financial analysis assignment.doc

8/19/2019 Financial Analysis Assignment.doc

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FINANCIAL ANALYSIS

SID# 1546886/1

FINANCIAL ANALYSIS

VOLKSWAGON AG.

SID# 1546886/1

WORD COUNT: 2250


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FINANCIAL ANALYSIS

SID# 1546886/1

Table of Contents

COMPANY OVRVIW.................................................................................................1

PART A........................................................................................................................ 2

VNTS IMPACTING VW FROM T! PRIOD 2010 TO 2014...........................................2

Events of 2010............................................................................................................. 2

Events of 2011............................................................................................................. 2

Events of 2012............................................................................................................. 3

Events of 2013............................................................................................................. 3

Events of 2014............................................................................................................. 4

PART "........................................................................................................................ 5

IMPACT OF VNTS ON FINANCIAL STATMNTS.......................................................5

Impact on VW Financials - 2010.......................................................................................5

Sales/Revenue..........................................................................................................5

Share rice.............................................................................................................. 5


Sales/Revenue..........................................................................................................6

!e"t.......................................................................................................................6

Share rice.............................................................................................................. 6


Sales/Revenue..........................................................................................................7

!e"t.......................................................................................................................7

#ssets.....................................................................................................................7

Share rice.............................................................................................................. 7


Sales/Revenue..........................................................................................................8

!e"t.......................................................................................................................8

#ssets.....................................................................................................................8Share rice.............................................................................................................. 8


Sales/Revenue..........................................................................................................9

!e"t.......................................................................................................................9

#ssets.....................................................................................................................9


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FINANCIAL ANALYSIS

SID# 1546886/1

Share rice.............................................................................................................. 9

PART C...................................................................................................................... 10

TRND ANALYSIS...................................................................................................... 10

$i%ui&it' Ratio #nal'sis............................................................................................ 11

Efficienc' Ratio #nal'sis...........................................................................................12

Solvenc' Ratio #nal'sis...........................................................................................13

(ar)et #nal'sis...................................................................................................... 14

CONCLUSION.......................................................................................................... 14

APPENDICES........................................................................................................... 16

#ppen&i* II + VW ,alance Sheet- Five ear .ren&..............................................................17

#ppen&i* III + VW ash Flo Statements- Five ear .ren&...................................................18

#ppen&i* IV+ VW Ratio .a"le- Five ear .ren&..................................................................19


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FINANCIAL ANALYSIS

SID# 1546886/1

COMPANY OVRVIW

.he Vol)saen # VW is a erman multinational automotive manufacturin compan' ith

its hea&%uarters in Wolfs"ur5 erman'6 VW is one of the orl&7s lea&in automo"ile

manufacturers an& the larest carma)er in Europe6 It &esins5 manufactures an& &istri"utes

passener an& commercial vehicles5 motorc'cles5 enines5 an& tur"o machiner' an& offers

relate& services inclu&in financin5 leasin an& fleet manaement throuh it Financial Services

&ivision6 VW has appro*imatel' 340 su"si&iaries5 operates 118 pro&uction plants in 31 countries

an& sells its vehicles in 193 mar)ets6 VW has a orl&i&e staff of appro*imatel' 98259:; an&

pro&uces the secon& larest num"er of vehicles in the orl&6 VW is a pu"lic compan' an& has it

primar' listin on the Fran)furt Stoc) E*chane5 here it is a constituent of the Euro Sto**

90 stoc) mar)et in&e*5 an& secon&ar' listins on the $on&on Stoc) E*chane5 $u*em"our

Stoc) E*chane5


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FINANCIAL ANALYSIS

SID# 1546886/1

PART A

VNTS IMPACTING VW FROM T! PRIOD 2010 TO 2014

$%&' () 2010

• E*pansionar' monetar' polic' an& recover' in emerin economies le& to a"ove-averae

roth of lo"al econom' "' 461? ith positive impact of VW main mar)ets+


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FINANCIAL ANALYSIS

SID# 1546886/1

SalA"ur GS at a value of @363 "illion5 inclu&in the ac%uisition of automo"ile

operations of GS such as the holesale an& retail "usiness5 orsche Informati)5 orsche

,an)5 orsche Immo"ilien 5orsche Versicherun an& # (otors6 Hn&er the VW

roup5 GS retaine& its status as an in&epen&ent oraniAational unit an& continue& ith

its e*istin "usiness mo&el6 #ll assets remaine& intact6

• Fe"ruar' 29th 20115 Vol)saen # investe& @140m in an :61:? sta)e in the e%uit' of

