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Executive Summary
Our department of management of sciences has been seized with the need for
developing training regulation, which not only cater for the above stated requirements
but would also help in providing experience to trainees to meet the future needs of the
market place.
In this concern I was given a task to make a project finance relating activities which
include financial analysis of company’s financial statement for which I choose
Unilever to complete my analysis. I visited different places to gather fact based
information. so, this document is all based financial position of Unilever. I hope that
my report will give you a brief overlook of company’s financial position and about all
departmental, managerial, information till 2016.
1
Chapter No. 2
The usage of unilever products by over 90% of the people Pakistan stands a testimony
to their successful operation. Their array of products show that they household care,
fabric cleaning, skin cleaning, oral care, hair care, personal grooming, and tea based
beverage products under worldwide famous brand names Wheel, LUX, Lifebuoy, Fair
and Lovely, ponds, Close-up, Sun silk, Lipton, Lipton Taza, Pepsodent, All clear, Vim,
Surf Excel, and Rexona. Unilever Pakistan (70.4% unilever equity) is the largest FMCG
Company in Pakistan, as well as one of the largest multinationals operations in the
country.
Unilever Pakistan Ltd, a subsidiary of the unilever Group is operation in Pakistan since
1948. The company’s main business lines are soap and detergents, personal products,
cooking oils and fats, packed Teas, and ice cream. In 1995, the company established a
new factory Lahore to manufacture the Wall’s rang of ice creams, which have become
popular within a short time. In 1996, the present group-unilever UK acquired the polka
group that produce ice creams. In 1999 Pakistan industrial promoters (private) Limited,
owners of ‘polka’ brands of ice cream wear merged with lever.
2.2. History of Unilever
Unilever was created in 1930 by the merger of British soapmaker Lever Brothers and
Dutch margarine producer Margarine Unie, a logical merger as palm oil was a major
raw material for both margarines and soaps and could be imported more efficiently in
larger quantities.
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In the 1930s the business of Unilever grew and new ventures were launched in Latin
America. In 1972 Unilever purchased A&W Restaurants' Canadian division but sold its
shares through a management buyout to former A&W Food Services of Canada CEO
Jeffrey Mooney in July 1995.By 1980 soap and edible fats contributed just 40% of
profits, compared with an original 90%. In 1984 the company bought the brand Brooke
Bond (maker of PG Tips tea).
In 1987 Unilever strengthened its position in the world skin care market by acquiring
Chesebrough-Ponds, the maker of Ragú, Pond's, Aqua-Net, Cutex Nail Polish,
Pepsodent toothpaste, and Vaseline. In 1989 Unilever bought Calvin Klein Cosmetics,
Fabergé, and Elizabeth Arden, but the latter was later sold (in 2000) to FFI Fragrances.
In 1996 Unilever purchased Helene Curtis Industries, giving the company "a powerful
new presence in the United States shampoo and deodorant market". The purchase
brought Unilever the Suave and Finesse hair-care product brands and Degree deodorant
brand.
In 2000 the company absorbed the American business Best Foods, strengthening its
presence in North America and extending its portfolio of foods brands. In a single day
in April 2000, it bought, ironically, both Ben & Jerry's, known for its calorie-rich ice
creams, and Slim Fast.
The company is fully multinational with operating companies and factories on every
continent (except Antarctica) and research laboratories at Colworth and Port Sunlight
in England; Vlaardingen in the Netherlands; Trumbull, Connecticut, and Englewood
Cliffs, New Jersey in the United States; Bangalore in India (see also Hindustan Unilever
Limited); Pakistan; and Shanghai in China.
Unilever has recently started a five year vitality company initiative in which it began to
converge the marketing of disparate arms of their business, including personal care,
dieting, and consumables into an umbrella function displaying the breadth of their
contributions to personal vitality. This plan has been implemented because of the lack
of recognition that the Unilever brand wields, despite its ubiquitous presence. In 2006
it concluded with the sell off of the global frozen foods division, excluding the ice cream
business and the Italian frozen vegetables businesses.
