FORECASTING & FINANCIAL

STATEMENT ANALYSIS
OF

FINANCIAL STATEMENT ANALYSIS

FIN 4218
TOPICS: FROECASTING & ANALYSIS OF FINANCIAL STATEMENT

SUBMITTED TO:

Muhammad Enamul Haque

Assistant Professor
United International University
School of Business

SUBMITTED BY:
NAME
MD. Jahangir Alam
Riad Chowdhury

ID
111 101 196
111 101 122

Shayan Ahmed

111 093 135

Mahin Ahmed

111 101 119

MD. Muzahid Baksh

111 101 208

SEC A
BBA

Date of submission: January 15, 2014

United International University

FALL 2014

Letter of Transmittal
15-Jan-2014
Muhammad Enamul Haque
Assistant Professor
Course Instructor- FIN 4218

United International University

Subject: A term paper on financial statement analysis & forecasting of Pharmaceutical
[listed] industry in Bangladesh.
Dear Sir,
We are submitting herewith our report entitled A term paper on financial statement
analysis & forecasting of Pharmaceutical [listed] industry in Bangladesh. For that
purpose we choose Ranata Ltd.
The main objective of this report is to get a set of concepts on financial statement, its
interpretation & the forecasting of financial performance of Renata Ltd.
This is a comparative analysis about the financial statement analysis & the forecasting the
performance of the company. Actually we have enjoyed more in preparing this term paper.
Our 5 members have worked hard to prepare this report. Though we have put our best efforts
yet it is very likely that the paper may have some mistakes and omissions that are
unintentional.
We hope that this report will merit your approval.
Respectfully yours
On behalf of the team

.
Mahin Ahmed
ID: 111101119
Sec: A

ACKNOWLEDGMENT

We give thanks to the Almighty for giving us the understanding, knowledge and wisdom
during the course of our study.
We convey our gratitude to our honorable faculty Mr. Muhammad Enamul Haque, course
instructor- FIN-4218 in United International University. His guidance and cooperation helped
us immensely to prepare this analytical report.
We are especially grateful to our course teacher in this regard as this type of practical work
creates opportunity to get familiar with the real business world. He always guided us to finish
this task successfully. Without his help it was quite impossible to finish this project properly
in time. To prepare the term paper we need to collect necessary information from different
sources. We have also collected some common data from another group that was suggested to
avoid unnecessary hassle. They all deserve high level of gratefulness from us and we are
cordially offering the same from our part.

Table of Contents
COMPANY PROFILE........................................................................................................................................- 1 History.............................................................................................................................................................- 1 Financial data..................................................................................................................................................- 1 Production facilities........................................................................................................................................- 2 Partnerships.....................................................................................................................................................- 2 Export markets................................................................................................................................................- 2 FINANCIAL STATEMENT ANALYSIS & CONCEPTUAL FRAMEWORK.................................................- 3 FINANCIAL STATEMENT & RATIO ANALYSIS...........................................................................................- 4 Importance and Advantages of Ratio Analysis....................................................................................................- 5 1. Analyzing Financial Statements..................................................................................................................- 5 2. Judging Efficiency.......................................................................................................................................- 5 3. Locating Weakness......................................................................................................................................- 5 4. Formulating Plans.......................................................................................................................................- 5 5. Comparing Performance.............................................................................................................................- 5 RENETA LIMITED: FINANCIAL TREND.......................................................................................................- 6 RATIO ANALYSIS & INTERPRETATIONS.....................................................................................................- 7 1. SHORT TERM LIQUIDITY RATIO..............................................................................................................- 7 CURRENT RATIO.........................................................................................................................................- 7 QUICK RATIO...............................................................................................................................................- 7 CASH RATIO.................................................................................................................................................- 7 DEFENSIVE INTERVAL (DAY)...................................................................................................................- 7 2. LONG TERM SOLVENCY RATIO...............................................................................................................- 9 DEBT/ASSET.................................................................................................................................................- 9 DEBT/EQUITY..............................................................................................................................................- 9 CFO TO DEBT...............................................................................................................................................- 9 3. BUSINESS PROFITABILITY RATIO.........................................................................................................- 10 RETURN ON NOA......................................................................................................................................- 10 NET BORROWING COST [NBC]..............................................................................................................- 10 RENATA LIMITED FINANCIAL PERFORMANCE......................................................................................- 11 ROCE:...............................................................................................................................................................- 12 4. PAYOUT & RETENTION RATIO...............................................................................................................- 13 DIVIDEND PAYOUT...................................................................................................................................- 13 RETENTION RATIO....................................................................................................................................- 13 5. SHAREHOLDER PROFITABILITY...........................................................................................................- 13 6. GROWTH RATIO.........................................................................................................................................- 14 GROWTH RATE OF CSE............................................................................................................................- 14 -

NET INVESTMENT RATE..........................................................................................................................- 14 GROWTH RATE IN OPERATING INCOME.............................................................................................- 14 GROWTH IN NOA......................................................................................................................................- 14 7. INCOME STATEMENT RATIO...................................................................................................................- 17 Operating Profit Margin (Pm).......................................................................................................................- 17 Sales Pm........................................................................................................................................................- 17 Net (Comprehensive) Income Profit Margin................................................................................................- 17 Expense Ratio................................................................................................................................................- 17 8. BALANCE SHEET RATIO..........................................................................................................................- 20 Operating Asset Composition Ratio:.................................................................................................................- 20 Operating liability composition ratio:................................................................................................................- 21 Operating liability leverage ratio:......................................................................................................................- 21 Financial Leverage Ratio:..................................................................................................................................- 22 Capitalization Ratio:..........................................................................................................................................- 23 9. TURNOVER DRIVERS...............................................................................................................................- 24 Account Receivable turnover........................................................................................................................- 24 Days in Account Receivable.........................................................................................................................- 24 Days in Accounts payable.............................................................................................................................- 24 Inventory turnover.........................................................................................................................................- 24 Days in Inventory..........................................................................................................................................- 24 PPE turnover.................................................................................................................................................- 24 Asset turnover (ATO)....................................................................................................................................- 24 Forecasting the Performance of Renata Ltd. in the Next Period.......................................................................- 27 CONCLUSION.................................................................................................................................................- 29 APPENDIX 1....................................................................................................................................................- 31 RATIO ANALYSIS SUMMARY.................................................................................................................- 31 APPENDIX-2....................................................................................................................................................- 34 APPENDIX- 3...................................................................................................................................................- 35 THE REFORMULATED CASH FLOW STATEMENT..............................................................................- 35 APPENDIX- 4...................................................................................................................................................- 35 Reformulated Comprehensive Income Statement.........................................................................................- 35 APPENDIX- 5...................................................................................................................................................- 36 REFORMULATED BALANCE SHEET.....................................................................................................- 36 -

