World Journal of Applied and Life Sciences
www.newscienceseries.com
Vol. 2, No. 3, June 2015, 13-25
ISSN: 2391-7504
Healthcare Strategic in Financial Analysis on PadiberaNasional
BHD Company (BERNAS)
Zahra Jalali*, Hossein Rezaie1, Abdorahim jalali2, Arezo Karimi3
Abstract
Abstract
ne of the companies listed on the Main Market of Bursa Malaysia is
Padiberas NasionalBerhad (BERNAS).Bernas and its group of
companies is a part of nation's domestic paddy and rice industry which
produces paddy as well as the importation, storing, distribution and marketing
of rice in Malaysia. Bernas company is now involved in seeding and farming
activities, international rice industry and rice complementary business to
increase its entire industry supply chain. With staff strength of 1,700 people,
BERNAS continues to fulfill its obligations under a Privatization Agreement
signed with the Government in 1996. This study tables financial statements of
the company for three consecutive years that the resources of the Internet have
been extracted World rice supply surplus to aid Bernas’cost. Global rice prices
remain weak as global supplies continue to exceed demand. This will provide
Bernas with more opportunities to procure attractively priced rice which will
enhance its profit margin in the near future . Furthermore, rice stockpile is at
maximum and has to be pared down soon, thus compounding the already
oversupply market.
Keywords: NasionalBerhad ,Bernas’cost, Bursa Malaysia, Food Industry
*
Master of Management MBA of Isfahan University, Management Development Human Resources, in Isfahan
University of Medical Sciences, Isfahan, Iran, Zahra_0931@yahoo.com
1
Ph.D. Assistant Professor ,Department of Management, School of Business Administration &
Economics, University of Isfahan, Isfahan, IRAN, Ho.Rezaie@gmail.com
2
Master of Accounting , Islamic Azad University of shahrekhord , Central National Bank, Isfahan, Iran.,
Rezajalali67@yahoo.com
3
Master of Accounting , Islamic Azad University of shahrekhord , Shahrekhord, Iran,
Akarimi661@gmail.com
Jalali, Rezaie, jalali and Karimi
Introduction
One of the companies listed on the Main Market of Bursa Malaysia is Padiberas NasionalBerhad
(BERNAS).Bernas and its group of companies is a part of nation's domestic paddy and rice industry
which produces paddy as well as the importation, storing, distribution and marketing of rice in
Malaysia. Bernas company is now involved in seeding and farming activities,international rice
industry and rice complementary business to increase its entire industry supply chain.With staff
strength of 1,700 people, BERNAS continues to fulfill its obligations under a Privatization Agreement
signed with the Government in 1996. These obligations include maintenance of the nation's rice
stockpile, acting as the buyer of last resort for paddy farmers, managing the Bumiputera Rice Millers
Scheme and the distribution of Paddy Price Subsidies to farmers on behalf of the Government. Also at
BERNAS, we will continue to strive towards fulfilling our responsibilities to our shareholders, the
industry, consumers and the nation as a whole.One of the most important an investment holding
company engaged in export, import and purchase of rice, paddy and other grains besides procurement,
collection and processing is Padiberas NasionalBerhad (Padiberas). It has a privatization agreement
with the Malaysian Government, which will ensure maintenance of the enough supply of rice across
the country at reasonable and subsidized prices. Pursuant to this agreement, the company also
maintains the rice stockpile, manages Bumiputra Rice Millers Scheme and also serves as the purchaser
of last resort at the Guaranteed Minimum Price of paddy. On behalf of Malaysian Government, it also
distributes paddy price subsidies to farmers across the country. Padiberas is headquartered in Petaling
Jaya, Malaysia.
Corporate Values
Challenges:

Improving performances

Renewing their understanding of their changing business

Conduct:
Integrity

Ethics

Probity

Corporate governance/ transparency

Commitment:
Value for customers

Leadership for community and environment

Teamwork

Shared purpose with regulators

Value for shareholders

Materials and method
This study was a retrospective observational study done on May 2013 about the PadiberaNasional
BHD Company This study tables financial statements of the company for three consecutive years that
the resources have been extracted of the Internet.
14
15
World Journal of Applied and Life Sciences
Vol. 2, No. 3, June 2015
Finding
Food Industry
Malaysia’s food industry is as diverse as the multi-cultures of Malaysia, with a wide range of
processed food with Asian tastes. The food processing industry is predominantly Malaysian-owned. It
is estimated that the present global retail sales in food products are worth around US$3.5 trillion, and
are expected to grow at an annual rate of 4.8 per cent to US$6.4 trillion by 2020. Rice is a strategically
important industry in Malaysia. Rice cultivation in Malaysia was closely associated with the rural
population and traditional farmers. But in the last 30 years, rice was transformed to a commercial
crop.It is possible that rice was first cultivated in China at least 8,000 years ago, reaching Southeast
Asia about four millenniums after this. Former beliefs that rice was introduced to Malaysia at a much
later date have been revised following the highly important discovery in Sarawak of rice grains dating
to around 4,500 years ago. Yet, the oldest rice found in Peninsular Malaysia is from 200
BCE.Malaysia has launched a RM300,000 (around $96,000) test project aimed to increase domestic
rice production and cut rice imports, in 8 to 9 years.Padiberas NasionalBerhad (BERNAS) will lead
the implementation of the project, Malaysian government’s partner in the domestic paddy and rice
industry. The project will provide drainage systems, technology and infrastructure on a big scale and
will cover both modern and traditional varieties of rice cultivation.Rice farmers say that the project has
enabled them to reduce the time spent in the fields and is attracting the country’s youth to return to
rice farming. A rice farmer says, “I hope that it brings modernization to the village and raises the
quality of life here. We hope that it will open doors to more job opportunities. Instead of everyone
moving to the city to work, we hope that some of them will stay.”The CEO of Bernas claims that the
project will help farmers increase their earning as well as farmers can now expect around 5 harvests
every two years, instead of the one in a year that is the norm now. He says, “The modern variety of
rice we use in this project requires between 100 and 120 days maturing, while the traditional varieties
planted by the farmers can take up to six months. With the introduction of new farming technology
and good agricultural practices in soil and water management, crop management and pest and disease
management, we expect a five-fold increase in yield.”Within five years, we expect to be producing up
to 8 tons of rice per hectare [from the current 3.8 tons per hectare] a year using the double-cropping
method,” he adds.Malaysia’s rice production has increased in the last five years, but has to import
almost 40% of the requirement as consumption needs have increased more than production. Bernas
hopes the project will eventually help the country increase rice output by at least two times the present
output. At present, the project covers around 77 hectares of land, but in about 9 years, around 5,100
hectares are targeted to be covered. Malaysia currently farms about 675,000 hectares of rice land each
year.
Competitors
Malayan Flour Mills Berhad
Company Background
MFM is a pioneer in the flour milling industry in Malaysia. The first Prime Minister of Malaysia, the
late Tunku Abdul Rahman, officiated the opening of the RM40 million modern flour mill at Lumut,
Perak on 15 October 1966. During the speech by the former Minister of Commerce and Industry, the
late Dr. Lim SweeAun, the mill was referred to as the ‘pride of the nation’.
KuantanFlour Mills SdnBhd
Company Background
The principal activities of KFM are flour milling and trading in its related products. The subsidiaries
are ceased operations and dormant. KFM is engaged in the manufacturing and trading of flour and its
related products.
3 Statement of Corporate Governance
Jalali, Rezaie, jalali and Karimi
The Board of Directors of Padiberas NasionalBerhad (“the Board”) remains committed in upholding
and continuously improving good corporate governance in conducting the Group affairs with full
transparency, integrity and professionalism towards enhancing business prosperity and corporate
accountability with the ultimate objective to safeguard the interests of all stakeholders.
3.1 Board of Directors
Board Composition:
The Board retains effective control of the Company. This includes determining the Group’s overall
strategic plans, performing periodic reviews of business and financial performance, adopting practical
risk management and internal controls. The Board currently consists of seven (7) members, one (1)
Executive Director and six (6) Non-Executive Directors with three (3) of them (including the
Chairman) being Independent Directors.Board Meetings Committees: The Board is assisted by four
(4) Board Committees, which operate within clearly defined terms of reference.



