nestle case study accounting

8/10/2019 nestle case study accounting

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Group Members-

DIlip.k.Singh-1421212

Hemant -1421213

Mayank Singh-1421216

Ashutosh-1421208


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COMPANY PROFILE-

Nestl is the world's leading Nutrition, Health and Wellness Company. It was founded in

1867 by HENRI NESTLE and was listed no.1 in fortune global 500 as the Worlds most

profitable corporation. It was also Ranked no.13 in FT global 2011 with market capitalization

of $200 million. The group comprises of 449 factories in 86 countries and employs more than

3, 28,000 people.

In India-

The company is the one of the most trusted brands and is an integral part of the social fabric

of the country

LOCATION OF THE PLANTS

Moga (Punjab), Choladi (Tamilnadu), Nanjagud (Karnatka), Samalakaha (Haryana), Ponda

(Goa)

MAIN PRODUCTS-

The Companys brands include NESCAFE, MAGGI, MILKYBAR, KIT KAT, BAR-ONE,

MILKMAID, NESTEA, NESTLE Milk, NESTLE SLIM Milk, NESTLE Dahi and NESTLE

Jeera Raita.

The Companys beverages include NESCAFE CLASSIC, NESCAFE My First Cup,

NESCAFE CAPPUCCINO, NESCAFE SUNRISE Premium, NESCAFE SUNRISE and

NESTEA ICED TEA. The Companys holding companies are Nestle S.A. and Maggi

Enterprises Limited.


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INSTALED AND UTILIZED CAPACITY(2009-2013) (units In Metric Ton)

2009-

Product Installed Utilized

Milk Products and Nutrition Data Not Disclosed 135,391

Beverages Data Not Disclosed 23,353

Prepared dishes Data Not Disclosed 156,601

Chocolate and confectionary Data Not Disclosed 44,593

2010-


Milk Products and Nutrition 147,546 147,425Beverages 47,794 26,709

Prepared dishes 205,017 194,583

Chocolate and confectionary 32,769 54,503

2011


Milk Products and Nutrition 162107 148,964

Beverages 226447 220,165

Prepared dishes 507,287 220,165

Chocolate and confectionary 48,500 52,091

2012






2013







4/10

NO OF UNITS SOLD (in Metric Ton)

2010 2011

2012 2013

Product Sales

Milk Products and Nutrition 144397Beverages 193494Prepared dishes 53483Chocolate and confectionary 26458

Product Sales


Product Sales


Product Sales


Question 1

Column1 Fixed Cost Variable Cost Product Cost Period Cost

Electricity N Y Y N

Salary of factory manager Y N Y N

Insurance of factory premises Y N Y N

Depreciation Y N Y N

Wages of staff N Y Y N

Office supervisors salary Y N Y N

Rent Y N N Y

Auditor's Remuneration Y N N Y

Security Y N N Y

Director's Fee Y N N YTelephone and Fax Y N N Y

Legal and Professional Y N N Y

Repair and Maintenance Building Y N N Y

Advertisement Y N N Y

Repairs To Machinery N Y Y N

Direct Labour N Y Y N

Raw Material N Y Y N

Primary Packing Material N Y Y N

Power and Fuel N Y Y N

Excise Duty N Y N Y


5/10

Question 4

OVERHEAD ALLOCATION Cost allocation basis

Power & Fuel Cost Production/unit

Other Manufacturing Expenses Sales

Repairs & Maintenance machinery Machine hours

Research & Development Sales

Stores, spare parts and tools consumed Production/unit

Rent Floor area

Insurance Sales

Professional and legal fees Sales

Telephones, Postage and Communications Sales

Payment to Auditors Sales

Travelling and conveyance Sales

Directors fee Sales

Security Floor area

Training Sales

Question 5

particulars RS.(in crores)

Total expenses 7144.7

(-)cost of goods sold 3313.7

Total Fixed costs 3831

Net Sales 9101.1

contribution 5787.4 Contribution=net sales-variable costs

p/v ratio 0.635901155 P.V=contribution/netsales

Expected Profit 20000Expected sales in Rs 26024.52122

We have assumed the profit to be Rs.20000 crores and calculated the expected sales in Rs in

order to achieve the assumed profit. The formula used to calculate the net sales is

(Expected profit + Fixed cost)/ P.V ratio

Thereby we found out that in order to make a profit of 20000 crores the company must sell

goods worth 26024 crores

Sales tax N Y N Y

Freight and forwarding N Y N Y


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Question 3

Nestle has consistently emphasized and worked towards sustainable use of natural and non-renewable resources. Within the factories there are continuous efforts to improve operationalefficiencies, minimising consumption of natural resources and reducing CO2 emissions whilemaximising production volumes. All processes follow the Nestle Environmental ManagementSystem, use state-of-the-art technology, and comply with government policies, laws andregulations relating to the environment. Your Company actively makes efforts to increaseawareness about the need to sustain the environment and within the factories it constantlyevaluates new initiatives that could reduce waste and emissions.

