engro foods 3

Engro Foods Limited was officially launched as a fully owned subsidiary of Engro in 2004. Using dairy as a stepping stone to enter into the food business, the Company has established its processing units in Sukkur and Sahiwal, along with an ice cream production facility in Sahiwal.

HISTORY…..

The main plant that is located at Sukhur on 23 acre of land, has the raw milk reception capability 300000 liters per day.The plant has been established at a cost of Rs. 1 billion which provides direct employment to 750 peoples.

MAIN PLANT…..

PRODUCTS

Hussain Dawood

M.Aliuddin Ansari

Sarfraz Ahmed

Khawaja Iqbal

Ruhail Muhammad

Shabbir Hashmi

HIRARICHY

Best Communication Award (for Tarang Sohni Mahiwal Campaign) In 2011 (Karachi)

Best Launch of 2007/2008 Award (for Tarang) In 2008

Brand that Created the Biggest Buzz Award for Olpers In 2008

Best Commercial Consumer Award for Olpers: Pakistan Media Awards, 2010

Tarang got award in 2011 for breakfast category.

AWARDS

Leadership

Innovation

International focus

Open communication

Individual growth and development

Safety ,Health and Environment

Core values……

RATIO ANALYSIS OF ENGRO FOOD…….

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm's financial performance. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or has to improve.

Liquidity RatioActivity RatioProfitability RatioSolvency RatioReturn on investment

Liquidity ratios are the ratios meant for testing short_term financial position of a business.

CURRENT RATIO

LIQUID/ACID TEST/QUICK RATIO

ABSOLUTE LIQUID RATIO

LIQUIDITY RATIO……

Current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares the firm’s current assets to its current liabilities.

Current Assets/Current

Liabilities

CUREENT RATIO

FORMULACurrent Assets/Current Liabilities

YEAR 2011 2012

Calculation

Result

=9512702/4441432

=2.14

=6369139/3479693

=1.83

Liquid ratio is also term as Acid test or Quick ratio. It is the ratio of Liquid assets to Current Liabilities. It expresses a company’s ability to repay short term creditors out of its liquid assets.

Liquid assets/Current liabilities

Liquid Ratio

FORMULA(Current Assets – Stock – Prepaid) / Current Liabilities

YEAR 2011 2012

Calculation

Result

=3465230/3479693 =5756307/4441432

=0.9 =1.2

Absolute liquid ratio

In addition to computing current and liquid ratio, some analysts also compute absolute liquid ratio to test the liquidity of the business.

Formula:

(Cash+Bank+Marketable secqurities)/Current liabilities

2011 2012

=350728/3479693 =422008/4441432

=0.10 =0.09

FORMULA (Cash + Bank + Marketable securities) / Current Liabilities

YEAR

Calculation

Result

ACTIVITY RATIOS….

ACTIVITY RATIOS……

Inventory Turnover Ratio.

Inventory Conversion Period.

Receivables Turnover Ratio.

Receivables Conversion Period.

Payables Turnover Ratio.

Payables Conversion Period.

Working Capital Turnover Ratio.

Fixed Assets Turnover Ratio….

Inventory Turnover Ratio…

“This ratio measures the velocity with which average stock is sold in market…….”

Formula...CGS / Cost Of Average Stock

Cost Of Average Stock=(opening

Stock+closing Stock)/2

Inventory Turnover Ratio…..

Calculation

Result:-

2011 2012“CGS / Cost Of Average Stock”

“CGS / Cost Of Average Stock”

Cost of Average Stock= (2089221+2637816)/2

Cost of Average Stock= (2637816+3494605)/2

=23230445/2363519 =29848301/3066211

=9.8 Times….. =9.7 Times……

Formula:-

Inventory Conversion Period…..

“It means that on an average how many days were taken to dispose off average inventory…..”

Formula“365 /

Inventory Turnover

Ratio”

2011 2012Formula:- 365 / Inventory

Turnover Ratio 365 / Inventory Turnover Ratio

Calculation: = 365 / 9.8 = 365 / 9.7

Result:- = 37 Days = 37 Days

Inventory Conversion Period…..

Receivables Turnover Ratio…..

