GROUP MEMBERS NAME:

SAQIB MANZOOR 5529 BILAL KHAN 5528

ZEESHAN HUSSAIN 5522

SUBJECT: DATE:

FINANCIAL ANALYSIS 24-12-2010

INSTRUCTERS NAME: SIR MUHHMAD AHMED

GROUP PROJECT

FINANCIAL ANALYSIS OF

RAFHAN MAIZE PAKISTAN LIMITED

Abbreviations
CDC CNIC GDP QMS EMS OHSAS ERP CSP MSP CSR ILO SECP INC CEO CFO IT IDPS IMS KSE LSE IFAC EPS IAS ITAT IFRS IFAS

Complete Words
Central Depository Company Computerized National Identity Card Gross Domestic Profit/Product Quantity Management System Environment Management System Occupational Health And Safety Assessment Series Enterprise Resource Planning Consoler Sales Planning Managing Sales Performance Corporate Social Responsibility International Labor Organization Securities And Exchange Commission Of Pakistan Incorporated Chief Executive Officer Chief Financial Officer Information Technology Internally Displaced People Integrated Management System Karachi Stock Exchange Lahore Stock Exchange International Federation Of Accountants Earnings Per Share International Accounting Standards Income Tax Appellate Tribunal International Financial Reporting Standards Islamic Financial Accounting Standards

LIQUIDITY ANALYSIS
Net working Capital = Current Asset Current Liabilities = Rs.2531960 Rs. 1036473 = Rs. 1495487 Interpretation: This ratio tells us the net working capital of any company. The working capital of RAFHAN MAIZE is Rs. 1495487 for the year of 2009. Current Ratio = Current Assets / Current Liabilities

= 2531960 / 1036473 = 2.44 Interpretation: The current ratio tells us that the company has Rs. 2.44 to pay its Rs. 1 currently maturing obligation. The current ratio of RAFHAN MAIZE ltd. Is 2.44 for the year 2009 which is less than the last years performances. But still it is very good for the company as the theoretical bench mark of the current ratio is 2 and for the year 2009 it is very near about the theoretical bench mark. The current ratio of RAFHAN MAIZE Ltd. tells us that the company is maintaining its current assets and liabilities very well. According to last years performances, it is decreasing due to recent recession but it is much better than the industry average.

Quick Ratio = Current Assets Stock in trade / Current Liabilities

= 2531960 1166118 / 1036473 = 1.32 Interpretation: The quick ratio tells us that the company has Rs. 1.32 in its current assets less stock in trade to pay its Rs. 1 currently maturing obligation. Its theoretical bench mark for quick ratio is from 1 to 1.5. Here we can see that its quick ratio is ranging between 1 to 1.5 and it is very suitable for the company. The quick ratio of the RAFHAN MAIZE Ltd. For the year 2009 is 1.32. Cash Ratio = Cash + Cash Equivalence / Current Liabilities = 277972+315365+11840+22227+65029+673409 /1036473 = 1.31 Interpretation: The cash ratio tells us that the company has how much cash and cash equivalence to its currently maturing obligation. The cash ratio of RAFHAN MAIZE Ltd. For the year 2009 is 1.31. It tells us that the company has Rs. 1.31 cash to pay its Rs. 1 currently maturing obligation. Cash ratio has a theoretical bench mark that is 0.5. By comparing with the theoretical bench mark of the ratio it is clear that the company has lot more cash than it is required to maintain and also it is possible that the cash is idle. So the company requires decreasing its cash ratio a bit and investing its idle cash.

Defensive Interval Ratio

= Cash + Short term investment + net Account Receivable / Average Daily Expense

= 673409+11840+64601 / 25471.67 = 29.44 days Average daily Expense = Cost of Goods Sold + Admin & Selling Expense / 365 = 8992742 + 304419 / 365 = Rs. 25471.67 Interpretation: Defensive interval ratio tells us that, how many days the company can keep all its processes at run by the present cash in the company. The defensive interval ratio of the RAFHAN MAIZE Ltd. For the year 2009 is 30 days approximately. It means that the company can run 30 days approximately by the present cash.

