financial statement analysis of beximco synthetics ltd
TRANSCRIPT
Introduction
This paper deals with the analysis and valuations of Beximco Synthetics Ltd. to get a practical
view of how analysis and valuations are done using financial statements.
I have taken the previous five year’s financial statements of the company to complete the whole
analysis and also got assistance from our text book. I have taken 2010 as the base year and other
analysis were done according to the instruction provided by our course teacher. At first the
financial statements were reformulated to get pure views of the trends regarding different items
of the statements. Analysis of profitability along with three levels of breakdown was also done
using the reformulated statements. I analyzed the cash flow statements, the free cash flow, the
operating cash flow etc. The sustainable and growth were also analyzed to look out the return on
net operating asset and other holdings.
Corporate Profile
Beximco Synthetics Limited (the "Company") a member of the BEXIMCO Group, was
incorporated in Bangladesh as a public limited company. It went for public issue of shares and
debentures in 1993 and commenced commercial operation in July 1994. The shares of the
company are listed in the Dhaka and Chittagong stock exchanges of Bangladesh and the
debentures of the company are listed in the Dhaka Stock Exchange of Bangladesh.
The principal activities of the company are manufacturing of Polyester Filament Yarn namely,
Partially Oriented Yarn (POY) and Draw Texturized Filament Yarn (DTFY) and sales thereof.
The Company employed 408 employees as of 31 December 2008.
Products
1. Partial Oriented Yarn (POY)
o POY 115 Denier
o POY 128 Denier
o POY 230 Denier
2. Draw Texturized Filament Yarn (DTFY)
o DTY 50 Denier
o DTY 75 Denier intermingled
o DTY 75 Denier Non Intermingled
o DTY 150 Denier intermingled
o DTY 150 Denier Non Intermingled
Analysis of Reformulated Financial Statement
Reformulated Balance Sheet
The typical balance sheet usually divides assets and liabilities into current and noncurrent (long-
term) categories. For assets, this division is based on liquidity, and for liabilities, it is based on
maturity, with the aim of giving an indication of the firm’s ability to meet creditors’ claims on
cash. To discover a firm’s ability to generate profits, we need to reformulate the balance sheet
into operating and financing assets and liabilities. Operating assets and liabilities are those
involved in the business, in selling goods and services. Financing assets and liabilities are those
that are involved in raising cash for operations and disbursing excess cash from operations.
Reformulated Balance Sheet
2010 2011 2012 2013 2014
Operating assets
Property, plant
&equipment 1460317096.00 1446152275.00 1435968983.00 1418578950.00 1392946720.00
Investment in long term
assets 5107298.00 5107298.00 5107298.00 5107298.00 5107298.00
Inventory 837904260.00 854468643.00 947588270.00 954266551.00 959646178.00
Trade Debtors & Other
Receivables 483382252.00 721835474.00 906582593.00 920054200.00 939431098.00
Advance, deposit and
other prepayments 67756450.00 40451219.00 36799733.00 13711306.00 11860725.00
Deferred Tax assets 0.00 0.00 0.00 4008000.00 7393584.00
Total operating assets 2854467356.00 3068014909.00 3332046877.00 3315726305.00 3316385603.00
Operating Liability
Creditors for goods 83324900.00 75948201.00 66103676.00 71624897.00 70029332.00
Accrued Expense 60782834.00 79774262.00 161690724.00 195270202.00 122311558.00
Total operating
liabilities 144107734.00 155722463.00 227794400.00 266895099.00 192340890.00
