standing of “julphar” in global pharmaceutical industry...
TRANSCRIPT
© International Academic Research
Journal of Economics and Finance
Vol No.2, Issue No. 3, Jan 2014 ISSN Number: 2227-6254
Standing of “Julphar” in Global Pharmaceutical
Industry - A Benchmarking report
AyaWadi Robin A. Carvalho MBA student, MBA student
Newyork Institute of Technology, Abudhabi Campus, UAE Newyork Institute of Technology, Abudhabi Campus, UAE
ABSTRACT
To meet stakeholder’s interest is the prime requirement of all the corporations. The
measurement tools of the firm’s financial health guide the stakeholders to understand company’s
performance and evaluate its future prospects in a better way. There are some financial monitoring
indicators that evaluate the company’s progress in context of its commitments, funding for operations,
projects in hands and future plans against its eligible cost. Financial statements and ratios assist the
investors to know better about the financial condition of the company and its overall performance. It is
particularly helpful in ascertaining the liquidity risk, credit risk, financial risk and business risk of the
firm.
This paper will focus on measuring the financial health of Julphar by conducting a
benchmarking exercise.
Key Words: Benchmarking, Financial Analysis, Ratio Analysis, Corporate valuation.
INTRODUCTION
The pharmaceutical industry is a
sector that is responsible for producing,
developing and selling licensed medical
drugs and pharmaceuticals, to be used as
medication. Pharmaceutical businesses
are permitted to deal with general and/or
brand medications as well as medical
devices. The firms in this industry are
mainly focusing on the Research and
Development of new drugs beneficial for
the human and animal lives. The
companies are obliged to follow a variety of
rules, laws and regulations in regards to
testing, assigning the medication or
medical device to the customer as well as
ensuring the efficiency and safety of the
drugs and medications in addition to ethical
practices. Some of the well-known
pharmaceutical companies are; Johnson &
Johnson, Pfizer, Abott laboratories, Roche
etc.
Healthcare market in GCC is
predominantly driven by the government.
The government’s per capita based
expenditure is much higher in GCC
countries than any developed country. The
pharmaceutical sector is one of the fastest
growing sectors in the world. The
government’s public health oriented
initiatives are boosting the growth of the
industry in local market. Also the other
factors such as demography, rising income
levels and increasing incidence of lifestyle
diseases are pushing further the growth of
the industry.
In order to analyze the company’s position
and overall financial health with respect to
the entire global pharmaceutical industry,
we have chosen a local pharmaceutical
company, Julphar(Gulf Pharmaceutical
Industries) and evaluated its financial
statements for previous three years (2009,
2010, & 2011) by collecting the financial
data from Bloomberg based on the ratio
22 AyaWadi and Robin A. Carvalho January
analysis and performing common size &
comparative statements and also trend
analysis. Subsequently, the results are
then compared topharmaceutical industry
outputs in order to determine the financial
position of Julphar in global market. Here,
for the study purpose, we have considered
the industry output as combined average
results of two renowned firms in the same
pharmaceutical industry such as Johnson
& Johnson and Pfizer Inc.
Julphar is a Ras Al Khaimahbased
pharmaceutical firm. The company was
established in 1980 under the leadership of
H.H Sheikh Saqr Bin Mohammed Al Qasimi.
Julphar’saim is to create high-quality
medicines whilst maintaining a competitive
cost. The company has achieved its goal
through a wide network of 12 world-class
manufacturing plants spread over five
regions.
Julphar has maintained a varied
product collection comprising of major
therapeutic segments including
endocrinology, anti-infective, cardiovascular
and gastroenterology, over-the-counter,
nephrology, dermatology, respiratory,
metabolic and burn & wound
management.Underlining the commitment to
diabetes management in the region, the
company iscurrently producing the raw
material required for making the insulin
through their divisions dedicated to
Diabetes.Julphar has won the Arab
Achievement Award which was organized
by Global Business in collaboration with the
Dubai Knowledge Village in 2011. As a part
of Corporate Social responsibility, the firm
provides scholarships and annual funding
for local educations, like the American
University of Ras Al Khaimah.
With over 800 products in many
quantity forms and presently in the pipeline,
Julphar is an instance of one of the UAE’s
local businesses creating a control on the
global stage.
REVIEW OF LITERATURE
Hossan F., Habib M.A.(2010),
analyzed the company’s performance
through ratio analysis of two pharmaceutical
companies in Bangladesh. The authors have
collected the data of these companies for
the year 2007–2008. In this paper, the
different financial ratios are evaluated such
market value ratios, liquidity ratios,
profitability ratios, debt management ratio,
asset management ratios, and finally
measure the best performance between two
companies. Asset management ration is
about the measuring of assets and control
them efficiently. It also quantifies seven
categories for both the selected
pharmaceutical companies considering their
account receivable turnover, fixed asset
turnover, average collection period, total
asset turnover inventory turnover, account
payable turnover in days account payable
turnover etc. Based on the financial analysis,
the paper concludes which company is
performing well financially and has better
position in the pharmaceutical market.
Bhunia A., Mukhuti S. S., Roy S. G.
(2011), study is regarding the identification
of financial strengths and weaknesses of
the Indian public sector pharmaceutical
companies by assessing the balance sheet
and profit and loss account. In this study,
the authors have selected two public sector
pharmaceutical companies. The data has
been collected for 12 years period (1997-
98 to 2008-09) from CMIE database. The
paper identifies the strong liquidity position
of both selected companies which shows
that the companies have capability to pay
short term obligations. However, these
companies rely more on external funding in
terms of long term borrowings which
creates a risk for the creditors. Further, it
mentions that the financial stability of both
the companies is drastically decreasing.