ACTIVITY / EFFICIENCY ANALYSIS

Operating fixed Assets Turnover ratio = Sales / Total Fixed Assets = 11428104 / 2753216 = 4.15 Interpretation: Operating fixed assets turn over ratio tells us that, how many times a year the company selling its fixed assets successfully. The operating fixed asset ratio of the RAFHAN MAIZE Ltd. For the year 2009 is 4.15 approximately. It means that the company has sold its fixed assets 4.15 times in the year of 2009.

Total Assets Turnover ratio = Sales / Total Assets = 11428104 / 5304524

= 2.15 Interpretation: The total assets turnover ratio tells us that how many times the company is successful to sell its assets. The total assets turnover ratio of the RAFHAN MAIZE Ltd. For the year 2009 is 2.15 times which tells that the company converted its assets successfully in to sells during the period. Accounts Receivable Ratio in Times = Credit Sales / Average Account Receivable

= 11428104 / 64512 =177.14 Times Account Receivable in Days = 365 * Average Account Receivable / Credit Sales = 365 * 64512 / 11428104 = 2.06 Days Interpretation: Account receivable ratio tells us that after approximately how many days and how many times the company is successful to convert its accounts receivables in to cash. The accounts receivable ratio for the year 2009 of the RAFHAN MAIZE Ltd. Is 177.14 times and 2.06 days approximately. It means that the company is converted its accounts receivable in to cash 177.14 times during the period and after approximately 2.06 days. No theoretical bench mark is available for the accounts receivable ratio but it is as much better as much less in days. And as much better as much greater in times. Here it is very good for the RAFHAN MAIZE Company.

Accounts Payable Ratio in Times = Credit Purchases / Average Accounts Payable = 6486348 / 170845.5

= 37.966 Times Accounts Payable Ratio in Days = 365 * Average Accounts Payable / Credit Purchases = 365 * 170845.5 /6486348 = 9.614 Days Interpretation: Accounts payable ratio tells us that after how many days during the year the company has paid its accounts payables or how many times the company has paid its accounts payable during the period. The accounts payable ratio of the RAFHAN MAIZE Ltd. For the year 2009 is 37.966 times and 9.614 days approximately. There is no theoretical bench mark available for the accounts payable ratio. It is as much better as low in times and as much better as high in no. of days. Here it is very good for the RAFHAN MAIZE Company as it pays its accounts payables after 9.614 days approximately. So it means that it retains the cash in the organization for a long time which can be use for progressive works in the organization. Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory = 8992742 /6439900 = 1.39 Times Inventory Turnover Ratio = 365 * Average Inventory / Cost of Goods Sold = 365 * 6439900 / 8992742 = 261.38 Days Interpretation: Inventory turnover ratio tells us that how times the company is successful to sell its inventory or after how many days the company successfully selling its inventory. For the year 2009 the RAFHAN MAIZE Ltd. The inventory turnover ratio is 1.39 times and 261.38 days approximately. It means that the company sells its inventory 1.39 times in the financial period

which is vary good for a production company and it shows very less chance of presence of obsolete inventory. Operating Cycles = Average Account Receivable + Average Inventory = 2.06 + 261.38 = 263.44 Days Interpretation: Operating cycle tells us that how many days a company is completing its operation which start from the purchase of raw material and the payment for that. For the year 2009 the operating cycle of the RAFHAN MAIZE Ltd. Is 263.44 days approximately. It tells that the company pays for the raw material it purchased in 263.44 days. Shorter operating cycles tells us better and efficient management of the company. Here it is 263.44 days so it looks very appropriate to me for a food producing company. Cash Conversion Cycle = Average Account Receivable + Average Inventory Average Accounts Payable = 2.06+261.38-9.614 = 253.826 days Interpretation: Cash conversion ratio tells us that after how many days the company successfully converted its cash from the process of purchasing raw material and payment for that and tills to the payment of cash to its accounts payables.