S$ ar"on SE5 one of the orl&7s lea&in manufacturers of car"on fi"ers for the auto

in&ustr'6

$%&' () 2012

• #uust 1st

20125 VW purchase remainin sta)e in orsche e%ualin 100? of shares

ta)in full onership an& consoli&ation of orsche # into the VW roup6 VW "ecame

the parent compan' of orsche ith contri"ution in full of orsche SE7s operative

automotive "usiness5 primaril' consistin of the 9061? interest in orsche Gol&in

Stuttart m"G an& thus in&irectl' in orsche #6 .his as complete& for share-"ase&

an& cash consi&eration6

• Cul' 20125 VW throuh its #u&i ,ran& "ouht !ucati5 Italian motorc'cle manufacturer

for @:;0m6 VW also inherite& !ucati7s lia"ilities of appro*imatel' @200m

• (a' 9th 20125 VW issue su"or&inate& man&ator' converti"le notes ith an initial

volume @2 "illion6 .he tarete& procee&s of appro*imatel' 2 to 269 "illion euros from the

issuance of the man&ator' converti"le notes as inten&e& for the improvement of VW

capital "ase aainst the "ac)roun& of the creation of the interate& automotive roup

an& implementation of the strateic roth an& investment proram6

$%&' () 201*

• Canuar' 20135 Vol)saen "an) m"tt5 a 100? one& su"si&iar' of VW # sol& its

90? in&irect interest in $ease lan orporation


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FINANCIAL ANALYSIS

SID# 1546886/1

• Cul' 2013 VW as iven approval "' the #( of (#< SE for its entr' into VW

commercial reister for the control an& profit an& lost transfer areement "eteen (#<

SE an& VW #6

$%&' () 2014

• Cune 20145 VW hel& 8869D? of Scania7s share capital6 .his correspon&e& to 886;;? of

the votin rihts6 Vol)saen initiate& a s%ueeAe-out for the remainin Scania shares6

• Cune 20145 to partiall' fun& the transaction of the Scania offer5 VW implemente& a capital

increase un&er hich ne preferre& shares ere issue& from authoriAe& capital aainst

cash contri"utions6 .his increase& the share capital "' a notional @2;6: million an&

enerate& ross procee&s totalin @260 "illion6

4


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FINANCIAL ANALYSIS

SID# 1546886/1

PART "

IMPACT OF VNTS ON FINANCIAL STATMNTS

I+,-& (% VW F%-%-' 2010

S-$'/R$$%$

• Revenue increase& resultin from the recover' of the econom' an& the e*pansion of the

"usiness &ue to the ac%uisitions of shares in SuAu)i (otors an& inclusion of the Scania

su"si&iaries6

D$3&

• !e"t increase& from ac%uisition cost incurre& from SuAu)i an& I!6

A''$&'

• .otal current assets re from the impact of the share capital increase in #pril 20106

Goever current assets as neativel' affecte& "' cash an& cash e%uivalent outflos for

increase& lia"ilit' from the increase& cost of sales an& sellin an& a&ministrative

e*penses from the increase volume sales an& capitalise& cost from the ac%uisitions6

• oo&ill as positivel' affecte& from the ac%uisition of I!6

S-$ P$

• apital increase in #pril 2010 increases the num"er of preferre& shares6


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FINANCIAL ANALYSIS

SID# 1546886/1

I+,-& (% VW F%-%-' 2011

S-$'/R$$%$

• Revenue increase& &ue to the inclusion of orsche Gol&ins SalA"ur5 (#< SE an& the

GS financial services "usiness from the financial services &ivision6

D$3&

• #n e*pense of @2;3 million as reconiAe& for SuAu)i an& @282 million for (#< from

the share of profits an& losses of e%uit'-accounte& investments in the fiscal inclu&in the

a&ustment of the e%uit' interest in SuAu)i (otor orporation an& (#< SE6

A''$&'

• urrent assets &ecline& as a result of the investment activit' an& capitalise& cost relate&

to the ac%uisitions as hich has sinificant cash outflo6

• #c%uisition an& investment in the financial assets of (#< SE an& the in&irect

ac%uisition of the tra&in "usiness of GS has &riven a sinificant increase in total assets6

S-$ P$

• Share price increase& sinificantl' in secon& %uarter an& mi&-'ear &riven "' VW positive

performance an& "usiness roth6 Wi&e fluctuation throuh the en& of the fiscal 'ear sa

the share price &ecline5 this &i& not have an' compan'-specific or fun&amental reasons5

"ut rather as larel' attri"uta"le to eneral uncertaint' on the financial mar)ets6