Executive Summary
Director in its report mentioned that the year 2012 was extremely challenging for Renata
Limited. Adverse developments on the macroeconomic front as well as slowdown in the
industries that they operate in severely constrained their growth. The combined effect of
currency depreciation, higher borrowing costs, and collapse of the poultry industry reduced
their overall bottom-line growth by approximately Taka 280 million. As a result, net profit
and sales grew modestly at 14.36% and 17.67%, respectively. Furthermore, there are
unmistakable signs of slowdown and structural change in the pharmaceutical industry.
They continue to believe that the most effective way to ensure sustained growth is by
expanding their exports. Although accessing foreign markets has proved difficult for all
Bangladeshi pharmaceutical companies including Renata, there are signs of progress. By
accessing institutional markets, they have been able to raise their short-term growth
prospects. In 2012, their exports grew by 89% largely due to new institutional business. In
addition, 88 dossiers in 14 countries were filed, while 57 approvals from previous filings
were received. Finally, it added several products to the development pipeline for accessing
the EU markets.
After reviewing the financial statement of RENATA & careful analysis of the selected ratios
we have found some intuitive understanding.
We first focus on the firms short term liquidity ratio. In includes current ratio, quick ratio,
cash ratio & defensive intervals in days. To meet up the short term obligations, the firm had
good financial back up in 2012. Again its defensive interval ratio is quite constant over the
operational period- it managed the capital expenditure with its cash about 100 days in 2012.
Then we calculate its ability to meet long term obligation. The firm was quite constant in the
last 3 years in making long term debt payment.
As the present economic condition is quite reverse for the company, its business profitability
ratio is quite unpleasant for its shareholders. Its net borrowing cost was higher than ever with
low return on NOA in 2012.
Although it has been passing troublesome situation, it increases its dividend in the year 2012
thanks to the free cash flow of the firm in that year. But as it paid a large amount of tax &
operating cost in the year, ROCE is still quit low & continue to decrease at an alarming rate.
7

The growth rate of the firm was constant through the years. As ROCE was low in 2012 the
growth rate of CSE was also quite low comparing to the previous years. The firms operating
profit margin, sales profit margin, net CI profit margin & expense ratio was also remain the
same as earlier years.
By analyzing balance sheet ratio we found that the firm makes huge investment on its PPE, it
keeps large amount of money in tax provision & other liabilities. In 2012, operating liabilities
had eaten up only 18% of NOA. We can easily judge on this matter by reviewing the chart
that shows the firm periodically lowering the ratio & keep the RNOA constant over its
operational life. It financed operating assets from equity & its capitalization ratio was quite
high in 2012 as it had greater NFO.
In anticipation of this evolution, Renata has been working for several years to develop their
nron-antibiotics portfolio. While inroads into chronic care products have been limited, they
have made considerable progress in over-the-counter (OTC) products. In 2012, their OTC
portfolio grew by an impressive 35% and now constitutes nearly 25% of their overall product
portfolio compared to 14% only five years ago.

COMPANY PROFILE
Renata Limited [formerly Pfizer Laboratories Limited], also known as Renata, is one of
the top ten (in terms of revenue) pharmaceutical manufacturers in Bangladesh. Renata is
engaged in the manufacture and marketing of human pharmaceutical and animal health
products. The company also manufactures animal therapeutics and nutrition products. Renata
currently employs about 2300 people in its head office in Mirpur, Dhaka and its two
production facilities in Mirpur, Dhaka and Rajendrapur, Dhaka.

Type
Industry
Founded
Headquarters
Key people
Website

Limited Company
Pharmaceutical
1993
Mirpur, Dhaka, Bangladesh
Syed S Kaiser Kabir - CEO
www.renata-ltd.com

History
The company began its operations as Pfizer (Bangladesh) Limited in 1972. For the next two
decades it continued as a subsidiary of Pfizer Corporation. However, by the late 1990s the
focus of Pfizer had shifted from formulations to research. In accordance with this
transformation, Pfizer divested its interests in many countries, including Bangladesh.
Specifically, in 1993 Pfizer transferred the ownership of its Bangladesh operations to local
shareholders, and the name of the company was changed to Renata Limited. At present,
Renata manufactures about 300 generic pharmaceutical products including hormones,
contraceptives, anti-cancer drugs, oral preparations, cephalosporin, parenteral preparations as
well as other conventional drugs. In addition, they also offer about 95 animal therapeutics and
nutrition products.

Financial data
Renata is a publicly traded company on the Dhaka Stock Exchange (ticker: RENATA). In
2009, the companys annual turnover was about US $56 million, with an annual growth of
about 35%.

Production facilities
Recently, Renata Limited has received the UK MHRA approval for its Potent Product
Facility. This facility currently manufactures hormone, steroid and cytotoxic drugs, and is
exporting prednisolone to the UK. The company also operates four other manufacturing units
the original Pfizer facility for general products, a UNICEF-approved SFF (Sachet Filling
Facility), a Cephalosporin facility, and a Penicillin facility.

Partnerships
Recently, GAIN (The Global Alliance for Improved Nutrition) provided US$ 2.9 million to
Renata Limited and BRAC, one of the biggest NGOs in the developing world, to build and
operate an innovative business model to produce and deliver multi-nutrient powders to
vulnerable infants in Bangladesh.

Export markets
As of the third quarter of 2010, Renata exports its products to the UK, Afghanistan,
Cambodia, Hong Kong, the Philippines, Jordan, Sri Lanka, Vietnam, Myanmar, Kenya,
Belize, Nepal, Malaysia, and Guyana, with registration ongoing in 23 other countries.

FINANCIAL STATEMENT ANALYSIS & CONCEPTUAL FRAMEWORK

Financial statement analysis is the process of understanding the risk and profitability of a
firm (business, sub-business or project) through analysis of reported financial information, by
using different accounting tools and techniques.
Financial statement analysis consists of 1) reformulating reported financial statements, 2)
analysis and adjustments of measurement errors, and 3) financial ratio analysis on the basis of
reformulated and adjusted financial statements. The first two steps are often dropped in
practice, meaning that financial ratios are just calculated on the basis of the reported numbers,
perhaps with some adjustments. Financial statement analysis is the foundation for evaluating
and pricing credit risk and for doing fundamental company valuation.
Potential and existing investors, creditors or lenders and other stakeholders often rely on
financial statements in making decision to a business entity. We can know why financial
statements are actually prepared from the IASB Conceptual Framework. The company
prepares financial statements to provide financial information about the reporting business
entity. The existing Framework also identified in addition to the addressees listed above,
employees, customers, suppliers, governments and the other interested group.

FINANCIAL STATEMENT & RATIO ANALYSIS

Ratio analysis is a useful way of gaining a "snapshot" picture of a company. These ratios can
be analyzed to identify the company's strengths and weaknesses and useful insights can be
gained through the process.
There are two primary ways to use financial ratios:
1. Compare a ratio's value over several periods of time (trend analysis or time-series
analysis). If we see a deteriorating trend in any ratio's values over several quarters or
years, we can investigate to find the cause.
2. Compare the company's ratios to the industry average (cross-sectional analysis). A
single ratio value by itself usually means nothing - we need a standard, or benchmark,
to compare it to. This benchmark is usually the industry average (i.e., the ratio's
average value for all firms in the industry).
To evaluate & forecast the performance of RENATA ltd. we have focused on nine
different base point:

The ratio is calculated & elaborated in Appendix 1

Importance and Advantages of Ratio Analysis

Ratio analysis is an important tool for analyzing the company's financial performance. The
following are the important advantages of the accounting ratios.

1. Analyzing Financial Statements

Ratio analysis is an important technique of financial statement analysis. Accounting ratios are
useful for understanding the financial position of the company. Different users such as
investors, management. Bankers and creditors use the ratio to analyze the financial situation
of the company for their decision making purpose.

2. Judging Efficiency
Accounting ratios are important for judging the company's efficiency in terms of its
operations and management. They help judge how well the company has been able to utilize
its assets and earn profits.

