Inter Company Analysis

7/30/2019 Inter Company Analysis

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Inter Company

Analysis Nimir & Sitara Chemicals.ARSALAN AZ

HUMA KALEEM

SANA KHA

WAQAS ALI BABA


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INTRODUCTIONSitara Chemicals

SCL was incorporated in 1981 and began producing caustic soda

1985

The plants capacity was gradually increased over years to currentlevel of 545 metric tones a day from just 30 metric tons initially

Its specialty chemicals and export division was established in 2001and agri chemicals division in 2003

In addition to foreign technology based products various products

have been developed by company R & D people. Such productsare covered in Specialty Chemical and Agriculture products


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Sales

Sales have been increasing since 2006. In 2010 it fell becauseof bad economics conditions in Pakistan.


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Fixed Assets

Fixed assets have also been increasing as the company haexpanded its business


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Price Earning Ratio / Earning perRatio


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Shareholders Equity

Overall positive and upward trend during the years


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Profitability

Profit was increasing and was stable till 2009 .


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Current Assets Vs Current Liabilitie


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NIMIR INDUSTRIAL CHEMICALS LIMITED ("NICL"), PREVIOUSLY KNOWN A

RAVI ALKALIS LIMITED AND OWNED BY A LOCAL BUSINESS FAMILY WASINCORPORATED ON FEBRUARY 6, 1994.

COMPANY WAS LISTED ON THE KARACHI AND LAHORE STOCKEXCHANGES IN 1996

YEAR OVER YEAR, NIMIR INDUSTRIAL CHEMICALS LIMITED HAS BEEN ABTO GROW REVENUES FROM 1.7B TO 2.4B.

ACCOUNTS RECEIVABLE ARE AMONG THE INDUSTRY'S WORST WITH 32DAYS WORTH OF SALES OUTSTANDING

LAST, NIMIR INDUSTRIAL CHEMICALS LIMITED. IS AMONG THE LEASTEFFICIENT IN ITS INDUSTRY AT MANAGING INVENTORIES, WITH 45.90 DAYOF ITS COST OF GOODS SOLD TIED UP IN INVENTORIES.

ADDITIONALLY, EVEN THOUGH THERE ARE NOT ENOUGH LIQUID ASSETSATISFY CURRENT OBLIGATIONS, OPERATING PROFITS ARE MORE THAN

ADEQUATE TO SERVICE THE DEBT.


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RATIO ANALYSIS


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Solvency analysis: current ratio


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Quick ratio


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Account receivable turnover andno. of days sales in receivable


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Inventory turnover and no. of daysales in inventory


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Fixed assets to liabilities


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Number of times interest chargesearned


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Ratio of net sales to assets


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Return on total assets


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Price earning ratio


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HORIZONTAL

ANALYSIS

C t t 705 059 592 558 663 174146,396,418


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Current assets 705,059,592 558,663,174 146,396,418Long Term Investments 12,933,900 27,212,664 -14,278,764Property Plant and Equipment 1,060,461,362 1,108,764,558 -48,303,196Total Assets 1,778,454,854 1,694,640,396 83,814,458

LIABILITIESCurrent Liabilities 580,998,579 516,059,763 64,938,816 Long term liabilities 291,583,303 1,059,667,686 (768,084,383)Total Liabilities 872,581,882 1,575,727,449 (703,145,567)

STOCK HOLDERS EQUITY

290,000,000 : Ordinary shares ofRs. 5/- each (2010. 5/- each 1,450,000,000 1,450,000,000Issued, Subscribed and paid upcapital 1,105,905,465 1,105,905,465 0Accumulated lossess (200,032,493) (986,992,518) 786,960,025Total Liabilities and equity 906,872,972 118,912,947 787,960,025 6.


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We have taken 2010 as the base year

To start off the analysis, The total assets have shown a 5% increase fromtheir previous year(2010), mainly because current assets were increase

by 26% of their value which thus increased the total assets of thecompany.

Fixed assets were decreased, 56% to be specific this couldve been

because the company is not investing on long term basis anymore


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Coming towards liabilities, my analysis shows that there was a decrease in total liabilities, by 45%This clearly indicates the health of the company, a decrease in liabilities means that the compahas either paid off a loan or any other liability that had incurred to her.

We see a decrease in Long term liabilities of about 72% from 2010 to 2011, so this clearly indicatethe good health of the company, the company gave off some liabilities from her own retainedearnings, to get away from liabilities a company uses her net income or retained earnings.

We see that there was a decrease in retained earnings of about 80%, this loss clearly connectsthe dot for me and shows that the company got away with 72% of her liabilities in 2011, but theopportunity cost was the 80% loss in Retained earnings.