The study aims at guiding the investors
about their investment decisions in Indian
pharmaceutical Industry by measuring the
2014 International Academic Research Journal of Economics and Finance 23
company’s liquidity, stability, profitability,
solvency and other financial indicators and
in turn ensuring adequate returns to the
stakeholders.
Siddiqua M. J., Hpssan M. T.
(2012), This paper explains the
requirement of the preparation of cash flow
statement, which describes the changes,
occurred in the company’s cash and cash
equivalents during the financial year, for
the public companies in Bangladesh
conforming to Companies Act 1994. The
pharmaceutical companies in Bangladesh
are preparing the cash flow statement
along with the financial statements by
providing the information regarding
company’s operating, investing and
financing activities in the given financial
period. The authors have found out that
although most of the pharmaceutical
companies are abiding to the law by
producing the cash flow statements
however, no one is interested in disclosing
some more useful information voluntarily
regarding the cash flows like operating
capacity due to increase in operating
capacity, segmental cash flows or cash
flow per share etc. The paper recommends
the improvement in presentation of the
statement incorporating the above said
factors.
Kakkad R (2013), examined the
literature review on ratio analysis to assess
the health of pharmaceutical industry in
India. Indian pharmaceutical market is
growing at a CAGR of about 12% since
last 5 years. The aged population of
average age of 67 is around 67 million in
India. As per statistics, people of this age
group consume 3 to 4 times more drugs as
compared to younger population. This is an
indicator of significant growth of
pharmaceutical industry in India. Although
conducting financial performance analysis
of the company is a tedious work, it has
ample of benefits. The ratio analysis gives
a clear picture about the successfulness of
an organization in short and long run. The
paper provides the insight to the financial
health of the pharmaceutical companies in
India. By taking an example of Dr. Reddy’s
Laboratories Ltd. and Lupin Ltd. examples
the paper examines the soundness of the
industry using the tools such as ration
analysis and T test.
Majumder T.H., Rahman M. M
reviewed the case study of pharmaceutical
industry in Bangladesh. The
industrialization of the country is moving at
rapid pace and pharmaceutical sector is a
leading industry in Bangladesh that
facilitates country’s GDP growth. It is
observed that over last few years, the net
profit of this industry is diminishing. The
authors have tried to search for the
reasons behind declining growth of the
pharmaceutical industry in Bangladesh by
carrying out financial performance of this
industry to test its strengths and
weaknesses for which they have used
financial ratios, Multivariate Discriminate
Analysis (MDA) as developed by Prof.
Altman as well as some statistical tools,
coefficient of variance (CV) and T-test etc.
as measuring tools. Upon review of the
collected data from financial statements of
various pharmaceutical companies in the
country, the authors have found that most
of the companies’ financial position, their
performance, liquidity position and profit
earning capacity are not strong and sound
and most of the companies are heading
towards bankruptcy in near future. In order
to sustain in the industry, the authors
recommended immediate improvement in
the financial performance of these
companies by taking necessary measures
to overcome the issues relating to strict
government regulation, insufficiency of
financial management, absence of realistic
goals, and increased cost of materials,
labor and overhead.
24 AyaWadi and Robin A. Carvalho January
Theoretical Review
Financial statement analysis:It is an
extremely powerful tool for various users of
financial statements. Different stakeholders
have different objectives in learning about
the financial position of the
company.Particularly, the business owners
and managers use specific analysis tools
to closely review the company’s financial
statements for decision-making purposes.
Following are the five tools used to analyze
the financial statements:
Ratio Analysis
In order to analyze the health,
financial position and performance of the
company, some tool are being used by
individuals is called“ratio analysis”. Ratio
analysis helps the stakeholders to conduct
a quantitative analysis of information
presented in a company's financial
statements. There are many such ratios
that are related to a company's
performance, financing activity, and
liquidity and which are computed against
the current year data of the company
referring to the financial statement and
subsequently compared to the previous
years or with other companies, industry or
economy to evaluate the performance of
the company. Some common ratios are as
follows:
Liquidity ratio: It is one of financial
metrics that is used to determine the firm’s
strength. Mostly, higher the ratio, bigger is
the margin of safety that the company
possesses to cover short-term debts.
Credit ratio: It is identified as percentage,
which results when a debtors are either
monthly payment obligation long-term
debts is divided by his/her net income or
gross monthly income.
Growth ratio: The amount of increase that
specific variables have gained within a
specific period and context. For
stockholders, this naturally represent the
compound annualize rate of growth of a
firm's returns, earnings, dividends.
Yield ratio: Yield ratio is explained as the
connection between the predictable yields
of a bond to the predictable yield of other
bonds. It is beneficial to determine whether
to invest or not in one bond or another. In
such circumstances the higher yield is
selected.
Profitability: The financial ratio that is
used to enter a business ability to create
earnings compared with its expenses and
other related costs earned through a
specific period of time. If the ratio is higher
in value than its competitors ratio or same
from previous period that means the
company is doing well.
DuPont: A method of performance that is
started by the DuPont Corporation. With
this technique, assets are measured at
their gross book value rather than at net
book value in order to produce a higher
return on equity (ROE). DuPont analysis
tells us that ROE is affected by three
things: Operating efficiency, Asset use
efficiency and Financial leverage which are
measured by profit margin, total asset
turnover and the equity multiplier.
Common Size Financial Statement
Common size financial statement of
company is that in which all items are
displayed as percentages of a common
base figure. This particular type of financial
statement helps analyzingthe company’s
health against other companies or between
time periods of the company. In this way,
the statement reduces the unfairness that
can occur when analyzing companies of
differing sizes. It also allows the
stakeholders to analyze the company over
various time periods. E.g. the percentage
of sales versus the cost of goods sold and
also gives an indication about the value
change over the time.
