FINANCIAL ANALYSIS

OF UNILEVER
PAKISTAN

Final Project Of:

FINANCIAL MANAGMENT

UNILEVER PAKISTAN LIMITED

INTRODUCTION TO UNILEVER PAKISTAN LTD.

Unilever Pakistan (70.4% Unilever equity) is the largest FMCG company in Pakistan, as well
as one of the largest multinationals operating in the country..The company had a turnover
of Rs. 23.3 bn (Euro 309 Mn) in 2007, and enjoys a leading position in most of its core
Home and Personal Care and Foods categories, e.g. Personal Wash, Personal Care,
Laundry,
Beverages (Tea) and Ice Cream.
Since the time Unilever Pakistan began its operations in 1948, the Company has been
closely connected to the Pakistani people and its brands have been an integral feature
in their daily lives. In fact, the nature of our business enables our brands to be the
pulse and heartbeat of the 164 million people in Pakistan.
This is a huge commitment, which makes them responsible and accountable to all our
stakeholders and society as a whole and strengthens our resolve to:

Make a positive difference to the lives of low income consumers

Create new opportunities for growth

Improve the overall quality of life in Pakistan, by promoting education,

nutrition, health and hygiene.

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

VIEW OUR BRANDS

Unilever makes and sells products under more than 400 brand names worldwide.
Two billion people use them on any given day. Here is a selection of our top brands,
available in many countries, along with the stories behind them.

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HISTORY
HELPING PEOPLE GET MORE OUT OF LIFE In the
1890s, William Hesketh Lever, founder of Lever Bros, wrote down his
ideas for Sunlight Soap his revolutionary
new product that helped popularize cleanliness and hygiene in
Victorian England. It was 'to make cleanliness commonplace; to lessen work for women;
to foster health and contribute to
invented, but these.E ven if their language - and the notion
of only women doing housework has become outdated.
In a history that now crosses three centuries, Unilever's success has been influenced
by the major events of the day economic boom, depression, world wars, changing consumer
lifestyles and advances in technology. And throughout They've created products that help
people get more out of life cutting the time spent on household chores, improving nutrition,
enabling people to enjoy food and take care of their homes, their clothes and themselves.

BALANCING PROFIT WITH RESPONSIBLE CORPORATE

BEHAVIOUR
FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)
Through this timeline you'll see how their brand portfolio has evolved. At the
beginning of the 21st century, their Path to Growth strategy focused us on global
high- potential brands and their Vitality mission is taking us into a new
phase of development.
19th Century: Although Unilever wasn't formed until 1930, the companies that
joined forces to create the business they know today theyre already well-established
before the start of the 20th century.
1900s: Unilever's founding companies produced products made of oils and fats,
principally soap and margarine. At the beginning of the 20th century their expansion
nearly outstrips the supply of raw materials.
1910s: Tough economic conditions and the First World War make trading difficult
for everyone, so many businesses form trade associations to protect their shared
interests.

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1920s: With businesses expanding fast, companies set up negotiations intending to

stop others producing the same types of products. But instead they agree to merge
and so Unilever is created.
1930s: Unilever's first decade is no easy ride: it starts with the Great Depression and
ends with the Second World War. But while the business rationalises operations, it
also
continues to diversify.
1940s: Unilever's operations around the world begin to fragment, but the business
continues to expand further into the foods market and increase investment in research
and development.
1950s: Business booms as new technology and the European Economic Community
lead to rising standards of living, while new markets open up in emerging economies
around the globe.
1960s: As the world economy expands so does Unilever and it sets about developing
new products, entering new markets and running a highly ambitious acquisition
program

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1970s: Hard economic conditions and high inflation make the '70s a tough time for
everyone, but things are particularly difficult in the Fast Moving Consumer Goods
(FMCG) sector as the big retailers start to flex their muscles.
1980s: Unilever is now one of the world's biggest companies, but takes the decision to
focus its portfolio, and rationalize its businesses to focus on core products and brands.
1990s: The business expands into Central and Eastern Europe and further sharpens its
focus on few product categories, leading to the sale or withdrawal of two-thirds of its
brands.

21 Century: The decade starts

with the launch of Path to Growth, a five-year

ssttrategic plan, and in 2004 further sharpens its focus on the needs of 21st

century- consumers with its Vitality mission.

WHAT IS RATIO ANALYSIS?

Ratio analysis involves the calculation and comparison of ratios which are derived
from the information given in the company's financial statements. The historical
trends of these ratios can be used to make inferences about a company's financial
condition, its operations and its investment attractiveness and whether the company
has improved or deteriorated in the past few years. Financial ratio analysis groups the
ratios into categories that tell us about the different sides of a company's financial
state. Some of those categories are described below:

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Liquidity Ratios:
Liquidity ratios tell us about the companys short term debt paying ability, or
the companys short term financial situation or the companys short term
solvency.

