1.

COMPANY BACKGROUND
Spritzer Berhad (Spritzer) is an investment holding company operates in the
manufacturing of natural mineral water, carbonated flavored water, distilled water, drinking
water and non-carbonated flavored water. It is engaged in the sale of bottled water and other
consumer products. The company classifies its business operations into three reportable
segments namely, manufacturing, trading and others. Spritzer also provides water dispenser and
water issues services to its customers. The company operates through its six wholly-owned
subsidiaries namely, Chuan Sin Sdn. Bhd., Golden PET Industries Sdn. Bhd., Chuan Sin Cactus
Sdn. Bhd., PET Master Sdn. Bhd., Angenet Sdn. Bhd., and HidroDinamik Sdn. Bhd (SPRITZER
BERHAD, 2015).
Spritzer is the largest bottled water producer in Malaysia. Spritzer Berhad was founded
by Datuk Lim Kok Boon in 1989. He started to bottle mineral water in a small set-up in Taiping,
Perak. On 26 May 1993, Spritzer was incorporated as a private limited company as Spritzer Sdn
Bhd before the Company was converted into a public limited company on 11 July 1994 as
Spritzer Bhd. Spritzer Bhd was listed on the 2nd Board of the Kuala Lumpur Stock Exchange. It
is also an investment holding company and on 1 September 2000, Spritzer was listed on Bursa
Malaysia. Spritzer Bhd Group also consists of six wholly-owned subsidiary companies which are
Chuan Sin Sdn Bhd, Golden PET Industries Sdn Bhd, Chuan Sin Cactus Sdn Bhd, PET Master
Sdn Bhd, Angenet Sdn Bhd and Hidro Dinamik Sdn Bhd as at 31 May 2014
The brand, SPRITZER, Malaysia bestselling natural mineral water is produced and
bottled out of a vast 300 acre site with plentiful natural mineral water resources in an
environmentally friendly site surrounded by lush tropical rainforests greenery, away from
pollution. Their production lines are completely automated and equipped with the state-of-the-art
bottling technologies. The plant is manned by highly qualified professionals such as food
technologists, chemists, microbiologists and engineers (Sidel, 2015)

1.1.

Industry Background
Bottled water beverage is a part of everyday life for millions of Americans. Per capita

consumption in the United States now tops fifteen gallons per year with sales over $5 billion in
2002. Even as fuel prices climb, many people are still willing to pay more for a gallon of bottled
water than they are for the equivalent in gasoline. At the same time, bottled water has become a
symbol of refined taste and a healthy lifestyle (Francis & Brown, n.d.)
The bottling and commercialization of natural mineral waters first began in Europe in the
mid-16th century, with mineral water from Spa in Belgium, from Vichy in France, from
Ferrarelle in Italy and Apollinaris in Germany. It is said that the first mechanical corking
machine was invented in France in 1840 and bottling plants emerged throughout the continent by
the late 19th century. As such, other European countries also adopted the trend of bottling waters
from the source, including Malvern, Englands first bottled water in 1851, Germanys
Appolinaris in 1892 and the Italian mineral water, San Pellegrino in 1899. Bottled waters were
sold as medicinal treatment in pharmacies until the 20th century (EFBW, 2016)

1.2.

Issue the company face

In this section, it will be discussed about 2 aspects of issues relating to Spritzer Berhad,

which is financial and non-financial issues.

1.2.1. Financial issue
a. Wealth and Profit Maximization
The profitability ratio from the table 1 indicates the inability of Spritzer to meet
the average local value and also show the decreasing pattern for the net profit percentage
within 2013-2015 although it still above the local average in the industry of bottle water
industry or beverage industry. Business that always did a profit and provide more benefit
to shareholders than make a loss become the first priority in the shareholders heart
(Addae et al., 2013). The first issue related with this company is how to portray the
wealth and profit making for owners of Spritzer Company normally known as
shareholders. Addae and his friends, (2013) also stated through their study that the term
terms firms value, shareholders value, shareholders wealth and profitability
because these terms establish the methods that paint wealth construction for shareholders.
Thapa, (2013) stated on his study that the food and beverage industry has
recorded growth even during the economic strike in comparison to other industries. And,
due to large populations and rising per capita income, the industry is expected to grow in
future as well. Unfortunately the ability of Spritzer Company to pay its short term
obligations in full and on time are lower than most others Malaysia companies in the
same industry as stated on table 1. If the short term responsibilities they cannot perform
how they afford to meet shareholders requirement by create and provide more profit and
benefit known as profit and wealth maximization.

