View with images and charts Financial Statement Analysis of Pharmaceutical Industry in Bangladesh 1. INTRODUCTION 1.1 Background Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis, and ratios analysis. Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. There are various advantages of financial statements analysis. The major benefit is that the investors get enough idea to decide about the investments of their funds in the specific company. Secondly, regulatory authorities like International Accounting Standards Board can ensure whether the company is following accounting standards or not. Thirdly, financial statements analysis can help the government agencies to analyze the taxation due to the company. Moreover, company can analyze its own performance over the period of time through financial statements analysis. Following are the most important tools and techniques of financial statement analysis: 1. Horizontal and Vertical Analysis 2. Ratios Analysis 1. Horizontal and Vertical Analysis: Comparison of two or more year's financial data is known as horizontal analysis, or trend analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form. Horizontal analysis of financial statements can also be carried out by computing trend percentages. Trend percentage states several years' financial data in terms of a base year. The base year equals 100%, with all other years stated in some percentage of this base. Vertical analysis is the procedure of preparing and presenting common size statements. Common size statement is one that shows the items appearing on it in percentage form as well as in dollar form. Each item is stated as a percentage of some total of which that item is a part. Key financial changes and trends can be highlighted by the use of common size statements. 2. Ratios Analysis: The ratios analysis is the most powerful tool of financial statement analysis. Ratios simply mean one number expressed in terms of another. A ratio is a statistical yardstick by means of
which relationship between two or various figures can be compared or measured. Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another. Financial ratio analysis, base year analysis, common size analysis, trend analysis are the best tools of performance evaluation of any company. In order to determine the financial position of the pharmaceutical company and to make a judgment of how well the pharmaceutical company efficiency, its operation and management and how well the company has been able to utilize its assets and earn profit. 1.2 Purpose of This Report The purpose of this study is to evaluate the performance of two pharmaceutical companies in Bangladesh. 2. LITERATURE REVIEW 2.1 Pharmaceutical sector in Bangladesh In Bangladesh Pharmaceutical sector is one of the most developed hi tech sector which is contributing in the country's economy. After the promulgation of Drug Control Ordinance 1982, the development of this sector was accelerated. The professional knowledge, thoughts and innovative ideas of the pharmacists working in this sector are the key factors for these developments. Due to recent development of this sector we are exporting medicines to global market including European market. This sector is also providing 95% of the total medicine requirement of the local market. Leading Pharmaceutical Companies are expanding their business with the aim to expand export market. Recently few new industries have been established with hi tech equipments and professionals which will enhance the strength of this sector. The annual per capita drug consumption in Bangladesh is one of the lowest in the world. However, the industry has been a key contributor to the Bangladesh economy since independence. With the development of healthcare infrastructure and increase of health awareness and the purchasing capacity of people, this industry is expected to grow at a higher rate in future. Healthy growth is likely to encourage the pharmaceutical companies to introduce newer drugs and newer research products, while at the same time maintaining a healthy competitiveness in respect of the most essential drugs. In 2000, there were 210 licensed allopathic drug-manufacturing units in the country, out of which only 173 were on active production; others were either closed down on their own or suspended by the licensing authority for drugs due to non compliance to GMP or drug laws. They manufactured about 5,600 brands of medicines in different dosage forms. There were, however, 1,495 wholesale drug license holders and about 37,700 retail drug license holders in Bangladesh. Anti-infective is the largest therapeutic class of locally produced medicinal products, distantly followed by antacids and anti-ulcerants. Besides, out of the total domestic requirement of medicines almost 95 per cent is met by the local manufacturing and Bangladesh also exports formulations to 27 countries around the world. The current turnover of the industry in Bangladesh is Tk. 3,000 crore. According to industry sources, the formulation industry in Bangladesh currently grows at the rate of 22 per cent. With this estimate, the expected business in year 2005 is 50,000 million Tk. Today, Bangladesh is dealing with USA, India, China, Taiwan, Hong Kong, European Union, Singapore, Malaysia, Pakistan, Sri Lanka, Thailand, Burma, Bhutan, Nepal, Yemen,
Mauritius, Vietnam, Kampuchea, Laos, Mexico, Columbia, Ecuador, Kuraso Russia, Uzbekistan, Tazakistan, Kenya, Tunisia, Maldives, etc. as well as with the least developing countries where there is hardly any industry for the production of pharmaceutical formulations. The combined capacity of the industry for the pharmaceutical formulation is huge and a number of companies have recently got approval from UNICEF as its global as well as local supplier of pharmaceutical products. Turnover from pharmaceutical sector is encouraging which is about 14% of total industry turnover is. This position also indicates the positive sign for investment in pharmaceutical sector. Presently top pharmaceutical companies in Bangladesh are also in the process of getting into bulk drug production with collaborative technology, technology transfers and joint venture basis. The large-scale players in the Bangladesh pharmaceutical industry currently include Square Pharma, Beximco, Alma, Apson Chemicals, FEI, Araneta, General Pharma, Hudson Pharma and SKF among others. The MNCs that have a major presence in the country's pharma sector are Aventis, Pfizer, Novartis and Astra Zeneca. Bangladesh, currently having more than a couple of hundred manufacturing facilities with huge potential in pharmaceutical formulations, is heading on a new path of industry economics for self-reliance. Aiming at minimizing the import dependency on basic drugs, the country's prime concern is about building up of own capability in the manufacturing of active pharmaceutical ingredients(APIs), base materials and other allied industry inputs. 2.2 Pharmaceuticals Industry Analysis Increasing Political Attention: Over the years, the industry has witnessed increased political attention due to the increased recognition of the economic importance of healthcare as a component of social welfare. Political interest has also been generated because of the increasing social and financial burden of healthcare. Examples are the UK’s National Health Service debate and Medicare in the US. Economic Value Added: In the decade to 2003 the pharmaceutical industry witnessed high value mergers and acquisitions. With a projected stock value growth rate of 10.5% (2003-2010) and Health Care growth rate of 12.5% (2003-2010), the audited value of the global pharmaceutical market is estimated to reach a huge 500 billion dollars by 2004. Only information technology has a higher expected growth rate of 12.6%. Majority of pharmaceutical sales originate in the US, EU and Japanese markets. Nine geographic markets account for over 80% of global pharmaceutical, Canada, Brazil and Spain. Of these markets, the US is the fastest growing market and since 1995 it has accounted for close to 60% of global sales. In 2000 alone the US market grew by 16% to $133 billion dollars making it a key strategic market for pharmaceuticals. The Social Dimension: Good health is an important personal and social requirement. And pharmaceutical firms play a significant role in meeting this society’s need. In recent times, the impact of various global epidemics (e.g. SARS, AIDS etc) has also attracted political and media attention to the industry. The effect of the intense media and political attention has resulted in increasing industry efforts to create and maintain good government-industry-society communications. Technological Advances:
Modern scientific and technological advances are forcing industry players to adapt ever faster to the evolving environments in which they participate. Scientific advancements have also increased the need for increased spending on research and development in order to encourage innovation. Legal Environment: The pharmaceutical industry is a highly regulated and compliance enforcing industry. As a result there are immense legal, regulatory and compliance overheads which the industry has to absorb. This tends to restrict it’s dynamism but in recent years, government have begun to request industry proposals on regulatory overheads to so as not to discourage innovation in the face of mounting global challenges from external markets. 2.3 The Pharmaceutical Industry Economic Environment The modern pharmaceutical industry is a highly competitive non-assembled global industry. Its origins can be traced back to the nascent chemical industry of the late nineteenth century in the Upper Rhine Valley near Basel, Switzerland when dyestuffs were found to have antiseptic properties. A host of modern pharmaceutical companies all started out as Rhine-based family dyestuff and chemical companies e.g. Hoffman-La Roche, Sandoz, CibaGeigy (the product of a merger between Ciba and Geigy), and Novartis. Most are still going strong today. Over time many of these chemical companies moved into the production of pharmaceuticals and other synthetic chemicals and they gradually evolved into global players. The introduction and success of penicillin in the early forties and the relative success of other innovative drugs, institutionalized research and development (R&D) efforts in the industry The industry expanded rapidly in the sixties, benefiting from new discoveries and a lax regulatory environment. During this period healthcare spending boomed as global economies prospered. The industry witnessed major developments in the seventies with the introduction of tighter regulatory controls, especially with the introduction of regulations governing the manufacture of ‘generics’. The new regulations revoked permanent patents and established fixed periods on patent protection for branded products, a result of which the market for ‘branded generics’ emerged. 2.4 The Ten Principles of Global Compact (UN): The ten principles of Global Compact initiated by the UN Secretary General as have been adopted by the two pharmaceutical companies are as follows: Human Rights: 1) Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence; and 2) Make sure that they are not complicit in human rights abuses. Labor Standards: 3) Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; 4) The elimination of all forms of forced and compulsory labor; 5) The effective abolition of child labor and 6) Eliminate discrimination in respect of employment and occupation. Environment:
7) Business should support a precautionary approach to environmental challenges: 8) Undertake initiatives to promote greater environmental responsibility; and 9) Encourage the development and diffusion of environmentally friendly technologies. Ethical Standards: 10) Business should work against corruption in all its forms, including extortion and bribery. 3. METHODOLOGY 3.1 Data collection Main data for my project is the annual financial reports on these two pharmaceutical companies in 2005 to 2010. When any one measures the financial condition for any company, he must use the annual financial report of that company. Otherwise he does not measure it. I used four main financial statements for financial analysis of pharmaceutical company such as; balance sheets, an income statement, cash flow statement; statement of shareholder’s equity. Data is also collected from different financial books and websites. The annual financial report presents financial data of a company's position, operating performance, and funds flow for an accounting period. I used the annual report of these two pharmaceutical companies in 2005 to 2010. 4. RESULTS AND ANALYSIS 4.1 Base Year Analysis Base-Year Analysis is the analysis of economic trends in relation to a specific base year. Baseyear analysis expresses economic measures in base-year prices to eliminate the effects of inflation. This analysis is an analysis of company's financial statements by comparing current data with that of a previous year, or base year. Base-year analysis allows for comparison between current performance and historical performance. 4.2 Common Size analysis Common-size analysis (also called vertical analysis) expresses each line item on a single year's financial statement as a percent of one line item, which is referred to as a base amount. The base amount for the balance sheet is usually total assets (which is the same number as total liabilities plus stockholders' equity), and for the income statement it is usually net sales or revenues. By comparing two or more years of common-size statements, changes in the mixture of assets, liabilities, and equity become evident. On the income statement, changes in the mix of revenues and in the spending for different types of expenses can be identified. 4.3.1. Liquidity ratio Liquidity ratio refers to the ability of a company to interact its assets that is most readily converted into cash. Assets are converted into cash in a short period of time that are concerns to liquidity position. However, the ratio made the relationship between cash and current liability. The Liquidity ratio we can satisfy on the four ratios, those are: 1) Current ratio, 2) Quick ratio or acid test, 3) Average Collection Period, 4) Days to sell inventory.
Current ratio: The current ratio is calculated by dividing current assets by current liabilities. Current asset includes inventory, trade debtors, advances, deposits and repayment, investment in marketable securities in short term loan, cash and cash equivalents, and current liabilities are comprised short term banks loan, long term loans-current portion, trade creditors liabilities for other finance etc. Generally current ratios are acceptable of shot term creditors for any company. The formula is shown as below; Current Ratio = Current assets /Current liabilities Quick ratio or acid test: Quick ratio or acid test ratio is estimating the current assets minus inventories then divide by current liabilities. It is easily converted into cash at turn to their book values and it also indicates the ability of a company to use its near cash. The formula of quick ratio or acid test ratio are as follow as; Quick ratio = (Current asset- inventories)/Current liabilities Average collection period: The average collection period is refers the average number of days of the company. It maintain the company to collection its credit policy. It has made good relationships between account receivable and outstanding payment. It measures the average number of days customers take to pay their bills to divide by account receivable turnover .The average number of day also indicate the 360 days . So, the equation of average collection period is following as; Average collection period = 360 days/Accounts receivable turnover Days to sell inventory: Days to sell inventory is a ratio measuring the number of day’s inventory is held. As a general rule, the longer inventory is held, the greater is its risk of not being sold at full value. This ratio is crucial in the case of inventory that is perishable or prone to obsolescence, such as high technology and fashion items. Days to sell inventory= Average Inventory / (Cost of Goods Sold/360) 4.3.2. Capital Structure and Solvency Capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. On the other hand, Solvency, in finance or business, is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity. To measure the capital structure and solvency, we can satisfy on the three ratios, those are: 1) Total Liabilities to Equity 2) Equity to total asset 3) Total liabilities to asset Total Liabilities to Equity: It is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. Total Liabilities to Equity ratio formula as following as;
Total Liabilities to Equity= Total Liabilities/ Equity Equity to total asset: A ratio used to help determine how much shareholders would receive in the event of a company-wide liquidation. The ratio, expressed as a percentage, is calculated by dividing total shareholders' equity by total assets of the firm, and it represents the amount of assets on which shareholders have a residual claim. Equity to total asset ratio formula as following as; Equity to total asset= Equity/ Total asset Total liabilities to asset: Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and long-term liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as 'goodwill'). The higher the ratio, the greater risk will be associated with the firm's operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firm's financial flexibility. The Total liabilities to asset ratio formula as following as; Total liabilities to asset= Total liabilities/ Asset 4.3.3. Profitability Ratio Profitability ratios designate a company's overall efficiency and performance. It measures the company how to use of its assets and control of its expenses to generate an acceptable rate of return. It also used to examine how well the company is operating or how well current performance compares to past records of both pharmaceutical companies. There are six important profitability ratios that we are going to analyze: 1. Gross Profit Margin 2. Operating profit margin 3. Pretax profit margin 4. Net Profit Margin 5. Return on Asset 6. Return on Equity Gross Profit Margin ratio: Gross margin express of the company efficiency of raw material and labor during the working process .If any company higher gross profit margin then the company more efficiency to controls their raw material and labors. So it is most important for performance evaluation of pharmaceutical company. It can be assigned to single products or an entire company. It determines the gross profit to divide by net sales. The gross profit margin ratio formula as following as; Gross profit margin ratio= Gross profit/sales*100 Operating profit margin: The operating profit margin ratio recognize of the percentage of sales to exchange into all cost and expenses after remaining sales. A high operating profit margin is preferred. Operating profit margin is calculated as follows: Operating Profit Margin = Operating profits / Sales Pretax Profit Margin: Pretax profit margin is company's earnings before tax as a percentage of total sales or revenues. The higher the pre-tax profit margin, the more profitable the company. The trend of