Net Operating
Asset(Operating
assets-Operating
liability) 2710359622.00 2912292446.00 3104252477.00 3048831206.00 3124044713.00
Financial Obligations
Short term borrowing 502915003.00 483959876.00 795394747.00 767941344.00 467941344.00
Lease Obligation 41922512.00 28939145.00 28939145.00 27519974.00 27519974.00
Long term borrowings
Current maturity 0.00 0.00 0.00 0.00 27292878.00
Long term loans 0.00 0.00 0.00 0.00 379393163.00
secured
Term Borrowing 0.00 200000000.00 0.00 0.00 0.00
Debenture Current
maturity 45160186.00 21542388.00 0.00 0.00 0.00
Interest free block
account long term 31208043.00 16341538.00 0.00 0.00 0.00
Interest free block
account for short term 28776153.00 19184102.00 32281492.00 42401457.00 42401457.00
Debentures-current 50298789.00 33532526.00 46984594.00 43572345.00 40160096.00
Total financial
Obligations 700280686.00 803499575.00 903599978.00 881435120.00 984708912.00
Financial Assets
Cash equivalent 5231582.00 14693819.00 3277873.00 2932494.00 4431461.00
Total Financial Assets 5231582.00 14693819.00 3277873.00 2932494.00 4431461.00
Net financial
obligations(Financial
Liabilities- Financial
Assets) 695049104.00 788805756.00 900322105.00 878502626.00 980277451.00
Common Stockholder’s
equity 2015310518.00 2123486690.00 2203930372.00 2170328580.00 2143767263.00
Total NFO+ CSE 2710359622.00 2912292446.00 3104252477.00 3048831206.00 3124044714.00
Reformulated Income Statement
The income statement reports the profits and losses that the net operating assets and net financial
assets have produced. The reformulated statement groups these items into operating and
financing categories. However, the reformulated statement is on a comprehensive basis, so it also
includes dirty surplus items reported within the equity statement. Within these operating and
financing components, some further distinctions are made.
This analysis of reformulated income statement consists of both common size and trend analysis
of Beximco Synthetics Limited.
2010 2011 2012 2013 2014
Turnover
1009552138.0
0
1545017437.0
0
1426752263.0
0
1337835656.0
0
1187413298.0
0
Cost of goods sold 875855449.00
1300156899.0
0
1161418416.0
0
1203687812.0
0
1066299550.0
0
Gross profit 13369668900 244860538.00 265333847.00 134147844.00 121113748.00
Operating Expense 15854944.00 19587878.00 20418704.00 20334684.00 20978142.00
Selling and distribution
expenses 3947721.00 5080289.00 5076623.00 5174413.00 5688083.00
Administrative expenses 11907223.00 14507589.00 15342081.00 15160271.00 15290059.00
Operating Income From
sales 117841745.00 225272660.00 244915143.00 113813160.00 100135606.00
Allocation for WPPF 1532942.00 6652881.00 5019813.00 0.00 0.00
Provision for income tax -
113184700.00 -24881457.00 19952572.00 7176209.00 1774922.00
Profit After Taxes 113124103.00 193738322.00 219942758.00 106636951.00 101910528.00
Other operating Income
Foreign Currency 0.00 0.00 0.00 0.00 0.00
Operating Income after tax 113124103.00 193738322.00 219942758.00 106636951.00 101910528.00
Financing Expense 85649980.00 85562149.00 139499076.00 141723001.00 128471845.00
Comprehensive Income 27474123.00 108176173.00 80443682.00 -35086050.00 -26561317.00
Reformulated Cash Flow Statement
For cash flow forecasting we need to distinguish clearly the cash generated by operations (the
free cash flow) from the flows that involve paying that cash flow out to the firm’s claimants. If
operations use cash (and thus have negative free cash flow), we need to distinguish that negative
free cash flow from the cash flows that involve claimants paying into the firm to cover the free
cash flow deficit.