6


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FINANCIAL ANALYSIS

SID# 1546886/1

I+,-& (% VW F%-%-' 2012

S-$'/R$$%$

• Revenue increase& primaril' attri"uta"le to hiher volumes an& the full consoli&ation of

orsche # #uust 15 20126

D$3&

• !e"t increase& from the cash outflos an& e%uit' use& in the full ac%uisition of orsche

an& the lia"ilities assume& &irectl' from the purchase of !ucati

A''$&'

• .otal non-current assets increase& "ecause of the a&&ition of orsche7s primar' assets an&

lia"ilities an& their re-measurement as part of purchase price allocation6

• .he issuance of the man&ator' converti"le note le& to a cash inflo an& the inclusion of

orsche inventor' "oth contri"ute& to positive impact on current assets6

• .he lia"ilities assume& &irectl' from the purchase of !ucati ha& a neative effect on

current assets6

• Intani"le assets increase& as a result of the oo&ill an& "ran& value of orsche6

• Investe& capital rose mainl' &ue to the full effect of the consoli&ation of orsche Gol&in

SalA"ur the consoli&ation of orsche in 20125

S-$ P$

• VW share price recor&e& sinificant increases in 20125 &ue larel' to the interation of

the automotive roup ith orsche in #uust 15 20126 .he issuance of the man&ator'

converti"le notes ha& minor impact on the share price6

7


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FINANCIAL ANALYSIS

SID# 1546886/1

I+,-& (% VW F%-%-' 201*

S-$'/R$$%$

• Events in perio& have no impact on revenue

D$3&

• Event in perio& ha& no impact of !e"t

A''$&'

• #ssets ere positivel' impacte& from the purchase of 90? in&irect interest in $ease lan

orporation


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FINANCIAL ANALYSIS

SID# 1546886/1

I+,-& (% VW F%-%-' 2014

S-$'/R$$%$

• Events &urin 2014 ha& no effect on revenue6

D$3&

• Event ha& no impact on &e"t an& e%uit' financin as use& for ac%uisition an& "usiness

e*pansion activities6

A''$&'

• #ssets ere positivel' impacte& from the capital increase implemente& to fun& the Scania

share purchase6 In a&&ition5 the increase& onership in Scania resulte& in increase& fi*e&

an& current assets6

• Increase in cash inflos from financin activit'5 h'"ri& notes place& in (arch 2014 an&

the capital increase implemente& in Cune 2014 "' issuin ne preferre& shares5 positivel'

impacte& current assets6

• Increase in the interest in Scania an& the s%ueeAe outJ resulte& in cash outflos ith

neative impact on current assets6

S-$ P$

apital increase an& the further ac%uisition of Scania shares positivel' affecte& the share price5

hoever the volatilit' of the mar)et cause& share price to &ecline to the en& of the 'ear6

9


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FINANCIAL ANALYSIS

SID# 1546886/1

PART C

TRND ANALYSIS

P()&-3&

.his assesses the a"ilit' of VW to enerate earnins in comparison to its e*penses an& other

relevant cost incurre& &urin the specifie& perio&6

G('' P()& M-7% GPM9

( as relativel' constant ith averae 1? chane over the perio&6 Increase& net sales

resultin from recover' of the econom' an& ac%uisitions ere proportional to the

increase in e*penses6 #lthouh revenue ha& increase& over the perio&5 there as no

maor impact on its profits marin6

N$& P()& M-7% NPM9

#verae roth of 44? from 2010 to 2012 relate& to increase& revenue from recover' of

econom' an& "usiness e*pansion activities 6 Goever5


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FINANCIAL ANALYSIS

SID# 1546886/1

from ac%uisition an& "usiness e*pansion hile net sales increase&6 !espite this5 VW B

is slihtl' hiher than the in&ustr' me&ian of 96086

R$&% (% C-,&- +,($ ROC9

RBE re in 2010 "ecause of the increase& net earnins &ue to the recover' of the econom'6

Goever5 "ecause of the sinificant capital outla' an& increase& lia"ilities in 2011-2012

for the ac%uisition of orsches5 !ucati an& e%uit' on (#< SE an& the 'et to "e realiAe&

earnin from these ac%uisitions in the short term5 the RBE tren&e& &onar&s6

R$&% (% ;& RO9

RBE ha& a stea&' incline from 2010 to 2012 ith the roth in net income attri"uta"le to

increase revenue from ac%uisition activities an& recover' of the econom'6 Goever5 in 2012

RBE &roppe& sharpl' as VW fun&e& its ac%uisitions5 strateic roth an& investment proram

"' issuin shares6 2014 sa a mo&est increase of 3? in&icatin the re&uction of investment

e*pen&iture6

L;& R-&( A%-''