the pretax profit margin is as important as the figure itself, since it provides an indication of which way the company's profitability is headed. Net Profit Margin: The net profit margin is determined of net profit after tax to net sales. It argues that how much of sales are changeover after al expense .The higher net profit margins are the better for any pharmaceutical company. The net profit margin is calculated as follows: Net Profit margin = Net profit after tax/sales*100 Return on asset: The Return on Assets ratio can be directly computed by dividing net income by average total asset. It finds out the ability of the company to utilize their assets and also measure of efficiency of the company in generating profits. The Return on Assets ratio is calculated as follows: Return on Total Assets = Net profits after taxes / total assets*100 Return on Equity: Return on Equity is compute by dividing net income less preferred dividend by average company stockholder equity. It demonstrate how a company to generate earnings growth for using investment fund. It has some alternative name such Return on average common equity, return on net worth, Return on ordinary shareholders' fund. Return on Equity is calculated as follows: Return on common stock equity = Net income / Common stockholders equity*100 4.3.4. Asset management ratio Asset management ratios are most notable ratio of the financial ratios analysis. It measure how effectively a company uses and controls its assets. It is analysis how a company quickly converted to cash or sale on their resources. It is also called Turnover ratio because it indicates the asset converted or turnover into sales. Finally, we can recognize the company can easily measurement their asset because this ratio made up between assets and sales. Following are discussed six types of asset management ratios: 1) Cash turnover 2) Accounts receivable turnover 3) Inventory turnover 4) Working capital turnover 5) PPE turnover 6) Total asset turnover Cash turnover: Cash turnover indicates a firm's efficiency in its use of cash for generation of sales revenue. It is the inverse of cash-to-sales ratio. Cash flow is extremely important in business, even more so than earning a profit. Companies that consistently lose money on their income statement may still generate cash. Executive management teams will often use ratios to help assess their company's cash flow and efficiency. Cash Turnover= Sales / average cash balance Accounts receivable turnover: The Accounts receivable turnover is comparison of the size of the company sales and uncollected bills from customers. If any company is difficult to collect money so it has large
account receivable and also indicates the low ratio. Instead of, if any company aggressive collection money so it has low receivable and also high ratio. This ratio measure the number of times are collected during the period. Account receivable turnover ratio formula is; Accounts receivable turnover = Sales / Accounts receivable Inventory turnover: The inventory turnover ratio measures the number of times on average the inventory was sold during the period. The ratio is calculating the cost of goods sold by divide into average inventory. The measurement of average inventory is; at first we are adding two year’s inventory after that we divide in to two. Inventory turnover ratio is also known as inventory turns ratio and stock turnover ratio. The equation of Inventory Turnover is following as; Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Working capital turnover: It is a measurement which comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales. The equation of working capital turnover is following as; Working capital turnover= Sales/Working capital Fixed asset turnover: Fixed asset turnover ratio is the sales to the value of fixed assets of the company. It determines the effectiveness in generating net sales revenue from investments in net property, plant, and equipment back into the company evaluates only the investments. The equation of fixed asset turnover is following as; Fixed asset turnover = Sales / Net fixed asset Total asset turnover: The total asset turnover ratio measures the ability of a company to use its assets to generate sales. It considers all assets including property ,plant and equipment, capital working in process, investment –long term, inventories, trade debtors, advances, deposit and prepayment, investment in market securities, short term loan, cash and cash equivalents etc. In these criteria a high ratio means the company is achieving more profit. The formula is following as: Total asset turnover = Sales / Total asset 4.3.5. Market Measures Ratios 1) Price to earnings ratio 2) Earnings yield 3) Dividend yield 4) Dividend payout rate 5) Price to book Price to earnings ratio: The price-to-earnings ratio is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with a lower P/E ratio. The P/E ratio (price-to-earnings ratio) of a stock (also
called its "P/E", or simply "multiple") is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. Earnings yield: The earnings yield can be used to compare the earnings of a stock, sector or the whole market against bond yields. Generally, the earnings yields of equities are higher than the yield of riskfree treasury bonds reflecting the additional risk involved in equity investments. Earnings yield is the quotient of earnings per share divided by the share price. It is the reciprocal of the P/E ratio. Dividend yield: The dividend yield or the dividend-price ratio on a company stock is the company's total annual dividend payments divided by its market capitalization, or the dividend per share, divided by the price per share. It is often expressed as a percentage. Its reciprocal is the Price/Dividend ratio. Dividend payout rate: Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends. The part of the earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. Price to book: A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. A lower P/B ratio could mean that the stock is undervalued. 4.3.6. Cash Based Ratios 1) Operating Cash Flow to Sales 2) Operating Cash Flow to Assets 3) Operating Cash Flow to Equity 4) Operating Cash flow per share Operating Cash Flow to Sales: Percentage measure of a firm's ability to convert sales into cash, and an important indicator of its creditworthiness and productivity. A high number means the firm will be able to grow because it has sufficient cash flow to finance additional production, a low number indicates the opposite. Formula: Cash flows from operating activities x 100 รท Sales revenue. Operating Cash Flow to Assets: This ratio indicates the cash a company can generate in relation to its size. A healthy firm would be expected to generate positive cash flow. However, if the firm is young and/or is investing heavily to promote growth, then a negative Cash Flow from the firm's assets may be excused. Operating Cash Flow to Equity: This is a measure of how much cash can be paid to the equity shareholders of the company after all expenses, reinvestment and debt repayment. Operating Cash flow per share:
It is a measure of a company's financial flexibility that is determined by dividing free cash flow by the total number of shares outstanding. This measure serves as a proxy for measuring changes in earnings per share. Beximco Pharmaceuticals Ltd Bangladesh BEXIMCO PHARMACEUTICALS LTD. About Beximco Pharma Beximco Pharmaceuticals Ltd (BPL) is a leading manufacturer of pharmaceutical formulations and Active Pharmaceutical Ingredients (APIs) in Bangladesh. Beximco Pharma is the flagship company of Beximco Group, the largest private sector industrial conglomerate in Bangladesh, and remains the only Bangladeshi company with an AIM listing on the London Stock Exchange. The company is the largest exporter of pharmaceuticals in the country and its state-of-the-art manufacturing facilities are certified by global regulatory bodies of Australia, European Union, Gulf nations, Brazil, among others. The company is consistently building upon its portfolio and currently producing more than four hundred products in different dosage forms covering broader therapeutic categories which include antibiotics, antihypertensives, antidiabetics, antireretrovirals, anti asthma inhalers etc, among many others. With decades of contract manufacturing experience with global MNCs, skilled manpower and proven formulation capabilities, the company has been building a visible and growing presence across the continents offering high quality generics at the most affordable cost. Ensuring access to quality medicines is the powerful aspiration that motivates more than 2,500 employees of the organization, and each of them is guided by the same moral and social responsibilities the company values most. Today Beximco Pharma is building its presence across five continents and is the only Bangladeshi company to market pharmaceutical products in the USA. The company has a visible and growing presence in emerging market. Base-Year Analysis Beximco Pharmaceuticals Ltd. Balance Sheet Particulars 2006 ASSETS Non-Current Assets Property, Plant and Equipmemt- Carrying Value 14.85% Total Non-Current Assets 14.84% Current Asset Inventories 4.20% Accounts Receivable -44.83% Cash and Cash Equiuvalents 35.59%
2007
2008
2009
2010
5.64% 5.55%
32.56% 32.43%
8.77% 8.51%
16.63% 17.00%
-16.20% 16.14% -85.25%
2.39% 0.85% -14.06%
14.46% 37.74% 1337.16
15.14% 18.33% 39.02%
% Total current assets Total Assets
-3.96% 8.83%
12.92% 0.34%
-2.12% 23.98%
141.68% 34.23%
-10.48% 7.44%
35.59% -30.34% -51.75% -25.58% -49.08%
59.83% 61.05% 88.64% -3.18% 36.17%
-10.78% -0.71% -52.35% 55.75% -3.28%
8.26% 13.00% 12.97% 5.47% 14.43%
-3.52% 246.06 %
-45.49% -51.01%
-12.72% 100.00%
59.83%
-10.78%
8.26%
20.00% 33.07% 0.00% 0.00%
38.81% -1.18% 0.00% 0.00%
-5.48% 6.93% 4.17% 34.23%
-5.11% 18.79% 46.74% 7.44%
EQUITY AND LIABILITIES Current Liabilities and Provisions Short Trem Borrowings Long Term Borrowings-Current Maturity Creditors and Other Payables Accrued Expenses Dividend Payable
1.02% 22.67% -33.20% 68.58% 15.78% 1466.90 %
Income Tax Payable
-70.10%
Total Current liabilities
1.02%
-74.75% 155.80 % 35.59%
Shareholders' Equity Issued Share Capital Share Premium Excess of Issue Price over Face Value of GDRs Capital Reserve on Merger
8.52% 0.00% 74.34% 0.00%
10.00% 0.00% 0.00% 0.00%
-4.76%
12.04%
10.00% -18.57% 0.00% 0.00% 100.00 %
12.86% 16.55% 8.83%
4.91% 3.79% 0.34%
25.58% 26.65% 23.98%
Tax-Holiday Reserve Revalution Surplus Retained Earnings Total shareholders equity TOTAL EQUITY AND LIABILITIES
Beximco Pharmaceuticals Limited Income Statement Particulars
2006
2007
2008
Sales Cost of Goods Sold
11.28% 11.46%
-2.84% -0.19%
11.49% 1.80%
Gross Profit Operating Expense Finance cost Operating Income
11.07% 18.03% 14.13% -1.83%
-5.87% -1.00% 0.56% -
23.18% 3.46% -2.00% 87.27%
2009 21.40 % 28.13% 14.68 % 28.98% 15.93% -4.98%
2010 33.33% 29.28% 37.84% 18.19% 128.79% 36.77%
Net Profit Before WPP & WF Allocation for W.P.P & W.F
7.80% 7.80%
Net Profit / Income Before Tax Provision for Income tax
7.80% -1450.03%
Net Profit
-3.80%
18.89% 23.62% -23.62% 23.62% -11.36% 24.98%
78.67% 78.67% 78.67% 262.11% 54.46%
21.47 % 21.75% 21.46 % 43.81% 14.54 %
56.95% 56.59% 56.97% 27.67% 68.36%
Findings: According to the base year analysis, I took five years data of Beximco Pharmaceuticals Limited. The change in Total asset condition is positively high in 2009 and lowest in the year 2007. On the other hand, in 2008 the highest amount of percentage change is reported for total current liabilities. In case of income statement, in 2010 the highest amount of percentage change is reported for sales, and it was lowest in 2007. It was the only year where the sales growth was negative. In 2010, the change in gross profit is positively high as followed by the sales. And as like as the sales, 2007 was the only year where the gross profit growth was negative. In 2008, both the net profit before WPP and net profit before tax was good. But in the both case, it was lowest in 2007. The change in net profit is best in 2010. And it was negatively high in 2007.Common-Size Analysis Beximco Pharmaceuticals Ltd. Balance Sheet Particulars ASSETS Non-Current Assets Property, Plant and EquipmemtCarrying Value Intangible Assets Investment in Shares Total Non-Current Assets Current Assets Inventories Spares & Supplies Accounts Receivable Loans, Advances and Deposits Short Term Investment Cash and Cash Equiuvalents Total current assets
2005
2006
2007
2008
2009
2010
67.72% 0.34% 0.00% 68.06%
71.46% 0.35% 0.00% 71.82%
75.23% 0.00% 0.31% 75.54%
80.44% 0.00% 0.25% 80.69%
65.19% 0.03% 0.01% 65.23%
70.76% 0.24% 0.03% 71.03%
15.38% 0.00% 7.12% 5.52% 0.00% 3.92% 31.94%
14.73% 0.00% 3.61% 4.97% 0.00% 4.88% 28.18%
12.30% 1.53% 4.18% 5.74% 0.00% 0.72% 24.46%
10.16% 1.58% 3.40% 3.67% 0.00% 0.50% 19.31%
8.66% 1.22% 3.49% 3.52% 12.57% 5.32% 34.77%
9.28% 1.29% 3.84% 3.65% 4.02% 6.88% 28.97%
Total Assets EQUITY AND LIABILITIES Non-Current Liabilities Long Term Borrowings-Net off Current Maturity (Secured) Fully Convertible, 5% Dividend, Preference Share Liability for Gratuity & WPPF Deferred Tax Liability Total Non-Current Liabilities Current Liabilities and Provisions Short Trem Borrowings Long Term Borrowings-Current Maturity Creditors and Other Payables Accrued Expenses Dividend Payable Income Tax Payable Total Current liabilities
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00%
12.68%
9.73%
14.86%
9.76%
9.68%
8.90%
0.00% 1.74% 0.41% 14.83%
0.00% 1.79% 0.52% 12.05%
0.00% 2.06% 0.43% 17.35%
0.00% 1.85% 0.31% 11.93%
20.61% 1.55% 1.77% 33.61%
0.00% 1.57% 3.03% 13.50%
9.70%
10.94%
7.59%
9.86%
7.30%
7.67%
9.74% 1.98% 0.93% 0.01% 0.50% 22.86%
5.98% 3.07% 0.99% 0.11% 0.14% 21.22%
2.87% 2.27% 0.50% 0.03% 0.35% 13.62%
4.37% 1.78% 0.55% 0.02% 0.97% 17.56%
1.55% 2.06% 0.40% 0.01% 0.35% 11.67%
1.63% 2.02% 0.42% 0.01% 0.00% 11.76%
8.74% 12.51%
9.58% 12.46%
8.50% 10.05%
7.60% 7.49%
9.82% 24.66%
14.18% 2.48% 3.31% 0.00% 25.52% 66.74% 100.00 %
14.14% 2.47% 3.70% 0.00% 26.68% 69.03% 100.00 %
11.40% 1.99% 0.00% 11.55% 27.03% 70.52% 100.00 %
8.49% 1.48% 0.00% 8.13% 21.53% 54.72% 100.00 %
7.91% 1.38% 0.00% 7.18% 23.80% 74.74%
2006 100.00 % 53.24% 46.76% 26.59%
2007 100.00 % 54.70% 45.30% 27.10%
2008 100.00 % 49.94% 50.06% 25.15%
2009 100.00 % 52.71% 47.29% 26.72%
2010
Shareholders' Equity Issued Share Capital 8.76% Share Premium 13.61% Excess of Issue Price over Face Value of GDRs 8.85% Capital Reserve on Merger 2.69% Tax-Holiday Reserve 3.79% Revalution Surplus 0.00% Retained Earnings 24.61% Total shareholders equity 62.32% TOTAL EQUITY AND 100.00 LIABILITIES %
100.00%
Beximco Pharmaceuticals Limited Income Statement Particulars Sales Less : Cost of Goods Sold Gross Profit Operating Expense
2005 100.00 % 53.16% 46.84% 25.07%
100.00% 51.11% 48.89% 23.69%
Finance cost Operating Income Add : Other Income Net Profit Before WPP & WF Allocation for W.P.P & W.F Net Profit / Income Before Tax Income tax Income/ (Expenses) Current Tax Defferred Tax Income/ (Expenses) Net Profit
6.67% 15.10% 0.22% 15.32% 0.73% 14.59% 0.12% -1.39% 1.50% 14.71%
6.84% 13.32% 1.52% 14.84% 0.71% 14.13% -1.42% -0.96% -0.46% 12.71%
7.08% 11.12% 0.55% 11.67% 0.56% 11.11% -1.30% -1.60% 0.31% 9.82%
6.23% 18.68% 0.02% 18.70% 0.89% 17.81% -4.21% -4.33% 0.12% 13.60%
5.95% 14.62% 4.09% 18.71% 0.89% 17.82% -4.99% 0.00% -4.99% 12.83%
10.20% 15.00% 7.03% 22.02% 1.05% 20.98% -4.77% -1.10% -3.68% 16.20%
Findings: In the Balance sheet, Property, Plant and Equipment are the biggest item for the non current asset. Inventories are the biggest item for the current asset. Retained Earnings is the biggest item for shareholders equity. The company contains more non-current asset than current asset. And shareholders equity is greater than the current liabilities. In the income statement, change in Net profit is good in 2010. It was lowest in 2007. On the other hand the operating cost was low in 2005, but it was high in 2009. RATIO ANALYSIS Liquidity Measures 01. Qucik Ratio 02. Current Ratio 03. Collection Period 04. Days to sell inventory
2005 0.48 1.40 84.38 342.7 4
2006 0.40 1.33 41.83 320.4 1
2007 0.47 1.80 50.01 269.0 0
2008 0.31 1.10 45.24 270.5 6
2009 1.94 2.98 51.33 241.7 0
2010 1.36 2.46 45.55 215.26
Findings: According to the liquidity measure ratios, the performance of Beximco Pharmaceuticals Ltd was good in 2009 and in the very last, in 2008, the performance was bad. In that year all the ratios are low. Capital Structure and Solvency 05. Total Liabilities to Equity 06. Equity to total asset 07. Total liabilities to asset
2005 0.37 0.62 0.23
2006 0.33 0.67 0.22
2007 0.20 0.69 0.14
2008 0.25 0.71 0.18
2009 0.25 0.55 0.13
2010 0.20 0.75 0.15
Findings: According to the Capital Structure & Solvency ratios, the performance of Beximco Pharmaceuticals Ltd was good in 2007 and 2010. On the other hand, in 2010, the performance was good according to the equity to asset ratio. In 2009, total liabilities to asset ratio were lowest.