3. Locating Weakness
Accounting ratios can also be used in locating weakness of the company's operations even
though its overall performance may be quite good. Management can then pay attention to the
weakness and take remedial measures to overcome them.

4. Formulating Plans
Although accounting ratios are used to analyze the company's past financial performance,
they can also be used to establish future trends of its financial performance. As a result, they
help formulate the company's future plans.

5. Comparing Performance
It is essential for a company to know how well it is performing over the years and as
compared to the other firms of the similar nature. Besides, it is also important to know how
well its different divisions are performing among themselves in different years. Ratio analysis
facilitates such comparison.

RENETA LIMITED: FINANCIAL TREND

Financial highlights are summarized in Appendix-2

RATIO ANALYSIS & INTERPRETATIONS

1. SHORT TERM LIQUIDITY RATIO
CURRENT
RATIO
QUICK RATIO
CASH RATIO
DEFENSIVE
INTERVAL
(DAY)

2012

2011

2010

2009

2008

CA/CL

1.15

0.728

1.115

1.17

1.15

CASH+RECEIVABLES/CL

0.41

0.23

0.35

0.35

0.36

CASH/CL

0.12

0.04

0.1

0.1

0.09

365*(CASH+RECEIVABLES)/CAP.
EXP.

100

75

93

127

168

1.151

1.166

1.147

0.35

0.35

0.36

0.10

0.10

0.09

1.115

0.728

0.41
0.23
0.12
0.04

Short term creditors- suppliers, short-term paper holders, & long term lenders of debt that is
shortly to mature are concerned with the firms ability to have enough cash to repay in the
near future. The long term lender is also interested in short term liquidity because if the firm
cant survive the short term, there is no long term.
In 2012, RENATAs short term loan was BDT 1,812,605,178; -25% than the previous year. In
the year 2011, its short term loan amount was BDT 2,402,992,758; 113% higher than the
earlier year. So from this trend we can forecast that in 2013 the company will again use its
credit limit higher than 2012. In last 3 years we can see that its current ratio, quick ratio &
cash ratio was quite constant & from its short term loan trend indicates that the firm is quite
good in meeting its short term obligation as it enjoys the favor of good relationship with
7

Eastern Bank Limited, The Hong Kong Shanghai Banking Corporation Limited, City Bank
Limited, Standard Chartered Bank Limited, Citibank N. A., Bank Asia Limited, Agrani Bank
Limited.

DEFENSIVE INTERVAL (DAY)

168
127
100

93
75

2012

2011

2010

2009

2008

Defensive Interval: This ratio measures

the liquidity available to meet capital expenditures without further borrowing. Multiplying by
365 yields the number of days expenditures can be maintained out of near cash resources. As
we showed earlier that the firm maintains its short term loan obligation quite efficiently, it
managed the capital expenditure with its cash about 100 days in 2012, 75 days in 2011, 93
days in 2010, 127 days in 2009 & 168 days in 2008. It is not quite amazing because it
borrowed much in 2011 & 2010 comparing to other years.

2012

2011

2010

2009

2008

TOTAL DEBT/TOTAL
ASSETS
TOTAL DEBT/TOTAL
EQUITY

33%

31%

22%

21%

26%

63%

61%

38%

36%

50%

CF from
OPERATION/TOTAL
DEBT

34%

37%

70%

95%

26%

2. LONG TERM SOLVENCY

RATIO
DEBT/ASSET
DEBT/EQUIT
Y
CFO TO DEBT

63%

61%
50%

33%

2012

38%

36%

22%

21%

31%

2011

2010
DEBT/ASSET

2009

26%

2008

DEBT/EQUITY

Long term debt holders watch the firms immediate liquidity, but they are primarily
concerned with its ability to meet its obligations in the more distance future. RENATAs debt
to asset ratio & debt to equity ratio in 2012 is quite high comparing to previous year due to
the inclusion of non-convertible bond & hold long term loan totaled BDT 1,358,333,333.
As it had enough equity to cover the debt amount its debt to equity ratio was quite constant
over the year.

CFO to Debt ratio: CFO to Debt ratio measures the cash flow relative to total debt
repayments to be made, not just the current repayment. In 2012 it used its 34% cash flow
from operation to meet up the debt, it were 37% in 2011 [quite constant]. We can see from the
above table RENATA was quite efficient in repaying its debt by using operating cash flows in
the year of 2010 & 2009. As in those years, 2010 & 2009, its operating cash flows was higher
than its proportional debt amount. But in the year 2011 it again raises its debt by borrowing
long term basis making it difficult for the firm to meet up the amount using its operating cash
flows. Thus RENATA proportionally retires its long term loan in the year 2012 & 2013 &
making the CFO to Debt ratio lower in 2008, 2011 & 2012.
2012

2011

2010

2009

2008

28%

31%

35%

34%

33%

14%

12%

13%

13%

15%

3. BUSINESS PROFITABILITY RATIO

RETURN ON NOA
NET BORROWING
COST [NBC]

OI/.5*(END NOA+BEG.
NOA)
NFE/.5*(END NFO+BEG.
NFO)

RETURN ON NOA
35%
28%

2012

34%

31%

2011

2010

2009

33%

2008

The separation of operating & financing

activities in the income statement identifies profit flows from the two activities. The
corresponding stocks in the balance sheet identify the net assets or obligations put in place to
generate the profit flows for the two activities.

RNOA: Return on Net Operating Asset is sometimes called return on invested capital
[ROIC]. RENATAs RNOA was quite constant over the corresponding years. We can forecast
that it will done well in 2013 but not quite satisfying. Due to adverse developments on the
macroeconomic front and a slowdown in industry growth due to the lack of blockbuster
products in the market and fewer drug discoveries globally, 2012 was an extremely
challenging year for Renata Limited.

NET BORROWING COST

15%
14%

2012

12%

2011

13%

2010

13%

2009

2008

NBC: As RENATA has net financial

obligation greater than net financial assets it paid net interest expense & thus the rate of
return on financing activities is called the net borrowing cost. The firms net borrowing cost
was quite constant. But the firm becomes very cautious about the present political situation &
higher borrowing cost comparing to the year 2011 & 2012. If it is the case, the firm will face
10

difficulty in maintaining its ongoing projects & thus the profit will harm severely. Again taka
devaluation strengthen this cost as we have mentioned earlier.

RENATA LIMITED FINANCIAL PERFORMANCE

FINANCIAL PERFORMANCE
Number of shares
Earning per share (Taka)
Dividend per share (Taka)
Dividend payout %
Effective Dividend Rate %
Price Earning ratio - PER
Market price per share on 31
December
Price/Equity Ratio (Times)
Return on Shareholder's Fund %
Current Ratio - (Times)
Net operating cash flow per
share (Taka)
Net asset value per share (Taka)

2012
28,241,87
5
43.83
8.50
19.39
1.15
16.87
739.50

2011
22,593,50
0
38.51
8.50
17.66
0.71
25.03
1,205.00

2010
18,074,80
0
30.19
8.50
18.04
0.66
27.48
1,294.27

2009
14,459,84
0
21.37
8.50
20.37
0.71
28.87
1,205.15

2008
11,567,870

73.95
24.41
1.15
38.50

120.50
27.48
0.73
39.84

129.43
28.69
1.11
34.79

120.52
27.34
1.17
33.24

77.89
26.06
1.15
9.63

179.54

175.21

131.52

97.70

73.56

15.34
7.50
20.03
0.96
20.80
778.92

RENATA continuously increases its number of shares. Its EPS was 43.83TK in 2012, quite
larger than the previous years. Due to the low level of financial obligation in the year 2011 &
2012, it somehow managed to offer higher than ever EPS in the year 2012. From the
Reformulated Cash Slow Statement [Appendix- 3] we can have an intuitive understand:

Free Cash Flow (C-I)

1,693,105,748
1,200,927,169

538,248,710

132,907,969

2012

2011

-198,469,686

2010

2009

2008

From the free cash flow chart we can easily see that was doing quite good in 2012, as it had a
large amount of free cash. From that free cash flow the firm paid out its financial obligation
[as we see 25% reduction of short term loan in the year 2012] & dividends.
11

As the present bearish share market hurts more or less all industries, & pharmaceutical
industries are not exceptional. RENATAs share price drops drastically from ~1205TK to
~740TK in 2012. Thats why the firms price to equity ratio is also low hurting return to
shareholders fund a lot [only ~24% in 2012, whereas in 2011 the return was ~27%].