This inability might be due to problem of rising fuel price in local and global.
Therefore this cluster of problem need to be solved one by one then probability to solve
the problem of inability to maximize the wealth and profit to shareholders become the
reality rather than become fantasy. This already forecasted by Thapa, (2013) in his
previous study that the industry may face problems due to price hikes of fuel and recent
droughts in some countries.

b. Dividend
According to the Spritzer annual report, a first and final dividend of 8% or 4.0 sen
per share, under the single tier system, declared in respect of the previous financial year
and dealt with in the previous directors report was paid by the Company during the
current financial year. The directors have proposed a first and final dividend of 10% or
5.0 sen per share, under the single tier system, in respect of the current financial year.
This dividend is subject to approval by the shareholders at the forthcoming. This
statement shows that Spritzer need to comply with the inquiring increment dividend from
their investor in order to keep them tightly in the organization. With the (Goods and
Services Tax (GST) implementation and competition from rivals, this company should
take a better strategy to secure their market.

c. Marketing strategy
Spritzer do not intensively promote their product at the moment because of the
thinking where they are already established in the Malaysia bottles industry. This
company seem to have a strong competition with the similar product offer such as Bleu
drinking water, Cactus, Sea Master and so on despite these competitor are not listed in the
main board.

2. FINANCIAL ANALYSIS
Year

LIQUIDITY
Current Ratio
Quick Ratio
ACTIVITY
Inventory
Turnover
Average
Collection
Period (days)
Total Asset
Turnover
LEVERAGE
Debt Ratio
(%)
Time Interest
Earned
PROFITABI
LITY
Gross Profit
Margin (%)
Net Profit
Margin (%)
Return on
Asset (ROA)
%
Return on
Equity (ROE)
%
MARKET
Price Earnings
Ratio
Market/Book
Ratio

Industry
Average

Industr
y
Average

Evaluation

201
3

201
4

201
5

2015
(Local)

2015
(Global)

CROSS
SECTIONA
L

1.2
1
0.9
0

1.2
4
1.2
3

1.4
4
1.1
0

1.70

1.12

1.20

0.56

Spritzer <
Industry
Spritzer >
Industry

4.4
5
108

4.8
9
100

5.7
4
83

5.45

6.65

62

41

0.7
1

0.7
8

0.8
1

1.1

0.65

41

41

31

35

45

4.5
9

7.0
8

10.
69

16.12

15.07

11.
2
9.5
2
6.8

10.
39
9.2
9
7.0
1

11.
52
8.9
9
7.3
2

21.25

54.7

7.90

11.3

8.30

7.15

11.
52

11.
48

10.
58

12.74

0.1

0.1
1
1.2
9

0.1
1
1.2
7

0.7
8

Spritzer >
Industry
Spritzer >
Industry

TIME
SERIE
S

OVERAL
L

Poor

Poor

Poor

Poor

OK

OK

Poor

Poor

Spritzer >
Industry

Good

Good

Spritzer <
Industry
Spritzer<
Industry

Good

Good

Poor

Poor

Spritzer<
Industry
Spritzer>
Industry
Spritzer>
Industry

Poor

Poor

OK

OK

OK

OK

24.37

Spritzer<
Industry

Poor

0.11

27.74

Poor

Poor

4.21

4.69

Spritzer<
Industry
Spritzer<
Industry

Poor

Poor

Poor

Table 1: Cross Sectional in Time Series Analysis for Spritzer Manufacturing Company

Year 2015
LIQUIDITY
Current Ratio
Quick Ratio
ACTIVITY
Inventory Turnover
Average Collection
Period (days)
Total Asset Turnover
LEVERAGE
Debt Ratio (%)
Time Interest Earned
PROFITABILITY
Gross Profit Margin
(%)
Net Profit Margin
(%)
Return on Asset
(ROA) %
Return on Equity
(ROE) %
MARKET
Price Earnings Ratio
Market/Book Ratio

