing costs are poor compared to the industry
average. The company had managed to generate 3.6 cents net profit for each
ringgit of sale compared to the industry average that managed to generate 6.4
cents for each ringgit of sale.
However, for year 2011, the net profit margin for the company of 6.6% is
higher compared to the Industry’s performance of 6.4%. This shows that the
management of purchasing and related purchasing costs are better compared to
the industry average. The company had managed to generate 6.6 cents net profit
for each ringgit of sale compared to the industry average that only managed to
generate 6.4 cents for each ringgit of sale.
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2.3.3 Operating Profit Margin
For year 2012, the operating profit margin of Lam Soon Malaysia Berhad is
below an average which is 4.9% compared to the industry average. This shows
that the company is less efficient in its operations and control of its operating
expenditures to generate higher earnings before interest and tax.
For year 2011, the operating profit margin of Lam Soon Malaysia Berhad is
also below an average compared which is 7.7% to the industry average. This
also shows that the company is less efficient in its operations and control of its
operating expenditures to generate higher earnings before interest and tax.
2.3.4 Return on Assets
For year 2012, return on assets of the company is better compared to the
industry average that contributes 4.9%. This shows that the company is better in
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managing its assets to generate profit compared to the other companies in the
industry.
Previously, for year 2011, return on assets of the company is better compared
to the industry average that contributes 9.7%. This shows that the company is
better in managing its assets to generate profit compared to the other companies in
the industry.
For year 2012, the return on equity of the company is 6.4% and this is less
satisfactory compared to 8% for the industry average. This shows that the
management of the company is less efficient compared to the industry average.
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However, for year 2011, the return on equity of the company is 13.3% and
this is more satisfactory compared to 8% for the industry average. This shows that
the management of the company is more efficient compared to the industry
average.
2.3.6 Earnings per share
= RM60000000
214285714
= RM 0.28
Industry average = RM0.26
For year 2012, the company obtained RM0.28 for each unit of shares issued
compared to the industry average of only RM0.26. The value of this difference is
small and in practice, this value represents the actual amount that will be
distributed to the shareholders.
= RM128000000
2154882
= RM 0.59
Industry average = RM0.26
However, for year 2011, the company obtained RM0.59 for each unit of
shares issued compared to the industry average of only RM0.26. The value of
this difference is big and in practice, this value represents the actual amount that
will be distributed to the shareholders.
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4.0 Conclusion
In conclusion, we can determine the business’s efficiency and effectiveness in
achieving its profit objective by measuring the profitability ratio of the company.
Profitability ratios can be measure through the Gross Profit Margin, Net Profit Margin,
Operating Profit Margin, Return on Assets, Return on Equity and Earnings per share of the
company.
In terms of profitability ratios, for year 2012 and 2011, Cocoaland Holdings Berhad’s
gross profit margin of 24% and 24.9% is lower compared to the industry average of 30%,
respectively. For year 2012 and 2011, the net profit margin for the company of 9.5% and
11.0% which are higher compared to the Industry’s performance of 6.4%, respectively. For
year 2012 and 2011, the operating profit margin of Cocoaland Holdings Berhad is better
compared to the industry average, which were 12.5% and 9.7% respectively. For year 2012
and 2011, return on assets of the company is better compared to the industry average that
contributes 4.9% and 8.8% respectively. For year 2012 and 2011, return on equity of the
company is 10.8 % and 10.2% in which these are more satisfactory compared to 8% for the
industry average. In terms of earning per share, for both year 2012 and 2011, the company
obtained RM 0.50 for each unit of shares issued compared to the industry average of only
RM0.26.
For year 2012, Lam Soon Malaysia Berhad’s profit contribution from most business
divisions were much lower compared to that for the previous year. For year 2012 and 2011,
gross profit margin of 15.1% and 15.5% are low compared to the industry average of 30%,
respectively. For year 2012, the net profit margin for the company of 3.6% is low compared
to the Industry’s performance of 6.4%. However, for year 2011, the net profit margin for
the company of 6.6% is higher compared to the Industry’s performance. For year 2012 and
2011, the operating profit margin of Lam Soon Malaysia Berhad is below an average which
is 4.9% and 7.7%, respectively, compared to the industry average. For year 2012, return on
assets of the company is better compared to the industry average that contributes 4.9% and
9.7% respectively. For year 2012, the return on equity of the company is 6.4% and this is
less satisfactory compared to 8% for the industry average. However, for year 2011, the
return on equity of the company is 13.3% and this is more satisfactory compared to the
industry average. For year 2012 and 2011, the company obtained RM0.28 and RM0.59
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respectively, for each unit of shares issued compared to the industry average of only
RM0.26.
(2901 Words)
5.0 Reference
Topic2 Analysis of Financial Statements. BBPW3103 Financial Management I. OUM
Lam Soon Malaysia Berhad Financial position. (2013). Retrieved on 29 June 2014 from
http://www.lamsoon.com.my/newsFinancial_Msia11.asp
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