2010 2011 2012 2013 2014
Free Cash Flow
Reported Cash Flow from Operating
Activities 97897244.00 -98319828.00 -91015216.00 17945528.00 43766993.00
Net Interest Payment 0.00 0.00 0.00 0.00 0.00
97897244.00 -98319828.00 -91015216.00 17945528.00 43766993.00
Cash Investment Reported -9377330.00 -19895382.00 -23745281.00
-
13459487.00 -8855777.00
Investment in Operating Cash 0.00 0.00 0.00 0.00 0.00
Investment in Financial Assets 1354860.00 9462237.00 -11415946.00 -345379.00 1498967.00
-8022470.00 -10433145.00 -35161227.00
-
13804866.00 -7356810.00
Free Cash Flow 89874774.00
-
108752973.0
0
-
126176443.0
0 4140662.00 36410183.00
Financing Flow
Debt Financing
Net increase/Decrease in Long Term
Borrowing 0.00 0.00 0.00 0.00 0.00
Net increase/Decrease in Term Borrowing 0 200,000,000 0 0 0
Net increase/Decrease in Short Term
Borrowing -15,794,210 -18,955,127 111,434,871 0 0
Lease Repayment
-
13018734.00 -12983365.00 0.00 -1419171.00
-
30000000.00
Proceeds/(Redemption) of Bonds &
Debentures -16,766,263 -40,384,061 -8,090,320 -3,412,249
-
3,412,249.00
Others Finance 0.00 0.00 0.00 0.00 0.00
Investment in Financial Assets 1354860.00 9462237.00 -11415946.00 -345379.00 1498967.00
-
44224347.00
137139684.0
0 91928605.00 -5176799.00
-
31913282.00
Equity Financing
Proceeds on Issue of Shares 0.00 0.00 0.00 0.00 0.00
Dividend paid- Ordinary Share -41,585,847 0 0 0 0
Paid to non -controlling interest 0.00 0.00 0.00 0.00 0.00
-
41585847.00 0.00 0.00 0.00 0.00
Total Financing Flows
-
85810194.00
137139684.0
0 91928605.00 -5176799.00
-
31913282.00
Reformulated Statements of Changes in Equity
Reformulated
Owner's Equity
2010 2011 2012 2013 2014
Beginning value
of common equity
2029422242.00
201531
0518.0
0
212348
6690.0
0
220393
0372.0
0
217032
8580.0
0
Add: Net effect of
transaction with
common
shareholders
(+)Dividend -41585847.00 0.00 0.00 0.00 0.00
(+ )share
repurchase 0.00 0.00 0.00 0.00 0.00
(-) share issue 0.00 0.00 0.00 0.00 0.00
net cash
contribution 1987836395
201531
0518
212348
6690
220393
0372
217032
8580
Add: effect of
operations and
non -equity
financing
(+) net income
27474
123.0
0
10
81
76
17
3.0
0
80443
682.0
0
-
35086
050.00
-
26561
317.00
(+) other
comprehensive
income 0.00
0.0
0 0.00 0.00 0.00
(-) preferred
dividend 0.00
0.0
0 0.00 0.00 0.00
comprehensive
income available
to common 27474123
108176
173
804436
82
-
350860
50
-
265613
17
closing book
value to common
equity 2015310518
212348
6691
220393
0372
216884
4322
214376
7263
Common Size Analysis
Common Size Income Statement
The comparative common-size statements reveal two things: How firms do business differently
and the different structure of revenues and expenses that result and operating profitability per
dollar of sales. As each operating item is divided through by sales revenue, the common-size
number indicates the proportion of each dollar of sales the item represents
2010 2011 2012 2013 2014
Turnover 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of goods sold 86.76% 84.15% 81.40% 22.85% 11.36%
Gross profit 13.24% 15.85% 18.60% 1.76% 1.97%
Operating Expense 1.57% 1.27% 1.43% 0.44% 0.53%
Selling and distribution expenses 0.39% 0.33% 0.36% 1.32% 1.43%
Administrative expenses 1.18% 0.94% 1.08% 21.09% 9.39%