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.

Efficiency/Turnover Ratios:
Efficiency Ratios are used in order to determine that how quickly and efficiently
certain assets are converted in to cash.

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Leverage Ratios:
The Leverage Ratios measure the long term solvency and ability of the company
to pay to its long term creditors.

Profitability Ratios:

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN

(2014)
Profitability ratios measure the operating efficiency and ability of a company to pay
an adequate return to its Shareholders/Stockholders. Management and Shareholders
are interested in profitability ratios, profitability ratios can be computed on the basis of
sales or investment.

Directors Review
The directors present the 2014 Annual Report together with audited financial
statements of the Company for the year ended December 31, 2014.Sales grew by
8.5% in a challenging economic and operational environment, with significant
commodity deflation headwind. Growth was broad-based and volume led. In the case
of Tea, commodity deflation and the resulting price reductions offset the
strong volume growth. The improvement in gross margin through higher volume, cost
efficiencies and better mix, was offset by restructuring charges. The business
continued to invest strategically behind key brands and increased spend by177 bps to
12.1% of Sales. Profit after tax grew by 3%.

Sales: sales increased by 8.54% to 65705 Millions

G.P: gross profit increase by 8.19% to 26424 Millions

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EBIT: Earning before profit is increased by 1.28 % to 9019 millions

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Net Earning : is increased by 3.02% to 6302 Millions

Financial Position Of UNILEVER PAKISTAN LIMITED

Operating and Financial Trends

Of
UNILEVER PAKISTAN LIMITED

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

STATEMENT OF FINANCIAL POSITION (SOFP)

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ASSET OF Unilever Pakistan Limited as at

December 31, 2014

FINANCIAL ANALYSIS OF UNILEVER PAKISTAN

(2014)

EQUITY AND LIABILITIES

OF
Unilever Pakistan Limited
as at December 31, 2014

Profit And Loss Account of Unilever Pakistan Limited

As at December 31, 2014

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UNILEVER PAKISTAN LIMITED

CASH FLOW STATEMENT
As at December 31, 2014

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Cont..

RATIO ANALYSIS
COMPARISON OF CURRENT YEAR WITH PREVIOUS
YEAR: LIQUIDITY RATIOS
Current Ratio:
Current Ratio = Current Assets/Current Liabilities

Current Ratio for 2014 = 17,021,156/ 23,874,046 = 0.71 times or. 0.71:1.00
Current Ratio for 2013 = 12,086,992/ 18,033,609 = 0.67 times or. 0.67:1.00

Interpretation:

In 2013, to pay off Current liabilities of Rs. 1 the company has Current

Assets of Rs. 0.71, which means that the company is not capable of paying its
current liabilities, when they fall due.

In 2014, to pay off Current liabilities of Rs. 1 the company has Current

Assets of Rs. 0.67 which means that the company is not capable of paying its
current liabilities when they fall due.

The companys current ratio was down in 2013 and it is still not

capable to pay off its current liabilities when they fall due. Although the
companys current ratio got better in 2014 but in both years the company is
not in a good position to pay off its current liabilities.

Current Ratio

2014

2013

2012

2011

2010

Times

0.71

0.67

0.82

0.79

0.83

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

Quick or Acid Test Ratio:

Acid test Ratio = Quick Assets/Current Liabilities

Acid Test Ratio for 2014 = 12,008,898/23,874,046 = 0.50 times or. 0.50:1.00
Acid Test Ratio for 2013 = 5,410,082/18,033,609 = 0.30 times or. 0.30:1.00

Interpretation:

In 2014, to pay off Current Liabilities of Rs. 1, the company has Quick

Assets of Rs. 0.50, which means that the company is not capable of paying its
current liabilities with its Quick Assets, when they fall due.

In 2013, to pay off Current Liabilities of Rs. 1, the company has Quick

Assets of Rs. 0.30 which means that the company is not capable of paying its
current liabilities with its Quick Assets when they fall due.

The companys Quick ratio improved in 2014 compared to 2013, but it

is still not capable to pay off its current liabilities when they fall due. In
both years the company is not in a good position to pay off its current
liabilities.