ROCE
33%

31%

31%

29%
28%

2012

2011

2010

2009

2008

ROCE: The reformulated statement yields

the comprehensive rate of return on common equity, ROCE, the profitability of the owners
investment for the period. ROCE is also growth in equity from business activities. Return on
common stockholders' equity, commonly known as return on equity, measures a company's
ability to generate a return on the investment of common stockholders. ROE is the ratio of net
income to average common equity. Investors use ROE in combination with other financial
ratios to analyze and compare different companies in an industry. ROE rises and falls with net
income. A combination of higher revenues and lower costs usually results in higher net
income. Top-line revenue growth may lead to higher net income, as long as costs remain the
same as a percentage of revenue. If costs increase at the same pace as revenues, the additional
revenue dollars will not flow through to the bottom line. Management also could maintain
profit margins by restructuring operations and cutting costs, especially in a period of
declining revenues. Conversely, a combination of falling revenues and rising costs could
mean lower net income and even losses. Comprehensive income in the year 2012 & 2011 was
quite good [BDT 1,247,275 & BDT 1,090,634 respectively] comparing to the previous year
[2010= 851,428; 2009= 603,524; 2008= 433,146]. So, decreasing ROCE would be the result
of increasing the number of share in the recent years.

12

2012

2011

2010

2009

2008

DIVIDENDS/CI

11%

10%

10%

10%

11%

1-DIVIDEND PAYOUT
RATIO

89%

90%

90%

90%

89%

2012

2011

2010

2009

2008

28%

31%

33%

31%

29%

4. PAYOUT & RETENTION RATIO

DIVIDEND PAYOUT
RETENTION
RATIO

5. SHAREHOLDER PROFITABILITY
CI/.5*(END CSE+BEG.
CSE)

ROCE

20%

20%

21%

22%

2012

2011
20%

2010

2009
19%

19%

2008

20%

20%

20%

Interpretation based on above discussion we can summarize the dividend payout & retention
ratio in the above chart. As its business operation is quite constant over the previous years we
can get similar results in each year. Among all difficulties the firm is trying to satisfy its
shareholders by planning for a quite handsome amount of dividend in 2012 & 2013.

13

2012

2011

2010

2009

2008

ROCE+NET INVESTMENT
RATE

32%

35%

37%

36%

34%

NET TRANSACTION WITH

SH/BEG. BV CSE

4%

4%

4%

5%

5%

CHANGE IN OPERATING
INCOME(AFTER
TAX)/PRIOR PERIODS OI
CHANGE IN NET
OPERATING
ASSETS/BEGINNING NOA

26.52%

30.16%

35.36%

32.18%

33.31%

27.40%

56.69%

21.52%

21.52%

47.46%

6. GROWTH RATIO
GROWTH RATE OF
CSE
NET INVESTMENT
RATE
GROWTH RATE IN
OPERATING INCOME
GROWTH IN NOA

32%

35%

37%

GROWTH RATE OF CSE

4%

2012

4%

2011

36%

34%

NET INVESTMENT RATE

4%

2010

5%

2009

5%

2008

Growth rate of CSE: The growth in shareholders equity is simply the change from
beginning to ending balances. Growth ratios explain this growth as a rate of growth. The part
of the growth rate resulting from transactions with shareholders is the NIR. RENATAs net
investment rate was 4% in 2012 [quite similar comparing to the previous years.] because net
cash investment made by the shareholders was positive all over the years.

NET INVESTMENT RATE: Both Return on Common Equity & Net Investment Rate in
2012 was quite low comparing to the other years. Some, economic factors affect corporate
profits, which influence stock prices and equity returns. Revenues depend on consumer and
business spending, which vary with interest rates, employment and global economic
conditions. Operating and non-operating expenses depend on interest rates, labor wage rates
and commodity prices. Economic growth and low inflation usually mean positive equity
returns, while recessions and high interest rates mean flat or negative returns. We have
mentioned earlier that the firms borrowing cost over the year was high comparing to the
14

previous years, & devaluation of taka was the key factors for that decreased growth rate of
CSE [2012~32%; 2011~35%; 2010~37%]. As the ROCE was quite low in 2012, the growth

Growth rate in operating income

35.36%
30.16%

32.18%

33.31%

26.52%

2012

2011

2010

2009

2008

rate of CSE was unsatisfactory for the share

holders point of view.
GROWTH RATE IN OI: If we observe the trend of the pattern of changing operating income,

we can clearly define the scenario. In the year 2012 the growth rate in operating income was
lower than previous years. This decreasing result would easily be estimated from the previous
years income statements. In 2012 the firm paid taxes amounted BDT 474,449,485; 35%
higher than the previous year [2011~351,117,807; 2010~278,175,022; 2009~219,505,643 &
2008~176,774,164]. Due to this the firm encounter decreasing growth in operating income
(after tax) in 2012.

15

growth rate in sales

30%
26%

28%

22%
18%

2007

2008

2009

2010

2011

2012

2013

GROWTH RATE IN SALES: Decreasing

growth in sales also cause the operating profit to decline. As the firm reported that the
adverse developments on the macroeconomic front as well as slowdown in the industries that
they operate in severely constrained their growth. The combined effect of currency
depreciation, higher borrowing costs, and collapse of the poultry industry reduced our overall
bottom-line growth by approximately Taka 280 million. As a result, net profit and sales grew
modestly at 14.36% and 17.67%, respectively. Furthermore, there are unmistakable signs of
slowdown and structural change in the pharmaceutical industry. The most plausible
explanation for this downward drift is the lack of blockbuster products in the market. With
new drug discoveries becoming fewer and far between globally, generic companies in
Bangladesh have had to generate growth by relying on their existing products portfolio.
There has also been a major structural shift in the Bangladesh pharmaceutical market. For
decades, antibiotics delivered both growth and volumes in the Industry. The share of
antibiotics in the pharmaceutical industry has been falling over the last five years. The
weakening of the antibiotic segment also explains to a large extent the weakening of the
pharmaceutical market in Bangladesh. With national health and hygiene programs gaining
momentum, antibiotic use is likely to erode further continuing this downward trend.
In anticipation of this evolution, Renata has been working for several years to develop our
non-antibiotics portfolio. While inroads into chronic care products have been limited, we
have made considerable progress in over-the-counter (OTC) products. In 2012, our OTC
portfolio grew by an impressive 35% and now constitutes nearly 25% of our overall product
portfolio compared to 14% only five years ago.
16

Growth in NOA
56.69%
47.46%

34.88%
27.40%
21.52%

2008

2009

2010

2011

2012

GROWTH

RATE

IN

NOA:

The

firm

periodically pay off its operating obligations. RENATAs total OA in 2012 was BDT
10,049,877,139

[2011~BDT

8,031,385,844;

2010~BDT

5,289,005,545;

2009~BDT

4,019,707,455 & 2008~BDT 3,285,642,893] & total OL was BDT 1,503,752,637

[2011~1,323,449,647; 2010~1,007,881,438; 2009~845,703,106 & 2008~673,822,495]. It
paid 56% of its total OL in 2012 causing lower growth in NOA [2012~27%; 2011~57%].