Industry Average

COCACOLA

YEOS

F&N

SPRITZER

2015 (Local)

1.16
1.07

3.03
2.37

1.96
1.26

1.44
1.10

1.7
1.20

1.57
2.84

3.4
3.8

5.16
7.22

5.74
4.38

5.45
5.80

0.12

0.5

1.34

0.81

1.1

31
21.55

38
10.69

35
16.12

60

40

30.98

11.52

21.25

12.68

6.49

6.90

8.99

7.9

1.56

3.3

9.27

7.32

8.30

5.52

3.94

14.9

10.58

12.74

0.75
0.05

0.43
1.71

0.23
3.57

0.11
1.27

0.17
4.21

Table 2: Average Ratio Analysis for Bottle Beverages Industry

Dupont Analysis
The DuPont system of analysis is used to dissect the firms financial statement and
to assess its financial condition. DuPont analysis in turn, provides a means of
disaggregating ROA into asset turnover and profit margin components to gain
insight into the underlying drivers of operating profitability (Bauman, 2014).
ROA= Net Profit Margin x Total asset turnover
Spritzer substituted into the DuPont Formula:
ROA= 8.9% x 0.81= 7.30%
This value same as calculated earlier. Spritzer have a low profit margin which is
8.9% but high total asset turnover. This result reasonably good return on total asset.
Modified DuPont Formula
ROE= ROA x FLM
ROE= 7.30% x FLM
Which FLM refer to (Total asset / common stockholder equity)= 311,738/215546=
1.45 as the equity multiplier.
So 7.30 x 1.45 = 10.58= ROE
Spritzer low ROE is the consequence of slow collections of accounts receivables,
which resulted in high levels of receivables and therefore high levels of total asset,
the high total asset slowed Spritzer total asset turnover, driving down its ROA,
which then down its ROE. By using the DuPont systems of analysis, we found that
slow collection of receivables caused spritzer the below average industry and global
ROE.

2.1.

Financial Analysis Explanation

2.1.1.

Liquidity

Current ratio for Spritzer is 1.44 t is less than current ratio for average industry which
is only 1.7t. If compare to global. Compare to Global Industry average which is 1.12t,
Spritzer is better. However in the quick ratio which is exclude inventory show that Spritzer
are poor if compare to industry average but better compare to global average. 23% from
Spritzer current asset come from inventories while 56% come from receivables, which is all
debt, unpaid transactions, or other monetary obligation owed, by its debtors or customer.
79% from total asset are come from receivables, inventories Receivable account cant
convert to cash easily, and inventories are low liquidity because it will take a time to convert
from inventories to sales. Only 21% from total asset can use to fulfill their short term of
obligation. Its important for Spritzer to have enough liquidity for day to day operation.

2.1.2. Activity
Spritzer inventory appears to be in good condition. Its inventory management seems
to have improved, and in 2015 it performed decreasingly from 2013 and above industry
average even though less than global average. As mention before, the firm may be have some
problems with accounts receivables. Average collection period seems to have crept up above
industry average which is 62 days and global average 41 days. Despite liquidity appears in
good, receivables account should be investigated. Spritzer total asset turnover increase from
2013 to 2014, however is less than industry average and global average.

2.1.3. Leverage
Spritzers indebtness decrease from 2013 to 2015 and is currently lower than industry
average and global average. Spritzer decrease their debtness because in 2015 and 2016
growth in economy expected to be lower rate. At economic crisis, it better for this company
to reduce their debt. Spritzer also increase their times interest earned from 2013 to 2015 but
still lower than average industry and global industry.

2.1.4. Profitability
Spritzers profitability show increasing pattern in gross profit margin but still below
industry average and global average. However, it seems Spritzers net profit margin decrease
from 2013 to 2015 but are better than average industry and global. Spritzers ROA and ROE
increase show is performing is quite well.

2.1.5. Market
Investors confidence level was stagnant from 2013 to 2015. This ratio also below
average industry and global average. The P/E ratio suggest that the firm risk has constant and
unchanged but the risk is more than Industry average and global. The market per book was
increased over 2013 to 2015 reflects the firms profitability .Its show investors expect to earn
high future return as compensation is stable.