The process to localize raw materials has continued successfully delivering savings and

shorter procurement lead times. The improvement in service levels has been achieved in

conjunction with an incremental reduction of stock levels.

During the year, Nestle Continuous Excellence (NCE) has been rolled out across all locations

in India, with an acceleration of cost saving initiatives. NCE continues to be a key enabler for

problem solving and people engagement. LEAN has been extended to the entire value chain,

and the first results from suppliers, distribution centres and customers are very encouraging.

The modernisation of warehouses and transport continues to be a key priority for yourCompany. Two new Distribution Centres with modern infrastructures were opened

successfully with increased speed and productivity levels and better controls. Nestle has alsocontinued the roll out of the warehouse management systems (WMS) with RF technologiesacross location to improve performances and prepare for the future.

The Responsible Sourcing program, initiated in 2010, has now reached over 130 supplierswith continuous support and regular audits. The NESCAFE plan launched in 2012 to workwith farmers has been extended, and your Company has started sourcing certified "4 C"coffee from selected farmers. The "4 C" is a voluntary common code for the coffeecommunity to improve social, economic and environmental sustainability in coffee farming.

Nestle has been able to operate efficiently because of the culture of professionalism,creativity, integrity and continuous improvement in all functions and areas as well as theefficient utilisation of the Company`s resources for sustainable and profitable growth.

Given the large variety of products that are manufactured and marketed, and hundreds ofdifferent raw materials used by the company, accurate forecasting of inventory is veryimportant for effective working capital management. A wrong forecast can lead to piles ofinventory, thus blocking unnecessary investment and increasing storage cost as well as therisk of damage associated with perishable items. An inventory management system Isinstituted involving all related departments like procurement, manufacturing, marketing, salesand supply chain. The finance department is involved throughout the process and helps in

linking all operations and controlling flow of information through various departments.


7/10

On the basis of sales targets set for the forthcoming period, the sales department establishesproduct-wise requirements of the finished goods. This information is used by the productiondepartment to prepare a rolling production plan and establish the quantity of each type of rawmaterial required for meeting the production targets. This information on raw materialrequirements is then communicated to the purchase/procurement department.

As the production department itself establishes the requirements of raw materials to bepurchased, it prevents excess purchases and helps in reducing the storage cost as well as thecost of funds blocked in inventories.

