Вы находитесь на странице: 1из 31

Packages Ltd.

Financial Analysis 2012-2013

Group Members:
Javeria Iqbal
Taniya Haseeb
Abul Hassan
Shaharyar Babar

Introduction:
Packages limited is a public limited company and it is listed in three
main stock exchanges of the country.
It is mainly engaged to produce packages, paper, paperboards, and
tissue products according to growing packing demand of industry.
Their main clients are Unilever Pakistan and Pakistan Tobacco
Company; they are serving them since 50 years. Currently it is the
market leader in terms of total capacity installed.
The business partners of packages limited are Nestle limited, TriPack films limited, Packages Lanka private limited, First international
bank limited, DIC limited, IGI Pakistan and Coca-Cola beverages
Pakistan limited. It also have a strong investment portfolio.

Packages Limited was established in 1957. It is a joint


venture between Ali Group of Pakistan and Akerlund &
Rausing of Sweden for the purpose of making packing
products.

VISSION STATEMENT
To become a business and production model by providing
quality products to the consumers and industry.
To keep introducing latest machines and technology.
Develop strong position of the company to face
challenges.
Develop ethical culture in the organization.

MISSION STATEMENT
To provide quality products and services to our
customers.
To be a company that continuously enhances its
technologies and competes the market.
To be a company that promotes innovative culture and
attracts customers.
To achieve a profitable growth by providing fair returns
to the investors.
To set the highest standard in corporate ethics in serving
the society.

Product Line:

PAPER AND BOARD

FOLDING CARTONS:

Note books

Food and Beverages

Registers

Soap and Detergents

Tea and food cartons

Electronics

Confectionary

Shoe

Match Boxes

Tobacco

Paper Cups

CORRUGATED BOXES:

CONSUMER PRODUCTS:

Dairy and Ice Cream

Facial Tissues

Rubber

Tissue Roll

FLEXIBLE PACKING SOLUTIONS:

Kitchen Roll

Oil and Ghee

Rose Patel Hand Towel

Laminates for Milk Powders

Rose Patel Pocket Packs

Shampoo Bottles

Horizontal Analysis (Balance


Sheet)

Horizontal Analysis (Balance


Sheet)

Interpretation of Assets:
Cash and cash equivalents decreased from 105.68M to
-34.81M which shows that company has not enough
cash and it needs to collect receivables from the
customers as the receivables has been significantly
increased during 2013.
Marketable securities and the inventory have increased
as a percentage of total assets.
Long term investments increased. It is also a reason for
decrease in companys cash. Property, plant and
equipment have increased and a decrease is noticed in
intangible assets of the company.

Interpretation of Liabilities & Equity


Accounts Payable, accrued liabilities and secured loans
have been considerably increased. This shows that the
short term transactions are made on credit terms.
There is no significant change in long term debt
compared to previous year which means that the
company has not financed for long term period. Other
liabilities and deferred tax liability have been increased
slightly.
Accumulated profit, retained earnings have been
decreased and reserves have increased as compared to
previous year.

Horizontal Analysis Income


Statement:

Interpretation of Income Statement:


According to the horizontal analysis of Income
statement, there is an increase in Net Sales/Revenue of
the company i-e 26.76%, which is good. The cost of
sales are not exceeding the revenue that means that
the company has performed well in 2013.
Income from operations is very low as compared to the
previous year. This is due to the high administrative,
selling and operating expenses.
Net income has rose significantly higher than the
previous year which shows great financial performance
of the company.

Vertical Analysis (Balance


Sheet)

Vertical Analysis (Balance


Sheet)

Interpretation:
Cash and cash equivalents has been decreased as total
percentage of assets which is corresponding to an
increase in the investments of the company which have
significantly increased from 45% to 77%. This increase
in investments is also related to the increase in current
liabilities of the company which shows a slight increase
in Accounts payable and secured loans. Accumulated
profits have increased as a percentage of total assets.