2014 International Academic Research Journal of Economics and Finance 25
Comparative Statement
Comparative statement helps
comparing the financial data of a company
from different periods of time. It
distinguishes the income statement, cash
flow statement and balance sheet with its
corresponding sections from a previous
period. It can also be used to compare
financial data from different companies
over time, aiding to understand the trend in
the financials for individuals and
stakeholders benefit. It provides ready
figures for comparison in order to evaluate
manager’s performance, new product or
business line. Also it is useful to know
better about the company’s performance in
the current market conditions and how the
business reacts affecting the entire
industry.
Trend Analysis
Trend analysis is a tool that forecast
the future movement of a stock based on
historical data. Trend analysis is based on
the judgment by assessing the previous
results and financial data and accordingly
predicting what will happen in the in the
future. It is useful since investor can get
the profit investing in a company which is
performing well historically following the
trend and hence would likely be performing
well in the future.
Cash Flow Analysis
The cash flow statement gives
information to the stakeholders about the
amount of cash generated and used by a
company in a given period which is
generally arise either from financing,
operations or investing activities. Thecash
flow is used by the analyst as an indication
of a company's financial strength. The
statement analysis provides a tool to the
individual to gauge the financial
performance of the company. The
creditors, employees and other
stakeholders can get the assurance for the
timely payments if there is enough free
cash available on the company’s account,
based on the cash flow statement.
Corporate Valuation: Similarly, in order to
assess the company’s financial standing in
the current market, business valuation is
carried out based on some predefined
formulas which is called as Corporate
Valuation. It is useful for the potential
investors to understand the fair market
value of the company before investing into
it. Corporate valuation is a set of
procedures used to estimate the economic
value of a firm in terms of its assets and
liabilities. Valuation is done by financial
market participants to determine the price
they are willing to pay or receive to affect a
sale of a business. It is usually used to
ascertain the fair value of a business for
establishing partner ownership, investment
analysis, merger and acquisition
transactions, capital budgeting, financial
reporting, taxable events to determine the
proper tax liability, and also in divorce
litigation.
The corporate valuation is done
using different tools and methods as
considered by the valuators, businesses
and industries. A common approaches to
corporate valuation comprises of the tools
such as NOPAT (Net Operating Profit after
Tax), FCV(free cash flow), ROIC (Return
on Invested Capital), EVA (Economic
Value Added), and MVA (Market Value
Added) computed upon review of financial
statements, discounting cash flow models,
and similar company comparisons.
NOPAT is defined as company's potential
cash earnings. FCF is the better indicator
of the firm’s ability to generate cash. ROIC
explains how well the company’s invested
capital is giving the profitable results. EVA
is an estimate of firm’s economic profit.
MVA is an indicator for the investor to
understand the market value of his/her
investment. Higher MVA that the company
26 AyaWadi and Robin A. Carvalho January
has earned significant wealth for its
shareholders
OBJECTIVE OF THE STUDY
To conduct the financial analysis of
a local pharma company, Julphar for year
2009-2011 and compare its current
position in global pharmaceutical industry.
RESEARCH METHODOLOGY
The present study is about
understanding the financial health of a
pharmaceutical company; Julphar with
respect to the global industry. The
published data, financial statements of
Julphar as well as other renowned firms
such as Johnson & Johnson, Pfizer
(combining output these companies is
assumed to be pharmaceutical industry
output), has been obtained for the period of
three years (2009-2011) from Bloomberg
database.
FINANCIAL ANALYSIS
In order to assist decision makers,
periodical financial statements provide a
structured framework to analyze
company’s performance. Financial ratio
analysis is based on the Balance Sheet
and Income Statement which gives the
unique picture of a company's financial
position. Following ratios and certain tools
are used to distinguish Julphar’s financial
standing in the global pharmaceutical
industry.
Current Ratio, which is 2.24, indicates that
the company’s current assets are higher
than its current liabilities. (Greater than 1)
Hence the company is in good health. Also
the ratio is higher than general industry
trend (2.02).
Quick Ratio(1.58) also indicates sound
position of the company in terms of its
current assets after subtracting inventories
as compared with current liabilities (> 1).
The strong position against the industry
average (1.46) indicates that the company
can still invest in extra inventories in short
term.
In terms of profitability, Return on
Common Equity(10.37) and Net Income
Margin(16.49)show above industry
average (5.62 and 5.21 respectively) which
indicates that the company is performing
better on profitability criterion.
Total Debt/Equity ratio (26.40) is less
than the industry average of 47.43 which is
not a good sign from investor’s
perspective. The Debt Ratio, Total
Debt/Total Assets, (18.89)is not much
less than the industry debt ratio (19.32)
that does mean there is no immediate debt
risk involved in the business but the firm
will have to be cautious about their future
debt based expansion plans.
DuPont Analysis
The Du Pont analysis splits the
Return on Equity into three distinct
elements; profit margin, and asset turnover
and equity multiplier. It helps the investor
to forecast their returns on the investment
and compare them with similar industries
for investment decision.
ROE = (Profit margin)*(Asset
turnover)*(Equity multiplier) = (Net
profit/Sales)*(Sales/Assets)*(Assets/Equity
) = (Net Profit/Equity)
Asset Turnover- Revenue/Avg. Assets
ratio -(0.46) is less than the industry
average of 0.64. However, Adjusted
Return on Equity(10.37) is much above
than the average of 6.86 which indicates
that the business the potential to attract the
investors.
Account Receivable (18.04) is higher than
the industry average of 10.21 that implies
the company has better cash in hand from
its growth perspective than other
companies in the same industry.