3.2 Directors Remuneration
The Level and Make-up of Remuneration:
The Board as a whole reviews the level of remuneration of directors to ensure that it is sufficient to
attract and retain the directors needed to lead the Company. The level of remuneration reflects the
experience and level of responsibilities undertaken by directors. Procedure: The Board through the
Nomination and Remuneration Committee annually reviews the performance of executive directors as
a prelude to determining annual remuneration, bonus and other benefits.
3.3 Accountability & Audit
Financial Reporting
Directors’ Responsibility Statement in Respect of the Preparation of the Audited Financial Statements
Relationship with the External Auditors
4 SWOT Analysis
Strength:
Monopoly rice market in Malaysia, more than 60 %. No foreign operation.
Weakness:
Rice is a controlled item, so the product price cannot be change accordingly and the price control
cannot be obtain fully cornered stock. No foreign fund exposure, so the upside is limited, but to some
this is the strength.
Opportunity:
Though rice is a controlled item, population will keep on increasing. Malaysia rice consumption is not
enough, we are still importing from Thailand. BERNAS for sure will continue to expand. Also with
greater population, greater rice consumption = profit figure increase for BERNAS.
Threat:
Malaysians will forgo rice as the main source of carbo Political interference as government may use
price control on rice to garner popular support.
5 Financial AnalysisOver Three (3) Years
In this section, the horizontal and ratio analysis will use for the financial statement analyze. Actually,
the tool which we use for the financial statement data over period of time is horizontal analysis that
sometime named time series comparison. Also the ratio analysis will use to analysis the data. In this
analysis the five major metrics will used for performance analysis of the Bernas and its rivals.
5.1
Liquidity Ratio
Actually, we will use the liquidity ratio when we want to determine the ability of the company to pay
of its short term debt obligations. When the company has enough cash to pay off its short term debt the
value of ratio will be high which is better. The result of current ratio and acid test ratio can reflected to
the liquidity ratio, so it is better if the ratio value is higher. It means, we can decide that if the company
may not be able to pay its obligations at time requires then for both current and acid test ratio should
be less than 1. Dividing the company's most liquid assets that would be cash and cash equivalent with
the total liabilities is one of the ways to calculate the liquidity ratio. The main reason is because when
the creditor request for the payment then the cash and equivalent can be sold to cover the short term
16
17
World Journal of Applied and Life Sciences
Vol. 2, No. 3, June 2015
debt. Also, for determine the ability of a company to sustain its operation as going concern; we can use
the liquidity ratio.
Liquidity Ratio Table
Liquidity Ratio
Ratio
2009
2010
2011
Current Ratio
1.5610
1.8355
2.6157
Acid Test Ratio
0.9983
1.6473
1.6300
Normally for healthy business, current ratios are generally between 1.5 and 3 and a company generally
indicates good short-term financial strength if ratio is in this range. If current liabilities exceed current
assets then the company may have problems meeting its short-term obligations. In the above diagram,
you can find the three (3) years increasing trending on the liquidity ratios for Bernas. However, the
best recommendation for the company is improve the acid test ratio which measures immediate
liquidity of the company complementing the current ratio.
5.2 Activity Ratio:
When we want to measure that how efficient a company use and controls its assets, we can use
efficiency ratio which isreflects how fast the company pays its suppliers and managed its inventories.
When a company wants to improve the company’s profitability should know the efficiency ratio.
Among the calculations that can determine efficiency ratio are turnover of receivables and turnover of
fixed asset. Total asset turnover is translated into the amount of sales generated for every
dollar’s worth of assets. The number of days the company takes to collect the money from their sales
activities named receivables day. Both inventory days and receivable are based on industry.
Efficiency Ratio Table
Efficiency Ratio
Ratio
2009
2010
2011
inventory turnover
5.13
14.48
3.89
Fixed Assets Turnover
3.02
3.00
2.97
Total Assets Turnover
1.51
1.28
1.26
Jalali, Rezaie, jalali and Karimi
Generally, a high inventory ratio means that the company is efficiently managing and selling its
inventory. The faster the inventory sells the fewer funds the company has tied up. Companies have to
be careful if they have a high inventory turnover as they are subject to stock outs. A high inventory
turnover ratio implies either strong sales or ineffective buying. A high inventory turnover ratio can