Operating Income From sales 11.67% 14.58% 17.17% 0.43% 0.00%
Allocation for WPPF 0.15% 0.43% 0.35% 1.72% 0.17%
Provision for income tax -11.21% -1.61% 1.40% 18.94% 9.56%
Profit After Taxes 11.21% 12.54% 15.42% 0.00% 0.00%
Other operating Income 0.00% 0.00% 0.00% 0.00% 0.00%
Foreign Currency 0.00% 0.00% 0.00% 18.94% 9.56%
Operating Income after tax 11.21% 12.54% 15.42% 12.01% 12.05%
Financing Expense 8.48% 5.54% 9.78% 6.93% -2.49%
Comprehensive Income 2.72% 7.00% 5.64% 0.00% 0.00%
Common-size Analysis of Balance Sheet
2010 2011 2012 2013 2014
Operating assets
Property, plant &equipment 51.16% 47.14% 43.10% 42.78% 42.00%
Investment in long term assets 0.18% 0.17% 0.15% 0.15% 0.15%
Inventory 29.35% 27.85% 28.44% 28.78% 28.94%
Trade Debtors & Other Receivables 16.93% 23.53% 27.21% 27.75% 28.33%
Advance, deposit and other prepayments 2.37% 1.32% 1.10% 0.41% 0.36%
Deferred Tax assets
0.00% 0.00% 0.00% 0.12% 0.22%
Total operating assets 100.00% 100.00% 100.00% 100.00% 100.00%
Operating Liability
Creditors for goods
57.82% 48.77% 29.02% 26.84% 36.41%
Accrued Expense 42.18% 51.23% 70.98% 73.16% 63.59%
Total operating liabilities 100.00% 100.00% 100.00% 100.00% 100.00%
Net Operating Asset(Operating assets-Operating
liability)
Financial Obligations
Short term borrowing 71.82% 60.23% 88.03% 87.12% 47.52%
Lease Obligation 5.99% 3.60% 3.20% 3.12% 2.79%
Long term borrowings Current maturity 0.00% 0.00% 0.00% 0.00% 2.77%
Long term loans secured 0.00% 0.00% 0.00% 0.00% 38.53%
Term Borrowing 0.00% 24.89% 0.00% 0.00% 0.00%
Debenture Current maturity 6.45% 2.68% 0.00% 0.00% 0.00%
Interest free block account long term 4.46% 2.03% 0.00% 0.00% 0.00%
Interest free block account for short term
4.11% 2.39% 3.57% 4.81% 4.31%
Debentures-current 7.18% 4.17% 5.20% 4.94% 4.08%
Total financial Obligations 100.00% 100.00% 100.00% 100.00% 100.00%
Financial Assets
Cash equivalent 100.00% 100.00% 100.00% 100.00% 100.00%
Total Financial Assets 100.00% 100.00% 100.00% 100.00% 100.00%
Trend Analysis
Trend analysis gives a picture of how financial statement items have changed over time. The
index for net operating assets indicates whether the firm is growing investments in operations,
and at what rate, or is liquidating. The index for common stockholders’ equity tracks the growth
or decline in the owners’ investment. And the index for net financial obligations tracks the net
indebtedness. The trend analysis is attached to the appendix to overlook the change over the
years in financial statements.
Trend Analysis of Income Statement
2010 2011 2012 2013 2014
Turnover 85.02% 130.12% 120.16% 112.67% 100.00%
Cost of goods sold 82.14% 121.93% 108.92% 112.88% 100.00%
Gross profit 110.39% 202.17% 219.08% 110.76% 100.00%
Operating Expense 75.58% 93.37% 97.33% 96.93% 100.00%
Selling and distribution expenses 69.40% 89.31% 89.25% 90.97% 100.00%
Administrative expenses 77.88% 94.88% 100.34% 99.15% 100.00%
Operating Income From sales 117.68% 224.97% 244.58% 113.66% 100.00%
Allocation for WPPF
Provision for income tax -6376.88% -1401.83% 1124.14% 404.31% 100.00%
Profit After Taxes 111.00% 190.11% 215.82% 104.64% 100.00%
Other operating Income
Foreign Currency
Operating Income after tax 111.00% 190.11% 215.82% 104.64% 100.00%
Financing Expense 66.67% 66.60% 108.58% 110.31% 100.00%