2.1.6. Conclusion
As expected in current economic condition that is economy will be in recession is
better for Spritzer to less their financial leverage. Spritzer should also examined their
receivables account, which is more than 50% from their total asset. As prove by DuPont
analysis that ROE is low due to slow collection of accounts receivable but high in total asset
turnover. Spritzer should consider to decline their time interest earned to has get more debt
for exp

3. Theories related to the Spritzer Berhad.

3.1.

Dividend Policy Theory

Shareholders, which is owner of the company, should be given earning pay out by the firm
based on dividend policy. Previous studies suggest that investors are not worried with a firms
dividend policy since they can release a portion of their equities or portfolio if they do not want
cash. This attitude refer to dividend irrelevancy policy. It means any issuance of dividends
should have little or no impact on firms stock price. However, previous study find that dividends
affect shareholder wealth as reflected in the intrinsic value of a firm stock has existed for many
decades ( Baker, 2015). They are three approach to dividend such as residual, stability or
Hybrid.
Firms practicing the residual dividend policy choose to rely on internally equity to
finance any new projects. After all project capital requirements are fulfill, dividend payment can
be paid out of the residual equity. The decision in dividend will consider balance in firms debt or
equity ratio before making any dividends companies usually attempt to maintain balance in their
debt/equity ratios before making any dividend distributions, deciding on dividends only if there
is enough money left over after all operating and expansion expenses. Example if the Spritzer
expand their products to bicarbonate drinking water and the project achievable so the dividend
should pay based on the project profit.
The superior of the dividend-residual model is that with capital-projects budgeting, the residualdividend model is useful in setting longer-term dividend policy. Perhaps, the disadvantage is that
dividends may be unstable. Earnings from year to year can change determine by business
achievements. It is hard to maintain stable earnings and thus a stable dividend. Residualdividend model is useful if the company have long-term planning, despite many company do not
use the model.

Dividend stability policy depend on fluctuations on business conditions significant with

residual policy. The most determinants of dividend involve earning which is stability as well as
the level of current and expected future earning and the pattern of past dividends ( Baker &
Sajuta , 2015) With this policy, quarterly dividends are set at a fraction of yearly earnings.
Investors can reduce uncertainty and provide them income if the firm use this policy. For
example, Spritzer will adjust yearly earning for every quarter. This policy are always attempting
to share earnings with shareholder rather than searching for project to invest excess cash.
The last approach is a merger between the stable and residual dividend policy. This
practicing need companies to view the debt/equity ratio as a long-term rather than a short-term
goal. In Malaysia markets, companies that pay dividends usually use this approach. As a firm
experience in business cycle fluctuations, they will set a dividend, which is set as a relatively
small portion of yearly income and can be easily maintained. Spritzer use this approach on given
dividend to their shareholder. If income exceeds than their target, companies who offered this
approach will offer another extra dividend.

3.2.

Agency Theory
Agency theory defined as the relationship between the principal, who are delegate their

authority and responsibility to the agent to take the decision on their behalf (Bendickson et al,
2016). Referring to the case study, there is a relationship between shareholders who are the
principals and managers who are the agent will decide on behalf the shareholders for all the
responsibility and authority given to them.
Spritzer had an obligation to meet their investor inquiring in deciding the dividends
percentage, positive perception towards the company performance in the market and so on. This
should be the elements for the Spitzer managerial level focus on as the agents towards their
principle which is the investors. This agency theory actually had been used in wide application
such in accounting, economic, finance, marketing, political science, organizational behavior and
sociology (Angwin, 2015).

3.3.