2005 2006 2007 2008 2009 2010 4.47% 3.95% 2.95% 3.68% 3.14% 4.92% 7.17% 5.92% 4.28% 5.22% 5.74% 6.58%
Return on Investment 08. Return on Asset 09. Return on common equity Findings:
According to the Return on Investment ratios, the performance of Beximco Pharmaceuticals Ltd was good in 2010 and in 2008, the performance was bad. In that year all the ratios are low. Operating Performance 10. Gross profit margin 11. Operating profit margin (pretax) 12. Pretax profit margin 13. Net profit margin
2005 46.84 % 21.77 % 14.59 % 14.71 %
2006 46.76 % 20.16 % 14.13 % 12.71 %
2007 45.30 % 18.20 % 11.11 % 9.82%
2008 50.06 % 24.91 % 17.81 % 13.60 %
2009 47.29 % 20.57 % 17.82 % 12.83 %
2010 48.89% 25.20% 20.98% 16.20%
Findings: According to the Operating Performance ratios, the performance of Beximco Pharmaceuticals Ltd was good in 2010 and in 2007, the performance was bad. In that year all the ratios are low. Asset utilization 14. Cash turnover 15. Accounts receivable turnover 16. Inventory turnover 17. Working capital turnover 18. PPE turnover 19. Total asset turnover
2005 7.76 4.27 1.05 3.35 0.45 0.30
2006 6.37 8.61 1.12 4.46 0.43 0.31
2007 41.97 7.20 1.34 2.78 0.40 0.30
2008 54.45 7.96 1.33 15.43 0.34 0.27
2009 4.60 7.01 1.49 1.06 0.38 0.24
2010 4.41 7.90 1.67 1.76 0.43 0.30
Findings: According to the Asset utilization ratios, the performance of Beximco Pharmaceuticals Ltd was good in 2010 and in that year the cash turnover and other ratios are high. In 2005, the performance was bad according to the accounts receivable turnover. The PPE turnover and the total asset turnover were low in 2008 and 2009. Market measure 20. Price to earnings ratio 21. Earnings yield 22. Dividend yield 23. Dividend payout rate 24. Price to book
2005 9.082 0.110 0.260 2.357 0.651
2006 11.494 0.087 0.093 1.070 0.680
2007 21.013 0.048 0.085 1.784 0.899
2008 38.734 0.026 0.060 2.310 2.021
2009 44.526 0.022 0.000 0.000 2.555
2010 26.132 0.038 0.000 0.000 1.720
Findings: According to the Market measure ratios, the Price to earnings ratio was high in 2009 and low in 2005. Earnings yield ratio was high in 2005 and low in 2009. Dividend payout rate ratio was high in 2005 and low in 2010. Price to book ratio was high in 2008 and low in 2005. Cash based ratios 25. Operating Cash Flow/ Sales 26. Operating Cash Flow/ Assets 27. Operating Cash Flow/ Equity 28. Operating Cash flow per share
2005 0.094 0.028 0.046 4.053
2006 0.292 0.091 0.136 10.716
2007 0.095 0.028 0.041 2.703
2008 0.220 0.059 0.084 6.992
2009 0.107 0.026 0.048 2.918
2010 0.208 0.063 0.085 6.647
Findings: According to the Cash based ratios, Operating Cash Flow/ Sales were low in 2005 and high in 2006. The Operating Cash Flow/ Assets ratio was low in 2009 and high in 2006.
Beximco Pharmaceuticals Ltd. Common Size Current Assets and Current Liabilities Current Asset Particulars Inventories Spares & Supplies Accounts Receivable Loans, Advances and Deposits Short Term Investment Cash and Cash Equiuvalents Total Current Assets Current Liabilities Particulars Short Trem Borrowings Long Term Borrowings-Current Maturity Creditors and Other Payables Accrued Expenses Dividend Payable Income Tax Payable Total Current Liabilities
2005 48.16% 0.00% 22.31% 17.27% 0.00% 12.26% 100.00 %
2006 52.26% 0.00% 12.81% 17.62% 0.00% 17.31% 100.00 %
2007 50.28% 6.24% 17.09% 23.46% 0.00% 2.93% 100.00 %
2008 52.60% 8.19% 17.61% 19.03% 0.00% 2.57% 100.00 %
2009 24.91% 3.50% 10.04% 10.11% 36.14% 15.30% 100.00 %
2010 32.04% 4.47% 13.27% 12.58% 13.88% 23.76%
2005 42.45% 42.61% 8.66% 4.07% 0.03% 2.18% 100.00 %
2006 51.55% 28.18% 14.45% 4.67% 0.51% 0.64% 100.00 %
2007 55.75% 21.11% 16.70% 3.69% 0.20% 2.56% 100.00 %
2008 56.17% 24.91% 10.11% 3.14% 0.12% 5.54% 100.00 %
2009 62.52% 13.30% 17.66% 3.41% 0.07% 3.04% 100.00 %
2010 65.26% 13.88% 17.20% 3.60% 0.06% 0.00%
100.00%
100.00%
Findings: According to the common Size Current Assets and Current Liabilities table, the Inventories are the large item among all current assets. The change in inventories is positively high in 2006 and it was low in 2009. On the other hand the, Short Term Borrowings are the large item among all current liabilities. The change in Short Term Borrowings is positively high in 2010 and it was low in 2007.