Vertical Analysis Income Statement:

Interpretation of Income Statement:


According to the vertical analysis, company has shown
considerable growth as the percentage of its Revenue.
The expenses of the company are relatively lower and
cost of sales is also very less. This shows exceptional
performance of the company.
Finance costs have decreased which means the
companys interest expenses are very less and most of
the investments are not made on credit terms. This
shows a healthy performance of the company in year
2013.

Ratio Analysis:
Liquidity Ratios: It is used to determine a company's
ability to pay off its short-terms debts obligations.
Sr No.
1
2
3
4

Ratios
Current
Ratio
Quick
Ratio
Cash Ratio
Cash
Conversio
n Cycle

2013
1.57

2012
1.57

1.17

0.96

0.43
15.8

0.51
9.47

The higher the value, the safer it is for the company to pay its
obligations.
Current ratio = 1.57 which means it is quite capable of paying its
obligations easily.
Quick ratio = 1.17 which indicates that the business can meet its
current financial obligations with the available quick funds on hand.
Cash Ratio = 0.45
It measures the ability of a business to repay its current liabilities by
only using its cash and cash equivalents and nothing else. We have our
cash ratio of 0.45 which is good becausebusinesses usually do not plan
to keep their cash and cash equivalent at level with their current
liabilities because they can use a portion of idle cash to generate profits.
Cash Conversion Cycle = 15.8 days
It shows how long cash is tied up in inventory before the inventory is
sold and cash is collected from customers. It takes 15.8 days from
paying for companys inventory to receive the cash from its sale.

Activity Ratio:

Ratios that measure a firm's ability to


convert different accounts within its balance sheets into cash
or sales.
Sr No.
1

Ratios
Inventory Turnover

Days of Inventory on 14.4


hand
Receivable Turnover 5.1

25.2

70.6

52.17

5.2
69.2

5.3
67.9

5.3

3.1

Days of Sales
outstanding
Payables Turnover
Number of days of
Payables
Working Capital
Turnover
Fixed Asset Turnover

0.43

0.41

Total Asset Turnover

0.30

0.26

3
4
5
6
7

2013
25

2012
14.3

6.9

Inventory Turnover = 25 shows the times a company's


inventory is sold and replaced over a period.
Days of Inventory on Hand = 14.4 days an inventory
remains on hand which is showing companys
remarkable performance.
Receivable Turnover = 5.1 shows the times the
company receives its cash from the sales over a period.
Days of Sales Outstanding = 70.6 days that a company
takes to collect revenue after a sale has been made.
Payable turnover = 5.2, It is a short-term liquidity
measure used to quantify the rate at which a company
pays off its suppliers. The company takes 5.2 times in a
period to pay off its suppliers.
No. of Days of Payables = 69.2 days in a period are
required by the company to pay off its suppliers.

Working Capital Turnover = 5.3 times, shows how well a


company is utilizing its working capitalto support a
given level of sales. The value of 5.3 is good enough for
the company showing that management is being
extremely efficient in using a firm's short-term assets
and liabilities to support sales growth.
Fixed Asset Turnover = 0.43 tells how successfully the
company is using its assets to generate revenue. This
ratio has improved as compared to last year but still it is
significantly lower which tells that the company is not
using its assets optimally.
Total Asset Turnover = 0.30 shows a lower turnover
which suggests problems with excess production
capacity, poor inventory management, or tax collection
methods.

Solvency Ratio:

is used to measure an enterprises ability to meet its


debt and other obligations. The solvency ratio indicates whether a companys
cash flow is sufficient to meet its short-term and long-term liabilities.

Sr No.

Ratios

2013

2012

Debt to Asset
Ratio
Debt to Capital
Ratio
Debt to Equity
Ratio
Financial
Leverage Ratio

0.21

0.21

0.21

0.21

0.27

0.32

1.37

1.5

2
3
4

Debt to Asset Ratio = 0.21 defines the total amount of


debt relative to assets. The higher the ratio, the higher
the degree of leverage, and consequently, financial
risk.0.21 shows lower financial risk of the company.
Debt to Capital Ratio = 0.21 shows whether company
finances it operations through debt or equity. The value
0.21 is very lower which means the company uses very
low debt to finance its operations which is good for the
company.
Debt to Equity Ratio = 0.27 is a low value which shows
that the shareholders'equitycan easily fulfill a
company's obligations to creditors in the event of
aliquidation. Lower the better.

