accounting report - financial ratio analysis

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Taylor’s University | FNBE April 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis Foundation in Natural and Built Environments Basic Accounting [ACC 30205] Financial Ratio Analysis Carlsberg Brewery Malaysia Berhad Group Members: Pang Khai Shuen 0318423 Hor Weng Lim 0319441 Aaron Ngu Nguok Soon 0319396

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Page 1: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

Foundation in Natural and Built Environments

Basic Accounting [ACC 30205]

Financial Ratio Analysis

Carlsberg Brewery Malaysia Berhad

Group Members:

Pang Khai Shuen 0318423

Hor Weng Lim 0319441

Aaron Ngu Nguok Soon 0319396

Page 2: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

A Brief History of Carlsberg

Carlsberg was founded by J. C. Jacobsen in 1847. The first brewery was built at

Copenhagen, Denmark. In 1868, Carlsberg exported its first beer to Edinburgh, England.

When J. C. Jacobsen died in 1887, the company was taken over by Gamle Carlsberg, In

1939, 55% of beers imported into the United Kingdom was Carlsberg. Carlsberg beer was

brewed for the first time outside Denmark in 1966. The first brewery built outside

Denmark was in Blantyre, Malawi in 1968. Carlsberg also bought Tuborg in 1970, and

merged with Tetley in 1992. In 2008, Carlsberg Group, together with Heineken, bought

the largest brewer in UK - Scottish & Newcastle - for US$ 15.3 billion.

The Carlsberg Group divide their operation into 3 regions, namely Northern & Western

Europe, Eastern Europe, and Asia. According to its annual report in 2013, the operating

profit generated from these regions are: 5.3 billion in Western Europe, 4.1 billion in

Eastern Europe, and 1.9 billion in Asia.

Page 3: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

Carlsberg Brewery Malaysia Berhad was incorporated in December 1969. After being

listed in Bursa Malaysia in 1971 under the consumer products sector, the group began

brewing Carlsberg Green Label beer locally in 1972. Today, the group has approximately

42% of the Malaysian beer and stout market (2012). Carlsberg Green label beer is the

best selling brand in the country and “accounts for the bulk of the group’s beer sales.”

(2012).

The group has investments in Sri Lanka and Singapore. It’s subsidaries and associates

include Carlsberg Singapore, Carlsberg Marketing, Luen Heng F&B, Carls Distributors

Taiwan Ltd and Lion Brew (Ceylon).

Since 2007, Carlsberg has expanded its brand portfolio by introducing more brands. For

instance, Carlsberg Gold, Hoegaarden and Asahi Super Dry.

In 2009, the Group purchased Carlsberg Singapore Pte. Ltd. From Carlsberg Breweries

A/S for 370M in cash (2012).

Page 4: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

PROFITABILITY RATIOSProfitability

Ratios 2012 2013

Return onEquity (ROE)

Net ProfitAverage O/EProfit of the year 2012

Average O/E193753298115= 64.99%

Net ProfitAverage O/EProfit of the year 2013

Average O/E186620295557= 63.14%

Net ProfitMargin(NPM)

Net ProfitNet SalesProfit of the year 2012

Revenue1937531584780= 12.22%

Net ProfitNet SalesProfit of the tear 2013

Revenue1866201555149= 12%

Gross ProfitMargin(GPM)

Gross ProfitNet SalesGross ProfitRevenue5795481584780= 36.57%

Gross ProfitNet SalesGross ProfitRevenue5707661555149= 36.7%

SellingExpensesRatio (SER)

Total Selling ExpensesNet Sales

Sales & Distribution Exp.Revenue

2957951584780= 18.66%

Total Selling ExpensesNet Sales

Sales & Distribution Exp.Revenue

2890701555149= 18.59%

GeneralExpensesRatio (GER)

Total General ExpensesNet Sales

Administrative & Other Exp.Revenue

42256+29801584780= 2.85%

Total General ExpensesNet Sales

Administrative & Other Exp.Revenue

44920+35631555149= 3.12%

FinancialExpensesRatio (GER)

Total Financial ExpensesNet SalesFinance CostRevenue4971

1584780= 0.31%

Total Financial ExpensesNet SalesFinance CostRevenue5318

1555149= 0.34%

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Page 5: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

PROFITABILITY RATIOS INTERPRETATION

Return on Equity (ROE)

During the year 2012-2013 period, the business Return of Equity (ROE) has decreased

from 64.99% to 63.14%. This means that Carlsberg is getting slightly less return from the

capital than last year.

Net Profit Margin (NPM)

During the year 2012-2013 period, the business Net Profit Margin (NPM) has decreased

from 12.22% to 12%. This means that the business of is getting worse at controlling its

overall expenses.

Gross Profit Margin (GPM)

During the year 2012-2013 period, the business Gross Profit Margin (GPM) has increased

from 36.57% to 36.7%. This means that the business is getting better at controlling its

Cost of Goods Sold expenses.

Selling Expenses Ratio (SER)

During the year 2012-2013 period, the business Selling Expenses Ratio (SER) has

decreased from 18.66% to 18.59%. This means that the business is getting better at

controlling its selling expenses.

Page 6: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

General Expenses Ratio (GER)

During the year 2012-2013 period, the business General Expenses Ratio (GER) has

increased from 2.85% to 3.12%. This means that the business is getting worse at

controlling its general expenses.

Financial Expenses Ratio (FER)

During the year 2012-2013 period, the business Financial Expenses Ratio (FER) has

increased from 0.31% to 0.34%. This means that the business is getting worse at

controlling its financial expenses.

