A FINANCIAL ANALYSIS OF

JG SUMMIT HOLDINGS
FOR THE YEARS 2014 - 2015

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A Research Paper Presented to

Mr. Daniel Espina, CPA
A Faculty of the Accountancy Program
Father Saturnino Urios University
Butuan City, Philippines

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In Partial Fulfillment
Of the Requirements for the Course
Acctg412
(Management Accounting II)

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Nancy Vicmi Hoshepina T. Carlobos

Junel Christian M. Felisilda
Mary Beth R. Lopena
John Renzo G. Pastor
Maegan C. Tiu
Krizzia Kyle F. Tranquilan
Maria Mae Wevinia S. Yu

MARCH 2016

TABLE OF CONTENTS
Table Of Contents ...................................... i
CHAPTER I Company Background ...................... 1
CHAPTER II Definition of Terms
Financial Statement Analysis ............ 6
Ratio Analysis .......................... 6
CHAPTER III Financial Statement Analysis
Vertical Analysis ....................... 7
Horizontal Analysis ..................... 11
CHAPTER IV Ratio Analysis .......................... 14
CHAPTER V Interpretations
Financial Statement Analysis............. 17
Ratio Analysis .......................... 18
CHAPTER VI Conclusion .............................. 23

CHAPTER I

COMPANY BACKGROUND

The business of JG Summit started in 1957 when Universal

Corn Products, Inc. was established to operate a cornstarch
plant in Manila. Since then, JG Summit has pioneered
breakthroughs, broadened its enterprise and stayed at the
forefront in every phase of the country's rise to
development the entrepreneur, who invested in agribusiness
and the manufacture of feeds and prime food commodities; the
visionary, who channeled resources and expanded into
financial services, textile and property, all backbones of a
growing economy; the captain of industry, who invested in
power, telecommunications, petrochemicals, cement, and air
transportation, all requisites for industrialization; the
innovator, who continually provides value and fun in
snacking; and the new regional multinational, who has
embraced the challenge of global competitiveness with zeal.

Currently, JG Summit is one of the largest and most

diversified Filipino conglomerates, engaged primarily in
businesses that serve a growing middle class with rising
disposable incomes in the Philippines, South East Asia and
Australasia.

Its largest subsidiary, Universal Robina Corporation,

is one of the fastest growing snack-food and beverage
companies in the ASEAN region, serving well-loved
quality products with great value for money.

Cebu Pacific Air is the Philippines' first budget

airline and its largest domestic airline carrier with a
growing international network reaching Asia, Australia
and the Middle East; already projected to serve this
year, serving about 18 millions of Filipino workers,
tourists and business travelers with affordable and
reliable air transportation.

Robinsons Land Corporation is a leading mixed-use

property developer which offers a network of modern
commercial centers, office buildings, hotels,
residential condominiums and housing project
subdivisions.
 JG Summit Petrochemicals is the first and only
integrated petrochemical manufacturing operation in the
country, which is from naphtha cracking to polymer
operations, poised to serve the requirements of the
country's manufacturing sector.

Robinsons Bank is a growing commercial bank positioned

for growth as it serves the growing number of
suppliers, tenants, distributors, business partners and
employees of the entire JG Summit and Robinsons Retail
Group.

In addition to these businesses that are majority-owned

and managed, JG Summit also has significant minority
positions in the Philippines' largest telecoms company
Philippine Long Distance Telephone Co. (PLDT), its
largest electricity distributor Manila Electric
Company (Meralco), and one of Singapore's leading
property developers United Industrial
Corporation/Singapore Land.

JG Summit's place in Philippine business has for its

cornerstone a business portfolio of market leaders, a solid
financial position, a formidable management team, and a
vision of leading the country to global competitiveness and
making life better for every Filipino.

VISION

JG Summit Holdings, Inc. will be the leading conglomerate in

the Philippines, with an established and viable global
presence. We make life better.
CORE VALUES

Passion to Win

By being entrepreneurial and proactive, we deliver more than

what is asked for and endear ourselves to, above else- our
customers. We continuously challenge ourselves to strive for
excellence.

Dynamism

We build a culture that thrives on collaboration and

innovation to meet constantly changing consumer needs.

Integrity

Our business is built on trust and honor, making products to

the highest standards.

Courage

We are unafraid to try new things, even discover and journey

where others don't -- to deliver our promise to delight. We
possess an indomitable spirit, a lot of grit.

ORGANIZATIONAL STRUCTURE
 CHAPTER II

DEFINITION OF TERMS

FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is the use of analytical

or financial tools to examine and compare financial
statements in order to make business decisions. In other
words, financial statement analysis is a way for investors
and creditors to examine financial statements and see if the
business is healthy enough to invest in or loan to.

Financial statement analysis takes the raw financial

information from the financial statements and turns it into
usable information the can be used to make decisions. The
three types of analysis are horizontal analysis, vertical
analysis, and ratio analysis. Each one of these tools gives
decision makers a little more insight into how well the
company is performing.

HORIZONTAL ANALYSIS

Horizontal analysis is the comparison of historical

financial information over a series of reporting periods, or
of the ratios derived from this financial information. The
intent is to see if any numbers are unusually high or low in
comparison to the information for bracketing periods, which
may then trigger a detailed investigation of the reason for
the difference.

VERTICAL ANALYSIS

Vertical analysis is the proportional analysis of a

financial statement, where each line item on a financial
statement is listed as a percentage of another item.
Typically, this means that every line item on an income
statement is stated as a percentage of gross sales, while
every line item on a balance sheet is stated as a percentage
of total assets.

RATIO ANALYSIS

A ratio analysis is a quantitative analysis of

information contained in a companys financial statements.
Ratio analysis is based on line items in financial
statements like the balance sheet, income statement and cash
flow statement; the ratios of one item or a combination of
items - to another item or combination are then calculated.