“This ratio measures that how

many times average

receivables have been received

during a period of one year…”

• Formula…

• Net Credit Sales / Average Receivables

• Average Receivables = (Opening Debtors & B/R + Closing Debtors & B/R)/2

Receivables Turnover Ratio…..

2011 2012Formula... “Net Credit Sales /

Average Receivables”“Net Credit Sales /

Average Receivables”

Calculation: Average Receivables = {(51879+720735) + (87121+1160126)}/2

Average Receivables = {(87121 + 1160126)

+ (149074+1440167)}/2

// = 29859226/1009931 = 40168919 / 1418244

Result = 29.5 Times… = 28.3 Times…

Receivables Conversion Period“It means that on an average how many days were taken to

receive average receivables…..”

FormulaDays In Year /

Receivables Turnover

Ratio

365 / Receivables Turnover

Ratio

Receivables Conversion Period

2011 2012Formula 365 /

Receivables Turnover Ratio

365 / Receivables

Turnover Ratio

Calculation = 365 / 29.5 = 365 / 28.3

Result = 12 Days……

= 13 Days…..

“This ratio measures that how many times average payables are being paid during a

period of one year…”

Payables Turnover Ratio

Formula…….Net Credit Purchases /

Average Payables

CGS Opening

Stock+Purchases-Closing Stock

Avg Payables (Opening

Creditors & B/P + Closing Creditors

& B/P) / 2

Payables Turnover Ratio :Year 2011 2012

Formula… Net Credit Purchases / Average Payables

Net Credit Purchases / Average

Payables

Calculation: Avg Payables = (2040575 + 2343506) / 2

Avg Payables =(2343506 + 2358793) /

2

// = 23779040 / 2192041 = 30705090 / 23511495

Result….. 10.8 Times 13.05 Times

“Payables Conversion Period”

“It means that on an average how many days were taken to pay average payables…..”

Formula: 365 / Payables Turnover Ratio

“Payables Conversion Period”

Year 2011 2012Formula “365 / Payables

Turnover Ratio”“365 / Payables

Turnover Ratio”

Calculation = 365 / 10.8 = 365 / 13.05

Result = 34 Days = 28 Days

Working Capital Turnover Ratio……

“This ratio measures that how efficiency working capital is being utilized for generation of revenues………”

• CGS / Average working Capital

Formula!!

• Current Assets – Current Liabilities

Working Capital

• (Opening Working Capital + Ending Working Capital) / 2

Avg Working Capital

Working Capital Turnover Ratio……

Year 2011 2012Formula “CGS / Average

working Capital”“CGS / Average

working Capital”

Calculation = 23230445 / 2888152

= 29848301 / 5071270

Result…. = 8.04 Times…..

= 5.9 Times……

Fixed Assets Turnover Ratio“This ratio measures that how efficiency fixed

assets are being utilized for generation of revenues………”

Formula = CGS / Fixed Assets

Fixed Assets Turnover Ratio

Year 2011 2012

Formula = CGS / Fixed Assets

= CGS / Fixed Assets

Calculation = 23230445 / 10270045

= 29848301 / 12675983

Result……. = 2.3 Times….

= 2.4 Times…

PROFITABILITY RATIO

THE MAIN OBJECT OF BUSINESS CONCERN IS TO EARN PROFIT. IN GENERAL TERMS, EFFICIENCY IN THE BUSINESS IS MEASURED BY PROFITABILITY. BANKERS, FINANCIAL INSTITUTIONS AND OTHER CREDITORS LOOK AT THE PROFITABILITY RATIOS AS AN INDICATOR WHETHER OR NOT THE FIRM EARNS MORE THAN IT PAYS INTEREST FOR THE USE OF BORROWED FUNDS AND WHETHER THE ULTIMATE REPAYMENT OF THEIR DEBT APPEARS REASONABLY CERTAIN.

TYPES….GROSS PROFI RATIO

OPERATING PROFIT RATIO

NET PROFIT RATIO

OPERATING RATIO

EXPENSE RATIO

GROSS PROFIT RATIO….

