2014

FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Group Members:
1.
Azam Aliani (2893)
2.
Namraah Khalid (3096)
3.
Afsheen S. Baig (1036)
Report Submitted to
Sir IQBAL NIYANI
Annual Report 2014
UNILEVER PAKISTAN
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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Acknowledgement
Abstract
Introduction
Brands
History
Vision Of unilever
What is ratio Analysis
Director’s Review
Performance Indicator
Balance sheet
Income statement
Cashflow statement
Ratio Anaylsis
Conclusion
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
This report is the result of the hard work of all our group members. First of all we would like to thank the ALMIGHTY ALLAH on the successful completion of this report. We would also like to thank our course instructor Mr. Iqbal Nayani for helping us understand the depths of Finance and it was only because of his support, help and guidance throughout the semester that we were successfully able to complete this project report. It was because of this report that we were able to do our own analysis of a company’s financial statements, which required a great deal of thinking and brainstorming. This whole project has been an excellent learning experience for us all as it helped us put our knowledge about business finance to practical implementation.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
A financial statement is a formal record of the financial activities of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand. They typically include basic financial Statements that include the Balance Sheet or Statement of Financial Position, Income Statement or Profit and Loss Account and Cash Flow Statement. Financial statements provide the overview of the financial position of the company to the company’s stakeholders and the management; however the company’s true financial position cannot be determined unless the company’s financial statements are analyzed. Analysis of these Financial Statements helps us find out about the liquidity position of the company, the company’s long term solvency, the company’s profitability and its financial viability. Ratio analysis and interpretation of financial statements help in determining the liquidity position, long term solvency, financial viability and profitability of a firm and shows overall whether the company has improved or deteriorated in the past few years. In this report we have done our best to analyze the financial statements of Unilever Pakistan Limited.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Unilever Pakistan (70.4% Unilever equity) is the largest FMCG company in Pakistan, as well as one of the largest multinationals operating in the country..The company had a turnover of
Rs. 23.3 bn (Euro 309 Mn) in 2007, and enjoys a leading position in most of its core Home and
Personal Care and Foods categories, e.g. Personal Wash, Personal Care, Laundry, Beverages
(Tea) and Ice Cream.
Since the time Unilever Pakistan began its operations in 1948, the Company has been closely connected to the Pakistani people and its brands have been an integral feature in their daily lives. In fact, the nature of our business enables our brands to be the pulse and heartbeat of the 164 million people in Pakistan.
This is a huge commitment, which makes them responsible and accountable to all our stakeholders and society as a whole and strengthens our resolve to:
 Make a positive difference to the lives of low income consumers
 Create new opportunities for growth
 Improve the overall quality of life in Pakistan, by promoting education, nutrition, health and hygiene.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Unilever makes and sells products under more than 400 brand names worldwide. Two billion people use them on any given day. Here is a selection of our top brands, available in many countries, along with the stories behind them.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for
Sunlight Soap – his revolutionary new product that helped popularize cleanliness and hygiene in Victorian England. It was 'to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal attractiveness, that life may be more enjoyable and rewarding for the people who use their products'.
This was long before the phrase 'Corporate Mission' had been invented, but these ideas have stayed at the heart of their business. Even if their language - and the notion of only women doing housework – has become outdated.
In a history that now crosses three centuries, Unilever's success has been influenced by the major events of the day – economic boom, depression, world wars, changing consumer lifestyles and advances in technology. And throughout They've created products that help people get more out of life – cutting the time spent on household chores, improving nutrition, enabling people to enjoy food and take care of their homes, their clothes and themselves.
In the late 19th century the businesses that would later become Unilever were among the most philanthropic of their time. They set up projects to improve the lot of their workers and created products with a positive social impact, making hygiene and personal care commonplace and improving nutrition through adding vitamins to foods that were already daily staples.
Today, Unilever still believes that success means acting with 'the highest standards of corporate behavior towards their employees, consumers and the societies and world in which they live'. Over the years they've launched or participated in an ever-growing range of initiatives to source sustainable supplies of raw materials, protect environments, support local communities and much more.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Through this timeline you'll see how their brand portfolio has evolved. At the beginning of the 21st century, their Path to Growth strategy focused us on global high-potential brands and their Vitality mission is taking us into a new phase of development.
19 th Century: Although Unilever wasn't formed until 1930, the companies that joined forces to create the business they know today they’re already well-established before the start of the 20th century.
1900s : Unilever's founding companies produced products made of oils and fats, principally soap and margarine. At the beginning of the 20th century their expansion nearly outstrips the supply of raw materials.
1910s : Tough economic conditions and the First World War make trading difficult for everyone, so many businesses form trade associations to protect their shared interests.
1920s : With businesses expanding fast, companies set up negotiations intending to stop others producing the same types of products. But instead they agree to merge - and so
Unilever is created.
1930s : Unilever's first decade is no easy ride: it starts with the Great Depression and ends with the Second World War. But while the business rationalises operations, it also continues to diversify.
1940s : Unilever's operations around the world begin to fragment, but the business continues to expand further into the foods market and increase investment in research and development.
1950s : Business booms as new technology and the European Economic Community lead to rising standards of living, while new markets open up in emerging economies around the globe.
1960s : As the world economy expands so does Unilever and it sets about developing new products, entering new markets and running a highly ambitious acquisition program.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
1970s : Hard economic conditions and high inflation make the '70s a tough time for everyone, but things are particularly difficult in the Fast Moving Consumer Goods
(FMCG) sector as the big retailers start to flex their muscles.
1980s : Unilever is now one of the world's biggest companies, but takes the decision to focus its portfolio, and rationalize its businesses to focus on core products and brands.
1990s : The business expands into Central and Eastern Europe and further sharpens its focus on few product categories, leading to the sale or withdrawal of two-thirds of its brands.
21 st Century : The decade starts with the launch of Path to Growth, a five-year strategic plan, and in 2004 further sharpens its focus on the needs of 21st century-consumers with its Vitality mission.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
“We help people around the world meet everyday needs for nutrition; hygiene and wellbeing, with brands that help people look good, feel good and get more out of life.”
Unilever is committed to supporting sustainability and providing our consumers around the world with the products they need to look good, feel good and get more out of life.
Unilever is committed to supporting sustainability and providing our consumers around the world with the products they need to look good, feel good and get more out of life.
Five key priorities provide the foundation for our brand’s campaigns. Read some examples of how different brands are upholding these principles.
 Our oral care brands Signal and Close-Up encourage children to brush their teeth day and night for optimal dental health. We also partner the FDI World Dental Federation, supporting oral health programmes around the world
 Brands such as Omo and Persil have helped parents believe the unconventional philosophy that Dirt is Good. Children learn through play, and mud spatters and grass stains can easily be removed with effective laundry products
 Unilever also partners the World Food Programme and launched the Together for Child
Vitality initiative to bring our expertise in nutrition to children in some of the world’s poorest countries.