Quick Ratio

2014

2013

2012

2011

2010

Times

0.50

0.30

0.30

0.30

0.40

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PROFITABILITY RATIOS:
Gross Profit Margin:
Gross Profit Margin = 100 x Gross Profit/Net Sales

Gross Profit Margin for 2014 = 100 x 26,424,000/65,705,000 = 40%

Gross Profit Margin for 2013 = 100 x 24,422,000/60,535,000 = 40%

Interpretation:

In 2014, if the company makes net sales of Rs. 100, then the company

will earn a Gross Profit of Rs 40.

In 2013, if the company makes net sales of Rs. 100, then the company

will earn a Gross Profit of Rs. 40.

In terms of gross profitability the company is in same position in 2014,

as it is earning same Gross Profit.

G.P Margin

2014

2013

2012

2011

2010

40%

40%

36%

35%

33%

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

Net Profit Margin:

Net Profit Margin = 100 x Net Income After tax/Net Sales

Net Profit Margin for 2014 = 100 x 6,302,000/65,705,000= 10%

Net Profit Margin for 2013 = 100 x 6,117,000/60,535,000 = 10%

Interpretation:

In 2014, if the company makes net sales of Rs. 100, then the company

will earn a Net Profit of Rs. 10.

In 2013, if the company makes net sales of Rs. 100, then the company

will earn a Net Profit of Rs. 10.

In terms of net profitability the company is in same position in 2014, as

it earning same Net Profit.

N.P Margin

2014

2013

2012

2011

2010

10%

10%

9%

8%

7%

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Earnings before Interest and Tax (EBIT) Margin:

EBIT Margin = 100 x EBIT/Net Sales

EBIT Margin for 2014 = 100 x 9949065/65,705,000 = 15%

EBIT Margin for 2013 = 100 x 9315571/60,535,000 = 16%

Interpretation:

In 2014, if the company makes net sales of Rs. 100, then the

companys earnings before interest and tax will be Rs. 15.

In 2013, if the company makes net sales of Rs. 100, companys

earnings before interest and tax will be Rs. 16.

The company was in a slightly better position in 2013, as its earnings

before interest and tax are higher in 2013.

EBIT

2014

2013

2012

2011

2010

15%

16%

15%

13%

12%

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN

(2014)

Return on Equity:
Return on Equity = 100 x Net income after tax/Common Shareholders Equity

Return on Equity for 2014 = 100 x 6,302,000/3,206,000 = 196%

Return on Equity for 2013 = 100 x 6,117,000/3,058,000 = 200%

Interpretation:

In 2014, if the companys shareholders makes an investment

of

Rs.100 than the companys earnings after income tax will be of Rs.196.

In 2013, if the companys shareholders makes an investment

of

Rs.100 than the companys earnings after income tax will be of Rs.200.

The company was in a better in 2013 because it was getting some good

return on its investment compared to only as small return in 2014.

Return On Equity

2014

2013

2012

2011

2010

196%

200%

104%

101%

92%

Equity Ratio:
Equity Ratio = Shareholders Equity/Total Assets

Equity Ratio for 2014 = 3,206,000/27,856,186 = 0.12 times or 12%

Equity Ratio for 2013 = 3,058,000/22,003,808 = 0.14 times or 14%

Interpretation:

In 2014, the Equity Ratio of 0.12 times indicates that the Shareholders

or the Stockholders have a holding of 12% in the business.

In 2013, the Equity Ratio of 0.14 times indicates that the creditors have

a holding of 14% in the business.

The company was better in 2013 as the Shareholders had less holding

or claims in the business.

EFFICIENCY RATIOS
Inventory Turnover (Times and Days):

Inventory Turnover = Cost of Goods Sold/Average Inventory

Inventory Turnover for 2014 = 39,281,000/4,673,783 = 8 times

Inventory Turnover for 2013 = 36,114,000/4335309

=8.5 times

Interpretation:

In 2014, the inventory will turnover is 8 times in a year.

In 2013, the inventory will turnover was 8 times in a year.

The company is better in 2014 as compared to 2013 because the

inventory turns over more times in 2014.

Inventory Period = 360 days/ Inventory Turnover (times)

Inventory Period for 2014 = 360/8 = 46 days
Inventory Period for 2013 = 360/78.5 = 43 days

Interpretation:

In 2014, after every 46 days the inventory will turnover.

In 2013, after every 43 days the inventory will turnover

The company is slightly better in 2014 as it takes fewer days for the
inventory to turnover or fewer days are required to sell the inventory in 2014.

Inventory Turnover

2014

2013

2012

2011

2010

Days

46

43

59

49

46

Debtor Turnover (Times and Days):

Debtor turnover= Credit Sales or Net Sales/Average Accounts Receivables

Debtor Turnover for 2014 = 65,704,906/972,405 = 68 times

Debtor Turnover for 2013 = 60,535,320/855,771 =71 times

Interpretation:

In 2014, 68 times receivable is collected from the customers or debtors

in a year.