GROSS PROFIT RATIO IS THE RATIO OF GROSS PROFIT TO NET SALES. IT IS MOST COMMONLY CALCULATED RATIO. THE RATIO TUS REFLECT THE MARGINE OF PROFIT THAT A CONCERN IS ABLE TO EARN ON ITS TRADING AND MANUFACTURING ACTIVITY.

FORMULA

=GROSS PROFIT/NET

SALES*100

YEAR 2011 2012CALCULATIONS 6628781/29859226

*10010320618/40168919

*100

RESULT 22.20% 25.69%

GROSS PROFIT RATIO….


OPERATING PROFIT RATIO HELPS IN DETERMINING THE ABILITY OF MANAGEMENT IN RUNNING THE BUSINESS…

FORMULA…

OPERATING PROFIT/NET SALES*100

=G.P - OPERATING EXPENSES

YEAR 2011 2012

CALCULATIONS 2411801/29859226*100

4823292/40168919*100

RESULT 8.07% 12.00%


NET PROFIT RATIO

NET PROFIT/NET

SALES*100

THIS RATIO MEASURES THE OVERALL PROFITABILITY.NET PROFIT IS ARRIVED AT AFTER TAKING INTO ACCOUNT BOTH THE OPERATING AND NON OPERATING ITEMS OF iNCOME AND EXPENSES.THE RATIO INDICATE WHAT PORTION OF NET SALES IS LEFT FOR THE OWNERS AFTER ALL EXPENSES HAVE BEEN MET..


*1002595193/40168919

*100

RESULT 3.00% 6.5%

NET PROFIT RATIO

OPERATING RATIO

The ratio is the test of efficiency of the management in their business operation. In normal conditions, the operating ratio should b low enough so as to leave portion of sales sufficient to give a fair return to the investors.

FORMULA

((C.G.S+OPERATING EXPENSES)/NET SALES*100)

year 2011 2012CALCULATIONS ((23230445+4430113)/29859226

*100)((29848301+5879728)/40168919*100)

RESULT 92.63% 88%

OPERATING RATIO

EXPENSE RATIO

EXPENSE RATIOS ARE CALCULATED BY DIVIDING EACH ITEM OF EXPENSE OR GROUP OF EXPENSES WITH THE NET SALES SO ANALYSE THE CAUSE OF VARIATION OF THE OPERATING RATIO.IT INDICATE THE PORTION OF SALES WHICH IS CONSUMED BY VARIOUS OPEATING EXPENSES…

FORM

ULA

EXPENSES/

NET SALE

S

*100


*1OO8107847/40168919

*100

RESULT 19.92% 20.18%

EXPENSE RATIO

Ratio:- The term accounting ratios is used to describe significant relationship which exist between figures shown in a balance sheet, in a profit and loss account or in any other part of the accounting organization.

EXAMPLE:- The relationship between 100 and 500 may be expressed as1:5. Ratio analysis facilitates the presentation of information of financial statements in simplified, concise and summarized form.

J. Batty

SOLVENCY

RATIO

The ratio determine the long term debt paying capacity of any organization & measure the efficiency of firm regarding interest payment.

Solvency Ratio

Solvency Ratio

Solvency Ratios

Debt to equity ratio

Fixed asset ratio Reserves to Capital

Proprietary ratio

Interest coverage ratio


The relationship between borrowed funds and internal owner’s funds is measured by debt equity ratio.

Also known as:- Debt to net worth ratio. FORMULAS:

Debt to equity ratio= long term debt/ equityDebt to equity ratio= total debt /equityDebt to equity ratio= long term debt/long term funds


Debt to equity ratio= long term debt/ equity

Year 2011 2012

Calculation =5610,000/7236942 = 6023070/10054273

Result =0.77 =0.59

2011 20120

0.10.20.30.40.50.60.70.80.9

ANALYSIS

Debt to equity ratioDebt to equity ratio= total debt /equity

Year 2011 2012

Calculation =(5610,000+252250)/7236942

=(6023,070+85389)/10054273

Result =0.81 =0.60

2011 20120

0.20.40.60.8

1

ANALYSIS


Debt to equity ratio= long term debt/long term fundslong term funds=long term debt+equity