A healthier future
Our Flora/Becel margarine brands have been scientifically proven to help reduce
 cholesterol levels, and a new Flora/Becel Heart Age tool allows consumers to work out whether their heart might be old beyond its years
Vaseline has launched the Vaseline Skin Care Foundation, providing research into skin conditions and support for people affected by them
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Ratio analysis involves the calculation and comparison of ratios which are derived from the information given in the company's financial statements. The historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and its investment attractiveness and whether the company has improved or deteriorated in the past few years. Financial ratio analysis groups the ratios into categories that tell us about the different sides of a company's financial state. Some of those categories are described below:
1.
Liquidity Ratios:
Liquidity ratios tell us about the company’s short term debt paying ability, or the company’s short term financial situation or the company’s short term solvency.
2.
Efficiency/Turnove r Ratios:
Efficiency Ratios are used in order to determine that how quickly and efficiently certain assets are converted in to cash.
3.
Leverage Ratios:
The Leverage Ratios measure the long term solvency and ability of the company to pay to its long term creditors.
4.
Profitability Ratios:
Profitability ratios measure the operating efficiency and ability of a company to pay an adequate return to its Shareholders/Stockholders. Management and Shareholders are interested in profitability ratios, profitability ratios can be computed on the basis of sales or investment.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
The directors present the 2014 Annual Report together with audited financial statements of the Company for the year ended December 31, 2014.Sales grew by 8.5% in a challenging economic and operational environment, with significant commodity deflation headwind. Growth was broad-based and volume led. In the case of Tea, commodity deflation and the resulting price reductions offset the strong volume growth. The improvement in gross margin through higher volume, cost efficiencies and better mix, was offset by restructuring charges. The business continued to invest strategically behind key brands and increased spend by177 bps to 12.1% of Sales. Profit after tax grew by
3%.
Sales: sales increased by 8.54% to 65705 Millions
G.
P: gross profit increase by 8.19% to 26424 Millions
EBIT: Earning before profit is increased by 1.28 % to 9019 millions
Net Earning : is increased by 3.02% to 6302 Millions
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
UNILEVER PAKISTAN LIMITED
CASH FLOW STATEMENT
As at December 31, 2014
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Cont..
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Current Ratio:
Current Ratio = Current Assets/Current Liabilities
Current Ratio for 2014 = 17,021,156 / 23,874,046 = 0.71 times or. 0.71:1.00
Current Ratio for 2013 = 12,086,992 / 18,033,609 = 0.67 times or. 0.67:1.00