(Industry AVG) (nestle)2013 2012 2011 2013 2012 2011

Gross Sales 441.8371 406.9014 293.0187 9419 8614.2 7697.3

Less: Excise 2.640927 2.537349 1.182588 318 279.6 182.8

Net Sales 439.0915 404.2969 291.727 9101.1 8334.5 7514.6

EXPENDITURE : 0

Increase/Decrease

in Stock

-2.76048 -7.77522 -3.99073

105.3 -92 -48.3Raw MaterialsConsumed

247.7351 210.6473 163.0073313.7 3238.4 3052.6

Power & Fuel Cost 5.941129 4.932186 3.72476 385.4 370.9 295.8

Employee Cost 7.611492 6.841997 5.499681 741.5 663.4 546.5

OtherManufacturingExpenses

10.42117 10.23408 13.49249

929.2 849.2 778

General andAdministrationExpenses

124.9992 137.8506 79.08291

673 617.5 549.8

Selling andDistribution

Expenses

10.76794 11.22599 8.693131

832.8 740 675.1MiscellaneousExpenses

6.259073 6.045095 3.407188163.9 114.9 145.8

Less: Pre-operativeExpensesCapitalised

-0.00048

0 0 0

Total Expenditure 410.9746 378.2518 270.3013 7144.7 6502.3 5995.4

PBIDT (Excl OI) 28.11694 26.04509 21.42572 1956.3 1832.2 1519.2

Other Income 3.381855 3.249053 2.934026 84.3 31 27.2

Operating Profit 31.49879 27.35594 21.62045 2040.6 1863.2 1546.4

Interest 8.810887 7.976248 4.771885 36.5 26.6 5.1

PBDT 22.6879 19.47332 16.93898 2004.1 1836.6 1541.3

Depreciation 7.541129 6.546816 4.437859 339.9 284 153.3

Profit BeforeTaxation &Exceptional Items

15.14677 13.02083 12.53419

1664.2 1552.6 1387.9

ExceptionalIncome /Expenses

0.483065 -0.03494 -0.04952

13.8 0 0

Profit Before Tax 15.62984 12.98589 12.48466 1678 1552.6 1387.9

Provision for Tax 4.665323 3.938726 4.150799 560.9 484.7 426.4

PAT 10.96452 9.047332 8.334026 1117.1 1067.9 961.6

Appropriations 29.69415 26.18847 18.61805 2191.7 1724.8 1296.1

Dividend(%) 140.7675 28.87642 11.22061 485 485 485

EPS -374.813 -126.722 44.09265 115.9 110.8 99.7


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Book Value 1829.003 2936.173 2024.698 245.7 186.5 132.1

% changefrom lastyear(industry)

% changefrom lastyear(nestle)

0.085858 0.093427 Gross Sales

0.040821 0.137339 Less: Excise

0.086062 0.091979 Net Sales

EXPENDITURE :

-0.64496-2.14457

Increase/Decreasein Stock

0.1760660.023252

Raw MaterialsConsumed

0.204563 0.039094 Power & Fuel Cost

0.112466 0.117727 Employee Cost

0.018281

0.094206

Other

ManufacturingExpenses

-0.09323

0.089879

General andAdministrationExpenses

-0.0408

0.125405

Selling andDistributionExpenses

0.0353970.426458

MiscellaneousExpenses

Less: Pre-operativeExpenses

Capitalised0.086511 0.098796 Total Expenditure

0.079548 0.067733 PBIDT (Excl OI)

0.040874 1.719355 Other Income

0.151443 0.095213 Operating Profit

0.104641 0.37218 Interest

0.165076 0.091201 PBDT

0.151877 0.196831 Depreciation

0.163273

0.071879

Profit BeforeTaxation &Exceptional Items

-14.8256 Exceptional

Income /Expenses

0.203602 0.080768 Profit Before Tax

0.184475 0.157211 Provision for Tax

0.211906 0.046072 PAT

0.133864 0.270698 Appropriations

3.874827 0 Dividend(%)

1.957745 0.046029 EPS

-0.37708 0.317426 Book Value


9/10

A)Net sales percentage change compared to previous is more in Nestle India as

compared to Industry wide.

B) The Percentage change in Total Expenditure is more in Nestle India as compared

industry wide.

C) The Percentage change in Profit after tax is more industry wide as compared to NestleIndia

D) Earnings per share is more industry wide, as compared to Nestle India.

Question 2-

Overview-

Nestl has developed performance indicators to provide a focus for measuring and reporting Creating

Shared Value, sustainability and compliance. This performance summary forms part of our

communication on progress regarding the United Nations Global Compact Principles. Unless stated

otherwise, performance indicators are for for the year ending 31 December 2013.

Economic-

The total group sales for 2012 and 2013 were 89721and 92518 respectively whereas net profit was10228 and 10015 million respectively.

This suggest that the company sales as well as their profit are increasing from the previous year,

which suggest the company is growing

KPI definition 2012 2013

Total Group sales (CHF million)(a)

89721 92158

Net profit (CHF million)(a)

10228 10015

Workforce-

KPI definition GRI 2012 2013

Total workforce (number of employees)(a)

LA1 333220 333214

Total rate of new employee hires (%)(l)

LA2 11.8 10.7

Total rate of employee turnover (%)(l)

10.3 11.1

The total number of workforce in the company was 333220 in 2012 and in 2013 it was 333214.

The rate of new employees hired was 11.8% in 2012 and in 2013 it was 10.7%.

Rate of employee turnover was 10.3% in 2012 and 11.1 in 2013


10/10

The workforce KPI suggests that there is little change in the number of new employee being hired as

compared to previous year.

Employee turnover is also increased very less when compared to the year 2012.

Environment-

KPI definition GRI 2012 2013

Product ion volume

Total production volume (million tonnes) 47.7 52.1

Materials

Raw materials used (million tonnes) EN1 22.5 23.9

Materials for packaging purposes (million tonnes) EN1 4.77 5.33

Packaging source optimization (kilotonnes saved) 47.1 66.6

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nestle case study accounting