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The company publicly takes a strong stance on sustainability and started a sustainable
agriculture programmed in 1998. In May 2007 it became the first tea company to
commit to sourcing all its tea in a sustainable manner, asking the Rainforest Alliance,
an international environmental NGO, to start certifying its tea estates in East Africa. It
declared its aim to have all Lipton Yellow Label and PG Tips tea bags sold in Western
Europe certified by 2010, followed by all Lipton tea bags globally by 2015. Covalence,
an ethical reputation ranking agency, placed Unilever at the top of its ranking based on
positive versus negative news coverage for 2007.
In 2008 Unilever was honored at the 59th Annual Technology & Engineering Emmy
Awards for "Outstanding Achievement in Advanced Media Technology for Creation
and Distribution of Interactive Commercial Advertising Delivered Through Digital Set
Top Boxes" for its program Axe: Boost Your ESP.
2.3. List of Brands in Pakistan
Food and drinks
• Lipton
• Blue Band
• Wall's
• Rafhan
• Pearl Dust
• Knorr
• Glaxose-D
• Cornetto
• Magnum
• Brooke Bond
• Fruttare
• Wall's Kid's Range
Personal care
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• Lifebuoy shampoo
• Lifebuoy soap - Soap & hand wash range.
• Lux - Soap, hand & body wash.
• Pond's - Talc’s & beauty creams.
• Rexona - Deo’s and Anti-perspirants.
• Sun silk - Shampoo range.
• Dove
• Pepsodent
• Toni & Guy
Home care
5
2.4. Competitors of Unilever
Kraft
Nestle
Competitor comparison
6
Top Segment CG/Foods Consumer Food Food
care
Top brand Dove Tide Mac&Cheese KIT Kat
CEO A. Burgmans A.G. Lafley R. Deromedi Ian J. Donald
Growth 15.58% 9.25% 8.2% 11.23%
Revenues 42942M 28.2BL 31010M $69B
Revenue -11.93% 19% 4.3% -1.93%
growth
International 100+ 42 150+ 86
Business 3 5 5 6
segment
Employees 234000 110000 10600 253000
43%
57%
Foods Division
Home and Personal Care
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2.5. Vision and Mission Statement
Vision Statement
Mission Statement
8
2.6. Management Hierarchy:
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2.7. Departments of Unilever
10
Project Department
Marketing Department
Sales Department
Manufacturing Department
Finance Department
Operational department
Trading Department
Admin Department
IT department
11
2.8. SWOT Analysis
“A study that undertaken by an organization to identify its internal strengths and
weaknesses, as well as its external opportunities and threats.’’
Strengths
Customer’s Loyalty.
Latest state of the art facilities and technology for producing high quality products.
International brand strength.
Committed to business ethics, safety, health, environment and community.
UNILEVER’s key competitive advantage over other market participants is the retail
reach of the company. UNILEVER services 500,000 outlets with 50 % through
direct distribution and remaining via wholesalers.
UNILEVER is enjoying market edge of 41% in FMCG industry. UNILEVER is at
number one in ice cream segment and having 14% market share all over the globe.
Weaknesses
The biggest challenge in safeguarding market position is to become cost leader.
Operational complexity due to a large number of products in portfolio and due to
diverse work force.
Strategic alliance with other small mills for manufacturing purpose is the weakness
as well as a threat for UNILEVER. Although UNILEVER claims that it is a part of
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its cost reduction strategy but it can not hide the reality that it shows weakness of
UNILEVER.
Opportunities
Markets of developing countries can be proved a profitable segment because people
are consumption oriented rather than saving or investment oriented.
UNILEVER can gear up its market share in the untapped rural market.
Diversification in unrelated business.
Rapid increase in world population. World population is set to grow by 800m in
2010 and almost all increase will be in developing countries.
Threats
FMCG market is highly responsive to economic conditions, inflation and social
disruptions resulting in variations in sales revenues and demand for the company.
P & G is the major competitor and threat for UNILEVER. Other organized players
are Nestle and R & B.