2014 International Academic Research Journal of Economics and Finance 27
Book Value per Share (6.97) of Julpharis
less than other pharmaceutical companies
in the industry which has ratio of 13.26.
Free Cash Flow: The Company is running
in negative in terms of FCF (-25.38)
against the quite higher industry ratioof
(13, 919.17) which indicates that the
company’s operating profit is too less than
its investment in the operating capital.
Similarly, Julphar’s Cash from
Operations(162.34)is also less than the
industry figure of 15,922.50.
Cash & Near Cash Items: The average of
cash and near cash items (4.70) is less
than the global industry figures (10.18)
which describes that Julphar is having less
cash in hand for its immediate operation
and expansion as compared to the industry
requirements.
From assets perspective, Inventories that
shows 12.70, are too less than the industry
benchmark figure of 21.75.
Total Long Term Liabilities are (6.46)
much less than the average industry TLT
Liabilities (20.74) which is a good
indication for the company.
Total Equityas well as Retained Earnings
and Other Equities is much higher than
the average industry numbers which is a
good sign for the investors.
Operating Expenses(41.89) is less than
the global industry figure of 48.16 which
shows that the company’s operating
expenses are below the industry expenses.
Net income (16.49)is much better than the
industry income of 5.21 which explains that
the company is doing well as compared to
the other companies in the pharmaceutical
business.
Inventories ratio (11.17) is higher than
industry ratio of 8.94 which is a good sign
for the company. Having more inventories
in the store is a good indication in the
pharmaceutical industry.
Total Current Assets(9.62) are less than
the industry average of 12.63 which is not
a favorable sign.
Total Current Liabilities(36.78)are higher
than the industry average of 10.19 which is
not a good indicator of the business.
Total Equity(6.51) shows relatively lower
than the industry average of 7.95.
Cost of Sales (9.13) is much higher than
the industry average of 2.39 which shows
that the company spends much on its
marketing and sales as compared to the
other firms in the industry.
Operating Expenses(3.46) are less than
industry average of 9.51 which is a good
indicator.
Net Fixed Assets(38.27) are higher than
the other firms in the industry (8.62) which
is a positive sign for the growth.
Total Long-Term Assets(23.37)are higher
than industry average (14.60) which shows
sound health of the company.
Total Current Liabilities (52.76) are
higher than the industry average of 13.23
which is a bad indication.
Total Equity (10.29) is much higher than
the other firms in the industry (1.86) which
is a good sign.
The trend analysis of Income Statement
shows Gross Profit of 28.59 whereas the
industry data shows the loss (-2.42).
Similarly, Operating profit (loss)figure
(21.37) gives a relief to the company when
compared with the industry losses (-79.03).
CONCLUSION
When any investor plans for
investing in a firm, it is most important to
know about the product, its market and the
industry in which it operates. The
Pharmaceutical sector is one of the leading
industries since it has a widespread market
in global population. In this benchmarking
28 AyaWadi and Robin A. Carvalho January
project, we have analyzed the financial
statements of a local drug company
julpharInc. for the years 2009-2011.
According to the analysis ofbalance sheet
and income statement that give varied views
about the performance of the company for
the given financial periods, the paper
provides some clues to the stakeholders
how the company is performing in the
current market and whether it has capability
to compete with the global firms in the
future.
From liquidity perspective, the
respective current and quick ratios, which
are higher than the industry ratios, show the
sound health of the firm. Moreover, the firm
provides excellent profitability ratios such as
Return on Common Equity and Net Income
Margin. However, when it comes to Asset
Management and Financial Leverage ratios,
the company’s performance gives
disappointing results. Similarly, the company
is lagging behind on Free Cash Flow as well
as Cash from Operation as compared to the
firms in the industry.
The Common Size Statement and
Comparative Statement give mixed views on
the financial position of Julphar. The firm is
performing unsatisfactory on Cash,
Inventory, Operating Expenses and Total
Long Term Liabilities. Nevertheless, it does
well on Total Equity and Retained Earnings.
On the other hand, the Trend Statement
demonstrates better performance of the firm
on several criteria as compared to the
industry. The company’s Net Fixed Assets,
Total Long term Assets, Total Equity, Gross
and Operating Profit are much higher.
Based on the study and analysis of
balance sheets, income statements and
ratios such as liquidity, profitability,
creditability and associated analysis like
DuPont, growth and yield analysis, finally we
have reached to the conclusion that the
overall health of the Company, in
comparison to the overall pharmaceutical
industry, is not so sound however, its
liquidity and profitability ratios give some
relief to the stakeholders. Considering its
government immunity the firm, Julphar, will
sustain in the market in the near future but
needs to take corrective measures in order
to compete in the global industry.