2012

2011

2010

2009

2008

OI (after tax) / sales

16%

17%

17%

15%

14%

OI (after tax) from

sales / sales
comprehensive
income / sales

22%

21%

22%

26%

14%

16%

17%

0%

0%

0%

expense / sales

36%

35%

35%

37%

36%

7. INCOME STATEMENT RATIO

Operating Profit
Margin (Pm)
Sales Pm
Net (Comprehensive)
Income Profit Margin
Expense Ratio

17

operating profit margin (PM)

17%

sales PM

17%

26%

16%

22%

15%

22%

21%

14%
14%

2012

2011

2010

2009

2008 2012

2011

2010

2009

2008

Operating Profit Margin

Operating profit margin identifies the operating profitability per dollar of sales. As each
operating item is divided through by sales revenue, the common-size number indicates the
proportion of each dollar of sales the item represents. Thus, the number for an operating
expense is the percentage of sales that is absorbed by the expense, & the number for
operating income is the percentage of sales that ends up in profit.
We can easily get intuitive understanding from the above OPM chart that shows the trend of
operating profit. After the year 2008, RENATA made some inclusion in its product portfolio.
The resulting effect illustrates the picture above that it was quite good in making profit by
absorbing the operating expenses through the year 2008~14% to 2011~17%. But as we have
mentioned earlier that it faces some trouble the year 2012 in boosting up the sales, it reported
only 16% OPM. Again both the cost of sales [2012~ 3,619,613,644; 2011~3,099,355,955;
2010~ 2,405,361,976; 2009~ 1,820,496,777 & 2008~ 1,526,514,685] & administrative
expenses

[2012~

1,890,859,261;

2011~

1,712,148,104;

2010~1,378,630,620;

2009~1,118,768,795; 2008~ 845,169,923] were quite high in 2012 comparing to previous

years. That was another reason for that low OPM.

SALES PROFIT MARGIN

This ratio is a good indicator of the firms operating efficiency. It also stresses how much the
firm generates profit from sales after adjusting payments.
18

NET CI PM
17%

17%
16%

15%

14%

2007

2008

2009

2010

2011

2012

2013

After inclusion of new products in

their portfolio in 2009, they had boosted up their sales as well as their profit. But the firm
faces some difficulties for example- economic health, market stability, marketing effort
behind the company's product line, pricing, and payment options available to the customer,
raw materials cost, political unrest and global supply issues are the common factors that
affect cost of goods sold. A change in materials price is a surefire way of affecting sales profit
margin. Thats why the firms SPM were boosted up from 14% in 2008 to 26% in 2009 & as
the firm faced such problems its SPM were 22% in 2012.

NET CI PROFIT MARGIN:

NET CI Profit margin analysis uses the percentage calculation to provide a comprehensive
measure of a company's profitability on a historical basis (3-5 years) and in comparison to
peer companies and industry benchmarks.
Basically, it is the amount of profit [comprehensive income] generated by the company as a
percent of the sales generated. The objective of margin analysis is to detect consistency or
positive/negative trends in a company's earnings. Positive net comprehensive income profit
margin analysis translates into positive investment quality. To a large degree, it is the quality,
and growth, of a company's earnings that drive its stock price.
The firm is very consistent over its fiscal years. Although the present economic downturn
causes the industry severely, it somehow manages itself quite well. The investors may find

19

the firm less risky as RENATA shows its consistency over the year 16% in 2012; 17% in
2011 and so forth.

expense ratio
37%
36%
36%

35%

2012

2011

35%

2010

2009

2008

Expense Ratio
Expense ratio calculate the percentage of sales revenue that is absorbed by expenses. For
RENATA, cost of sales absorb 35% to 37% all over its operating life.
The trend forecasts that its expense ratio will rise in the upcoming fiscal year. But we can say
that it will remain similar in the next year not a quite big shift will result for sure.

The values are determined based on Reformulated Comprehensive Income Statement

[Elaborated in Appendix-4].
Later in this section we will discuss the balance sheet ratio to forecast the firm more
accurately. For that reason we need Reformulated Balance Sheet [Elaborated in Appendix-5].
Here we only present the summarized chart:

20

Reformulated Balance Sheet

8,546,124,502
6,707,936,197

5,544,929,233
4,309,725,843
4,281,124,107
3,249,645,966
3,174,004,349
2,611,820,398
2,426,785,599
1,838,847,521

2012
2011
2010
2009
3,001,195,269
2,398,210,354
1,031,478,141
747,218,750
NET OPERATING ASSET

2008
772,972,877

NET FINANCIAL OBLIGATION

CSE

21

8. BALANCE SHEET RATIO

60%
50%
40%
30%
20%
10%

s
re
s
kin
-p
ro
g

Tr
a

de

Ca
p

an

ita

ot

t
la
n
ty
,p
er
Pr
op

lw
or

he

an

re
c

eq

ei
va
b

ui
pm
en

le
s

0%

Operating Asset Composition Ratio

Operating Asset Composition Ratio: The operating assets ratio can be used as part of
an analysis to eliminate those company assets that are not contributing to operations. For
example, if a rival company has a low operating assets ratio, a competitor could use the
rival's ratio as the basis for an internal review to see how many assets should be eliminated in
order to arrive at a similar ratio. The result of these actions would be a reduced investment in
assets, with the terminated assets being converted into cash.
There are several issues to be aware of when using the operating assets ratio: Which assets
are not considered to assist in generating revenues is a subjective decision, since some assets
could be considered reserve capacity. Some assets, such as overdue receivables, are simply a
part of doing business, and are unlikely to be eliminated on an ongoing basis.
From the above chart we can see the major assets that are essential in operation. RENATA
made major investment in its property plant & equipment in 2010(48%) & continue investing
on this particular item in the recent time [2012~42%; 2011~47%].

22

Operating Liability Composition Ratio

30%
25%
20%
15%
10%
5%
0%
Deferred liability-staff gratuity

Trade payables

Provision and other liabilities

Operating liability composition ratio: Operating liability composition ratio signifies the
major operating liability items in the balance sheet that the firm finds vital to reinvestigate.
From the total operating liability the major liability items would be provision for taxation,
provision & other liabilities. The firm is quite sincere in making the tax payment regularly.
After the year 2008, the firm periodically paid off its trade payables & so we see a big change
in the trade payables account in the balance sheet. From this trend we can forecast that the
firm will keep provision in taxation in the upcoming year.

