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CONTENTPAGE NO.1.0Introduction1.1Purpose of assignment....................................................................................31.2Definition of profitability ratios..32.0Company 1:Cocoaland Holdings Berhad2.1Company overview.32.2Financial statement.52.3Profitability ratios93.0Company 2:Lam Soon Malaysia Berhad3.1Company overview163.2Financial statement163.3Profitability ratios..194.0Conclusion.............................................................................................................245.0Reference...............................................................................................................25

1.0Introduction1.1Purpose of assignmentThe purpose of assignment is to determine the companies performance of two listed companies of Bursa Malaysia from the Consumer Products sector by analysing their profitability ratios for the years 2011 and 2012, based on their published financial statements. Cocoaland Holdings Berhad and Lam Soon Malaysia were the two subjects that chosen to be analyzed.

1.2 Definition of profitability ratioThe profitability ratio measures the effectiveness of the company in generating returns from investments and sales. It is used as a sign to determine the businesss efficiency and effectiveness in achieving its profit objective. Profitability ratios are shown as following:a) Gross Profit Marginb) Net Profit Marginc) Operating Profit Margind) Return on Assetse) Return on Equityf) Earnings per share

2.0Company 1:Cocoaland Holdings Berhad2.1Company overviewThere were 7 companies formed the structure of Cocoaland Holding Group which were Cocoaland Industry Sdn. Bhd., LB Food Sdn. Bhd, B Plus Q Sdn. Bhd, Mite Food Enterprise Sdn. Bhd., Greenhome Marketing Sdn. Bhd., LOT 100 Food Co. LTD, and CCL Food & Beverage Sdn. Bhd. Cocoaland Industry Sdn. Bhd., which is located in Rawang and Kepong, Selangor Darul Ehsan, is the principal manufacturing arm of the Cocoaland Holding Group, manufacturing mainly chocolates, hard candy, fruit gummy, cookies, wafer, snack and beverage, whilst LB Food Sdn. Bhd., which is located in Rawang, Selangor Darul Ehsan, is the primary trading arm and is responsible for export market of the Cocoaland Holding Group. B Plus Q Sdn. Bhd. which is located in Kampar, Perak Darul Ridzuan, mainly manufactures soft drinks, wafer rolls, peas, nuts, jelly cups, snacks and cracker. Mite Food Enterprise Sdn. Bhd., which is a wholly-own subsidiary of B Plus Q, is the trading and distribution arm for B Plus Q Sdn. Bhd. and operates from the same premises as B Plus Q Snd. Bhd.

2.2Financial statement for the Year Ended 31 December 2012 and 2011(a) Financial highlights for years 2012 and 2011

(b) Profit after income tax for year 2012

(c) Profit after income tax for year 2011

(d) Balance Sheet for year 2012

(e) Balance Sheet for year 2011

(f) Income statement for years 2012 and 2011

2.3Profitability ratio2.3.1Gross Profit MarginGross profit margin measures the profit for each ringgit of sales that can be used to pay the sales and administration expenditures. The higher the gross profit margin, the better the status of the company as this shows lower expenditures or costs involved in implementing sales activities. Gross profit margin can be obtained by dividing the gross profit with sales. It shows the balance percentage for each ringgit of sales after the company had paid all the costs of goods.

Gross Profit Margin = Gross Profit x 100 (2012) Sales = RM53744858 x 100 RM223207000 = 24% Industry average = 30%

For year 2012, gross profit margin of 24% is lower compared to the industry average of 30%. This shows that the purchasing management and cost of the company are lower as compared to the industry average. The company generates 24.0 cents gross profit after deducting all costs of goods for each ringgit of sale.

Gross Profit Margin = Gross Profit x 100 (2011) Sales = RM43318446 x 100 RM173994000 = 24.9% Industry average = 30%

For year 2011, gross profit margin of 24.9% is lower compared to the industry average of 30%. This also shows that the purchasing management and cost of the company are lower as compared to the industry average. The company generates 24.9cents gross profit after deducting all costs of goods for each ringgit of sale.

