Inter Company Analysis

Nimir & Sitara Chemicals.

ARSALAN AZIZ

HUMA KALEEM
SANA KHAN WAQAS ALI BABAR

INTRODUCTION
Sitara Chemicals

SCL was incorporated in 1981 and began producing caustic soda in 1985 The plants capacity was gradually increased over years to current level of 545 metric tones a day from just 30 metric tons initially Its specialty chemicals and export division was established in 2001 and agri chemicals division in 2003 In addition to foreign technology based products various products have been developed by company R & D people. Such products are covered in Specialty Chemical and Agriculture products

Sales

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

Fixed Assets

Fixed assets have also been increasing as the company has expanded its business

Price Earning Ratio / Earning per Ratio

Shareholders Equity

Overall positive and upward trend during the years

Profitability

Profit was increasing and was stable till 2009 .

Current Assets Vs Current Liabilities

NIMIR INDUSTRIAL CHEMICALS LIMITED ("NICL"), PREVIOUSLY KNOWN AS RAVI ALKALIS LIMITED AND OWNED BY A LOCAL BUSINESS FAMILY WAS INCORPORATED ON FEBRUARY 6, 1994.

COMPANY WAS LISTED ON THE KARACHI AND LAHORE STOCK EXCHANGES IN 1996

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

ACCOUNTS RECEIVABLE ARE AMONG THE INDUSTRY'S WORST WITH 32.20 DAYS WORTH OF SALES OUTSTANDING

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

ADDITIONALLY, EVEN THOUGH THERE ARE NOT ENOUGH LIQUID ASSETS TO SATISFY CURRENT OBLIGATIONS, OPERATING PROFITS ARE MORE THAN ADEQUATE TO SERVICE THE DEBT.

RATIO ANALYSIS

Solvency analysis: current ratio

Quick ratio

Account receivable turnover and no. of days sales in receivable

Inventory turnover and no. of days sales in inventory

Fixed assets to liabilities

Number of times interest charges earned

Ratio of net sales to assets

Return on total assets

Price earning ratio

HORIZONTAL ANALYSIS

Current assets Long Term Investments Property Plant and Equipment Total Assets

705,059,592 12,933,900 1,060,461,362 1,778,454,854

558,663,174 27,212,664 1,108,764,558 1,694,640,396

146,396,418 -14,278,764

26% -52%

-48,303,196
83,814,458

-4%
5%

LIABILITIES Current Liabilities Long term liabilities Total Liabilities 580,998,579 291,583,303 872,581,882 516,059,763 1,059,667,686 1,575,727,449 64,938,816 (768,084,383) (703,145,567) 13% -72% -45%

STOCK HOLDERS EQUITY

290,000,000 : Ordinary shares of Rs. 5/- each (2010. 5/- each Issued, Subscribed and paid up capital Accumulated lossess Total Liabilities and equity

1,450,000,000 1,105,905,465 (200,032,493) 906,872,972

1,450,000,000 1,105,905,465 (986,992,518) 118,912,947 0 786,960,025 787,960,025 0% -80% 6.626360248

We have taken 2010 as the base year To start off the analysis, The total assets have shown a 5% increase from their previous year(2010), mainly because current assets were increased by 26% of their value which thus increased the total assets of the company. Fixed assets were decreased, 56% to be specific this couldve been because the company is not investing on long term basis anymore

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 company has 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 indicates the good health of the company, the company gave off some liabilities from her own retained earnings, 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 connects the dot for me and shows that the company got away with 72% of her liabilities in 2011, but the opportunity cost was the 80% loss in Retained earnings.

HORIZONTAL ANALYSIS OF INCOME STATEMENT

Sales Cost of sales Gross Profit

2,431,135,925 (2,119,039,395) 312,096,530

1,742,804,413 (1,562,063,478) 180,740,935

688,331,512 (556,975,917) 131,355,595

39% 36% 73%

Distribution Costs Administrative Expenses Operating Profit

(61,093,868) (49,762,067) 201,240,595

(50,404,991) (41,652,841) 88,683,103

(10,688,877) (8,109,226) 112,557,492

21% 19% 127%

Other expenses
Other income Finance costs Foreign Exchange loss Remission of subordinated loan Profit before taxation