Change in Net Working Capital Particulars Current Assets Inventories Spares & Supplies Accounts Receivable Loans, Advances and Deposits Short Term Investment Cash and Cash Equiuvalents Total Current Assets Current Liabilities Short Trem Borrowings Long Term BorrowingsCurrent Maturity Creditors and Other Payables Accrued Expenses Dividend
2005
2006
2007
2008
2009
2010
1,983,809,444
1,754,440,288
1,470,152,24 2
1,505,288,093
1,722,953,28 4
1,983,809,444
276,520,188
0
182,328,049
234,530,326
242,034,855
276,520,188
821,356,439
430,240,095
499,680,792
503,916,401
694,111,730
821,356,439
779,129,620
591,613,938
685,915,465
544,509,106
699,204,450
779,129,620
859,403,704
0
0
0
2,500,000,00 0
859,403,704
1,471,448,436
581,098,945
85,698,910
73,647,728
1,058,433,57 4
1,471,448,436
6,191,667,831
3,357,393,266
2,923,775,45 8
2,861,891,654
6,916,737,89 3
6,191,667,831
1,639,961,052
1,302,816,980
907,582,327
1,461,666,227
1,451,326,35 4
1,639,961,052
348,860,443
712,122,930
343,604,498
648,165,841
308,820,056
348,860,443
432,315,660
365,255,938
271,814,118
263,176,822
409,898,122
432,315,660
90,512,178
117,936,620
60,052,739
81,776,450
79,094,905
90,512,178
1,507,899
13,012,146
3,285,324
3,169,568
1,727,724
1,507,899
Payable Income Tax Payable Total Current Liabilities Net Working Capital Net Chanes in Working Capital
0
16,276,184
41,633,930
144,077,359
70,584,481
0
2,513,157,232
2,527,420,798
1,627,972,93 6
2,602,032,267
2,321,451,64 2
2,513,157,232
3,678,510,599.0 0
829,972,468
1,295,802,52 2
259,859,387
4,595,286,25 1
3,678,510,599
(2,848,538,131)
465,830,054
(1,035,943,135 )
4,335,426,86 4
(916,775,652)
Projected Change in Net Working Capital Particulars Current Assets Inventories Spares & Supplies Accounts Receivable Loans, Advances and Deposits Short Term Investment Cash and Cash Equiuvalents Total current assets Current Liabilities Short Trem Borrowings Long Term BorrowingsCurrent Maturity Creditors and Other
2010
2011
2012
2013
2014
2015
1,983,809,44 4
2,182,190,38 8
2,400,409,42 7
2,640,450,37 0
2,904,495,40 7
3,194,944,948
276,520,188
304,172,207
334,589,427
821,356,439
903,492,083
993,841,291
368,048,370 1,093,225,42 0
404,853,207 1,202,547,96 2
779,129,620
857,042,582
859,403,704
945,344,074
942,746,840 1,039,878,48 2
1,037,021,52 4 1,143,866,33 0
1,140,723,67 7 1,258,252,96 3
1,471,448,43 6 6,191,667,83 1
1,618,593,28 0 6,810,834,61 4
1,780,452,60 8 7,491,918,07 6
1,958,497,86 8 8,241,109,88 3
2,154,347,65 5 9,065,220,87 1
1,062,011,19 2
1,168,212,31 1
1,285,033,54 2
1,413,536,89 7
1,554,890,58 6
1,710,379,645
1,066,030,95 7 216,660,743
1,172,634,05 3 238,326,817
1,289,897,45 8 262,159,499
1,418,887,20 4 288,375,449
1,560,775,92 4 317,212,994
1,716,853,517 348,934,293
445,338,528 1,322,802,759 1,254,796,044 1,384,078,259 2,369,782,421 9,971,742,959
Payables Accrued Expenses Dividend Payable Income Tax Payable Total Current Liabilities
101,859,834
112,045,817
123,250,399
135,575,439
149,132,983
164,046,281
830,440
913,484
1,004,832
1,105,316
1,215,847
1,337,432
54,431,402
59,874,542
65,861,996
72,448,196
79,693,016
87,662,317
2,501,824,56 8
2,752,007,02 5
3,027,207,72 7
3,329,928,50 0
3,662,921,35 0
4,029,213,485
Net Working 3,689,843,26 Capital 3 Net Chanes in Working Capital
4,058,827,58 9
4,464,710,34 8
4,911,181,38 3
5,402,299,52 1
5,942,529,473
368,984,326
405,882,759
446,471,035
491,118,138
540,229,952
SQUARE PHARMACEUTICALS LTD. About SQUARE Square Pharmaceuticals Ltd. is a public limited pharmaceutical company based in Bangladesh. It is part of the SQUARE Group of Companies. SQUARE today symbolizes a name – a state of mind. But its journey to the growth and prosperity has been no bed of roses. From the inception in 1958, it has today burgeoned into one of the top line conglomerates in Bangladesh. Square Pharmaceuticals Ltd., the flagship company, is holding the strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a high performance global player. SQUARE Pharmaceuticals Limited is the largest pharmaceutical company in Bangladesh and it has been continuously in the 1st position among all national and multinational companies since 1985. It was established in 1958 and converted into a public limited company in 1991. The sales turnover of SPL was more than Taka 11.46 Billion (US$ 163.71 million) with about 16.43% market share (April 2009– March 2010) having a growth rate of about 16.72%. SQUARE Pharmaceuticals Limited has extended her range of services towards the highway of global market. She pioneered exports of medicines from Bangladesh in 1987 and has been exporting antibiotics and other pharmaceutical products. This extension in business and services has manifested the credibility of Square Pharmaceuticals Limited. Base-Year Analysis Square Pharmaceuticals Ltd. Balance Sheet Particulars ASSETS:
2007
2008
2009
2010
2011
Non-Current Assets: Property, Plant and Equipment
55.29%
15.79%
19.84%
14.92%
23.99%
Capital work in progress
-55.35%
22.83%
-100.00%
0.00%
39.92%
Investment-Long Term (at cost)
45.74%
29.35%
24.82%
-11.49%
1.05%
Investment in Marketable Securities
0.00%
0.00%
0.00%
236.01 %
34.28%
Total Non-Current Assets
29.18%
21.85%
14.86%
11.76%
16.71%
Inventories
15.04%
31.25%
3.55%
5.16%
15.16%
Trade Debtors
11.82%
11.58%
32.57%
6.43%
51.98%
Advance, Deposits and prepayments
42.02%
22.14%
-9.86%
37.61%
46.26%
Investment in Marketable Securities
0.00%
0.00%
-100.00%
0.00%
0.00%
Short term loan
-25.21%
6.46%
-54.11%
76.11%
130.50%
Cash & Cash Equivalents
-55.84%
46.79%
42.94%
-11.83%
43.12%
Total Current Assets
-8.66%
19.81%
-13.34%
19.09%
54.23%
TOTAL ASSETS
12.78%
21.13%
5.06%
13.86%
27.95%
Shareholders' Equity:
14.55%
14.78%
19.34%
16.69%
17.89%
Share Capital
20.00%
50.00%
35.00%
25.00%
30.00%
Share Premium
0.00%
0.00%
0.00%
0.00%
0.00%
Tax Holiday Reserve
16.28%
0.00%
0.00%
0.00%
0.00%
Gain on Marketable Securities
0.00%
0.00%
0.00%
75.21%
55.40%
Retained Earnings
24.06%
22.49%
28.49%
23.70%
22.80%
Non-Current Liabilities:
-5.99%
31.29%
-15.83%
90.38%
-23.83%
-25.36%
129.60 %
-36.51%
Current Asset:
EQUITY AND LIABILITIES
Long Term Loans- Secured
-18.23%
22.33%
Deferred Tax Liabilities
211.65 %
73.06%
15.64%
6.88%
34.16%
Current Liabilities:
13.04%
36.99%
-24.56%
16.06%
110.59%
Short Term Bank Loans
23.63%
46.79%
-42.53%
-52.00%
256.78%
Long Term Loans- Current Portion
-13.86%
31.90%
-0.48%
56.33%
3.49%
Trade Creditors
-23.67%
66.58%
23.05%
217.75 %
85.80%
Liabilities for Expenses
-50.64%
31.45%
115.46%
-18.84%
40.80%
Liabilities for Other Finance
6.87%
-5.99%
53.94%
-8.12%
32.20%
TOTAL EQUITY & LIABILITIES
12.78%
21.13%
5.06%
13.86%
27.95%
Square Pharmaceuticals Limited Income Statement Particulars Sales Cost of Goods Sold Gross Profit Operating Expense
2007 22.94% 21.08% 26.04% 42.91%
2008 9.81% 13.77% 5.24% 20.32%
2009 18.83% 16.81% 21.94% 5.16%
2010 16.83% 15.67% 18.15% 24.27%
Finance cost Operating Income Net Profit Before WPP & WF Allocation for W.P.P & W.F Net Profit / Income Before Tax Provision for Income tax Provision for deferred income tax Net Profit
69.34% 29.99% 12.38% 12.38% 12.38% 4.40% 111.65% 11.78%
48.56% 174.65% 8.46% 8.46% 8.46% 17.72% 7.58% 6.03%
12.86% 10.07% 34.39% 34.39% 34.39% 44.67% -62.96% 36.78%
-22.23% -12.01% 12.50% 12.50% 12.50% 16.17% 70.50% 10.47%
2011 17.30% 17.41% 17.68% 24.22% 12.95% 42.41% 20.87% 20.87% 20.87% 17.00% 58.37% 21.27%
Findings: According to the base year analysis, I took six years data of Square Pharmaceuticals Limited. The change in Total asset condition is positively high in 2011 and lowest in the year 2009. On the other hand, in 2009 the highest amount of percentage change is reported for total current liabilities. In case of income statement, in 2007 the highest amount of percentage change is reported for sales, and it was lowest in 2008. There was no year where the sales growth was negative.