OLLEV
26%

27%
24%
20%
18%

2007 2008 2009 2010 2011 2012 2013

Operating liability leverage ratio:

The operating liability composition ratio reveal which liabilities have contributed to the
operating liability leverage. The operating liability leverage ratio gives an indication of how
the investment in net operating assets has been reduced by operating liabilities. It is called a
23

leverage ratio because it can lever up the return on net operating assets with a lower
denominator. Operating liabilities lever the profitability of operations, which is RNOA.
RNOA is operating income relative to net operating assets, and net operating assets are
operating assets minus operating liabilities. So, the more operating liabilities a firm has
relative to operating assets, the higher its RNOA, assuming no effect on operating income in
the numerator.
In 2012, operating liabilities had eaten up only 18% of NOA. We can easily judge on this
matter by reviewing the chart that shows the firm periodically lowering the ratio & keep the
RNOA constant over its operational life.
169%

169%

157%
144%

capitalization ratio
59%

financial leverage ratio (FLEV)

61%
35%

2012

144%

2011

2010

34%

2009

47%

2008

Using
operating liabilities to lever the rate of return from operations may not come for free,
however; there may be a numerator effect on operating income. Suppliers provide what
nominally may be interest-free credit, but presumably charge for that credit with higher prices
for the goods and services supplied. This is the reason why operating liabilities are
inextricably a part of operations rather than the financing of operations.

Financial Leverage Ratio: The FLEV measure excludes operating liabilities but includes
(as a net against financing debt) financial assets. If financial assets are greater than financial
liabilities, FLEV is negative. This analysis breaks shareholder profitability, ROCE, down into
that which is due to operations and that which is due to financing. Financial leverage levers
the ROCE over RNOA, with the leverage effect determined by the amount of financial
leverage (FLEV) and the spread between RNOA and the borrowing rate.

24

Financial leverage is the degree to which NOA are financed by common equity. The firm
increased its share capital after 2008 [115,678,700]. The share capital was increased by 25%
through the year 2012, 2011, 2010 & 2009. In 2011, the firm uses 61% of its share capital to
finance in OA. The invested amount was 59% in 2012 & it will continue same portion in the
next fiscal year.

Capitalization Ratio: The capitalization ratio compares total debt to total capitalization
(capital structure). The capitalization ratio reflects the extent to which a company is operating
on its equity.
Capitalization ratio is also known as the financial leverage ratio. It tells the investors about
the extent to which the company is using its equity to support its operations and growth. This
ratio helps in the assessment of risk. The companies with high capitalization ratio are
considered to be risky because they are at a risk of insolvency if they fail to repay their debt
on time. Companies with a high capitalization ratio may also find it difficult to get more
loans in the future. RENATAs capitalization ratio through the years was quite high
[2012~169%; 2011~169%; 2010~144%; 2009~144% & 2008~157%] that indicates that the
firm is financing itself with more debt [especially short term] than equity. It will increase its
capitalization ratio in the FY-13.

25

2012

2011

2010

2009

2008

sales / Account
Receivable(net)

9.1

10.18

10.64

11.34

8.98

365 / Account Receivable

turnover

40.11

35.855

34.305

31.357

40.646

365* Accounts Payable /

Purchase
Cost of goods sold /
Inventory
365 / Inventory turnover

4.155

5.908

4.818

5.593

30.392

1.822

1.955

1.856

1.693

1.591

200.329

186.701

196.659

215.594

229.415

Sales / PPE net

1.7971

1.7235

1.9849

2.7936

3.0458

Sales / NOA

0.8977

0.9719

1.189

1.229

1.183

9. TURNOVER DRIVERS
Account Receivable
turnover
Days in Account
Receivable
Days in Accounts payable
Inventory turnover
Days in Inventory
PPE turnover
Asset turnover (ATO)

229.42
215.59
200.33

196.66

186.7

Days in Account Receivable

Days in Accounts payable

DAYS
Days in Inventory
40.11

4.16
2012

35.86

34.31

31.36

5.91

4.82

5.59

2011

2010

2009

40.65
30.39

2008

Days in Accounts Receivables turnover measures the days that it takes the company to
collect its accounts receivables. The number of days required to convert receivables into cash.
In 2008 number of days was 41. In 2009 it was 31days. After that last three years, days in
accounts receivables was decreased by 34days, 36days, and 40days.

26

Days in Accounts payable turnover ratio indicates that in how many days the company
pays off its suppliers. From the chart we can see that the firm is quite efficient in making
payment to the trade payable within one week.

Days in inventory: Days' inventory on hand (also called days' sales in inventory or simply
days of inventory) is an accounting ratio which measures the number of days a company
takes to sell its average balance of inventory. It is also an estimate of the number of days for
which the average balance of inventory will be sufficient.
The industry where it operates requires high level of inventory in its stock & so RENATAs
days in inventory is quite large. It were around 200 days in 2012, 187 days in 2011, 197 day
in 2010, 216 days in 2009 & 230 days in 2008. As the price of the R/M are quite high we can
predict that the firm will continue this momentum in the upcoming years.

11.34
10.18

10.64

9.1

8.98
Account Receivable turnover

Inventory turnover
1.82

2012

1.96

2011

1.86

2010

1.69

2009

1.59

2008

Accounts receivable turnover ratio

measures that the efficiency of a business in collecting in credit sales. In 2008 this ratio was
8.98 which was increased by11.34 in 2009. That means their credit collection was improving.
It reflects a short lapse of time between sales and the collection of cash. After this year in
2010, 2011 and 2012, Accounts receivable turnover ratio decreased by 10.64, 10.18 and 9.1.
That indicates inefficiency of collecting outstanding sales compared to the year of 2009.

27

Inventory turnover indicates the number of times per period that the company sells and
replaces its entire batch of inventory again. That means how well a company is turning their
inventory into sales. In 2008, RENATAs inventory turnover was 1.591. In 2009, inventory
turnover was 1.693. After two years this turnover increased; that were 1.856 and 1.955
respectively. These low inventory turnover ratio is a signal of inefficiency, since inventory
usually has a rate of return of zero. It also implies either poor sales or excess inventory. A low
turnover rate can indicate poor liquidity, possible overstocking, and obsolescence, but it may
also reflect a planned inventory buildup in the case of material shortages or in anticipation of
rapidly rising prices. As we have mentioned earlier that it faced some difficulties in selling
their product.

3.05
2.79

1.98
1.8
1.72
PPE turnover

Asset turnover(ATO)
1.19

0.9

2012

1.23

1.18

0.97

2011

2010

2009

2008

Asset turnover ratio tells that how

successfully the company is using its assets to generate revenue. In 2008, 2009 and 2010,
asset turnover ratio was 1.183. 1.229 And 1.189. In these years RENATA Company used their
assets efficiently in generating revenue. But in last two years this performance was getting
worse. Asset turnover ratio was decreased by 0.9719 and 0.8977 in 2011 and 2012. That
indicates that the company was not using its assets properly compared to previous years.

PPE turnover ratio tells that how much amount of sales company gets for each amount
invested in property, plant, and equipment (PPE). Its a measure of how efficient the company
is generating revenue from fixed assets such as buildings, vehicles, and machinery. In 2008,
the ratio was 3.0458, which mean the company generated 3.0458 taka in sales revenue for
every 1 taka of PPE. In 2009, 2010 and 2011 this ratio was decreased by 2.7936, 1.9849 and
28

1.7235. In these years their revenue had been decreased. In 2012 they tried to overcome their
performance. In 2012 the ratio was 1.7971, as it disposed some of its PPE in that year. The
most plausible explanation for this downward drift is the lack of blockbuster products in the
market. With new drug discoveries becoming fewer and far between globally, generic
companies in Bangladesh have had to generate growth by relying on their existing products
portfolio.