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30 AyaWadi and Robin A. Carvalho January
Financial Ratios:
1. Liquidity:
Julphar
Industry
Average
FY 2011 FY 2010 FY 2009 Average
Cash Ratio 0.12 0.24 0.39 0.25
1.02
Current Ratio 1.71 2.39 2.63 2.24
2.02
Quick Ratio 1.20 1.66 1.87 1.58
1.46
CFO/Avg. Current Liability 0.40 0.32 0.48 0.40
0.62
Common Equity/Total
Assets 68.04 72.22 75.82 72.03
48.26
Long-Term Debt/Equity 6.39 10.11 6.76 7.75
31.45
Long-Term Debt/Capital 4.86 8.02 5.55 6.14
21.81
Long-Term Debt/Total
Assets 4.35 7.30 5.12 5.59
14.59
Total Debt/Equity 31.55 26.01 21.64 26.40
40.60
Total Debt/Capital 23.98 20.64 17.79 20.80
28.51
Total Debt/Total Assets 21.46 18.78 16.41 18.89
19.18
CFO/Total Liabilities 27.44 20.86 37.54 28.61
23.62
CFO/CapEx 0.87 0.61 1.22 0.90
8.73
2. Profitability:
Julphar
Industry
Average
FY 2011 FY 2010 FY 2009 Average
Return on Common Equity 11.15 10.78 9.19 10.37
5.62
Return on Assets 7.81 7.97 7.00 7.59
3.45
Gross Margin 61.29 58.91 59.68 59.96
61.42
EBITDA Margin 22.65 22.12 24.28 23.02
14.62
Operating Margin 18.17 17.35 18.69 18.07
13.27
Incremental Operating
Margin 25.39 10.91 39.61 25.30
624.75
Income before XO Margin 16.62 16.79 16.08 16.49
5.21
Net Income Margin 16.62 16.79 16.08 16.49
5.21
Net Income to Common
Margin 16.62 16.79 16.08 16.49
5.21
Dvd Payout Ratio 41.92 46.18 44.79 44.30
25.10
Sustainable Growth Rate 6.48 5.80 5.07 5.78
5.86
2014 International Academic Research Journal of Economics and Finance 31
3. Creditability:
Julphar
Industry
Average
FY 2011 FY 2010 FY 2009 Average
Total debt 495.21 385.65 299.53 393.46
8815.06
Short-Term Debt 394.85 235.80 206.03 278.89
3690.15
Long Term Debt 100.36 149.85 93.49 114.57
5124.91
Total Debt/T12M EBITDA 2.13 1.89 1.62 1.88
3.79
Net Debt/EBITDA 1.81 1.43 0.91 1.39
3.67
Total Debt/EBIT 2.66 2.41 2.10 2.39
0.91
Net Debt/EBIT 2.26 1.82 1.19 1.76
0.09
EBITDA to Interest Expense 11.55 14.92 15.57 14.02
19.87
EBITDA-CapEx/Interest
Expense -0.09 0.70 4.17 1.60
14.38
EBIT to Interest Expense 9.27 11.71 11.99 10.99
17.03
Interest Expense 20.08 13.64 11.88 15.20
309.35
Common Equity/Total Assets 68.04 72.22 75.82 72.03
43.81
Long-Term Debt/Equity 6.39 10.11 6.76 7.75
15.83
Long-Term Debt/Capital 4.86 8.02 5.55 6.14
11.03
Long-Term Debt/Total Assets 4.35 7.30 5.12 5.59
7.18
Total Debt/Equity 31.55 26.01 21.64 26.40
47.43
Total Debt/Capital 23.98 20.64 17.79 20.80
31.24
Total Debt/Total Assets 21.46 18.78 16.41 18.89
19.32
Net Debt/Equity 26.80 19.61 12.23 19.55
21.54
Net Debt/Capital 20.37 15.56 10.05 15.33
11.77
EBITDA 231.98 203.56 184.99 206.85
9705.16
EBITDA-CapEx -1.77 9.58 49.59 19.13
8397.96
EBIT 186.06 159.70 142.44 162.73
8245.96
Julphar Industry
Average
FY 2011 FY 2010 FY 2009 Average
Normlzd Net Inc/Net Inc to Cmn 1.00 1.00 1.00 1.00
0.74
EBIT/Revenue % 18.17 17.35 18.69 18.07
13.27
Revenue/Avg Assets 0.47 0.47 0.44 0.46
0.64
Avg Assets/Avg Equity 1.43 1.35 1.31 1.36
2.29
Adjusted Return on Equity 11.15 10.78 9.19 10.37
6.86
5 Year Average Adj ROE 10.37 9.75 10.70 10.27
12.68
32 AyaWadi and Robin A. Carvalho January
4. Growth:
Julphar
Industry
Average
FY 2011 FY 2010 FY 2009 Average
Revenue 0.00 20.76 0.00 6.92
6.19
EBITDA 0.00 10.04 0.00 3.35
6.17
Operating Income 0.00 12.12 61.36 24.49
3.93
Net Income to Common 10.18 26.07 -8.52 9.24
-0.11
EPS Diluted 9.09 27.11 -8.29 9.31
-2.02
EPS Diluted before
Abnormal 9.09 27.11 45.33 27.18
0.46
Dividend per Share 0.00 30.00 0.00 10.00
-2.15
Accounts Receivable 16.21 16.36 21.56 18.04
10.21
Inventory 11.12 12.31 3.43 8.95
25.49
Fixed Assets 23.85 23.53 16.99 21.46
6.89
Total Assets 12.37 12.48 9.10 11.32
18.37
Modified Working Capital 20.33 13.66 15.76 16.58
18.57
Working Capital -22.24 3.55 37.41 6.24
30.15
Accounts Payable 0.00 52.59 -0.62 17.32
18.37
Short-Term Debt 67.45 14.45 -10.58 23.77
1.68
Total Debt 28.41 28.75 17.17 24.78
35.92
Total Equity 5.87 7.14 7.88 6.97
13.26
Capital 10.52 10.99 9.43 10.31
18.24
Book Value per Share 5.87 7.14 7.88 6.97
10.27
Cash From Operations 70.03 -28.20 169.58 70.47
5.59
Capital Expenditures 20.50 43.27 -26.97 12.27
0.90