(7,806,868)
7,762,450 (96,959,415) (2,273,810) 711,084,887 813,047,839

(6,708,787)
6,911,621 (51,709,997) (23,717,539) 13,458,401

(1,098,081)
850,829 (45,249,418) 21,443,729

16%
12% 88% -90%

799,589,438

5941%

Taxation

(26,087,814)

(8,889,597)

(17,198,217)

193%

Profit after taxation

Net Income

786,960,025
786,960,025

4,568,804
4,568,804

782,391,221
782,391,221

17125%
17125%

The companys Income statement is a Dream of every company, where it pays off her 72% of the liabilities the company manages to increase her Net Income by a whooping 17125%.
This is every companys dream to show growth figure like these, but to create such results is not that easy. The components of Net Income showed growth, The Net Sales were increased by 39%, Cost of Good sold was increased by 36% which increased the gross profits of the company by 73% taking 2010 as the base year. Deductions from the gross sales are represented in the net sales figure. Therefore, net sales gives a more accurate picture of the actual sales generated by the company, or the money that it expects to receive. There was an increase in expenses too, of about 40%, this expense is a direct result of increased sales, the company was now selling more goods, and thus the increment in expense is not a surprise. The taxation has shown a huge increase, but this increase did not incur any severe loss to the company. The taxation was

VERTICAL ANALYSIS

Vertical Analysis

Vertical analysis reports each amount on a financial statement as a percentage of another item. For example, the vertical analysis of the balance sheet means every amount on the balance sheet is restated to be a percentage of total assets. The restated amounts from the vertical analysis of the balance sheet will be presented as a common-size balance sheet. A common-size balance sheet allows you to compare your companys balance sheet to another companys balance sheet or to the average for its industry.

VERTICAL ANALYSIS OF INCOME STATEMENT

Amount 2011
Sales Cost of sales Gross Profit Distribution Costs 2,431,135,925 (2,119,039,395) 312,096,530 (61,093,868)

Amount 2010
1,742,804,413 (1,562,063,478) 180,740,935 (50,404,991)

%age 2011
778% 678% 100% 19.5%

%age 2010
964% 864% 100% 29%

Administrative Expenses
Operating Profit Other expenses Other incom

(49,762,067)
201,240,595 (7,806,868) 7,762,450

(41,652,841)
88,683,103 (6,708,787) 6,911,621

16%
64.5% 100% 252% 2.5%

23%
5% 4% 4%

Finance costs
Foreign Exchange loss Remission of subordinated loan Profit before taxation Taxation Profit after taxation Net Income

(96,959,415)
(2,273,810) 711,084,887 813,047,839 (26,087,814) 786,960,025 786,960,025

(51,709,997)
(23,717,539) 13,458,401 (8,889,597) 4,568,804 4,568,804

302%
0.73% 229% 261% 8.4% 252% 252%

29%
13% N/A 7.4% 5% 2.5% 2.5%

VERTICAL ANALYSIS OF BALANCE SHEET

Current assets Long Term Investments Property Plant and Equipment Total Assets LIABILITIES Current Liabilities Long term liabilities 5,809,985,79 291,583,303 67% 33% 516,059,763 1,059,667,686 33% 67% 705,059,592 12,933,900 1,060,461,362 1,778,454,854 40% 1% 60% 100% 558,663,174 27,212,664 1,108,764,558 1,694,640,396 33% 2% 65% 100%

Total Liabilities
STOCK HOLDERS EQUITY

872,581,882

100%

1,575,727,449

100%

290,000,000: Ordinary shares of Rs. 5/- each (2010. 5/- each

Issued, Subscribed and paid up capital Accumulated lossess Total Liabilities and equity

1,450,000,000

1,450,000,000

1,105,905,465 (200,032,493) 906,872,972

1,105,905,465 (986,992,518) 118,912,947

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

This is every companys dream to show growth figure like these, but to create such results is not that easy.
The components of Net Income showed growth, The Net Sales were increased by 39%, Cost of Goods sold was increased by 36% which increased the gross profits of the company by 73% taking 2010 as the base year.

Conclusion

NICL has proven herself in the year 2011. The company has shown great improvements in her Net Income, ratio of assets to liabilities and many other crucial values have proven that Nimir is a more successful 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 out liabilities(long term) 72%. She used her retained earnings to do so. This massive jump is not consistent, companies like Nimir needs consistency. So, we would clearly say that Sitara is a better Industry than Nimir if we take a wider and an overall perspecive