UNILEVER is facing intense competition from unorganized players i.e. cheaper
smuggled products and Chinese products. According to industry source, 40% of tea
consumed locally and a large portion of HPC products are smuggled into the
country.
Legal, political and regulatory factors of host country. For example, supportive
Government policies for attracting FDI, 1% tax rate on corporate profit and inability
of Pakistan Government to control smuggled products etc.
Although UNILEVER has a first mover advantage in ice cream segment but Engro
has announced to enter in ice cream segment and is considering a big rival post
CY2010.
Rapid increase in raw material cost and supply disruptions from suppliers of raw
material. The unprecedented surge in palm oil, tallow prices and other materials has
resulted in declining margins. Going forward, high raw material costs are a key risk
to UNILEVER’s profitability.
2.9. Business facts & figures
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169,000 people work for Unilever
46% of our managers are women
By 2016, over 600 Unilever sites were sending zero non-hazardous waste to landfill
No.1 FMCG graduate employer of choice in 34 of the 60 countries we recruit from
In 2016 our Sustainable Living brands grew 40% faster than the rest of the business.
Innovation at Unilever
14
Chapter no 3
FINANCIAL HEALTH OF THE COMPANY
When the analysis is restricted to the financial statement of one particular period only,
it is known as analysis vertical analysis of financial statements. In this analysis, each
item of a particular financial statement is expressed as percentage of a base figure
selected from the same statement.
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liabilities associated with assets held for
sale 100% 0.00% 0.01% 0.00%
Non-current Liabilities
financial liabilities 100% 14.96% 18.84% 19.75%
Non-current tax Liabilities 100% 0.34% 0.23% 0.21%
pension and post-retirement health care
liabilities
funded schemes in deficit 100% 4.63% 3.00% 3.83%
unfunded schemes 100% 3.59% 3.22% 3.02%
Provisions 100% 1.91% 1.59% 1.83%
deferred tax liabilities 100% 3.19% 3.33% 3.65%
other non-current liabilities 100% 0.79% 0.75% 1.18%
Total Liabilities 100% 70.30% 69.25% 69.91%
Equity
Shareholder's Equity
Called up share capital 100% 1.01% 0.93% 0.86%
share premium account 100% 0.30% 0.29% 0.24%
other reserves 100% 15.70% 14.95% 13.19%
retained profit 100% 42.81% 43.25% 41.08%
non-controlling interest 100% 1.27% 1.23% 1.11%
total equity 100% 29.70% 30.75% 30.09%
total liabilities and equity 100% 100% 100% 100%
Explanation:
In common size balance sheet, the value of non-current asset is low in 2014 and it
increased in 2015 but in 2016 it is showing a little decrease. The value of current asset
is also showing the same trend as non-current assets.
Current liabilities are high in 2014 and then decrease in 2015 and again get high in 2016
and n0n-current liabilities are high in 2014 and has a gradually decrease in 2015 and a
gradually increase in 2016.
Total equity is less in 2014 and showing a gradually increase in 2015 and a little
decrease in 2016.
Total long-term liabilities and shareholder’s equity and total assets are 100 % during
the three years. Likewise, all other values of common size balance sheet are increasing
and decreasing during the years.
16
Common Size Income Statement
Explanation:
In common size income statement, turnover is 100 % from 2014 to 2016. Operating
profit is high in 2014 more than 2015 and 2016 and in 2015 it faces a gradually decrease
and in 2016 it is showing an increase.
Net profit high in 2014 more than 2015 and 16 and a decrease occur in 2015 and a little
increase occur in 2016 more than 2015.
Shareholder’s equity is high in 2014 and decrease in 2015 and then again increase in
2016.
17
The overall position of income statement shows that company is facing a cyclical
change somewhere their accounts increased and somewhere decreased.