Coverage Ratio:

A measure of a company's
ability to meet its financial obligations.

Sr No.

Ratios

2013

2012

Interest
Coverage

1.18

1.91

Fixed
Charge
Coverage

1.17

1.91

Interest Coverage = 1.18 shows how well a company


can meet its interest-payment obligations. A ratio under
1 means that the company is having problems
generating enough cash flow to pay its interest
expenses.
This ratio has decreased as compared to last year
because of reduced interest expenses in current year.
Fixed Charge Coverage = 1.17 times indicates a firm's
ability to satisfy fixed financing expenses, such as
interest and leases. The greater the number of times
the company can pay its charges the better it is for the
firm.

Profitability Ratio: It is used to assess a business's ability


to generate earnings as compared to its expenses and other
relevant costs incurred during a specific period of time.

Sr No.

Ratios

Gross Profit 0.13


Margin
Operating
0.07
Profit Margin

0.13

Pretax
Margin
Net Profit
Margin

0.15

0.20

0.10

(0.21)

3
4

2013

2012

0.09

Gross Profit Margin = 13% shows firm's financial health by revealing


the proportion of money left over from revenues after accounting for
the cost of goods sold.
Gross profit margin of 13% serves as the source for paying additional
expenses and future savings.
Operating Profit Margin = 7% of total revenues is made up by
operating income. This ratio demonstrates how much revenues are
left over after all the variable or operating costs have been paid. The
higher the ratio, the better it is for the company. Here, the ratio is
relatively lower as compared to previous year which means that
company is earning very less on its sales.
Pretax Margin = 15% shows company's earnings before tax as a
percentage of total sales or revenues. The higher the pre-tax profit
margin, the more profitable the company.
Net Profit Margin = 10% earned by the company is translated into
profits. The higher the margin is, the more effective the company is in
converting revenue into actual profit.

Return on Investments:

A performance measure used


to evaluate the efficiency of an investment or to compare the
efficiency of a number of different investments.

Sr No.

Ratios

2013

2012

Operating
ROA

0.02

0.023

ROA

0.031

(0.05)

ROE

0.042

(0.082)

Operating ROA = 2%
Operating ROA focuses only on those assets which are used to
generate revenue. The value of operating ROA in this company
shows that only 2% of revenues are generated through assets.
ROA = 3.1%
ROA gives an idea as to how efficient management is at using its
assets to generate earnings. This lower percentage is showing that
this company is asset insensitive which means that it needs
expensive plant and equipment to generate its income, as a result
operating ROA will be less. ROA has increased in 2013 as compared
to 2012 which is good.
ROE = 0.042
ROE is an indicator of company's profitability by measuring how
much profit the company generates with the money invested by
common stock owners. It has improved from the last year.

Critical Analysis & Conclusion:


Packages Limited is an old player of the Market and is maintaining its
competitive position since its establishment. However, as per given
financial data of last two years companys profits are showing
somewhat increasing trends.
Companys assets have seen considerable improvements on its
receivables and inventory turnovers. On the other hand, companys
profitability has also seen slight increase as compared to the previous
year though companys assets are not being used effectively to
generate enough profits.
Liquidity of the company is showing positive position. As per given
Data company is capable enough to pay its short obligations without
any difficulty and can run its asset conversion cycle without any
hurdle.

Critical Analysis & Conclusion:


Debt Equity position is satisfactory. No increase in debts
is observed in both years. Financial costs and interest
expenses have considerably decreased for the company.
Overall trends in the company show quite satisfactory
financial position as compared to the previous year.
It needs to focus on its optimum fixed asset utilization
which would ultimately lead to increased profitability
and would create attraction for the investors and
stakeholders.