2.3.2Net Profit MarginNet profit margin measures the ability of the company to generate net profit from each ringgit of sale after deducting all expenditure including the cost of goods sold, sales expenditures, general and administrative expenditures, depreciation expenses, interest expenses and tax. The higher the net profit margin, the better the status of the company as this shows an efficient purchasing management with low purchasing costs. Net profit margin is calculated by dividing the profit after tax with sales. Therefore, the net profit margin of Cocoaland Holdings Berhad is as below:

Net Profit Margin = Profit after tax x 100 (2012) Sales = RM21218139 x 100 RM223207000 = 9.5% Industry average = 6.4%

For year 2012, the net profit margin for the company of 9.5% is higher compared to the Industrys performance of 6.4%. This shows that the management of purchasing and related purchasing costs is better compared to the industry average. The company had managed to generate 9.5cents net profit for each ringgit of sale compared to the industry average that only managed to generate 6.4 cents for each ringgit of sale.

Net Profit Margin = Profit after tax x 100 (2011) Sales = RM19192020 x 100 RM173994000 = 11% Industry average = 6.4%

For year 2011, the net profit margin for the company of 11.0% is higher compared to the Industrys performance of 6.4%. This shows that the management of purchasing and related purchasing costs are better compared to the industry average. The company had managed to generate 11.0 cents net profit for each ringgit of sale compared to the industry average that only managed to generate 6.4 cents for each ringgit of sale.

2.3.3Operating Profit Margin

The operating profit margin measures the efficiency of operations in reducing costs and increasing returns before interest and tax. A higher operating profit margin is better as it indicates that the company is able to operate efficiently. The operating profit margin of Cocoaland Holdings Berhad is:

Operating Profit Margin = Operating Profit x 100 (2012) Sales = RM27991823 x 100 RM223207000 = 12.5% Industry average = 10%

Operating Profit Margin = Operating Profit x 100 (2011) Sales = RM21663816 x 100 RM223207000 = 9.7% Industry average = 10% For year 2012, the operating profit margin of Cocoaland Holdings Berhad is better compared to the industry average which is 12.5%. This shows that the company is more efficient in its operations and control of its operating expenditures to generate higher earnings before interest and tax.

For year 2011, the operating profit margin of Cocoaland Holdings Berhad is almost the reach the industry average which is 9.7%. This shows that the company is efficient in its operations and control of its operating expenditures to generate higher earnings before interest and tax.

2.3.4Return on Assets Return on assets or return on investment measures the effectiveness of the company in using its assets to generate profit. The higher the ratio, the better the status of the company as it indicates the managements efficiency in using its assets to generate profit.

Return on Assets = Profit after tax x 100 (2012) Total Asset = RM 21218139 x 100 RM 237320735 = 8.9% Industry average = 4.8%

For year 2012, return on assets of the company is better compared to the industry average that contributes 8.9%. This shows that the company is better in managing its assets to generate profit compared to the other companies in the industry.

Return on Assets = Profit after tax x 100 (2012) Total Asset = RM 19192020 x 100 RM 219050224 = 8.8 % Industry average = 4.8%

For year 2011, return on assets of the company is better compared to the industry average that contributes 8.8%. This shows that the company is better in managing its assets to generate profit compared to the other companies in the industry.

2.3.5Return on EquityReturn on equity measures the efficiency of the company in generating profit for its ordinary shareholders. The higher the ratio, the better as the company is able to generate high profit for its owners.

Return on equity = Profit after tax x 100 (2012) Shareholders Equity = RM21218139 x 100 RM 196159607 = 10.8 % Industry average = 8%

For year 2012, return on equity of the company is 10.8 % and this is more satisfactory compared to 8% for the industry average. This shows that the management of the company is more efficient compared to the industry average.

Return on equity = RM 19192020 x 100 (2011) Shareholders Equity = RM 19192020 x 100 RM188669464 = 10.2% Industry average = 8%

For year 2011, return on equity of the company is 10.2% and this is more satisfactory compared to 8% for the industry average. This shows that the management of the company is more efficient compared to the industry average.

2.3.6Earnings per share Earnings per share calculate the net profit that is generated from each ordinary share. This information is often given priority by the management and investors as it is regarded as an important indication of the companys success. Therefore, the bigger the value of this ratio, the better the status of the shareholders. Earnings per share is obtained by dividing the net profit with the number of shares issued.

Earnings per share = Profit available to ordinary shareholders (2012) Number of ordinary shares issues = RM 21218000 42436000 = RM0.50 Industry average = RM0.26

For year 2012, the company obtained RM 0.50 for each unit of shares issued compared to the industry average of only RM0.26. The value of this difference is big and in practice, this value represents the actual amount that will be distributed to the shareholders.