indicate better liquidity, but it can also indicate a shortage or inadequate inventory levels, which may
lead to a loss in business.
5.3
Debt Ratio:
Actually the debt ratio ranges from 0.00 to 1.00. Lower value of debt ratio is favorable and a higher
value indicates that higher portion of company's assets are claimed by its creditors which means higher
risk in operation since the business would find it difficult to obtain loans for new projects.
Debt Ratio
Ratio
2009
2010
2011
Debt Ratio
0.50
0.57
0.58
As the company debt ratio is 0.5 here, so it means that half of the company's assets are financed
through debts.
5.4
Profitability Ratio:
Profitability ratio is the ability of a company to generate earnings as compared to its expenses and
other cost within certain duration. It can be determined from profit margin, return on assets and return
on equity. The efficiency of management to generate earnings from its assets is return on assets (ROA)
which is also interchangeably known as return on investment..
Profitability Ratio Table
Profitability Ratio
Ratio
2009
2010
2011
Operating Profit Margin
8.00%
11.24%
8.31%
Gross Profit Margin
12.92%
18.57%
15.40%
Net Profit Margin
5.47%
8.03%
4.82%
Return on Assets
8.25%
10.28%
6.05%
Return on Equity
38.17%
48.66%
36.43%
5.4.1 Gross Profit Margin:
18
19
World Journal of Applied and Life Sciences
Vol. 2, No. 3, June 2015
The objective of maximization of gross profit margins can be significantly suffered by lower selling
price. So, low quality of products can came because of the lower selling price. The quality needs to be
focused and improved to regain the gross profit margins. The other uncontrollable reasons may be
severe competition and lack of demand. These situations call for innovation in terms of new products
and innovative selling techniques or better services.If a firm is selling more than one product and by
obvious reasons, all of them will have different selling prices and different margins. If the product
with lower margin is sold more, the overall gross profit margin would be affected.
5.4.2 Return on Asset (ROA):
A situation where a business has a negative return on assets can occur for many different reasons. One
very common reason is high capital expenses for the period that has to invest a lot in the business for
an acquisition or a new plant or equipment and so forth. Another reason could be that business
expenses go up dramatically for some reason; like trucking businesses when gas prices spike.
5.4.3 Return on Equity (ROE):
Return on equity measures a company’s profitability by revealing how much profit of a company
generates with the money shareholders have invested. It is important for comparing the profitability of
the company to the other firms in the same industry.
5.5 Market Ratio:
Earning per share (EPS) is an important variable to be used to determine share’s price and price-toearnings ratio.
Market Ratio
Market Ratio
Ratio
2009
EPS
36.00
2010
2011
35.00
Based on the above diagram and table, the earnings per share (EPS) of Bernas are getting worth from
2009 to 2011.
5.6 Comparative Analysis
BERNAS
KFM
MFLOUR
Liquidity Ratio
2009
2010
2011
2009
2010
2011
2009
2010
2011
Current Ratio
1.5610
1.8355
2.6157
1.5027
1.0592
0.8972
1.8104
1.6055
1.4459
Acid Test Ratio
0.9983
1.6473
1.6300
1.1504
0.7646
0.5058
1.0421
0.9365
0.8091
20
Jalali, Rezaie, jalali and Karimi
In these three companies, just BERNAS has increasing on the Acid ratio and two others have
decreasing in this ratio. It means BERNAS can handle the payment of its obligation when requires.
BERNAS
KFM
MFLOUR
Efficiency Ratio
2009
2010
2011
2009
2010
2011
2009
2010
2011
inventory turnover
5.1341
14.4750
3.8949
16.9842
14.2309
7.6603
0.7631
0.7323
0.6133
Fixed Assets Turnover
3.0164
3.0014
2.9709
4.3952
3.7739
2.9295
2.5984
3.0148
3.3477
Total Assets Turnover
1.5092
1.2807
1.2554
2.1024
1.8101
1.4319
1.5165
1.5519
1.6797
BERNAS
KFM
MFLOUR
Debt Ratio
2009
2010
2011
2009
2010
2011
2009
2010
2011
Debt Ratio
0.4997
0.5733
0.5775
0.5217
0.5204
0.5112
0.4164
0.4853
0.4983
21
World Journal of Applied and Life Sciences
Vol. 2, No. 3, June 2015
Debt to total assets of Bernasis higher compared to both KFM and MFLOUR. The increasing trend shows that this company
is on the good situation and company can achieve the maturing obligations. In addition, debt to asset with 0.5 rates indicates
that debt is an important key of source to capital for BERNAS group
BERNAS
KFM
MFLOUR
Profitability Ratio
2009
2010
2011
2009
2010
2011
2009
2010
Operating Profit Margin
8.00%
11.24%
8.31%
5.49%
5.58%
2.78%
7.64%
8.12%
Gross Profit Margin
12.92%
18.57%
15.40%
1.68%
2.59%
6.23%
15.83%
15.30%
Net Profit Margin
5.47%
8.03%
4.82%
4.22%
4.37%
1.84%
5.99%
6.36%
Return on Assets
8.25%
10.28%
6.05%
8.88%
7.91%
2.64%
9.08%
9.88%
Return on Equity
38.17%
48.66%
36.43%
11.05%
8.43%
2.61%
67.15%
93.20%
Compared to BERNAS, KFM and MFLOUR, MFLOUR has a better return on equity and return on
assets among the others.