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3.2. Horizontal Analysis
This analysis refers to the study of past consecutive balance sheets, income statements
or statement of cash flow at a time. The analysis can be made between two periods or
over a series of periods. Balance Sheet and Income Statement is evaluated by the
formula which is given below:
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Non-current tax Liabilities 11.03 -16.55 -17.24
pension and post-retirement health care liabilities
funded schemes in deficit 58.15 11.67 53.95
unfunded schemes 10.36 7.81 9.02
Provisions 2.69 -6.84 15.81
deferred tax liabilities 0.66 14.44 35.24
other non-current liabilities 27.70 32.77 125.34
Total non-current liabilities 6.05 21.64 41.88
Total Liabilities 9.99 17.98 28.51
Equity
Shareholder's Equity
Called up share capital 0.00 0.00 0.00
share premium account 5.07 10.14 -2.90
other reserves 11.74 15.86 10.33
retained profit 0.45 10.51 13.25
Total equity -4.83 7.63 14.01
non-controlling interest 29.94 36.52 32.91
total equity -3.73 8.55 14.61
total liabilities and equity 5.52 14.91 23.98
Explanation
Balance Sheet
Assets
Total assets of the Company have increased from financial year 2014 to financial year
2016 from 5.52% to 23.98%.
Current Assets
Out of total assets, non-current assets increased by 14.54% from financial year 2014 to
financial year 2016 mainly on current tax asset and non-current assets held for sale and
cash and cash equivalents.
Non-Current Assets
Non-Current assets of the Company have increased by 27.41% in financial year 2016
as compared to financial year 2014 and 2015. The main reason for increase is the
increase in loans and advances which includes working capital loans provided to
subsidiary companies. .
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➢ Equity and Liabilities:
• Equity:
The equity in 2016 with the value of 14.61% increased and in financial year 2014 and
15 is low. The main reason for this increase is increase in fair value reserves in equity
investments and Revenue reserves.
• Non-Current Liabilities:
Non-current liabilities of the Company in financial year 2016 have been increased more
than year2014 and 2015.
• Current Liabilities:
Current liabilities also increased in financial year 2014 to 2016. In the current financial
year mainly on account of increase in trade & other payables and short term borrowings.
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Income Statement
Particulars 2014 2015 2016
% % %
Turnover -2.73 6.98 5.86
operating profit 6.16 -0.03 3.78
after charging non- core items 91.62 -30.14 -51.10
net finance cost -5.17 -1.99 11.93
finance income 13.59 39.81 11.65
finance cost 0.00 3.20 16.80
pension and similar obligations -29.32 -9.02 -29.32
Share of net profit/(loss) of joint ventures and
associates -13.27 -5.31 12.39
Other income/(loss) from non-current
investments 221.43 550.00 642.86
Profit before taxation 7.48 1.49 4.99
Taxation 15.13 5.94 3.84
net profit 4.79 -0.08 5.40
Attributable to
non-controlling interest 0.75 0.66 0.65
shareholder equity 10.70 9.21 9.81
Explanation
The turnover is increasing from 2014 to 2016 in2014 the turnover is negative but in
2016 it is 5.86and net profit is also increased in 2016 over 2014 and 2015.
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Chapter No. 4
Evaluation and Inferences
4. Ratio Analysis:
Time series analysis comprises methods for analyzing time series data in order to
extract meaningful statistics and other characteristics of the data. Time series
forecasting is the use of a model to predict future values based on previously observed
values.
i. Profitability ratio:
Profitability ratio measures how effectively the firm uses its resources to generate
income. The first three of the ratios reported here are probably the best known and most
widely used of all financial ratios. A profitability ratio includes the following:
23
EPS
1.95
1.9
1.85
1.8
1.75
1.7 1.89
1.83
1.65
1.6
1.63
1.55
1.5
2014 2015 2016
EPS
100%
21.70% 23.20%
90%
80% 65.30%
70% 77.30% 65.40%
60%
9.83%
50%
11.00% 10.00%
40% 14.80%
30% 16.50% 14.10%
20% 42.60%
41.30% 42.10%
10%
0%
Gross profit margin 2014
Operating profit2015
margin 2016
Net profit margin ROA ROE ROEC
Explanation:
In profitability ratio, gross profit margin is increasing from 2014 to 2016. Operating
profit margin is decreased from 2014 to 2015 and then increasing in 2016. Net profit
margin is increasing in 2014 to 2016. EPS is decreasing from 2014 to 2016.ROA is also
decreasing. ROE is also decreasing from 2014 to 2016.ROCE in increasing from 2014
to 2016.