Ratio analysis is used to evaluate various aspects of a

companys operating and financial performance such as its
efficiency, liquidity, profitability and solvency. The trend
of these ratios over time is studied to check whether they
are improving or deteriorating.

Ratios are also compared across different companies in

the same sector to see how they stack up, and to get an idea
of comparative valuations. Ratio analysis is a cornerstone
of fundamental analysis.

CHAPTER V

INTERPRETATIONS

Financial Statement Analysis

Data collected in the study are the balances of the

balance sheet and income statement accounts. While two
analyses can be made: 1) a horizontal analysis of the
financial statements to spot increasing or decreasing trends
on the accounts using the year 2013 2014 2.) a vertical
analysis of the financial statements to determine the
relationship of the account balances to the total assets,
total liabilities, or net sales, the study provided greater
importance on the use of vertical analysis.

Horizontal analysis is devoted to analyze trends

(increase or decrease) of financial statement item; a
vertical analysis ponders on the relationships among
components of the financial statement within a particular
period (Plewa and Friedlob, 2002).

Focusing on the vertical analysis provides the

opportunity to create common-size financial statements
useful in comparing the company with another company and the
industry averages (Mohamad, 1996). This was due to a
limitation of financial analysis (Atkinson, Kaplan, and
Young, 2004) which shows the difficulty of using horizontal
analysis in interpreting trends. The existence of unknown
economic, competitive, or political factors that might
affect the organization can explain this drawback.

Ratio Analysis

Working capital measures the capability of a business

to settle its current obligations using current assets
(Garrison and Noreen, 2000). JG Summit Holdings Inc.
maintained a positive working capital ranging from
13,190,420,000 to 6,360,093,000. Louderback, Holmen, and
Dominiak (2000) argue that a positive working capital is a
rough measure of liquidity. Instead, variations in working
capital supplements other calculations that considers the
size of the company.
 Current ratio measures the firms ability to meet its
short-term obligations by determining how much pesos of
assets are likely to be converted into cash within one year
in order to pay debts that come due during the same year
(Kennon, 2006). The proxies for this ratio are current
assets and current liabilities of the enterprise. JG has a
current ratio of 1.1 in 2014 and 1.04 in 2015. The current
ratio of JFC pertains to the reclassification of accounts.
It also includes provisions to improve certain common
services required by various QSR systems.

Quick ratios test the ability of the business to

settle current obligations without placing reliance on
inventory since it is the most stringent and difficult test
of measuring financial strength (Kennon, 2006). The quick
ratio of JG is 0.79 in 2014 and decreased in 2015 with a
ratio of 0.71. It means that JFC has the lesser capability
to manage all their existing obligations without inventory
and prepaid expenses.

Inventory turnover measures the number of times the

companys inventory is sold during the year. It shows how
fast the inventory is sold, thereby reducing obsolescence
and spoilage. Average sale period, on the other hand,
identifies the number of days to sell inventory one time.
JGs inventory increased with turnover ratios from 3.56% in
2014 to 3.69% in 2015 and increasing inventory days from 90
days to 98.88 days.

The debt to equity ratio represents the amount of

assets contributed by creditors for every peso of assets
supplied by the stockholders. The debt to equity ratio for
JG ranges from 0.36 to 0.53.
 Earnings per share represent the share of each common
stock in the net income of the company. The higher the
earnings per share means the greater share the common stock
has in the companys profit after tax and dividends paid to
preferred stockholders (Louderback, et al., 2000). JG has
EPS ratios from 2.6 in 2014 to 3.16 in 2015. JFC has EPS
ratios from 4.8 in 2013 to 5.08 in 2014. Because JG has
stockholders who own more than 1 Billion authorized and
issued shares, the greater the denominator JG has in
determining its EPS. The stock of JG is attractive because
of its greater earning capability.

Garrison and Noreen (2000) defines dividend yield per

share of common stock as the ratio that shows the return in
terms of cash dividends provided by a stock. This ratio is
determined since investors cannot get the EPS, investors
are entitled to receive dividends. Dividend payout ratio, on
the other hand, is an index that shows whether the company
pays out its earnings or reinvests it for future dividends
(Louderback, et al., 2000). JGs dividend yield is 25 in
2014 and 28 in 2015. The dividend payout ratio increased
from 6 in 2014 to 8 in 2015.

As shown in the table, JG Summit has a positive return

on assets and equity because of its profitable operations
and its capital structure. The ROA in 2014 has decreased by
0.01 in the year 2015, while the ROE maintained. It is also
noteworthy that return on assets did not exceed return on
equity for JG Summit. This could mean the greater capability
of stockholders contribution to generate revenues for the
company.

Price-earnings ratio measures the amount investors are

willing to pay to purchase a dollar of earnings (Louderback,
et al., 2000). This is also used as a gauge of future
earning power of the firm (Gibson, 1997) since high price
earnings ratios would mean higher growth opportunities.

JFC improved from 37.8% in 2014 to 38.6% in 2015.

Because of profitable operations, the stockholders equity
because of the increase in retained earnings. This progress
kept total liabilities form a minority in the enterprises
total assets. The ratio means that for Jollibee, assuming
the business decides to liquidate; the common stockholders
are entitled to receive P54 Billion worth of net assets
2014.

Return on total assets is a ratio that measures a

company's earnings before interest and taxes (EBIT) against
its total net assets. The ratio is considered an indicator
of how effectively a company is using its assets to generate
earnings before contractual obligations must be paid.
Conversely, return on common stockholders equity, when
faced off with the return on total assets, measures the
extent to which the financial leverage is working for or
against common stockholders since return on investments are
affected by operations, debt and preferred stock in the
capital structure of the company (Louderback, et al., 2000).