6. Vertical Analysis
As we now, vertical analysis is a method of financial statement analysis that each entry for each of the
three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a
proportion of the total account. Two major advantages of vertical analysis are:
- The balance sheets of businesses of all sizes can easily be compared
201
1
5.4
5%
11.
54
%
4.7
8%
8.0
3%
85.
65
%
Jalali, Rezaie, jalali and Karimi
- It is easy to see relative annual changes within one business
In the other way, this means that every line item on an income statementis stated as a percentage of
gross sales, while every line item on a balance sheet is stated as a percentage of total assets.
The most common use of vertical analysis is within a financial statement for a single time period, so
that you can see the relative proportions of account balances. Vertical analysis is also useful for
timeline analysis, where you can see relative changes in accounts over time.
6.1 Income Statement
The most common use of vertical analysis in an income statement is to show the various expense line
items as a percentage of sales, though it can also be used to show the percentage of different revenue
line items that make up total sales.
6.2 Balance sheet
The central issue when creating a vertical analysis of a balance sheet is what to use as the denominator
in the percentage calculation.
7. Horizontal Analysis
7.1 Income Statement
7.2 Balance Sheet
8. Financial Performance, Summary &Analysis of Cash Flow
Revenue:According to above diagram revenue, there had been 11% growth through 2010 to 2011 ingroup, but in 2010 have had a slightly decline in both group, and company.
Profit:However, profit before tax for FYE 2011 decreased by 2.9% to RM238.73 million from
RM245.78 million in the previous year. This was attributed mainly to the higher cost of raw materials,
closure of the Group’s ‘Save More’ retail operations and increase in finance costs and operating
expenditure. Therefore, earnings per share declined to 35.0 sen from 37.7 sen recorded a year ago.
22
23
World Journal of Applied and Life Sciences
Vol. 2, No. 3, June 2015
According to cash flow with considering to horizontal cash flow, there are a significantly growth on
group’s investing through of 2010 to 2011, it means their trend to investing increased.In addition,
trend of generating cash of financing had a major increase in 2011, and it relate to sale of stocks.
However, at that year group had a significantly decrease because of effect of foreign rate change.
Among of these three years there is an increasing in inflows of cash at the end of each year.
(2012)
9. Summary of Material Risk Factors
Jalali, Rezaie, jalali and Karimi
i.
Increase in cost of food commodities
ii.
Risk of associated with market expensation outside of malaysia
iii.
Change of consumer preference and perception
iv.
Negative publicity
v.
Food contamination
vi.
Dependent on availability, cost and quality of raw materials for products
vii.
Successful imitation of products and concept by competitors
viii.
Infringement of trade marks
10. Policies
Description: execution of the Bernas agreement between the government of Malaysia and Padiberas
Nasional Berhad.
Value of the BERNAS Agreement
The BERNAS Agreement does not specify any value. (2012)
Financial Effects of the BERNAS Agreement
BERNAS’ involvement in Malaysian’s paddy and rice industry is pervasive and strategic which
extends throughout the rice supply chain i.e. seed production, paddy planting [via Program
RakanLadang, Entry Point Project 10 (EPP 10) under the National Key Economic Area (NKEA)],
paddy procurement, rice milling, rice importation and rice wholesaling. Therefore, the BERNAS
Agreement is expected to contribute positively to BERNAS’ future earnings.
The nature and extent of the interest of the interested directors and major shareholders.
None of the other Directors or Major Shareholders of BERNAS and/or other persons connected with
them has any interest, direct or indirect, in the BERNAS Agreement.
Statement by Directors
The Directors of the Company are of the opinion that the BERNAS Agreement is in the best interest of
BERNAS’ Shareholders.
Conclusion and Future Performance
World rice supply surplus to aid Bernas’cost. Global rice prices remain weak as global supplies
continue to exceed demand. This will provide Bernas with more opportunities to procure attractively
priced rice which will enhance its profit margin in the near future which has shown in the below table.
Furthermore, we understand that, rice stockpile is at maximum and has to be pared down soon, thus
compounding the already oversupply market
24
25
World Journal of Applied and Life Sciences
Vol. 2, No. 3, June 2015
11. References
"Annual Report." from http://www.bursamalaysia.com/market/listed-companies/companyannouncements/#/?category=IO(2009, 2010, 2011)..
"Fundamental Analysis for PADIBERAS NASIONAL BERHAD," (2012).
"Policies." from http://padiberas.listedcompany.com/newsroom/BERNAS180912.pdf., (2012)