2014 International Academic Research Journal of Economics and Finance 33
5. Yield Analysis:
Julphar
Industry
Average
FY
2011 FY 2010
FY
2009 Average
Cash From Operations 202.30 118.98 165.72 162.34
15922.50
Capital Expenditures -233.75 -193.99 -135.40 -187.71
-2003.33
Free Cash Flow -31.45 -75.00 30.32 -25.38
13919.17
Market Capitalization 1590.77 1333.97 1255.22 1393.32
162737.9
Free Cash Flow Yield -1.98 -5.62 2.42 -1.73
8.78
Dividends Paid -79.59 -46.14 -35.90 -53.87
-5859.50
Net ST Debt Repayments 109.56 86.12 43.89 79.86
-517.83
Net LT Debt Repayments 0.00 0.00 0.00 0.00
3565.67
Other Financing Activities -20.08 -13.64 -11.88 -15.20
42.00
T12 Cash to Suppliers of
Capital -9.89 -26.34 0.00 -12.08
5119.33
Market Capitalization 1590.77 1333.97 1255.22 1393.32
162737.9
T12 Shareholder Yield -0.62 -1.97 0.00 -0.87
3.06
Dividends Paid -79.59 -46.14 -35.90 -53.87
-5859.50
T12 Cash to Shareholders 79.59 46.14 0.00 41.91
8209.17
Market Capitalization 1590.77 1333.97 1255.22 1393.32
162737.9
T12 Shareholder Yield, Ex Debt 5.00 3.46 0.00 2.82
5.06
Cash From Operations 202.30 118.98 165.72 162.34
15922.50
Capital Expenditures -233.75 -193.99 -135.40 -187.71
-2003.33
Enterprise Value 2011.48 1624.70 1424.46 1686.88
166780.2
Dividends Paid -79.59 -46.14 -35.90 -53.87
-5859.50
Net ST Debt Repayments 109.56 86.12 43.89 79.86
-517.83
Other Financing Activities -20.08 -13.64 -11.88 -15.20
42.00
T12 Cash to Suppliers of
Capital -9.89 -26.34 0.00 -12.08
5119.33
Enterprise Value 2011.48 1624.70 1424.46 1686.88
166780.2
34 AyaWadi and Robin A. Carvalho January
o Common Size Statement (Balance Sheet):
Julphar
Industry
Average
Assets FY 2011 FY 2010 FY 2009 Average
Cash & Near Cash Items 2.9756 4.31807 6.79263 4.70
10.18
Accounts & Notes Receivable 28.8252 27.8743 26.946 27.88
22.90
Inventories 12.6024 12.7451 12.7646 12.70
21.75
Other Current Assets 0.89182 1.68971 1.06535 1.22
6.61
Total Current Assets 45.5483 46.932 47.9141 46.80
64.54
Net Fixed Assets 42.2712 38.3537 34.9222 38.52
13.52
Gross Fixed Assets 60.9607 57.1633 53.7024 57.28
22.80
Total Long-Term Assets 54.4517 53.068 52.0859 53.20
35.46
Total Assets 100 100 100 100.00
100.00
Liabilities & Shareholders'
Equity FY 2011 FY 2010 FY 2009 Average
Accounts Payable 0 1.93036 1.42293 1.12
6.50
Short-Term Borrowings 17.1137 11.4849 11.2876 13.30
12.15
Other Short-Term Liabilities 9.53968 6.21141 5.54216 7.10
16.80
Total Current Liabilities 26.6534 19.6267 18.2527 21.51
35.45
Long-Term Borrowings 4.34991 7.29838 5.12201 5.59
7.18
Other Long-Term Liabilities 0.95683 0.85557 0.8078 0.87
13.56
Total Long-Term Liabilities 5.30675 8.15395 5.92982 6.46
20.74
Total Liabilities 31.9601 27.7806 24.1825 27.97
56.19
Retained Earnings & Other
Equity 37.1213 37.4749 38.2397 37.61
26.96
Total Equity 68.0399 72.2194 75.8175 72.03
43.81
Total Liabilities & Equity 100 100 100 100.00
100.00
o Common Size Income Statement:
Julphar
Industry
Average
FY 2011 FY 2010 FY 2009 Average
Revenue 100.00 100.00 100.00 100.00
100.00
Cost of Revenue 38.71 41.09 40.32 40.04
38.58
Gross Profit 61.29 58.91 59.68 59.96
61.42
Operating Expenses 43.12 41.55 40.99 41.89
48.16
Operating Income 18.17 17.35 18.69 18.07
13.28
Interest Expense 1.96 1.48 1.56 1.67
3.74
Net Non-Operating Losses
(Gains) -0.41 -0.91 1.05 -0.09
0.48
Income Before XO Items 16.62 16.79 16.08 16.49
5.21
Net Income 16.62 16.79 16.08 16.49
5.21
2014 International Academic Research Journal of Economics and Finance 35
o Comparative Statement (Balance Sheet):
Julphar
Industry
Average
Assets 2010-2011 2009-2010 Average
Cash & Near Cash Items -22.56 -28.50 -25.53
-22.35
Accounts & Notes Receivable 16.21 16.36 16.28
5.90
Inventories 11.12 12.31 11.71
8.94
Other Current Assets -40.69 78.40 18.86
23.00
Total Current Assets 9.06 10.18 9.62
12.63
Net Fixed Assets 23.85 23.53 23.69
-3.51
Gross Fixed Assets 19.84 19.73 19.78
-26.89
Total Long-Term Assets 15.30 14.60 14.95
2.16
Total Assets 12.37 12.48 12.43
8.17
Liabilities & Shareholders' Equity 2010-2011 2009-2010 Average
Accounts Payable -100.00 52.59 -23.70
-3.49
Short-Term Borrowings 67.45 14.45 40.95
31.97
Other Short-Term Liabilities 72.59 26.06 49.33