29

Forecasting the Performance of Renata Ltd. in the Next Period

To evaluate & forecast the performance of RENATA ltd. we have focused on nine different
base point or parameter:

The ratio is calculated & elaborated in Appendix 1

1. Short Term Liquidity Stock: Here we have calculated current ratio, quick ratio, cash
ratio & defensive interval. The overall analysis about this particular measure shows
upward momentum that indicates the firm will keep operating leverage next year.
2. Long Term Solvency Ratio: To get an overall result about this parameter we have
calculated debt/asset ratio, debt/equity ratio & CFO/debt ratio. We have found that the
firm will not increase or decrease the amount of its debt by next year.
3. Business Profitability Ratio: As the firms NBC is high in 2012, Return on NOA
will be affected negatively. That will hurt the companys profitability in front of
shareholders.
4. Payout & Retention Ratio: As the firm will be less profitable in the upcoming fiscal
year, it may offer higher dividend to its shareholders.
5. Shareholders Profitability: Shareholders Profitability will also be hurt as the firm
will keep its long term borrowing that will cost higher interest expense.
6. Growth Ratio: As the firm has no other opportunity in the upcoming future, its
Growth Ratio will suffer as it decided to pay debt by this time.
7. Income Statement Ratio: Here we have focused operating profit margin, sales profit
margin, net income profit margin, & expense ratio. In this context we can say that the
firm will do well in the 2013. As its sales may up in the upcoming year, the other
variable related to sales will proportionately increase.

30

8. Balance Sheet Ratio: Previous sections evaluation about operating asset

composition ratio shows us a constant pattern & so does the operating liability
composition ratio. But the firm will lower its operating liability leverage & financial
leverage by the next year. The Capitalization ratio will be constant by that time- this
means it will no issue further shares in the market in 2013.
9. Turnover Drivers: When we measured he A/R turnover, Inventory Turnover, PPE
Turnover & ATO, we got similar & constant result. So, we end up our forecasting by
saying that the firm will have constant performance & may be able to do well in
upcoming years.
The year 2012 was extremely challenging for Renata Limited. Adverse developments on the
macroeconomic front as well as slowdown in the industries that they operate in severely
constrained their growth. The combined effect of currency depreciation, higher borrowing
costs, and collapse of the poultry industry reduced their overall bottom-line growth by
approximately Taka 280 million. As a result, net profit and sales grew modestly at 14.36%
and 17.67%, respectively. Furthermore, there are unmistakable signs of slowdown and
structural change in the pharmaceutical industry.

31

CONCLUSION
In anticipation of this evolution, Renata has been working for several years to develop our
non-antibiotics portfolio. While inroads into chronic care products have been limited, they
have made considerable progress in over-the-counter (OTC) products. In 2012, their OTC
portfolio grew by an impressive 35% and now constitutes nearly 25% of our overall product
portfolio compared to 14% only five years ago.
Two additional diversifications to their range of products are worth mentioning. First, their
latest subsidiary, Renata Oncology Limited, will introduce a range of new oncology products
in the coming years. Second, the newly constituted herbal division has been working to enter
the fast growing herbal product market with a few well-chosen products, which will be
marketed through their subsidiary Purnava Limited.
They continue to believe that the most effective way to ensure sustained growth is by
expanding their exports. Although accessing foreign markets has proved difficult for all
Bangladeshi pharmaceutical companies including Renata, there are signs of progress. By
accessing institutional markets, they have been able to raise our short-term growth prospects.
In 2012, their exports grew by 89% largely due to new institutional business. In addition, 88
dossiers in 14 countries were filed, while 57 approvals from previous filings were received.
Finally, it added several products to the development pipeline for accessing the EU markets.
After reviewing the financial statement of RENATA & careful analysis of the selected ratios
we have found some intuitive knowledge.
We first focus on the firms short term liquidity ratio. In includes current ratio, quick ratio,
cash ratio & defensive intervals in days. To meet up the short term obligations, the firm had
good financial back up in 2012. Again its defensive interval ratio is quite constant over the
operational period- it managed the capital expenditure with its cash about 100 days in 2012.
Then we calculate its ability to meet long term obligation. The firm was quite constant in the
last 3 years in making long term debt payment.

32

As the present economic condition is quite reverse for the company, its business profitability
ratio is quite unpleasant for its shareholders. Its net borrowing cost was higher than ever with
low return on NOA in 2012.
Although it has been passing troublesome situation, it increases its dividend in the year 2012
thanks to the free cash flow of the firm in that year. But as it paid a large amount of tax &
operating cost in the year, ROCE is still quit low & continue to decrease at an alarming rate.
The growth rate of the firm was constant through the years. As ROCE was low in 2012 the
growth rate of CSE was also quite low comparing to the previous years. The firms operating
profit margin, sales profit margin, net CI profit margin & expense ratio was also remain the
same as earlier years.
By analyzing balance sheet ratio we found that the firm makes huge investment on its PPE, it
keeps large amount of money in tax provision & other liabilities. In 2012, operating liabilities
had eaten up only 18% of NOA. We can easily judge on this matter by reviewing the chart
that shows the firm periodically lowering the ratio & keep the RNOA constant over its
operational life. It financed operating assets from equity & its capitalization ratio was quite
high in 2012 as it had greater NFO.

33

APPENDIX 1
RATIO ANALYSIS SUMMARY
Ratio

FORMULA
1. SHORT TERM LIQUIDITY STOCK MEASURES
Current Ratio
CA/CL

2012

2011

2010

2009

2008

1.15

0.728

1.115

1.17

1.15

Quick Ratio

CASH+RECEIVABLES/CL

0.41

0.23

0.35

0.35

0.36

Cash Ratio

CASH/CL
365*(CASH+RECEIVABLES)/C

0.12

0.04

0.1

0.1

0.09

100

75

93

127

168

(Day)
AP. EXP.
2. LONG TERM SOLVENCY RATIO
Debt/Asset
TOTAL DEBT/TOTAL ASSETS

2012
33%

2011
31%

2010
22%

2009
21%

2008
26%

Debt/Equity

63%

61%

38%

36%

50%

34%

37%

70%

95%

26%

DEBT
3. BUSINESS PROFITABILITY RATIO
RETURN ON NOA
OI/.5*(END NOA+BEG. NOA)

2012
28%

2011
31%

2010
35%

2009
34%

2008
33%

Net Borrowing Cost

14%

12%

13%

13%

15%

4. PAYOUT & RETENTION RATIO

Dividend Payout
DIVIDENDS/CI

2012
11%

2011
10%

2010
10%

2009
10%

2008
11%

Retention Ratio

89%

90%

90%

90%

89%

5. SHAREHOLDER PROFITABILITY
ROCE
CI/.5*(END CSE+BEG. CSE)

2012
28%

2011
31%

2010
33%

2009
31%

2008
29%

6. GROWTH RATIO
GROWTH RATE OF

ROCE+NET INVESTMENT

2012
32%

2011
35%

2010
37%

2009
36%

2008
34%

CSE
Net Investment Rate

RATE
NET TRANSACTION WITH

4%

4%

4%

5%

5%

SH/BEG. BV CSE
CHANGE IN OPERATING

26.52

30.16

35.36

32.18

33.31

Operating Income

INCOME(AFTER TAX)/PRIOR

GROWTH IN NOA

PERIODS OI
CHANGE IN NET OPERATING

27.40

56.69

21.52

21.52

47.46

%
2012
16%

%
2011
17%

%
2010
17%

%
2009
15%

%
2008
14%

22%

21%

22%

26%

14%

Defensive

Interval

TOTAL DEBT/TOTAL EQUITY

CF FROM OPERATION/TOTAL

CFO TO DEBT

Growth

Rate

NFE/.5*(END NFO+BEG. NFO)