Page 7: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

FINANCE STABILITY RATIOSFinancialStabilityRatios

2012 2013

WorkingCapital Ratio(WCR)

Total Current AssetsTotal Current Liabilities365436241644= 1.51 : 1

Total Current AssetsTotal Current Liabilities381810295687= 1.29 : 1

Total DebtRatio (TDR)

Total LiabilitiesTotal Assets262284569150= 46.08%

Total LiabilitiesTotal Assets312763597011= 52.39%

StockTurnoverRatio (STR)

Cost of Goods SoldAverage Inventory

Cost of SalesInventory 2011-2012100523254689

= 19.9 Days

Cost of Goods SoldAverage Inventory

Cost of SalesInventory 2012-201398438348273.5

= 17.9 DaysDebtorTurnoverRatio (DTR)

Credit SalesAverage Debts

Trade ReceivableAverage Trade Payable215469148760

= 252 Days

Credit SalesAverage Debts

Trade ReceivableAverage Trade Payable222113156216.5

= 256.71 DaysInterestCoverageRatio (ICR)

Interest Expenses + Net ProfitInterest Expenses

Finance Cost + Profit of year 2012Finance Cost

4971 + 1937534971

= 39.98 Times

Interest Expenses + Net ProfitInterest Expenses

Finance Cost + Profit of year 2013Finance Cost

5318 + 1866205318

= 36.1 Times

365 Days ÷

365 Days ÷

365 Days ÷

365 Days ÷

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x 100% x 100%

Page 8: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

FINANCIAL STABILITY RATIOS INTERPRETATION

Working Capital Ratio (WCR)

During the year 2012-2013 period, the business Working Capital Ratio (WCR) has

decreased from 1.51 : 1 to 1.29 : 1. This means that the business ability to pay its current

liabilities is getting worse. In addition, it does not satisfied the minimum requirement of

2 : 1.

Total Debt Ratio (TDR)

During the year 2012-2013 period, the business Total Debt Ratio (TDR) has increased

from 46.08% to 52.39%. This means that the business total debt has increased. In addition,

it has gone over the maximum limit 50%.

Stock Turnover Ratio (STR)

During the year 2012-2013 period, the business Stock Turnover Ratio (STR) has

decreased from 19.9 days to 17.9 days. This means that the business is getting faster at

selling their goods.

Debtor Turnover Ratio (DTR)

During the year 2012-2013 period, the business Debtor Turnover ratio (DTR) has

increased from 252 days to 256.71 days. This means that the business is getting slower in

collecting its debts.

Page 9: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

Interest Coverage Ratio (ICR)

During the year 2012-2013 period, the business Interest Coverage Ratio (ICR) has

decreased from 39.98 times to 36.1 times. This means that the business ability to pay its

interest has become better. In addition, it satisfied the minimum requirement of 5 times.

PRICE/EARNINGS RATIO

Current share priceEarnings per share

= RM 12.02RM 0.60

= 20.03 Years

This means that shareholders have to wait 20 years to claim back the money theyinvested.

Page 10: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

INVESTMENT RECOMMENDATION

Overall, the financial ratios of Carlsberg Brewery Malaysia Berhad is satisfying. Its

Profitability Ratios are more or less stable, and any negative changes are minute.

For the Financial Stability Ratios, other than the Working Capital Ratio that has

decreased, other ratios remain stable. Moreover, it’s Interest Coverage Ratio is very

satisfying, scoring at 36 times compared to the minimum or 5 times.

However, the P/E Ratio of Carlsberg Brewery Malaysia Berhad is about 20 years, which

is not a very good figure for shareholders.

Based on the overall aspects, we do not recommend to invest into Carlsberg Brewery

Malaysia Berhad, because even though the majority of aspects in Profitability Ratio and

Financial Stability Ratio are stable, its P/E Ratio is 20 years, which is a very long time to

wait in order for a share buyer to earn profit.

Page 11: Accounting Report - Financial Ratio Analysis

Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

APPENDIX:

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Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

Price Per Share - Yahoo Finance (Retreived 12th January 2015)

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Taylor’s University | FNBEApril 2014 | Basic Accounting (ACC 30205) | Financial Ratio Analysis

References:

1) Stock Performance Guide Malaysia. (2012). Malaysia: Dynaquest Sdn. Bhd.

2) Carlsberg A/S Annual Report 2013. (n.d). Retrieved December 30, 2014 from

http://www.carlsberggroup.com/investor/downloadcentre/Documents/Annual%20Report/

Carlsberg%20Group%20Annual%20Report%202013.pdf

3) Carlsberg Group. (n.d). Heritage. [online] Available at:

<http://www.carlsberggroup.com/Company/heritage/Pages/default.aspx> [Accessed 31

December 2014]

4) Carlsberg Malaysia. 2012. Carlsberg Malaysia. [online] Available at:

<http://carlsbergmalaysia.com.my/web/company/cm_carlsbergmsia.aspx> [Accessed 31

December 2014]

5) Wikipedia. 2014. Carlsberg Group. [online] (Updated 5 December 2014) Available at:

<en.wikipedia.org/wiki/Carlsberg_Group> [Accessed 29 December 2014]

6) Annual Report 2012. (n.d). Carlsberg Malaysia. Retreived 26 December 2014 from

http://carlsbergmalaysia.com.my/web/investor/in_annualreport2012.aspx

7) Annual Report 2013. (n.d). Carlsberg Malaysia. Retreived 26 December 2014 from

http://carlsbergmalaysia.com.my/web/investor/in_annualreport2013.aspx

8) Yahoo Finance. 2014. Carlsberg Brewery Malaysia Bhd. [online] Available at:

<chttp://finance.yahoo.com/q?uhb=uh3_finance_vert_gs_ctrl2&fr=&type=2button&s=28

36.KL%2C> [Accessed 12 January 2015]