Earnings per share = Profit available to ordinary shareholders (2011) Number of ordinary shares issues = RM13470590 134759 = RM 0.50 Industry average = RM0.26

For year 2011, the company obtained RM0.50 for each unit of shares issued compared to the industry average of only RM0.26. The value of this difference is big and in practice, this value represents the actual amount that will be distributed to the shareholders.

3.0Company 2:Lam Soon Malaysia Berhad Annual Report 20123.1Company overviewLam Soon Group business activities comprise of plantation or milling, refining of cooking oil to the manufacturing of margarine, specialty fats, soap and detergent and olechemicals. Example of products were Buruh cooking oil, Drinho and Antabax.

3.2 Financial statement for the Year Ended 31 December 2011 and 2012(a) Financial highlights

(b) Balance Sheet for years 2012 and 2011

(c) Income statement for years 2012 and 2011

3.3Profitability ratio2.3.1Gross Profit Margin

Gross Profit Margin = Gross Profit x 100 (2012) Sales = RM288110000 x 100 RM1910577000 = 15.1 % Industry average = 30%

For year 2012, gross profit margin of 15.1% is low compared to the industry average of 30%. This shows that the purchasing management and cost of the company are poor compared to the industry average. The company generate 15.1 cents loss after deducting all costs of goods for each ringgit of sale.

Gross Profit Margin = Gross Profit x 100 (2011) Sales = RM332610000 x 100 RM2147788000 = 15.5% Industry average = 30%

For year 2011, gross profit margin of 15.5% is low compared to the industry average of 30%. This shows that the purchasing management and cost of the company are poor compared to the industry average. The company generates 15.5cents gross profit after deducting all costs of goods for each ringgit of sale.

2.3.2Net Profit MarginNet Profit Margin = Profit after tax x 100 (2012) Sales = RM69533000 x 100 RM1910577000 = 3.6% Industry average = 6.4%

For year 2012, the net profit margin for the company of 3.6% is low compared to the Industrys performance of 6.4%. This shows that the management of purchasing and related purchasing costs are poor compared to the industry average. The company had managed to generate 3.6 cents net profit for each ringgit of sale compared to the industry average that managed to generate 6.4 cents for each ringgit of sale.

Net Profit Margin = Profit after tax x 100 (2011) Sales = RM141661000 x 100 RM2147788000 = 6.6% Industry average = 6.4%

However, for year 2011, the net profit margin for the company of 6.6% is higher compared to the Industrys performance of 6.4%. This shows that the management of purchasing and related purchasing costs are better compared to the industry average. The company had managed to generate 6.6 cents net profit for each ringgit of sale compared to the industry average that only managed to generate 6.4 cents for each ringgit of sale.

2.3.3Operating Profit MarginOperating Profit Margin = Operating Profit x 100 (2012) Sales = RM92834000 x 100 RM1910577000 = 4.9 % Industry average = 10%

Operating Profit Margin = Operating Profit x 100 (2011) Sales = RM x 100 RMy = 7.7% Industry average = 10% For year 2012, the operating profit margin of Lam Soon Malaysia Berhad is below an average which is 4.9% compared to the industry average. This shows that the company is less efficient in its operations and control of its operating expenditures to generate higher earnings before interest and tax.

For year 2011, the operating profit margin of Lam Soon Malaysia Berhad is also below an average compared which is 7.7% to the industry average. This also shows that the company is less efficient in its operations and control of its operating expenditures to generate higher earnings before interest and tax.2.3.4Return on Assets Return on Assets = Profit after tax x 100 (2012) Total Asset = RM69533000 x 100 RM1405378000 = 4.9 % Industry average = 4.8%

For year 2012, return on assets of the company is better compared to the industry average that contributes 4.9%. This shows that the company is better in managing its assets to generate profit compared to the other companies in the industry.

Return on Assets = Profit after tax x 100 (2011) Total Asset = RM141661000 x 100 RM1466055000 = 9.7% Industry average = 4.8%

Previously, for year 2011, return on assets of the company is better compared to the industry average that contributes 9.7%. This shows that the company is better in managing its assets to generate profit compared to the other companies in the industry.

