PFS 3263

Financial Statement Ananlysis

AJINOMOTO (2014)

Prepared to:

Hafizi Bin Abd Majid

Prepared by: Jamunarani Munian

HISTORY OF AJINOMOTO
Japanese food and chemical corporation which produces seasonings, cooking oils, TV
dinners, sweeteners, amino acids, and pharmaceuticals. In particular it is the world's largest
producer of aspartame, with a 40% global market share.
The literal translation of Aji no Moto is Essence of Taste, used as a trademarkfor the
companys original monosodium glutamate (MSG) product. Its head office is located
in Ch, Tokyo. Ajinomoto operates in 26 countries, employing around 27,518 people as of
2013. Its yearly revenue in the fiscal year of 2013 stands at around US$12 billion.

Product
Monosodium glutamate
Ajinomotos main product, monosodium glutamate (MSG; )
seasoning, was first marketed in Japan in 1909, having been discovered and patented
by Kikunae Ikeda. He found that the most important compound withinseaweed broth for
common use was actually a glutamate salt, which he identified with the taste umami, a word
meaning 'pleasant taste' or 'savoriness'. As the simplest such salt for human consumption, the
popularity of MSG helped the company rapidly expand to other countries, with Ajinomoto
U.S.A., Inc. established in 1956.
Before the eventual publicity, the conglomerate was founded on Ikeda's work: it was the first
to suggest that industrially purified glutamic acid salts, residues or analogues, originally found
in seaweed or dried fish-based broth, might have a characteristic taste of its own. That idea
was rapidly connected to the much older Japanese, culinary term of umami. This led to early
adoption of MSG as a culinary agent in Japan.
Aspartame
Ajinomoto is the world's largest manufacturer of aspartame, sold under the trade
name Aminosweet. It acquired its aspartame business in 2000 from Monsanto for US$67
million.
Glutamine
Ajinomoto supplies the amino acid L-Glutamine.

Lysine price-fixing (1990s)

Ajinomoto was a member of the Lysine price fixing cartel in the mid-1990s. Along
with Kyowa Hakko Kogyo, and Sewon America Inc., Ajinomoto settled with the United
States Department of Justice Antitrust Division in September 1996. Each firm and one
executive from each pleaded guilty as part of a plea bargain to aid in further investigation.
Their cooperation led toArcher Daniels Midland settling charges with the US Government in
October 1996 for $100 million, a record antitrust fine at the time. The cartel had been able to
raise Lysine prices 70% within their first six months of cooperation.
2000 to 2008
By mid-2000, Ajinomoto's acquisition of NutraSweet and 'Euro-Aspartame'
from Monsanto had been completed. In early 2001, Ajinomoto was involved in a scandal in
majority-Muslim Indonesia when it emerged that a pork-based enzymehad been used in its
production of MSG.
In January 2006, the company bought the cooking sauce and condiments manufacturer Amoy
Food from the French dairy product company Groupe Danone, which had run the division as
the "Amoy Asian food unit". At the time of the acquisition, Ajinomoto was the largest
Japanese maker of seasonings.
Lawsuits against Asda (20082010)
In 2008, Ajinomoto sued British supermarket chain Asda, part of Wal-Mart, for a malicious
falsehood action concerning its aspartame product when the chemical was listed as excluded
from the chain's product line along with other "nasties". In July 2009, a British court found in
favour of Asda. In June 2010, an appeal court reversed the decision, allowing Ajinomoto to
pursue a case against Asda to protect aspartame's reputation. At that time, Asda said that it
would continue to use the term "no nasties" on its own-label products, however, the suit was
settled out of court in 2011 after Asda removed references to aspartame from its packaging.
2010 to present
In late 2012, the Company sold its Calpis beverage unit to Asahi Breweries for US$1.5
billion.
In 2013, the Company acquired the contract manufacturing organization Althea Technologies
for US$175 million in a bid to expand biopharmaceutical manufacturing in the United States.

The liquidity of Ajinomoto Current Assets in Jun 2014

The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations. It is calculated as a company's Total Current Assets divides by its Total Current
Liabilities. Ajinomoto Co Inc's current ratio for the quarter that ended in Jun 2014 was 2.21.
During the past 13 years, Ajinomoto Co Inc's highest Current Ratio was 2.41.
The lowest was 1.95. And the median was 2.27.

Current Ratio (Q: Jun.

2014 )

Total Current Assets (Q: Jun.

2014 )

= 5357.64694319

Total Current Liabilities (Q: Jun.

2014 )

/ 2423.4126204

= 2.21

The current ratio can give a sense of the efficiency of a company's operating cycle or its
ability to turn its product into cash. Companies that have trouble getting paid on their
receivables or have long inventory turnover can run into liquidity problems because they are
unable to alleviate their obligations. Because business operations differ in each industry, it is
always more useful to compare companies within the same industry. Acceptable current ratios
vary from industry to industry and are generally between 1 and 3 for healthy businesses. The
higher the current ratio, the more capable the company is of paying its obligations. A ratio
under 1 suggests that the company would be unable to pay off its obligations if they came due
at that point. While this shows the company is not in good financial health, it does not
necessarily mean that it will go bankrupt - as there are many ways to access financing - but it
is definitely not a good sign. If all other things were equal, a creditor, who is expecting to be
paid in the next 12 months, would consider a high current ratio to be better than a low current
ratio, because a high current ratio means that the company is more likely to meet its liabilities
which fall due in the next 12 months.