Year 2011 2012

Calculation =5610,000/12846942 =6023070/16077343

Result =0.43 =0.37

20112012

0.320.340.360.380.4

0.420.44

ANALYSIS

Fixed assets ratio

Fixed assets ratio=Fixed Assets/Long Term Funds

Year 2011 2012

Calculation =10270045/12846942 =12675983/16077343

Result =0.80 =0.79

2011 20120.785

0.79

0.795

0.8

ANALYSIS

Reserves to CapitalReserves to Capital=Reserves/Capital

Year 2011 2012

Calculation =(-280947/7517889) =2437263/7615776

Result =(-0.03) =0.32

2011 2012-0.050

0.050.1

0.150.2

0.250.3

0.35

ANALYSIS

-0.03

Proprietary ratioProprietary ratio=Equity/Total assets

Year 2011 2012

Calculation =7236942/16639184 =10054273/22188685

Result =0.43 =0.45

20112012

0.420.4250.43

0.4350.44

0.4450.45

ANALYSIS

Interest coverage ratio Interest coverage ratio =EBIT/Interest

Year 2011 2012

Calculation =2411801/1049141 =4823292/902503

Result =2.298 times =5.344 times

2011 20120123456

ANALYSIS

Return on investment ratios

'Return On Investment RATIO

Return on investment is the primary ratio to measure the overall profitability and efficiency of business. It is also used to evaluate the efficiency of an investment. If an investment does not have a positive ROI then the investment should not be undertaken.

Types Of Return On Investment

Ratio

Return On Capital

Employed Ratio

Return On Equity Ratio

Earning Per Share Ratio

Price/ Earning

Ratio

Return On Capital

Employed (ROCE)

Return On Capital Employed (ROCE)

It is a measure of the returns that a business is achieving from the capital employed, usually expressed in percentage terms.

FORMULA

ROCE = Earning before interest and tax (EBIT) *100 Capital employed

=Current Asset+ Fixed Asset-current Liabilities-non Operating.Capital

employed

2012

=(4823292/15038503)*100

=32.07%

2011

=(2411801/11865491)*100

=20.32%

2011% 2012%0

5

10

15

20

25

30

35 20.32% 32.07%

ANALYSIS

'Return on Equity /shareholder’s fund

Ratio

'Return on Equity /shareholder’s fund Ratio

This ratio measures that how much profit a company generates with the money shareholders have invested.ROE is expressed as a percentage.

Formula=Profit After Tax*100

Equity

=(2595173/10054273)*100=25.81%

= (890793/7236942)*100=12.3%

2012

2011

Equity=Share Capital+Reserve+Profit&Loss (Cr.)-Deferred Cost

2011 20120

5

10

15

20

25

30 25.81%12.3%

ANALYSIS

EARNING PER SHARE RATIO

EARNING PER SHARE

“This ratio tells us about earning on “1” share”. EPS is the most important term for the investors of stock exchange.

2012 =2595173/763248 =Rs.3.40

2011 =890973/730721 =Rs.1.22

Earning per share= Net profit after tax No. of share outstanding.

FORMULA

2011 20120

0.5

1

1.5

2

2.5

3

3.5

Rs.3.40Rs.1.22

ANALYSIS

PRICE/EARNING RATIO

PRICE/EARNING RATIO

It is a valuation ratio of a company's current share price compared to its per-share earnings.

FORMULA:= Market Value per ShareEarnings per Share (EPS)

2012 =98/3.4 =Rs.28.8

2011 =22.6/1.22 =Rs.18.5

2011 201205

1015202530

Rs. 18.5 Rs.28.8

ANALYSIS

Positive Points

Won the G20 award on Inclusive Business Innovation .

Growth in profit

Growth in sales

Unique advertisement concept

Provide nutritious and affordable dairy product.

Pakistan’s first company to cross 1 billion Tetra packs in 1 year.

Having 3rd UHT generation plant.

Positive response from customers.

Positive Points

EFL should have its own packaging system to reduce the cost.EFL should build their own dairy farms to meet the increasing demand and for quality milk and to reduce cost.EFL should own any colour like Nestle and Habib.

Recommendations:

CONCLUSION

After making the ratio analysis of Engro Foods we determine that all the profitability ratios are increases as compare to previous year it means that this company is growing company.

Any Question

engro foods 3

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