2.3.5Return on Equity

Return on equity = Profit after tax x 100 (2012) Shareholders Equity = RM69533000 x 100 RM 1090544000 = 6.4% Industry average = 8%

For year 2012, the return on equity of the company is 6.4% and this is less satisfactory compared to 8% for the industry average. This shows that the management of the company is less efficient compared to the industry average.

Return on equity = Profit after tax x 100 (2011) Shareholders Equity = RM141661000 x 100 RM 1062690000 = 13.3% Industry average = 8%

However, for year 2011, the return on equity of the company is 13.3% and this is more satisfactory compared to 8% for the industry average. This shows that the management of the company is more efficient compared to the industry average.2.3.6Earnings per share Earnings per share = Profit available to ordinary shareholders (2012) Number of ordinary shares issues = RM60000000 214285714 = RM 0.28 Industry average = RM0.26

For year 2012, the company obtained RM0.28 for each unit of shares issued compared to the industry average of only RM0.26. The value of this difference is small and in practice, this value represents the actual amount that will be distributed to the shareholders.

Earnings per share = Profit available to ordinary shareholders (2011) Number of ordinary shares issues = RM128000000 2154882 = RM 0.59 Industry average = RM0.26

However, for year 2011, the company obtained RM0.59 for each unit of shares issued compared to the industry average of only RM0.26. The value of this difference is big and in practice, this value represents the actual amount that will be distributed to the shareholders.

4.0 ConclusionIn conclusion, we can determine the businesss efficiency and effectiveness in achieving its profit objective by measuring the profitability ratio of the company. Profitability ratios can be measure through the Gross Profit Margin, Net Profit Margin, Operating Profit Margin, Return on Assets, Return on Equity and Earnings per share of the company. In terms of profitability ratios, for year 2012 and 2011, Cocoaland Holdings Berhads gross profit margin of 24% and 24.9% is lower compared to the industry average of 30%, respectively. For year 2012 and 2011, the net profit margin for the company of 9.5% and 11.0% which are higher compared to the Industrys performance of 6.4%, respectively. For year 2012 and 2011, the operating profit margin of Cocoaland Holdings Berhad is better compared to the industry average, which were 12.5% and 9.7% respectively. For year 2012 and 2011, return on assets of the company is better compared to the industry average that contributes 4.9% and 8.8% respectively. For year 2012 and 2011, return on equity of the company is 10.8 % and 10.2% in which these are more satisfactory compared to 8% for the industry average. In terms of earning per share, for both year 2012 and 2011, the company obtained RM 0.50 for each unit of shares issued compared to the industry average of only RM0.26. For year 2012, Lam Soon Malaysia Berhads profit contribution from most business divisions were much lower compared to that for the previous year. For year 2012 and 2011, gross profit margin of 15.1% and 15.5% are low compared to the industry average of 30%, respectively. For year 2012, the net profit margin for the company of 3.6% is low compared to the Industrys performance of 6.4%. However, for year 2011, the net profit margin for the company of 6.6% is higher compared to the Industrys performance. For year 2012 and 2011, the operating profit margin of Lam Soon Malaysia Berhad is below an average which is 4.9% and 7.7%, respectively, compared to the industry average. For year 2012, return on assets of the company is better compared to the industry average that contributes 4.9% and 9.7% respectively. For year 2012, the return on equity of the company is 6.4% and this is less satisfactory compared to 8% for the industry average. However, for year 2011, the return on equity of the company is 13.3% and this is more satisfactory compared to the industry average. For year 2012 and 2011, the company obtained RM0.28 and RM0.59 respectively, for each unit of shares issued compared to the industry average of only RM0.26. (2901 Words)5.0 ReferenceTopic2 Analysis of Financial Statements. BBPW3103 Financial Management I. OUM

Cocoaland Annual Report 2012. (2013). Retrieved on 29 June 2014 from http://www.cocoaland.com/uploads/annual%20reports/COCOLND-AnnualReport2012.pdf

Cocoaland Annual Report 2011. (2012). Retrieved on 29 June 2014 from http://www.cocoaland.com/uploads/annual%20reports/COCOLND-AnnualReport2011.pdf

Lam Soon Malaysia Berhad Financial position. (2013). Retrieved on 29 June 2014 from http://www.lamsoon.com.my/newsFinancial_Msia11.asp

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