In 2013, to pay off Current liabilities of Rs. 1 the company has Current Assets of
Rs. 0.71, which means that the company is not capable of paying its current liabilities, when they fall due.

In 2014, to pay off Current liabilities of Rs. 1 the company has Current Assets of
Rs. 0.67 which means that the company is not capable of paying its current liabilities when they fall due.
 The company’s current ratio was down in 2013 and it is still not capable to pay off its current liabilities when they fall due. Although the company’s current ratio got better in 2014 but in both years the company is not in a good position to pay off its current liabilities.
Current Ratio
Times
2014
0.71
2013
0.67
2012
0.82
2011
0.79
2010
0.83
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Acid test Ratio = Quick Assets/Current Liabilities
Acid Test Ratio for 2014 = 12,008,898/ 23,874,046 = 0.50 times or. 0.50:1.00
Acid Test Ratio for 2013 = 5,410,082/ 18,033,609 = 0.30 times or. 0.30:1.00
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
In 2014, to pay off Current Liabilities of Rs. 1, the company has Quick Assets of
Rs. 0.50, which means that the company is not capable of paying its current liabilities with its Quick Assets, when they fall due.

In 2013, to pay off Current Liabilities of Rs. 1, the company has Quick Assets of
Rs. 0.30 which means that the company is not capable of paying its current liabilities with its Quick Assets when they fall due.
 The company’s Quick ratio improved in 2014 compared to 2013, but it is still not capable to pay off its current liabilities when they fall due. In both years the company is not in a good position to pay off its current liabilities.
Quick Ratio
Times
2014 2013 2012 2011 2010
0.50 0.30 0.30 0.30 0.40

FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
:
Gross Profit Margin = 100 x Gross Profit/Net Sales
Gross Profit Margin for 2014 = 100 x 26,424,000/65,705,000 = 40%
Gross Profit Margin for 2013 = 100 x 24,422,000/60,535,000 = 40%
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
In 2014, if the company makes net sales of Rs. 100, then the company will earn a
Gross Profit of Rs 40.

In 2013, if the company makes net sales of Rs. 100, then the company will earn a
Gross Profit of Rs. 40.