.his anal'ses VW a"ilit' to pa' off its short-term &e"t o"liations6

Current Ratio and Acid Test

,oth current ratio an& aci& test ere hih in 2010 resultin from the positive effect of the capital

increase hich increase li%ui&it' in the perio&6 ,' 20115 there as a &ecrease in

li%ui&it' "ecause of ac%uisition activities an& relate& cash outflos6

11


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FINANCIAL ANALYSIS

SID# 1546886/1

))$% R-&( A%-''

.his i&entifies ho effectivel'/efficientl' VW uses its resources or or)in capital to run the

"usiness6

R$$-3$ T%($

Receiva"le has "een consistent ith no fluctuation &espite the increase in sales over the perio&6

VW has stron cre&it policies an& manaement6

T(&- A''$&' T%($

#sset turnover rose in 2010 from the sinificant increase in sales &riven "' the recover' of the

econom'6 !espite the increase in assets in 20105 the increase sales offset the asset turnover6

.here as a minor &ecline from 2011 to 2014 "' an averae of 4? over the perio&5 as assets

continue to ro faster from the ac%uisition an& other e*pansion in comparison to the B sales

roth6

I%$%&( T%($

#lthouh sales increase& from the perio& 2010 to 20145 "ecause of the increase& stoc) from the

full consoli&ation orsche5 (#< S5 the Scania su"si&iaries5 inventor' increase at a faster rate

of sales thus the inventor' turnover tren&e& &onar& to 20146

12


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FINANCIAL ANALYSIS

SID# 1546886/1

S($% R-&( A%-''

.he Solvenc' or earin anal'ses the financial position of VW6 It focuses on the sta"ilit' of the

"usiness an& e*posure to ris) an& ta)es into consi&eration the a' the "usiness is finance&6

D$3& &( ;&

!e"t to e%uit' rose "' 101? in 2010 from &e"t incurre& in the ac%uisition of Scania5 initial

interest in (#< an& orsche as ell as the apital Increase6 .he &e"t to e%uit' move&

&onar& from 2011 as less &e"t as use& to finance "usiness roth an& investment activities

as these ere fun&e& "' e%uit'6

I%&$$'& C($

Interest coverae &ecline& in 2011 correlatin to the &ecline in !e"t-to-E%uit' an& further

in&icatin that VW utiliAe& mostl' e%uit' to fun& its ac%uisitions from 2012 to 20146

D$3& &( A''$&'

!e"t to assets is relativel' constant ithstan&in the accumulation of assets6 .his suests that

the &e"t portion of VW financin portfolio is &ecreasin in&icatin that VW is usin more e%uit'than &e"t6

13


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FINANCIAL ANALYSIS

SID# 1546886/1

M-


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FINANCIAL ANALYSIS

SID# 1546886/1

RFRNCS

!'son5 C6 #ccountin for 6 >niht5 C6 ass5 C65 #n& Financial Intellience+ # (anaerKs ui&e to >noin Whatthe


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FINANCIAL ANALYSIS

SID# 1546886/1

APPENDICES

A,,$%= I : VW I%(+$ S&-&$+$%& F$ Y$- T$%

16


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FINANCIAL ANALYSIS

SID# 1546886/1

A,,$%= II : VW "--%$ S$$& F$ Y$- T$%

17


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FINANCIAL ANALYSIS

SID# 1546886/1

A,,$%= III : VW C-' F(> S&-&$+$%&' F$ Y$- T$%

18


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FINANCIAL ANALYSIS

SID# 1546886/1

A,,$%= IV: VW R-&( T-3$ F$ Y$- T$%

VW AG Ratios 2010 2011 2012 2013 2014

Profitability

Gross margin 16.9 17.6 18.2 18.1 18.0Net Profit Margin .7 9.9 11.! !.6 .

"#erating Profit Margin 0.0 7.1 6.0 .9 6.$

Ret%rn on &a#ital 'm#loye( )R"&'* 10.2 12.7 7.8 .7 .8

Ret%rn on '+%ity )R"'* 16.1 18.8 20.2 11.2 11.6

,i+%i(ity

&%rrent Ratio 1.1 1.0 1.1 1.0 1.0

-%i/ est Ratio 0.9 0.8 0.8 0.8 0.8

'ffiieny

Reeiable %rnoer 1.1 1.0 1.1 1.0 1.0

otal Assets %rnoer 0.0 0.7 0.7 0.6 0.6

nentory %rnoer 6.! .8 .6 .8 .2

3oleny4ebt to '+%ity 0.8 1.6 1. 1.1 1.2

4ebt to Assets 0.0 0.2 0.2 0.2 0.2

nterest &oer $.$ . 0.0 0.0 0.0

Mar/et Analysis53areol(er

P5' Ratio 7.2 !.9 . 10.6 8.2

4ii(en( Per 3are 0.$ 0.6 0.8 1.0 1.0

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