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ii. Liquidity ratio:
A liquid firm is a firm that can meet its various short-term debt and credit obligations.
Those who extended credit to a firm are concerned with the firm’s liquidity. It is not
usual for a firm to show a profit on its income statement but still not have sufficient
cash to pay creditors-that is, the firm has an unhealthy liquidity ratio.
• Current ratio
• Quick ratio
• Cash flow from operation
• Working capital turnover
• Cash to current liabilities
0.18
0.175
0.17
0.165 0.18
0.16 0.17
0.155 0.16
0.15
2014 2015 2016
cash flow from operations
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Liquidity ratio chart
1.4
1.2
0.09 0.11
1
0.15
0.8 0.41 0.42
0.17
0.6
0.4
0.62 0.63 0.67
0.2
0
2014 2015 2016
Explanation
In liquidity ratio Current, Quick, Cash flow from operations, Cash to current liabilities
ratios are showing consistently increasing trend from 2014 to 2016.
Activity ratio measures with efficiency with which assets are converted to sales or cash.
Generally, greater activity is good. Activity ratio goes hand-in-hand with liquidity
ratios. If inventory is not turning over, current assets are not converted to cash and the
firm will have trouble paying its bills.
• Inventory turnover
• No of days in inventory
• Asset turnover
• Receivable turnover
• No of days in receivable
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Ratios 2014 2015 2016
Explanation:
In activity ratio, asset turnover is increasing from2014 to 2016 and debt ratio is
decreasing which is a good sign.
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Market ratio:
Relationship of gains from investments (including realized capital gains) resulting from
insurance operations to earned premiums. It relates a firm’s market value, as measured
by its current share price, to certain accounting values.
3.5
2.5
0.5
0.57 0.65 0.65
0
2014 2015 2016
28
Price Earning Ratio Chart
35
34
33
32
31
34.46 price earning ratio
30
29
30.48
28 29.5
27
2014 2015 2016
35
30
25
10
16.69
5
0
2014 2015 2016
Explanation:
In market ratio price earnings ratio dividend yield ratio dividend payout ratio and
breakup value per share are increasing consistently from 2014 to 2016
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4.2. Cross Sectional Analysis:
When the analysis is undertaken by outside parties namely existing and prospective
investors, suppliers, lenders, government agencies, customers etc., it is external
financial statement analysis.
Profitability Ratios:
Profitability ratios
180.00%
160.00% 28.10%
140.00%
120.00%
65.30%
100.00%
80.00% 0.10%
6.40%
9.83% 10.60%
60.00% 10.20%
15.30%
14.80%
40.00%
20.00% 42.60% 49.40%
0.00%
unilever 2016 nestle 2016
Gross Profit Margin Operating profit margin net profit margin ROA ROE ROCE
30
EPS
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
unilever 2016 nestle 2016
EPS
Liquidity Ratio:
Chart Title
1.4
1.2 0.18
1
0.46 0.17
0.8
0.6
0.4 0.85
0.67
0.2
0
Unilever 2016 -0.15
nestle2016
-0.2
-0.4
31
0.25
0.2
0.15
0.1
0.05
0
Unilever2016 nestle2016
Activity ratio:
Activity Ratio
80
0.49
60
40
67.8
20
0 0.69
0.93
unilever 2016 Nestle 2016
32
Market ratio:
Market ratio
40
34.46
35
30 27
25
20
15
10
5
0
unilever 2016 Nestle 2016
33
Market ratio
45 42.57
40
35
30
25
19.86
20
15
10
5
0
Unilever 2016 Nestle 2016
Market ratio
10 9.45
4
2.38
2 1.12
0.65
0
unilever 2016 nestle 2016
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Miss I know it’s not complete I’m so sorry I’ll complete it within two days please just
give me 2 days…
Asma Maqbool
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