1-DIVIDEND PAYOUT RATIO

In

ASSETS/BEGINNING NOA
7. INCOME STATEMENT RATIO
Operating
Profit
OI (AFTER TAX) / SALES
Margin (Pm)
Sales Pm
OI (AFTER TAX) FROM
SALES / SALES

34

Net

(Comprehensive)

Income Profit Margin

Expense Ratio

COMPREHENSIVE INCOME /

16%

17%

0%

0%

0%

SALES
EXPENSE / SALES

36%

35%

35%

37%

36%

2012
42%

2011
47%

2010
48%

2009
35%

2008
31%

8. BALANCE SHEET RATIO

(I)OPERATING ASSET COMPOSITION RATIO
Property, Plant And PROPERTY, PLANT AND
Equipment/Toa

EQUIPMENT / TOTAL

Inventories/Toa

OPERATING ASSET
INVENTORIES / TOTAL

20%

20%

25%

27%

29%

OPERATING ASSET
TRADE AND OTHER

8%

8%

9%

9%

10%

1%

1%

2%

2%

2%

21%

17%

7%

18%

17%

1%

1%

1%

2%

2%

2012

2011

2010

2009

2008

12%

11%

14%

15%

16%

18%

15%

15%

13%

12%

Trade

And

Other

Receivables/Toa

RECEIVABLES / TOTAL

Advance Deposits And

OPERATING ASSET
ADVANCE DEPOSITS AND

Prepayments/Toa

PREPAYMENTS / TOTAL

Capital

OPERATING ASSET
CAPITAL WORK-IN-

Work-In-

Progress/Toa

PROGRESS / TOTAL

Investment

In

Subsidiaries/Toa

OPERATING ASSET
INVESTMENT IN
SUBSIDIARIES / TOTAL

OPERATING ASSET
(II) OPERATING LIABILITY COMPOSITION RATIO
DEFERRED
DEFERRED LIABILITY-STAFF
LIABILITY-STAFF

GRATUITY / TOTAL

GRATUITY/TOL
DEFERRED
TAX

OPERATING LIABILITY
DEFERRED TAX LIABILITY /

LIABILITY/TOL

TOTAL OPERATING

TRADE

LIABILITY
TRADE PAYABLES / TOTAL

3%

4%

3%

3%

19%

PAYABLES/TOL
Accruals/TOL

OPERATING LIABILITY
ACCRUALS / TOTAL

18%

25%

22%

20%

20%

Provision And Other

OPERATING LIABILITY
PROVISION AND OTHER

23%

26%

28%

28%

12%

Liabilities/TOL

LIABILITIES / TOTAL
27%

19%

18%

21%

22%

2012
2%

2011
2%

2010
3%

2009
4%

2008
4%

3%

3%

4%

3%

3%

Provision

For

Taxation/TOL

OPERATING LIABILITY
PROVISION FOR TAXATION /
TOTAL OPERATING

LIABILITY
(III) OPERATING LIABILITY LEVERAGE
Deferred Liability-Staff DEFERRED LIABILITY-STAFF
Gratuity/NOA
Deferred
Liability/NOA

GRATUITY / NET OPERATING

Tax

ASSET
DEFERRED TAX LIABILITY /
NET OPERATING ASSET

35

Trade Payables/NOA

TRADE PAYABLES / NET

0%

1%

1%

1%

5%

Accruals/NOA

OPERATING ASSET
ACCRUALS / NET OPERATING

3%

5%

5%

5%

5%

Provision And Other

ASSET
PROVISION AND OTHER

4%

5%

7%

7%

3%

Liabilities/NOA

LIABILITIES / NET
5%

4%

4%

5%

6%

2012
169%

2011
169%

2010
144%

2009
144%

2008
157%

59%

61%

35%

34%

47%

2012

2011

2010

2009

2008

9.1

10.18

10.64

11.34

8.98

RECEIVABLE(NET)
365 / ACCOUNT RECEIVABLE

40.11

35.855

34.305

31.357

40.646

TURNOVER
365* ACCOUNTS PAYABLE /

4.155

5.908

4.818

5.593

30.392

PURCHASE
COST OF GOODS SOLD /

1.822

1.955

1.856

1.693

1.591

200.32

186.70

196.65

215.59

229.41

Provision

For

OPERATING ASSET
PROVISION FOR TAXATION /

Taxation/NOA
NET OPERATING ASSET
(IV) FINANCIAL LEVERAGE
Capitalization Ratio
NET OPERATING ASSET /
COMMON STOCKHOLDER'S
Financial

Leverage

Ratio

EQUITY
NET FINANCIAL
OBLIGATIONS / COMMON

STOCKHOLDER'S EQUITY
9. TURNOVER DRIVERS
Account
Receivable SALES / ACCOUNT
Turnover
Days
In
Receivable
Days In

Account
Accounts

Payable
Inventory Turnover

INVENTORY
Days In Inventory

365 / INVENTORY TURNOVER

PPE Turnover

SALES / PPE NET

9
1.7971

1
1.7235

9
1.9849

4
2.7936

5
3.0458

Asset Turnover

SALES / NOA

0.8977

0.9719

1.189

1.229

1.183

APPENDIX-2

36

37

APPENDIX- 3
THE REFORMULATED CASH FLOW STATEMENT
2008
418,117,883

(1,326,611,180
)
-198,469,686

2009
1,014,136,74
6
(475,888,036
)
538,248,710

85,372,340

85,555,885

57,051,213

47,511,431

282,418,750
-148,213,366

225,935,000
-140,562,660

180,748,000
-95,192,115

144,598,400
-87,547,187

115,678,700
-68,167,269

177,650,317
467,400
3,170,938,51
1
Interest on Debt [after tax]
370,881,897
F 1,841,319,11
4
Total financing Flows (d+F)
1,693,105,74
8

11,333,863
5,392,318
2,402,992,75
8
215,315,416
1,341,489,82
9
1,200,927,16
9

103,101,502
407,774
1,129,414,884

51,167,474
915,768
794,424,620

53,364,205
407,100
823,163,615

117,473,675
-103,277,571

99,513,638
625,795,897

87,270,665
201,075,238

-198,469,686

538,248,710

132,907,969

Cash Flow from Operations

(C)
Cash Investment (I)
Free Cash Flow (C-I)
Equity Financing Flows
Dividends & Share
Repurchases
Share Issues
Net Dividend (d)
Debt Financing Flows
Net Purchase of FA
Interest on FA [after tax]
Net Issue of Debt

2012
1,711,562,72
6
(18,456,978)

2010
1,128,141,494

1,693,105,74
8

2011
1,346,126,09
4
(145,198,925
)
1,200,927,16
9

134,205,384

APPENDIX- 4
Reformulated Comprehensive Income Statement

38

(285,209,914
)
132,907,969

APPENDIX- 5

39

REFORMULATED BALANCE SHEET

40