Marketing Mix Theory (4 Ps Model)

4 Ps Model in the Marketing Theory used to help improve the profitability of the

company rather than other theory especially related with the financing matters. This theory
actually help in increasing the profit and wealth in order to satisfy all the needs and requirement
of shareholders in the company as Spritzer Company. Marketing not only advertise and sell the
products but it is actually is a process develop strong relationship between business firm with
business stakeholders especially customers to create the value to customer and capture it from
them as the return for both parties (Amstrong and Kotler, 2011).
In order to provide high value to customers and receive high return there some
strategies need to apply by the firm. Amstrong and Kotler (2011), defined the strategy in
marketing is logical matters in the marking that can create a good relationship between company
and customers to achieve a profit. The company should include marketing mix made up of four
factors under its control- product, price, place and promotion. Both of them defined marketing
mix is the set of controllable tactical marketing tools that the firms blends it to produce the
response it wants in the target market.
3.3.1. Product
Product is categorize under tangible like a mobile phone, and intangible like a service
like health treatment. Most of the researchers identified product must be positioned based on
quality, design, brand name, functionality, features, benefits and price conscious (Ahmed, S., &
Rahman, M.,2015). According to Spritzer Company its product is tangible because it touchable
in physically then it is distinguished by the classifications position as mentioned by Ahmed &
Rahman, (2016).

3.3.2. Price
Based on the economics principle, price is a value of exchange while according to
marketing principles, it defined as amount of money charged for a product for the benefit of
having or using the product (Ahmed, S., & Rahman, M.,2015). Spritzer Company allocate some
amount value for their products as the exchange with money of customers.

3.3.3. Promotion
Promotion means activities that communicate the merits of the product and persuade
target customer to buy it (Amstrong and Kotler, 2011). Spritzer also involved in various activities
to influence their potential customers to buy all their products. The promotional tools like
advertising, public relations, sales promotion, direct marketing, and personal selling use to
communicate effectively the benefit of its products or services to its customers ( Ahmed, S., &
Rahman, M.,2015).

3.3.4. Place (Distribution)

The suitable distribution channel is very important to suit with culture of target
customer. This is due to create positive relationship between sales and consumer primarily
through face to face meeting and products distribution channel (Ke & Li, 2015). Ahmed &
Rahman, (2015) states place or distribution channel is the way to distribute the product to the
customer such as using any types of vehicles as a way of transporting the product. This is same
with the Spritzer Company they provide lorry as the vehicle of transporting to deliver all their
products to their potential buyers.

4. RECOMMENDATION
4.1.

Increasing company profits for investor wealth maximization

Spritzer (Malaysia) Bhd. can still improve their profits by increasing their sales of

existing products. New products and quality needs to be done by both companies. This is
because the products of both companies are for daily usage I.e. Mineral Water and Soft
Drinks. Spritzer could diverse their product into new sector or industry will lead to growth
(P0= D/G)

4.2.

Need to consider cost efficiency and effectiveness

The company need to focus on minimize operating cost. Supervision of assets and

asset management should be enhanced so that the company in future may not loose from year
to year. This condition will cause too many efforts to generate sales

4.3.

Corporate governance in Spritzer Company

Shareholder have a right in companys control asset, remove ineffective and

unoptimistic or effect ownership changes by voting stockholders exercise. Lower shareholder

rights mean weak external governance between shareholder and manager leads to greater
managerial incentives to reduce transparency and manage earnings to increase their bonus
(Jiang & Anandarajan, 2009). If shareholders right are strong enough will improve reliablity
of financial performance by reducing ability of management to manipulate information.

Scandals happen in global companies like Enron, Tyco International, Adelphia,

Worldcom because lack of corporate governance control. Lack of corporate governance will
lead to conflicts interest among the actor of corporation. Corporate governance is the process
and mechanism how corporation control and direction. Though much is made of the fact that
the first duty of directors is to maximize shareholder value the requirement in law is at best
indeterminate and at worst unenforceable (Tudway, 2006). However in the real business
situation the directors always seek for their interest.

Governance mechanism use by board of directors can help bridge the value added in
economy and and market values will lead to increase shareholder value (Mir& Seboui, 2008).
Spritzers shareholder should implement corporate governance to enhance economic value
added and increase shareholder value. Direction and controlling method to Spritzer such as
auditing, Board Meeting will lead to transparency in Spritzer financial position.
Additionally, management as agent to shareholder should disclose any matter or
problem facing by them to Spritzers shareholder. Governance problem arise because
shareholder ask to get more earnings from their investment. However, the shareholder should
realize that invest in consumer good is less risky. The management should let their
shareholder known well about this matter. Any increasing in dividend will reflect Spritzers
profit margin since the net profit margin in decreasing trend.