In terms of gross profitability the company is in same position in 2014, as it is earning same Gross Profit.
G.P Margin
%
2014 2013 2012 2011 2010
40% 40% 36% 35% 33%

FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Net Profit Margin = 100 x Net Income After tax/Net Sales
Net Profit Margin for 2014 = 100 x 6,302,000/65,705,000= 10%
Net Profit Margin for 2013 = 100 x 6,117,000/60,535,000 = 10%
:

In 2014, if the company makes net sales of Rs. 100, then the company will earn a
Net Profit of Rs. 10.

In 2013, if the company makes net sales of Rs. 100, then the company will earn a
Net Profit of Rs. 10.

In terms of net profitability the company is in same position in 2014, as it earning same Net Profit.
N.P Margin
%
2014 2013 2012 2011 2010
10% 10% 9% 8% 7%
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
EBIT Margin = 100 x EBIT/Net Sales
EBIT Margin for 2014 = 100 x 9949065/65,705,000 = 15%
EBIT Margin for 2013 = 100 x 9315571/60,535,000 = 16%
 In 2014, if the company makes net sales of Rs. 100, then the company’s earnings before interest and tax will be Rs. 15.

In 2013, if the company makes net sales of Rs. 100, company’s earnings before interest and tax will be Rs. 16.

The company was in a slightly better position in 2013, as its earnings before interest and tax are higher in 2013.
EBIT
%
2014 2013 2012 2011 2010
15% 16% 15% 13% 12%
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Return on Equity = 100 x Net income after tax/Common Shareholder’s Equity
Return on Equity for 2014 = 100 x 6,302,000/3,206,000 = 196%
Return on Equity for 2013 = 100 x 6,117,000/3,058,000 = 200%
 In 2014, if the company’s shareholder’s makes an investment of Rs.100 than the company’s earnings after income tax will be of Rs.196.
 In 2013, if the company’s shareholder’s makes an investment of Rs.100 than the company’s earnings after income tax will be of Rs.200.

The company was in a better in 2013 because it was getting some good return on its investment compared to only as small return in 2014.
Return On Equity
%
2014 2013 2012 2011 2010
196% 200% 104% 101% 92%
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Equity Ratio = Shareholder’s Equity/Total Assets
Equity Ratio for 2014 = 3,206,000/27,856,186 = 0.12 times or 12%
Equity Ratio for 2013 = 3,058,000/22,003,808 = 0.14 times or 14%

In 2014, the Equity Ratio of 0.12 times indicates that the Shareholders or the
Stockholders have a holding of 12% in the business.

In 2013, the Equity Ratio of 0.14 times indicates that the creditors have a holding of 14% in the business.

The company was better in 2013 as the Shareholders had less holding or claims in the business.
Inventory Turnover = Cost of Goods Sold/Average Inventory
Inventory Turnover for 2014 = 39,281,000/4,673,783 = 8 times
Inventory Turnover for 2013 = 36,114,000/4335309 =8.5 times
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

In 2014, the inventory will turnover is 8 times in a year.

In 2013, the inventory will turnover was 8 times in a year.

The company is better in 2014 as compared to 2013 because the inventory turns over more times in 2014.
Inventory Period for 2014 = 360/8 = 46 days
Inventory Period for 2013 = 360/78.5 = 43 days

In 2014, after every 46 days the inventory will turnover.

In 2013, after every 43 days the inventory will turnover

The company is slightly better in 2014 as it takes fewer days for the inventory to turnover or fewer days are required to sell the inventory in 2014.
Inventory Turnover 2014 2013 2012 2011 2010
Days 46 43 59 49 46
Debtor turnover= Credit Sales or Net Sales/Average Accounts Receivables
Debtor Turnover for 2014 = 65,704,906/972,405 = 68 times
Debtor Turnover for 2013 = 60,535,320/855,771 =71 times

In 2014, 68 times receivable is collected from the customers or debtors in a year.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
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In 2013, 71 times receivable was collected from the customers or debtors in a year.