In 2007, the change in gross profit is positively high as followed by the sales. And as like as the sales, 2008 was the only year where the gross profit growth was low. In 2011, both the net profit before WPP and net profit before tax was good. But in the both case, it was lowest in 2008. The change in net profit is best in 2011. And it was negatively high in 2008. Common Size Analysis Square Pharmaceyticals Ltd. Balance Sheet Particulars ASSETS: Non-Current Assets: Property, Plant and EquipmentCarrying Value Capital work in progress Investment-Long Term (at cost) Investment in Marketable Securities (Fair Value) Total Non-Current Assets Current Asset: Inventories Trade Debtors Advance, Deposits and prepayments Investment in Marketable Securities (at cost) Short term loan Cash & Cash Equivalents Total Current Assets TOTAL ASSETS
2006
2007
2008
2009
2010
2011
24.45% 11.59% 20.60%
33.67% 4.59% 26.63%
32.18% 4.65% 28.43%
36.71% 0.00% 33.78%
37.05% 4.17% 26.26%
35.91% 4.56% 20.73%
0.00% 56.64%
0.00% 64.88%
0.00% 65.27%
0.87% 71.35%
2.55% 70.04%
2.68% 63.89%
14.44% 3.10%
14.72% 3.08%
15.95% 2.84%
15.73% 3.58%
14.52% 3.34%
13.07% 3.97%
1.79%
2.25%
2.27%
1.95%
2.36%
2.69%
0.22% 20.40% 3.41% 43.36% 100.00 %
0.19% 13.53% 1.33% 35.12% 100.00 %
0.16% 11.89% 1.62% 34.73% 100.00 %
0.00% 5.19% 2.20% 28.65% 100.00 %
0.00% 8.03% 1.70% 29.96% 100.00 %
0.00% 14.47% 1.90% 36.11%
69.93% 5.68% 19.41% 1.01% 10.51%
66.26% 7.04% 16.02% 0.83% 8.67%
75.26% 9.05% 15.25% 0.79% 8.26%
77.13% 9.93% 13.39% 0.70% 7.25%
71.06% 10.09% 10.47% 0.54% 5.67%
0.00% 33.32%
0.00% 33.69%
0.71% 41.20%
1.10% 44.76%
1.33% 42.96%
SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' Equity: 68.85% Share Capital 5.34% Share Premium 21.89% General Reserve 1.14% Tax Holiday Reserve 10.19% Gain on Marketable Securities (Unrealized) 0.00% Retained Earnings 30.28%
100.00%
Non-Current Liabilities: Long Term Loans- Secured Deferred Tax Liabilities
6.84% 6.48% 0.36%
5.70% 4.70% 1.01%
6.18% 4.74% 1.44%
4.95% 3.37% 1.58%
8.28% 6.80% 1.49%
4.93% 3.37% 1.56%
Current Liabilities: Short Term Bank Loans Long Term Loans- Current Portion Trade Creditors Liabilities for Expenses Liabilities for Other Finance TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES
24.31% 15.82% 2.81% 0.85% 0.54% 4.29% 100.00 %
24.37% 17.34% 2.15% 0.58% 0.23% 4.07% 100.00 %
27.56% 21.02% 2.34% 0.79% 0.25% 3.16% 100.00 %
19.79% 11.50% 2.21% 0.93% 0.52% 4.62% 100.00 %
14.59% 4.85% 3.04% 2.60% 0.37% 3.73% 100.00 %
24.01% 13.51% 2.46% 3.77% 0.41% 3.86% 100.00%
Square Pharmaceuticals Limited Income Statement Particulars GROSS TURNOVER Less: Value Added Tax NET TURNOVER Cost of Goods Sold GROSS PROFIT Selling and Distribution Expenses Administrative Expenses Operating Expense PROFIT FROM OPERATIONS Financial Expenses Other Income Profit Before WPPF Allocation for WPPF NET PROFIT BEFORE TAX Provision for Income tax Provision for deferred income tax NET PROFIT AFTER TAX
2006 100% 14.05% 85.95% 49.75% 36.19%
2007 100.00% 13.89% 86.11% 49.00% 37.11%
2008 100% 13.67% 86.33% 55.75% 39.05%
2009 100% 13.60% 86.40% 65.12% 47.62%
2010 100% 13.68% 86.32% 75.32% 56.27%
2011 100% 13.51% 86.49% 88.44% 66.21%
11.26% 2.63% 13.89%
11.48% 4.67% 16.15%
14.02% 5.41% 19.43%
15.15% 5.29% 20.43%
19.37% 6.02% 25.39%
24.35% 7.19% 31.54%
22.30% 1.97% 2.39% 22.72% 1.08%
20.96% 2.72% 2.53% 20.77% 0.99%
19.62% 4.04% 6.94% 22.52% 1.07%
27.19% 4.56% 7.64% 30.27% 1.44%
30.88% 3.55% 6.72% 34.05% 1.62%
34.67% 3.09% 9.57% 41.16% 1.96%
21.64% 4.70%
19.78% 3.99%
21.45% 4.70%
28.83% 6.80%
32.43% 7.90%
39.20% 9.25%
0.48% 16.45%
0.82% 14.96%
0.89% 15.86%
0.33% 21.70%
0.56% 23.97%
0.89% 29.07%
Findings: In the Balance sheet, Property, Plant and Equipment are the biggest item for the non current asset. Short term loan are the biggest item for the current asset. Retained Earnings is the biggest item for shareholders equity. The company contains more non-current asset than current asset. And shareholders equity is greater than the current liabilities.
In the income statement, change in Net profit is good in 2011. It was lowest in 2007. On the other hand the operating cost was low in 2006, but it was high in 2011. RATIO ANALYSIS Liquidity Measures 01. Qucik Ratio 02. Current Ratio 03. Collection Period 04. Days to sell inventory
2006 1.12 1.78 14.67 137.08
2007 0.74 1.44 13.34 130.24
2008 0.60 1.26 13.56 150.25
2009 0.55 1.45 15.13 133.19
2010 0.90 2.05 13.78 121.10
2011 0.85 1.50 17.85 118.78
Findings: According to the liquidity measure ratios, the performance of Square Pharmaceuticals Ltd was good in 2010 and the Quick Ratio was low in 2009. The Collection Period takes more time in 2011. It took less time in 2007. Capital Structure and Solvency 05. Total Liabilities to Equity 06. Equity to total asset 07. Total liabilities to asset
2006 0.45 0.69 0.31
2007 0.43 0.70 0.30
2008 0.51 0.66 0.34
2009 0.33 0.75 0.25
2010 0.30 0.77 0.23
2011 0.41 0.71 0.29
Findings: According to the Capital Structure & Solvency ratios, in 2010 the Total Liabilities to Equity ratio was low. On the other hand, in 2009, the Equity to total asset ratio was high. Total liabilities to asset ratio were low in 2009 and high in 2008. Return on Investment 2006 08. Return on Asset 12.54% 09. Return on common equity 18.21%
2007 12.43% 17.77%
2008 10.88% 16.42%
2009 14.16% 18.82%
2010 13.74% 17.81%
2011 13.02% 18.32%
Findings: According to the Return on Investment ratios, the performance of Square Pharmaceuticals Ltd was good in 2009 and in 2006, the performance was bad. In that year all the ratios are low.