4.4.

Strengthen the marketing strategies

Some of the way to strengthen the marketing strategies in Spritzer Company is by

applied the marketing theory in integrated all the main 4 factors (4 ps model) in the
marketing activities as the solution to the issues of inefficiency of the company and other
issues related. Spritzer advisable to produce variety of product to compete with others
competitors in the market by launch new product rather than only focus on the mineral water
bottle. Ahmed & Rahman, (2015) stated that customer more satisfy through product
differentiation, quality and follow the Islamic shariah laws (free harmful and unethical
practices). By doing all these normally could influence the customer to buy and repeat the
same product.

Spritzer product categorized under perfect competition market because there are no
differentiation then other competitors (Ahmed & Rahman, 2015).Then we also suggested to the
Spritzer Company to create brand positioning to attract the mind of their customer to know and
remember the company through their unique identity. This already did by Wong Lo Kat
Company in positioning their product by introduce herbal tea drink (Shanshan, 2015). Besides
that, last time in 2006 PepsiC0s CEO already mention that And we have to modify our product
and refocus to Cola soft drinks to gain their market (Chong & Nik Hashim, 2016). These two
example literally show that position in product brand become the key player to improve the
performance of the company.
4.5.

Enhancing the company overall efficiency and effectiveness

Next suggestion in enhance the company efficiency and effectiveness by introduce

price positioning. In perfect competition market company cannot set their own price rather
than set equal the market price (Ahmed & Rahman, 2015). Then when the company can
create the unique product brand rather than others automatically it can set their own price.
Customer still prefer the Spritzer products due to value of uniqueness rather than normal
beverage. This situation happened in the Hong Kong RUN Company set the price low than
Wong Lo Kat Company and unfortunately customer still buy the higher one because of the
herbs value rather normal beverage (Chong & Nik Hashim, 2016).
Currently Spritzer Company sell product not direct to the consumer because they are
the manufacturer normally they their product to the distributor Centre then distributor Centre
will send their product to their customers. If company directly deliver the product to the
customer then the payment is made directly to the company (Ahmed & Rahman, 2015). The
table 1 the average payment collection period ratio very few times due to the scenario. So, we
recommend to Spritzer Company to diversify their market and distribution of channel. In,
conclusion, most important in business the distribution of channel to retain and satisfy the
customer because it play as the bridge to link the product with the customer (Ahmed &
Rahman, 2015).

REFERENCES
Ali El Mir, S. S. (2008). Corporate Governance and Relationship betwwen EVA and
Create Shaholder Value. International Journal of Business In Society, 46-58.
Bauman, M. P. (2014). Forecasting Operating Profitability with DuPont Analysis:
Further Evidence. Managerial Finance, 191-205.
EFBW, A. (2016, February). Natural waters: The natural choice for hydration.
Retrieved from European Federation of Bottle Waters:
http://www.efbw.eu/index.php?id=39
Francis , C. H., & Brown, K. F. (n.d.). Book Review: A Natural History Of Bottled
Spring Waters. Retrieved from Bottled Water of the World:
http://finewaters.com/Bottled_Water_History/Bottled_Water_Etiquette/Bottled_
Water_History/Book_Review_Wellsprings.asp
H. Kenat Baker, S. K. (2015). Dividend Policy In India: A New Survey Evidence.
Managerial Finance , 182-204.
H. Kent Baker, R. W. (2015). Corparate Dividend Policy Revisited. Managerial
Finance, 126-144.
Richard Tudway, A. M. (2006). Corparate Governance, shareholder value and
societal expectations. International Journal Of Business in Society, 305-316.
Sidel, A. (2015). Spritzer, Malaysia. Retrieved from Sidel.com:
http://www.sidel.com/about-sidel/global-references/spritzer,-malaysia
SPRITZER BERHAD. (2015). Retrieved from List of the companies:
http://listofcompanies.co.in/spritzer-berhad/
Wei Jiang, A. A. (2009). Shareholders Rights, Corporate Governance and Earnings
Quality: The Inflluence Investors. Managerial Auditing Journal, 767-791.