Introduction

Nestl is one of the worlds leading Nutrition, Health and Wellness Company which is spread globally. This Swiss based multinational company, Nestle global cooperation started its business in Sri Lanka in 1906 and became a public quoted company Nestle Lanka public limited company in 1983 and started commercial production in 1984. The production plant in Kurunegala manufactures more than 90% of the products sold in Sri Lanka. Nestle has some of the most popular brands in Sri Lankan market food market. They totally focus on food products. Some of the popular products are Nestomalt, Milo, Milkmaid, Nescafe, Lactogen, Nespray and Milo. It provides direct employment to over 1200 people in Sri Lanka and has more than 23,000 distributors around the country. The company involves in many CSR projects in Sri Lanka as well. Nestle develops its business by advertising with media, communication campaigns and launching new products rapidly.

VISION Good Food, Good Life.

2012 Key Events 1st quarter Launches first rice based noodles product, Maggi Ricey a chicken curry flavored 2 minute noodles made with the local rice. Launches Nestea Ginger - an instant tea made with natural ginger for the out-of home (vending) business. 2nd quarter Wins Bronze award for Best Corporate Website celebrates its highest monthly milk intake in history by procuring over Five million liters of milk from local dairy farmers in September

3rd quarter Wins Silver and Bronze Effie Awards for its Maggi Dhaiya and Nescaf Hey Ya communication campaigns Launches Lactogrow, a unique Growing-Up-Milk fortified with probiotics including L.Comfortis, vitamins and minerals. 4th quarter Global Commerce Award for supporting the national economy Introduces granulated seasoning with Maggi Magic Chicken; containing chicken, garlic and other essential spices.

2012 highlights

Contributed 4 billion rupees to the rural economy by way of raw material procurement Revenue: Rs. 28.6 billion (+11.7% increase from 2011) Contribution to Exchequer: Rs. 3.7 billion Earnings per Share: Rs. 55.42(+13.2% increase from 2011) 23,000 farming families working with Nestl 5,000+ children reached by the Nestl Healthy Kids programme. 54 million coconuts procured from 5,000 farming families 100,000+ children every year are encouraged to live a life of health and wellness via Milo school sports sponsorships 18,000 children benefit from clean drinking water projects in schools, hospitals and places of worship 5,000+ children benefit from 23 sanitation facilities in rural schools 54 million kilograms of milk procured from 18,000 farmers, signifying a 20% growth.

Asset management ratios Inventory days

This is the average number of days that goods remain in inventory before being sold. This value should not be far above or far below the industry norm. This is a measure of short term sales potential. In 2011 the inventory days figure was 47 but in 2012 it has decreased up to 40. This shows there has been some growth with respect to short term sales potential. Yet 40 is a bad figure since industry norm is about 14 days and 2012 figure 40 is even more than 2 times of the acceptable value. This shows problems with sales forecasts. The company has forecasted of the business very badly and they have not been able to achieve the sales targets they forecasted. Even experiencing same in 2011 they must have focused on this much more in 2012. Although inventory is an asset it becomes a liability as it ties up the money that can be used for other purposes. It also requires additional expenses such as costs for warehousing space, utilities, insurance and staff to manage the inventory while inventory may also subject to obsolescence and shrinkage. Since Nestle is involved with food production this is critical and they have to make sure they add the inventory in to the market with enough time gaps with the expiry dates for the retailer to sell and customer to use. In sudden business draw down Months Company may find it difficult to sell the inventory and may have to sell the inventory at lowered prices or with some other free attractors. This may even end up them having to sell even below the costs of production. Finally we can come to the conclusion that 2012 inventory days figure is a bad figure which is better than last years worse figure.

Debtor receivables days

The days receivables ratio shows how long on average it takes the firm to collect the sales for customers on credit. This figure is better when its lesser because it shows that the money comes fast to the company so the company can use that money for other purposes. So its profitable for the company indirectly when this figure is lesser. But in the other side, if company has a strict policy against the credit customers, this figure will be lesser too. But that may have been resulted in disinterest of the customers because of other competitors loose credit policies compared to Nestle. Too low value may be due to strict policies or good management. If too low value is created by the good management that is a good sign of the company. In 2011 receivables days figure was 14.5 while this year it has increased a little up to 15.5. But industry norm is about 2 weeks so both the figures are acceptable. Normally most credit retailers buy products once every 2 weeks and they pay the credit at that time. So 15.5 days which is closer to 14 days indicates that almost all the creditors have paid at correct times while only a few have paid later contributing the mere increase of 1.5 days. Giving about 14 days to the creditors allows them to recover money and being interested in the business with the company. Finally considered we can come to the conclusion that although a mere increase of receivables days increase, the figure is with acceptable range and shows a good sign of the company.