The company is slightly better in 2013 as compared to 2014 because receivable was collected more times in 2013.
Days Sales Outstanding for 2014 = 360/68 =5 days
Days Sales Outstanding for 2013 = 360/71 =5 days

In 2014, after every 5 days the receivable is collected from the customers or debtors.

In 2013, after every 5 days the receivable is collected from the customers or debtors.
 The company’s DSO same in 2014. As compare to 2013
Debtor Turnover 2014 2013 2012 2011 2010
Days 5 5 6 5 4
Creditors turnover= Credit purchases or Net purchases/Average Accounts payable
Creditors Turnover for 2014 = 39,364,604/23,286,354 =1.7 times
Creditors Turnover for 2013 = 35,348,870/17,079,170 =2.1 times

In 2014, 1.7 times receivable is collected from the customers or debtors in a year.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

In 2013, 2.1 times receivable was collected from the customers or debtors in a year.

The company was slightly better in 2013 as compared to 2014 because receivable is collected more times in 2013.
Days Sales Outstanding for 2014 = 360/1.7 = 212 days
Days Sales Outstanding for 2013 = 360/2.1 = 172 days
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In 2014, after every 212 days the receivable is collected from the customers or debtors.

In 2013, after every 172 days the receivable is collected from the customers or debtors.

The company is better in 2014 as it takes fewer days to collect receivables from the debtors or customers.
Inventory turnover 2014 2013 2012 2011 2010
Days 212 171 108 98 75
Cash Cycle = Inventory Turnover (days) + Accounts Receivable Turnover (days)-
Account payable (days)
Cash Cycle for 2014 = 46+5-212=(161) days
Cash Cycle for 2013 = 43+5-171= (123) days
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

In 2014, the Cash Cycle will complete in -161 days.

In 2013, the Cash cycle will complete in -129 days

The company is slightly better in 2014 as it takes fewer days for the Cash Cycle to complete.
CCC
Days
2014 2013 2012 2011 2010
(161) (123) 43 44 34
Total Assets Turnover = Net Sales/ Average Total Assets
Total Asset Turnover for 2014 = 65704906/27856186= 236 Times
Total Asset Turnover for 2013 = 60535320/22003808 = 276 Times
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
In 2014, the total assets turnover is 236 times in one year

In 2012, the total assets turnover was 276 times in one year

The company was better in 2013 as the total assets turned over more times in that year than they did in 2014.
Asset Turnover
Times
2014 2013 2012 2011 2010
236 278 324 327 331

FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Debt Ratio = Total Liabilities/Total Assets
Debt Ratio for 2014 = 24,649,648/27,856,186 =0.88 Times
Debt Ratio for 2013 = 18945838/22003808 =0.86 Times

In 2014, the Debt Ratio of 0.88 times indicates that the creditors have a holding of
88% in the business.

In 2013, the Debt Ratio of 0.86 times indicates that the creditors have a holding of
86% in the business.

The company is slightly better in 2014 as the Debtors have less holding in the business. The holding of Debtor is almost same in both years.
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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
According to the above analysis of Unilever Pakistan Limited, the company is in a good position as far as its profitability is concerned, over the past years the company has seen a same in its Gross Profit, Net Profit, with the company’s Margins in the current year being the highest.
However Unilever Pakistan Limited is in a good position. The company’s efficiency has seen some improvement in the turnover for the inventory and decrease in the account receivable turnover and it only takes a few days collect the money from customers, however given the company’s current liquidity position the company is not still converting the assets into cash quick enough to pay off its current liabilities. This is good for a company that they are working on creditors money. They return their money in 213 days in 2014.And unilever pakistan’s EPS is Rs.474 in 2014.
Conclusively, Unilever Pakistan Limited is operating effectively and efficiently on overall basis and generating enough profit to keep its operations running in the most effective way possible and keeping its standard of being one of the largest and most stable multinational organizations.
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