Comprehensive Income -103.44% -407.27% -302.86% 132.09% 100.00%
Trend Analysis of Balance Sheet
2010 2011 2012 2013 2014
Operating assets
Property, plant &equipment 104.84% 103.82% 103.09% 101.84% 100.00%
Investment in long term assets 104.84% 103.82% 103.09% 101.84% 100.00%
Inventory 87.31% 89.04% 98.74% 99.44% 100.00%
Trade Debtors & Other Receivables 51.45% 76.84% 96.50% 97.94% 100.00%
Advance, deposit and other prepayments 571.27% 341.05% 310.27% 115.60% 100.00%
Deferred Tax assets 0.00% 0.00% 0.00% 54.21% 100.00%
Total operating assets 86.07% 92.51% 100.47% 99.98% 100.00%
Operating Liability
Creditors for goods 118.99% 108.45% 94.39% 102.28% 100.00%
Accrued Expense 49.70% 65.22% 132.20% 159.65% 100.00%
Total operating liabilities 74.92% 80.96% 118.43% 138.76% 100.00%
Net Operating Asset(Operating assets-
Operating liability)
Financial Obligations
Short term borrowing 107.47% 103.42% 169.98% 164.11% 100.00%
Lease Obligation 152.33% 105.16% 105.16% 100.00% 100.00%
Long term borrowings Current maturity 0.00% 0.00% 0.00% 0.00% 100.00%
Long term loans secured 0.00% 0.00% 0.00% 0.00% 100.00%
Term Borrowing
Debenture Current maturity
Interest free block account long term
Interest free block account for short term
67.87% 45.24% 76.13% 100.00% 100.00%
Debentures-current 125.25% 83.50% 116.99% 108.50% 100.00%
Total financial Obligations 71.12% 81.60% 91.76% 89.51% 100.00%
Financial Assets
Cash equivalent 118.06% 331.58% 73.97% 66.17% 100.00%
Total Financial Assets 118.06% 331.58% 73.97% 66.17% 100.00%
Profitability Analysis
The analysis of the drivers of ROCE is called profitability analysis. Profitability analysis
establishes where the firm is now. It discovers what drives current ROCE. With this
understanding of the present, the analyst begins to forecast (as we will see in Part Three of the
book) by asking how future ROCE will be different from current ROCE. She aims to forecast
ROCE, and to do so she forecasts the drivers that we lay out in this chapter. The forecasts, in
turn, determine the value, so much so that the profitability drivers of this chapter are sometimes
referred to as value drivers.
Ratios of Profitability
2010 2011 2012 2013 2014
Operating income (after tax)
113124103.0
0
193738322.0
0
219942758.0
0
106636951.0
0
101910528.0
0
Net Operating Asset(Operating
assets-Operating liability)
2710359622.
00
2912292446.
00
3104252477.
00
3048831206.
00
3124044713.
00
RNOA (OI/NOA) 4.17% 6.65% 7.09% 3.50% 3.26%
NFO
695049104.0
0
788805756.0
0
900322105.0
0
878502626.0
0
980277451.0
0
CSE
2015310518.
00
2123486690.
00
2203930372.
00
2170328580.
00
2143767263.
00
FLEV (NFO/CSE) 34.49% 37.15% 40.85% 40.48% 45.73%
NFE 85649980.00 85562149.00
139499076.0
0
141723001.0
0
128471845.0
0
NFO
695049104.0
0
788805756.0
0
900322105.0
0
878502626.0
0
980277451.0
0
NBC (NFE/NFO) 12.32% 10.85% 15.49% 16.13% 13.11%
Spread (RNOA-NBC) -8.15% -4.19% -8.41% -12.63% -9.84%
ROCE
(RNOA+FELV*SPREAD) 1.36% 5.09% 3.65% -1.62% -1.24%
OL
144107734.0
0
155722463.0
0 2277944.00
266895099.0
0
192340890.0
0
NOA
2710359622.
00
2912292446.
00
3104252477.
00
3048831206.
00
3124044713.
00
OLLEV (OL/NOA) 5.32% 5.35% 0.07% 8.75% 6.16%
OI
113124103.0
0
193738322.0
0
219942758.0
0
106636951.0
0
101910528.0
0
Sales
1009552138.