Operating Performance 10. Gross profit margin 11. Operating profit margin (pretax) 12. Pretax profit margin
2006
2007
2008
2009
2010
2011
36.19%
37.11%
35.56%
36.49%
36.91%
37.03%
22.30%
20.96%
17.87%
20.84%
20.25%
19.39%
21.64%
19.78%
19.53%
22.09%
21.27%
21.92%
13. Net profit margin
16.45%
14.96%
14.45%
16.63%
15.72%
16.26%
Findings: According to the Operating Performance ratios, Gross profit margin was low in 2008 and high in 2011. Operating profit margin was low in 2011 and high in 2006. Pretax profit margin was low in 2008 and high in 2009. Net profit margin was low in 2008 and high in 2009. Asset utilization 14. Cash turnover
2006
2007
2008
2009
2010
2011
22.37
62.29
46.59
38.73
51.32
42.06
15. Accounts receivable turnover
24.54
26.98
26.55
23.80
26.13
20.17
16. Inventory turnover
2.63
2.76
2.40
2.70
2.97
3.03
17. Working capital turnover
6.24
16.47
76.07
21.80
12.32
11.16
18. PPE turnover
3.12
2.47
2.34
1.63
2.36
3.18
19. Total asset turnover
0.76
0.83
0.75
0.85
0.87
0.80
Findings: According to the Asset utilization ratios, the performance of Square Pharmaceuticals Ltd was good in 2007 and in that year the cash turnover and other ratios are high. In 2007, the performance was bad according to the accounts receivable turnover. The PPE turnover and the total asset turnover were low in 2009 and 2008. Market measure 20. Price to earnings ratio 21. Earnings yield 22. Dividend yield 23. Dividend payout rate 24. Price to book
2006 9.70 0.10 0.03 0.32 1.77
2007 11.19 0.09 0.02 0.23 1.99
2008 26.60 0.04 0.01 0.26 4.37
2009 18.75 0.05 0.01 0.26 3.53
2010 25.88 0.04 0.01 0.25 4.61
2011 25.35 0.04 0.01 0.23 4.65
Findings: According to the Market measure ratios, the Price to earnings ratio was high in 2008 and low in 2006. Earnings yield ratio was high in 2006 and low in 2011. Dividend payout rate ratio was high in 2006 and low in 2011. Price to book ratio was high in 2006 and low in 2011. Cash based ratios 25. Operating Cash Flow/ Sales 26. Operating Cash Flow/ Assets 27. Operating Cash Flow/ Equity 28. Operating Cash flow per share
2006
2007
2008
2009
2010
2011
0.17
0.17
0.14
0.22
0.20
0.19
0.13
0.14
0.10
0.19
0.18
0.15
0.19
0.20
0.15
0.25
0.23
0.21
239.36
243.20
145.47
206.08
176.51
146.98
Findings: According to the Cash based ratios, Operating Cash Flow/ Sales were low in 2008 and high in 2009. The Operating Cash Flow/ Assets ratio was low in 2006 and high in 2009. Square Pharmaceuticals Limited Common Size Current Assets and Current Liabilities Current Asset: 2006 Inventories 33.30% Trade Debtors 7.16% Advance, Deposits and prepayments 4.13% Investment in Marketable Securities (at cost) 0.50% Short term loan 47.06% Cash & Cash Equivalents 7.86% Total Current Assets 100%
2007 41.93% 8.77% 6.42%
2008 45.94% 8.17% 6.55%
2009 54.89% 12.49% 6.81%
2010 48.47% 11.16% 7.87%
2011 36.19% 11.00% 7.46%
0.55% 38.53% 3.80% 100%
0.46% 34.24% 4.65% 100%
0.00% 18.13% 7.68% 100%
0.00% 26.81% 5.68% 100%
0.00% 40.07% 5.27% 100%
Current Liabilities:
2006 65.07 % 11.56 %
2007 71.17 %
2008
3.51% 2.20% 17.65 % 100%
2.37% 0.96% 16.69 % 100%
0.00% 763.84 % 81.15% 184.72 % 100%
2010 33.22 % 20.85 % 17.81 % 2.55% 25.58 % 100%
2011
8.81%
2009 58.10 % 11.19 %
Short Term Bank Loans Long Term Loans- Current Portion Trade Creditors Liabilities for Expenses Liabilities for Other Finance Total Current Liabilities Findings:
76.26%
4.70% 2.63% 23.37 % 100%
56.28% 10.24% 15.71% 1.70% 16.06% 100%
According to the common Size Current Assets and Current Liabilities table, the Short term loans are the large item among all current assets. The change in inventories is positively high in 2006 and it was low in 2009. On the other hand the, Short Term Bank Loans are the large item among all current liabilities. The change in Short Term Bank Loans is positively high in 2006 and it was low in 2010.
Change in Net Working Capital Particulars Current Asset: Inventories
2006
2007
2008
2009
2010
2011
1,342,364,47
1,544,191,79
2,026,736,32
2,098,755,23
2,207,078,08
2,541,688,329
8
8
2
1
2
288,732,137
322,864,637
360,245,646
477,562,002
508,249,174
772,421,345
166,492,706
236,455,395
288,806,440
260,330,162
358,250,076
523,991,079
20,250,000 1,897,124,65 2
20,250,000 1,418,893,70 3
20,250,000 1,510,502,33 4
0
0
693,157,720
0 1,220,736,94 1
316,720,982 4,031,684,95 5
139,855,179 3,682,510,71 2
205,295,694 4,411,836,43 6
293,457,740 3,823,262,85 5
258,727,695 4,553,041,96 8
370,301,755
1,471,158,18 7
1,818,777,87 8
2,669,693,18 4
1,534,345,78 2
736,443,848
2,627,483,864
261,416,941
225,176,449
297,002,646
295,590,601
462,090,211
478,199,933
79,390,166
60,601,743
100,953,258
124,222,699
394,715,915
733,369,218
49,771,374
24,565,248
32,290,235
69,573,702
56,463,570
79,499,584
399,018,813 2,260,755,48 1
426,444,968 2,555,566,28 6
400,905,780 3,500,845,10 3
617,135,770 2,640,868,55 4
567,030,857 2,216,744,40 1
749,636,827
Change in Net Working 1,770,929,47 Capital 4
1,126,944,42 6
910,991,333
1,182,394,30 1
2,336,297,56 7
2,354,024,414
Trade Debtors Advance, Deposits and prepayments Investment in Marketable Securities (at cost) Short term loan Cash & Cash Equivalents Total Current Assets Current Liabilities: Short Term Bank Loans Long Term LoansCurrent Portion Trade Creditors Liabilities for Expenses Liabilities for Other Finance Total Current Liabilities
2,813,811,332
7,022,213,840
4,668,189,426
Projected Change in Net Working Capital Particulars
2011
2012
2013
2014
2015
2016
2,541,688,329
2,795,857,16
3,075,442,878
3,382,987,166
3,721,285,882
4,093,414,471
Current Asset: Inventories
2 Trade Debtors
772,421,345
849,663,480
934,629,827
1,028,092,810
1,130,902,091
1,243,992,300
Advance and prepayments 523,991,079
576,390,187
634,029,206
697,432,126
767,175,339
843,892,873
Short loan
3,095,192,46 5
3,404,711,712
3,745,182,883
4,119,701,171
4,531,671,288
Cash & Cash Equivalents 370,301,755
407,331,931
448,065,124
492,871,636
542,158,799
596,374,679
Tota l Current Assets 7,022,213,840
7,724,435,22 4
8,496,878,746
9,346,566,621
10,281,223,28 3
11,309,345,611
Short Term Bank Loans 2,627,483,864
2,890,232,25 0
3,179,255,475
3,497,181,023
3,846,899,125
4,231,589,038
Long Term Loans 478,199,933
526,019,926
578,621,919
636,484,111
700,132,522
770,145,774
Trade Creditors
733,369,218
806,706,140
887,376,754
976,114,429
1,073,725,872
1,181,098,459
Liabilities for Expenses
79,499,584
87,449,542
96,194,497
105,813,946
116,395,341
128,034,875
Liabilities for Other Finance 749,636,827
824,600,510
907,060,561
997,766,617
1,097,543,278
1,207,297,606
Total Current Liabilities 4,668,189,426
5,135,008,36 9
5,648,509,205
6,213,360,126
6,834,696,139
7,518,165,752
Change in Net WC 2,354,024,414
2,589,426,85 5
2,848,369,541
3,133,206,495
3,446,527,145
3,791,179,859
term 2,813,811,332
Current Liabilities:
5. Conclusion
After analysis the financial statement of these two pharmaceuticals companies, we found that all of them have huge business opportunities not only in our country but also in the whole world. Besides, out of the total domestic requirement of medicines almost 95 per cent is met by the local manufacturing and Bangladesh also exports formulations to 27 countries around the world. The current turnover of the industry in Bangladesh is Tk. 3,000 core. This is really good for us. So companies need support to make this industry more and more profitable. Our government should come forward to expand this potential sector.