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HORIZONTAL

ANALYSIS OFINCOME STATEMENT

Sales 2 431 135 925 1 742 804 413 688 331 512


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Sales 2,431,135,925 1,742,804,413 688,331,512 Cost of sales (2,119,039,395) (1,562,063,478) (556,975,917)Gross Profit 312,096,530 180,740,935 131,355,595

Distribution Costs (61,093,868) (50,404,991) (10,688,877)Administrative Expenses (49,762,067) (41,652,841) (8,109,226)Operating Profit 201,240,595 88,683,103 112,557,492

Other expenses (7,806,868) (6,708,787) (1,098,081)Other income 7,762,450 6,911,621 850,829

Finance costs (96,959,415) (51,709,997) (45,249,418)Foreign Exchange loss (2,273,810) (23,717,539) 21,443,729 Remission of subordinatedloan 711,084,887 -Profit before taxation 813,047,839 13,458,401 799,589,438

Taxation (26,087,814) (8,889,597) (17,198,217)Profit after taxation 786,960,025 4,568,804 782,391,221 Net Income 786,960,025 4,568,804 782,391,221


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The companys Income statement is a Dream of everycompany, where it pays off her 72% of the liabilities thecompany manages to increase her Net Income by awhooping 17125%.

This is every companys dream to show growth figure like

these, but to create such results is not that easy. Thecomponents of Net Income showed growth, The Net Saleswere increased by 39%, Cost of Good sold was increased by36% which increased the gross profits of the company by 73taking 2010 as the base year.

Deductions from the gross sales are represented in the net

sales figure. Therefore, net sales gives a more accurate pictuof the actual sales generated by the company, or the monethat it expects to receive. There was an increase in expensetoo, of about 40%, this expense is a direct result of increasedsales, the company was now selling more goods, and thus tincrement in expense is not a surprise.

The taxation has shown a huge increase, but this increase d

not incur any severe loss to the company. The taxation was


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VERTICAL ANALYSIS


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Vertical Analysis

Vertical analysis reports each amount on a financial statement as apercentage of another item. For example, the vertical analysis ofthe balance sheet means every amount on the balance sheet isrestated to be a percentage of total assets.

The restated amounts from the vertical analysis of the balancesheet will be presented as a common-size balance sheet. Acommon-size balance sheet allows you to compare yourcompanys balance sheet to another companys balance sheet oto the average for its industry.


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VERTICAL ANALYSIS OF INCOMESTATEMENT

Amount 2011 Amount 2010 %age 2011 %age 2010Sales 2,431,135,925 1,742,804,413 778% 964%Cost of sales (2,119,039,395) (1,562,063,478) 678% 864%Gross Profit 312,096,530 180,740,935 100% 100%

Distribution Costs (61,093,868) (50,404,991) 19.5% 29%Administrative Expenses (49,762,067) (41,652,841) 16% 23%Operating Profit 201,240,595 88,683,103 64.5% 5%

100%Other expenses (7,806,868) (6,708,787) 252% 4%Other incom

7,762,450 6,911,621 2.5%

4%

Finance costs (96,959,415) (51,709,997) 302% 29%Foreign Exchange loss (2,273,810) (23,717,539) 0.73% 13%Remission of subordinated

loan 711,084,887 - 229% N/AProfit before taxation 813,047,839 13,458,401 261% 7.4%

Taxation (26,087,814) (8,889,597) 8.4% 5%Profit after taxation 786,960,025 4,568,804 252% 2.5%Net Income 786,960,025 4,568,804 252% 2.5%


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VERTICAL ANALYSIS OF BALANCESHEET

Current assets 705,059,592 40% 558,663,174 33%Long Term Investments 12,933,900 1% 27,212,664 2%Property Plant and Equipment 1,060,461,362 60% 1,108,764,558 65%Total Assets 1,778,454,854 100% 1,694,640,396 100%

LIABILITIESCurrent Liabilities 5,809,985,79 67% 516,059,763 33%Long term liabilities 291,583,303 33% 1,059,667,686 67%Total Liabilities 872,581,882 100% 1,575,727,449 100%

STOCK HOLDERS EQUITY290,000,000: Ordinary shares of Rs.

5/- each (2010. 5/- each 1,450,000,000 1,450,000,000Issued, Subscribed and paid up

capital 1,105,905,465 1,105,905,465Accumulated lossess (200,032,493) (986,992,518) Total Liabilities and equity 906,872,972 118,912,947


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The companys Income statement is a Dream of every company,where it pays off her 72% of the liabilities the company manages toincrease her Net Income by a whopping 17125%.

This is every companys dream to show growth figure like these, butto create such results is not that easy.

The components of Net Income showed growth, The Net Sales wer

increased by 39%, Cost of Goods sold was increased by 36% whichincreased the gross profits of the company by 73% taking 2010 asthe base year.


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Conclusion

NICL has proven herself in the year 2011. The company has showngreat improvements in her Net Income, ratio of assets to liabilitiesand many other crucial values have proven that Nimir is a moresuccessful industry than Sitara.

Looking at a longer term, Sitara, we would say is more consistent,Nimir increased her net incomes by 1725% in 2011, and cleared outliabilities(long term) 72%. She used her retained earnings to do so. Th

massive jump is not consistent, companies like Nimir needsconsistency.

So, we would clearly say that Sitara is a better Industry than Nimir ifwe take a wider and an overall perspecive

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Inter Company Analysis