3.49
Total Current Liabilities 52.61 20.95 36.78
10.19
Long-Term Borrowings -33.02 60.28 13.63
-8.37
Other Long-Term Liabilities 25.67 19.13 22.40
5.00
Total Long-Term Liabilities -26.86 54.67 13.90
0.46
Total Liabilities 29.28 29.22 29.25
9.47
Retained Earnings & Other Equity 11.31 10.23 10.77
-101.33
Total Equity 5.87 7.14 6.51
7.95
Total Liabilities & Equity 12.37 12.48 12.43
8.17
o Comparative Income Statement
Julphar
Industry
Average
2010-2011 2009-2010 Average
Turnover (Revenue) -11.28 20.76 4.74
0.86
Cost of sales -4.83 23.09 9.13
2.39
Gross Profit -15.78 19.19 1.70
-2.06
Operating Expenses -15.48 22.41 3.46
9.51
Operating profit (loss) -16.51 12.12 -2.19
168.31
Interest Expense -47.19 14.83 -16.18
9.32
Net Non-Operating Losses
(Gains) 49.95 -204.55 -77.30
-57.21
Income Before XO Items -10.18 26.07 7.95
60.80
Net profit (loss) -10.18 26.07 7.95
60.80
36 AyaWadi and Robin A. Carvalho January
o Trend Statement (Balance Sheet):
Julphar
Industry
Average
Assets
FY
2011
FY
2010
FY
2009 Average
Cash & Near Cash Items -44.63 -28.50 100 -36.56
142.31
Accounts & Notes Receivable 35.21 16.36 100 25.79
18.77
Inventories 24.79 12.31 100 18.55
1.58
Other Current Assets 5.81 78.40 100 42.11
-36.09
Total Current Assets 20.16 10.18 100 15.17
12.93
Net Fixed Assets 53.00 23.53 100 38.27
8.62
Gross Fixed Assets 43.48 19.73 100 31.61
-16.96
Total Long-Term Assets 32.14 14.60 100 23.37
14.60
Total Assets 26.40 12.48 100 19.44
7.78
Liabilities & Shareholders'
Equity
FY
2011
FY
2010
FY
2009 Average
Accounts Payable -100.00 52.59 100 -23.70
27.17
Short-Term Borrowings 91.64 14.45 100 53.04
-5.41
Other Short-Term Liabilities 117.57 26.06 100 71.82
34.85
Total Current Liabilities 84.57 20.95 100 52.76
13.23
Long-Term Borrowings 7.35 60.28 100 33.81
-1.99
Other Long-Term Liabilities 49.72 19.13 100 34.43
2.85
Total Long-Term Liabilities 13.12 54.67 100 33.89
1.53
Total Liabilities 67.05 29.22 100 48.14
11.84
Retained Earnings & Other Equity 22.70 10.23 100 16.47
-113.71
Total Equity 13.43 7.14 100 10.29
1.86
Total Liabilities & Equity 26.40 12.48 100 19.44
7.78
2014 International Academic Research Journal of Economics and Finance 37
o Trend (Income) Statement:
Julphar
Industry
Average
FY
2011
FY
2010
FY
2009 Average
Turnover (Revenue) 34.39 20.76 100 27.57
1.87
Cost of sales 29.04 23.09 100 26.06
8.34
Gross Profit 38.00 19.19 100 28.59
-2.42
Operating Expenses 41.\36 22.41 100 31.88
-12.57
Operating profit (loss) 30.63 12.12 100 21.37
-79.03
Interest Expense 69.02 14.83 100 41.93
3.76
Net Non-Operating Losses
(Gains) -152.33 -204.55 100 -178.44
-56.37
Income Before XO Items 38.91 26.07 100 32.49
-52.39
Net profit (loss) 38.91 26.07 100 32.49
-52.39
Balance Sheet
Common Size
Statement
Comparative
Statement Trend Statement
Julphar Industry Julphar Industry Julphar Industry
Assets
Cash & Near Cash Items 4.70 10.18 -25.53 -22.35 -36.56 142.31
Accounts & Notes
Receivable 27.88 22.90 16.28 5.90 25.79 18.77
Inventories 12.70 21.75 11.71 8.94 18.55 1.58
Other Current Assets 1.22 6.61 18.86 23.00 42.11 -36.09
Total Current Assets 46.80 64.54 9.62 12.63 15.17 12.93
Net Fixed Assets 38.52 13.52 23.69 -3.51 38.27 8.62
Gross Fixed Assets 57.28 22.80 19.78 -26.89 31.61 -16.96
38 AyaWadi and Robin A. Carvalho January
Balance Sheet
Common Size
Statement
Comparative
Statement Trend Statement
Julphar Industry Julphar Industry Julphar Industry
Total Long-Term Assets 53.20 35.46 14.95 2.16 23.37 14.60
Total Assets 100.00 100.00 12.43 8.17 19.44 7.78
Liabilities &
Shareholders' Equity
Accounts Payable 1.12 6.50 -23.70 -3.49 -23.70 27.17
Short-Term Borrowings 13.30 12.15 40.95 31.97 53.04 -5.41
Other Short-Term
Liabilities 7.10 16.80 49.33 3.49 71.82 34.85
Total Current Liabilities 21.51 35.45 36.78 10.19 52.76 13.23
Long-Term Borrowings 5.59 7.18 13.63 -8.37 33.81 -1.99
Other Long-Term Liabilities 0.87 13.56 22.40 5.00 34.43 2.85
Total Long-Term Liabilities 6.46 20.74 13.90 0.46 33.89 1.53
Total Liabilities 27.97 56.19 29.25 9.47 48.14 11.84
Retained Earnings & Other
Equity 37.61 26.96 10.77 -101.33 16.47 -113.71
Total Equity 72.03 43.81 6.51 7.95 10.29 1.86