In 2013, 71 times receivable was collected from the customers or

debtors in a year.

The company is slightly better in 2013 as compared to 2014 because

receivable was collected more times in 2013.

Days Sales Outstanding = 360 days/ Receivable Turnover (times)

Days Sales Outstanding for 2014 = 360/68 =5 days
Days Sales Outstanding for 2013 = 360/71 =5 days

Interpretation:

In 2014, after every 5 days the receivable is collected from the

customers or debtors.

In 2013, after every 5 days the receivable is collected from the

customers or debtors.

The companys DSO same in 2014. As compare to 2013

Debtor Turnover

2014

2013

2012

2011

2010

Days

Creditor Turnover (Times and Days):

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN (2014)

Creditors turnover= Credit purchases or Net purchases/Average
Accounts payable

Creditors Turnover for 2014 = 39,364,604/23,286,354 =1.7 times

Creditors Turnover for 2013 = 35,348,870/17,079,170 =2.1 times

Interpretation:

In 2014, 1.7 times receivable is collected from the customers

or

debtors in a year.

In 2013, 2.1 times receivable was collected from the customers

or

debtors in a year.

The company was slightly better in 2013 as compared to 2014 because

receivable is collected more times in 2013.

Days Sales Outstanding = 360 days/ Receivable Turnover (times)

Days Sales Outstanding for 2014 = 360/1.7 = 212 days
Days Sales Outstanding for 2013 = 360/2.1 = 172 days

Interpretation:

In 2014, after

every 212 days the receivable is collected from

the

every 172 days the receivable is collected from

the

customers or debtors.

In 2013, after

customers or debtors.

The company is better in 2014 as it takes fewer days to collect

receivables from the debtors or customers.

Inventory turnover

2014

2013

2012

2011

2010

Days

212

171

108

98

75

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Cash Cycle:
Cash Cycle = Inventory Turnover (days) + Accounts Receivable Turnover
(days)- Account payable (days)

Cash Cycle for 2014 = 46+5-212=(161) days

Cash Cycle for 2013 = 43+5-171= (123) days

Interpretation:

In 2014, the Cash Cycle will complete in -161 days.

In 2013, the Cash cycle will complete in -129 days

The company is slightly better in 2014 as it takes fewer days for the

Cash Cycle to complete.

CCC

2014

2013

2012

2011

2010

Days

(161)

(123)

43

44

34

Total Assets Turnover (times)

Total Assets Turnover = Net Sales/ Average Total Assets

Total Asset Turnover for 2014 = 65704906/27856186= 236 Times

Total Asset Turnover for 2013 = 60535320/22003808 = 276 Times

Interpretation:

In 2014, the total assets turnover is 236 times in one year

In 2012, the total assets turnover was 276 times in one year

The company was better in 2013 as the total assets turned over more

times in that year than they did in 2014.

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FINANCIAL ANALYSIS OF UNILEVER PAKISTAN

(2014)
Asset Turnover

2014

2013

2012

2011

2010

Times

236

278

324

327

331

LEVERAGE RATIOS
Debt Ratio = Total Liabilities/Total Assets

Debt Ratio for 2014 = 24,649,648/27,856,186 =0.88 Times

Debt Ratio for 2013 =18945838/22003808 =0.86 Times

Interpretation:

In 2014, the Debt Ratio of 0.88 times indicates that the creditors have a

holding of 88% in the business.

In 2013, the Debt Ratio of 0.86 times indicates that the creditors have a

holding of 86% in the business.

The company is slightly better in 2014 as the Debtors have less holding

in the business. The holding of Debtor is almost same in both years.

CONCLUSION
According to the above analysis of Unilever Pakistan Limited, the company is in a
good position as far as its profitability is concerned, over the past years the company
has seen a same in its Gross Profit, Net Profit, with the companys Margins in the
current year being the highest.
However Unilever Pakistan Limited is in a good position. The companys efficiency
has seen some improvement in the turnover for the inventory and decrease in the
account receivable turnover and it only takes a few days collect the money from
customers, however given the companys current liquidity position the company is
not
still converting the assets into cash quick enough to pay off its current liabilities. This
is good for a company that they are working on creditors money. They return their
money in 213 days in 2014.And unilever pakistans EPS is Rs.474 in 2014.
Conclusively, Unilever Pakistan Limited is operating effectively and efficiently on
overall basis and generating enough profit to keep its operations running in the most
effective way possible and keeping its standard of being one of the largest and most
stable multinational organizations.

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