00
1545017437.
00
1426752263.
00
1337835656.
00
1187413298.
00
Profit Margin (OI/SALES) 11.21% 12.54% 15.42% 7.97% 8.58%
Asset Turnover
(SALES/NOA) 37.25% 53.05% 45.96% 43.88% 38.01%
Analysis of Growth and Sustainable Earnings
Growth and Sustainable Earnings
2010 2011 2012 2013 2014
Change in ROCE= Change in RNOA+ Change
in Financing 4.64% -1.72% -5.84% 0.09%
Level 1
1.Change in RNOA
Core OI from sales/NOA 0.04 0.08 0.08 0.04 0.03
Core other items/ NOA 0.00 0.00 0.00 0.00 0.00
Unusual items/ NOA 0.00 0.00 0.00 0.00 0.00
2. Change in Financing
SPREAD -8.15% -4.19% -8.41% -12.63% -9.84%
FLEV 34.49% 37.15% 40.85% 40.48% 45.73%
Previous FLEV 34.49% 37.15% 40.85% 40.48%
Change in SPREAD 3.95% -4.21% -4.23% 2.79%
Change in FLEV 2.66% 3.70% -0.37% 5.25%
Change in ROCE (SPREAD change) 1.36% -1.57% -1.73% 1.13%
Change in ROCE (FLEV change) -0.11% -0.31% 0.05% -0.52%
Level 2
Change in RNOA
Change in core sales profit margin
0.02907914
6
0.02585329
2
-
0.08658659
2
-
0.00074172
4
ATO
0.37247903
6
0.53051589
6
0.45961218
5
0.43880279
5
0.38008844
5
Previous ATO 0.372479
0.53051589
6
0.45961218
5
0.43880279
5
Change in ATO
0.15803686
1
-
0.07090371
1
-
0.02080938
9
-
0.05871435
Core sales PM = Core OI from sales/ sales
0.11672675
5
0.14580590
1
0.17165919
4
0.08507260
2
0.08433087
8
Change in other core income 0.00 0.00 0.00 0.00
Change in unusual items 0.00 0.00 0.00 0.00
Change in RNOA
0.03387407
8
0.00154430
9
-
0.04156656
2
-
0.00527690
3
Analysis of changes in growths in Shareholder’s
equity
CSE
2015310518
.00
2123486690
.00
2203930372
.00
2170328580
.00
2143767263
.00
Sales
1009552138
.00
1545017437
.00
1426752263
.00
1337835656
.00
1187413298
.00
1/ATO 2.68471485 1.88495765 2.17574736 2.27892805 2.63096658
5 6 5 2 8
Previous 1/ATO
2.68471511
1
1.88495765
6
2.17574736
4
2.27892805
5
Change in Sales
535465299.
00
-
118265174.
00
-
88916607.0
0
-
150422358.
00
Change in 1/ATO 0.70210721
1.15426856
3
1.04742310
1
1.15447549
3
NFO
695049104.
00
788805756.
00
900322105.
00
878502626.
00
980277451.
00
Change in NFO
93756652.0
0
111516349.
00
-
21819479.0
0
101774825.
00
Change in CSE (change in sales) 1437571780
-
222924845.
2
-
193460073.
3
-
342801731.
7
Change in CSE (change in ATO) 1084767882 1646855285 1401279972 1370839553
Change in CSE
2616096313
.42
1535446788
.67
1186000419
.25
1129812646
.43
ROCE (RNOA+FELV*SPREAD) 276.92% 149.01% 336.46% -507.76% -446.72%
Required Rate Of Return 10% ( assum) 10% 10% 10% 10% 10%
Residual Earning 5379337371 2951826995 7194918033
-
1123714534
4
-
9791082444
Abnormal earning
-
2427510375 4243091038
-
1843206337
7 1446062900
Conclusion
The items of the financial statements have been analyzed by breaking down to the fullest. From
the analysis it could be said that there is a still a lot sectors in which it can improve. So that
shareholders could be more benefited.