Total Liabilities & Equity 100.00 100.00 12.43 8.17 19.44 7.78
Income Statement
Common Size
Statement
Comparative
Statement Trend Statement
Julphar Industry Julphar Industry Julphar Industry
Revenue 100.00 100.00 4.74 0.86 27.57 1.87
Cost of Revenue 40.04 38.58 9.13 2.39 26.06 8.34
Gross Profit 59.96 61.42 1.70 -2.06 28.59 -2.42
Operating Expenses 41.89 48.16 3.46 9.51 31.88 -12.57
Operating Income 18.07 13.28 -2.19 168.31 21.37 -79.03
Interest Expense 1.67 3.74 -16.18 9.32 41.93 3.76
Net Non-Operating Losses
(Gains) -0.09 0.48 -77.30 -57.21 -178.44 -56.37
Income Before XO Items 16.49 5.21 7.95 60.80 32.49 -52.39
Net Income 16.49 5.21 7.95 60.80 32.49 -52.39
2014 International Academic Research Journal of Economics and Finance 39
Liquidity
Creditability
Julphar Industry
Julphar Industry
Cash Ratio 0.25 1.02
Total debt 393.46 8815.06
Current Ratio 2.24 2.02
Short-Term Debt 278.89 3690.15
Quick Ratio 1.58 1.46
Long Term Debt 114.57 5124.91
CFO/Avg Current Liab 0.40 0.62
Total Debt/T12M
EBITDA 1.88 3.79
Common Equity/Total
Assets 72.03 48.26
Net Debt/EBITDA
1.39 3.67
Long-Term Debt/Equity 7.75 31.45
Total Debt/EBIT 2.39 0.91
Long-Term Debt/Capital 6.14 21.81
Net Debt/EBIT 1.76 0.09
Long-Term Debt/Total
Assets 5.59 14.59
EBITDA to Interest
Expense 14.02 19.87
Total Debt/Equity 26.40 40.60
EBITDA-CapEx/Interest
Expense 1.60 14.38
Total Debt/Capital 20.80 28.51
EBIT to Interest Expense 10.99 17.03
Total Debt/Total Assets 18.89 19.18
Interest Expense 15.20 309.35
CFO/Total Liabilities 28.61 23.62
Common Equity/Total
Assets 72.03 43.81
CFO/CapEx 0.90 8.73
Long-Term Debt/Equity 7.75 15.83
Long-Term Debt/Capital 6.14 11.03
Profitability
Long-Term Debt/Total
Assets 5.59 7.18
Julphar Industry
Total Debt/Equity 26.40 47.43
Return on Common
Equity 10.37 5.62
Total Debt/Capital
20.80 31.24
Return on Assets 7.59 3.45
Total Debt/Total Assets 18.89 19.32
Gross Margin 59.96 61.42
Net Debt/Equity 19.55 21.54
EBITDA Margin 23.02 14.62
Net Debt/Capital 15.33 11.77
Operating Margin 18.07 13.27
EBITDA 206.85 9705.16
Incremental Operating
Margin 25.30 624.75
EBITDA-CapEx
19.13 8397.96
Income before XO
Margin 16.49 5.21
EBIT
162.73 8245.96
Net Income Margin 16.49 5.21
Net Income to Common
Margin 16.49 5.21
Dvd Payout Ratio 44.30 25.10
Sustainable Growth Rate 5.78 5.86
40 AyaWadi and Robin A. Carvalho January
Growth Ratio
Yield Ratio
Julphar Industry
Julphar Industry
Revenue 6.92 6.19
Cash From Operations 162.34 15922.50
EBITDA 3.35 6.17
Capital Expenditures -187.71 -2003.33
Operating Income 24.49 3.93
Free Cash Flow -25.38 13919.17
Net Income to Common 9.24 -0.11
Market Capitalization 1393.32 162737.90
EPS Diluted 9.31 -2.02
Free Cash Flow Yield -1.73 8.78
EPS Diluted before
Abnormal 27.18 0.46
Dividends Paid -53.87 -5859.50
Dividend per Share 10.00 -2.15
Net ST Debt Repayments 79.86 -517.83
Accounts Receivable 18.04 10.21
Net LT Debt Repayments 0.00 3565.67
Inventory 8.95 25.49
Other Financing
Activities -15.20 42.00
Fixed Assets 21.46 6.89
T12 Cash to Suppliers of
Capital -12.08 5119.33
Total Assets 11.32 18.37
Market Capitalization 1393.32 162737.90
Modified Working
Capital 16.58 18.57
T12 Shareholder Yield -0.87 3.06
Working Capital 6.24 30.15
Dividends Paid -53.87 -5859.50
Accounts Payable 17.32 18.37
T12 Cash to Shareholders 41.91 8209.17
Short-Term Debt 23.77 1.68
Market Capitalization 1393.32 162737.90
Total Debt 24.78 35.92
T12 Shareholder Yield,
Ex Debt 2.82 5.06
Total Equity 6.97 13.26
Cash From Operations 162.34 15922.50
Capital 10.31 18.24
Capital Expenditures -187.71 -2003.33
Book Value per Share 6.97 10.27
Enterprise Value 1686.88 166780.24
Cash From Operations 70.47 5.59
Dividends Paid -53.87 -5859.50
Capital Expenditures 12.27 0.90
Net ST Debt Repayments 79.86 -517.83
Other Financing
Activities -15.20 42.00
DuPont Ratio
T12 Cash to Suppliers of
Capital -12.08 5119.33
Julphar Industry
Enterprise Value 1686.88 166780.24
Normlzd Net Inc/Net Inc
to Cmn 1.00 0.74
EBIT/Revenue % 18.07 13.27
Revenue/Avg Assets 0.46 0.64
Avg Assets/Avg Equity 1.36 2.29
Adjusted Return on
Equity 10.37 6.86
5 Year Average Adj ROE 10.27 12.68