Total Current Assets

Total current assets includes Cash and Cash Equivalents,Accounts Receivable, Inventory,
and Other Current Assets. Ajinomoto Co Inc's total current assets for the quarter that ended
in Jun. 2014 was $5,358 Mil. Total Current Assets are the asset that can be converted to cash
or used to pay current liabilities within 12 months.
Ajinomoto Co Inc's Total Current Assets for the fiscal year that ended in Mar. 2014 is
calculated as
Total Current
Assets

Cash and Cash

Equivalents

= 1295.25268891

Accounts
Receivable

+0

+ Inventory

1596.0393
5271

Other Current
Assets

+ 2444.48456929

= 5,336

Ajinomoto Co Inc's Total Current Assets for the quarter that ended in Jun. 2014 is calculated
as
Total Current
Assets

Cash and Cash

Equivalents

= 1399.00727344

Accounts
Receivable

+0

+ Inventory

1674.3168
8618

Other Current
Assets

+ 2284.32278357

= 5,358
All numbers are in millions except for per share data and ratio. All numbers are in their own
currency. Total Current Assets is linked to the Current Ratio, which is the result of dividing
total current assets by total current liabilities. It is frequently used as an indicator of a
company's liquidity, its ability to meet short-term obligations. Total Current Assets is also
linked to Working Capital, Net working capital is calculated as Total Current
Assets minus Total Current Liabilities.

Explanation
In Ben Grahams calculation of liquidation value, inventory is only considered worth half of
its book value, and accounts receivable is considered worth 75% of its value. Therefore the
liquidation value is lower than calculated from total current assets.
Ajinomoto Co Inc's Liquidation Value for the quarter that ended in Jun. 2014 is
Liquidation value
=

Cash and Cash

Equivalents

= 1399.00727344

Total
Liabilities

4814.084922
+ 0.75 * 0
35

(0.75 * Account
Receivable)

+ (0.5 * Inventory)
+

0.5 *
1674.31688618

= -2,578
All numbers are in millions except for per share data and ratio. All numbers are in their own
currency.

Account Receivable
Accounts Receivable are created when a customer has received a product but has not yet paid
for that product. Ajinomoto Co Inc's accounts receivables for the quarter that ended in Jun.
2014 was $0 Mil. Accounts receivable can be measured by Days Sales Outstanding.
Ajinomoto Co Inc's Days Sales Outstandingfor the quarter that ended in Jun 2014 was 0.00.
In Ben Grahams calculation of liquidation value, accounts receivable are only considered to
be worth 75% of book value. Ajinomoto Co Inc's Liquidation Value for the quarter that ended
in Jun. 2014 was$-2,578 Mil.

Explanation
1. Accounts Receivable are created when a customer has received a product but has not yet
paid for that product. Days sales outstandingmeasures of the average number of days that a
company takes to collect revenue after a sale has been made. It is a financial ratio that
illustrates how well a company's accounts receivables are being managed.
Ajinomoto Co Inc's Days Sales Outstanding for the quarter that ended in Jun. 2014 is
calculated as:
Days Sales Outstanding
= Account Receivable

/ Revenue

* Days in Period

= 0

/ 2236.90780421 * 91

= 0.00
2. In Ben Graham s calculation of liquidation value, Ajinomoto Co Inc's accounts receivable
are only considered to be worth 75% of book value:
Ajinomoto Co Inc's liquidation value for the quarter that ended in Jun. 2014 is calculated as:
Liquidation value
=

Cash and Cash

Equivalents

= 1399.00727344

Total
Liabilities
4814.084922
35

(0.75 * Account
Receivable)

+ 0.75 * 0

+ (0.5 * Inventory)

0.5 *
1674.31688618

= -2,578
All numbers are in millions except for per share data and ratio. All numbers are in their own
currency.

Total Current Liabilities

Total current liabilities includes Account Payable, Current Portion of Long-Term Debt,
and Other Current Liabilities. Ajinomoto Co Inc's total current liabilities for the quarter that
ended in Jun. 2014 was $2,423 Mil. Total Current Liabilities is the total amount of liabilities
that the company needs to pay over the next 12 months.
Ajinomoto Co Inc's Total Current Liabilities for the fiscal year that ended in Mar. 2014 is
calculated as
Total Current
Liabilities

Account
Payable

=0

Current Portion of LongTerm Debt

+ 357.717308556

Other Current
Liabilities

+ 1887.42704328

= 2,245
Ajinomoto Co Inc's Total Current Liabilities for the quarter that ended in Jun. 2014 is
calculated as
Total Current
Liabilities

Account
Payable

=0

Current Portion of LongTerm Debt

+ 554.855514055

Other Current
Liabilities

+ 1868.55710635

= 2,423
All numbers are in millions except for per share data and ratio. All numbers are in their own
currency. The increase of Total Current Liabilities of a company is not necessarily a bad
thing. This may conserve the company s cash and contribute positively to cash flow. Total
Current Liabilities is linked to Total Current Assets through Working Capital and the Current
Ratio. The Current Ratio is equal to dividing total current assets by total current liabilities. It
is frequently used as an indicator of a company's liquidity, its ability to meet short-term
obligations. Total Current Liabilities is also linked to Working Capital, Net working capital is
calculated as Total Current Assets minus Total Current Liabilities.

Short- Term Debt

Short-Term Debt is the portion of a company s debt that needs to be paid within the next 12
months. This gives investors an idea of how much money the company needs to pay down for
the principle of its debt. Ajinomoto Co Inc's short-term debt for the quarter that ended in Jun
2014 was$555 Mil. Long-Term Debt is the debt due more than 12 months in the future.
Ajinomoto Co Inc's long-term debt for the quarter that ended in Jun 2014 was $862 Mil.
This is the portion of a companys debt that needs to be paid within the next 12 months. This
gives investors an idea of how much money the company needs to pay down for the principle
of its debt. In the notes to balance sheet in annual (10-K) or quarterly (10-Q) reports,
companies usually break down the details of the debt, their due dates, the interest rates etc.