DEBT RATIOS

Debt Ratio / Debt to Equity Ratio = Total Liabilities / Total Assets = 5304524 / 5285176 = 1.00 Interpretation: Debt ratio tells us about the degree of protection for advancing and granting a loan. Here for the year of 2009 it is 1.00 for the RAFHAN MAIZE Ltd. Which is very good? Its theoretical bench mark is 50% or 0.5 and here it is above than the 0.5 and assumes very well for an organization. Debt to Equity Ratio = Total Liabilities / Total Equity = 5304524 / 4007730 = 1.323 Interpretation: Debt to equity ratio tells us the ratio of the liabilities to the equity of the organization. It is assumed good if it comes equal or 1. Here for the year 2009 the debt to equity ratio of the RAFHAN MAIZE Ltd. Comes 1.323 which tells that the liabilities are greater than the equity of the company. It is assumed to be good as very near to the theoretical bench mark. Interest Payment / Coverage Ratio = Earnings before Interest and Taxation / Interest = 2210202 / 48766 = 45.322 Interpretation: Interest payment or coverage ratio tells us that how many times the company can pay interest out of its profit. Here it is 45.322 for the year 2009 of the RAFHAN MAIZE Ltd. It means that the company can pay the amount of interest from its profits more than 45.322 times.

PROFITABILITY ANALYSIS

Gross Profit Margin

= Gross Profit / Sales * 100 = 2435362 / 11428104 * 100 = 21.31%

Interpretation: Gross profit margin tells us that how much cash would remain in the company after its cost of sales. It comes 21.31% for the year 2009 of the RAFHAN MAIZE Ltd. It tells that the 21.31% of sales is left behind after paying all its costs.

Net Profit Margin

= Net Profit / Sales * 100 = 1297080 / 11428104 * 100 = 11.35 %

Interpretation: Net profit margin ratio tells us that how much cash left in the company after paying all its costs, expenses, interests and taxes. Here it is 11.35% for the company RAFHAN MAIZE for the year 2009. It tells that the net profit is 11.35% of total sales made by the company during the financial period.

Return on investment / Assets

= Net Income / Total Assets * 100

= 1297080 / 5285176 * 100 = 24.54 % Interpretation: Return on investment or assets tell us that in what ratio the investment is to assets or in what ratio of assets the return is earned by the company. It is 24.54% for the year of 2009 of RAFHAN MAIZE Ltd. It tells that company earned 24.54% return on its assets. Return on Equity = Net Profit / Equity * 100 = 1297080 / 4007730 * 100 = 32.36 % Interpretation: Return on equity tells us that in what ratio of equity the return is earned by the company. It is 32.36% for the year of 2009 of the RAFHAN MAIZE Company. Return on Assets = Net Profit / Total Assets =1297080 / 5285176 = 0.24 Interpretation: It tells us that in what ratio the profit is to total assets. It is 0.24 for the year 2009 of RAFHAN MAIZE Company.

INVESTMENT ANALYSIS

Earnings per Share

= Net Profit / Total number of Ordinary Shares = 1297080 /20000000 = Rs.0.064

Interpretation: Earning per share tells us the amount of income earned on share of common stock during an accounting period. Here it is Rs. 0.064. It means the holders of shares of common stock earn Rs. 0.064 during the accounting period of 2008-09. Price Earnings Ratio = Market Price per Share at 23-12-2010 / Earning per Share = 2115.25 / 0.064 = 33050.78 Interpretation: The ratio expresses the relationship between market price of share of common stock and current earnings per share. Investors view is that price earning ratio as a hint or future earning of the firm. The company with high ratio has the high growth opportunity or vice versa. Here it is 33050.78 which show that it is very high to the earning per share and tells that the company has a great opportunity of growth in its near future.

VERTICAL ANALYSIS Profit and Loss Account

Cost of sales = cost of sales / net sales 100 = 8992742 /11428104 100 78.6% Gross profit = gross profit / net sales 100 = 2435362 / 11428104 100 21.3 % Distribution cost = distribution cost / net sales 100 = 116884 / 11428104 100 1.0% Administrative expensive = administrative expensive / net sales 100 = 187535 / 11428104 100 1.64% Operating profit = operating profit / net sales 100 = 2130943 / 11428104 100 18.6 % Other operating income = other operating income / net sales 100 = 79259 / 11428104 100 0.7 %

Finance cost = finance cost / net sales 100 = 48766 / 11428104 100 0.4 % Other operating expenses = other operating expenses / net sales 100 = 149572 / 11428104 100 1.3 % Profit before taxation = profit before taxation / net sales 100 = 277864 /11428104 100 17.6% Taxation = taxation / net sales 100 = 714784 / 11428104 100 6.3% Profit after taxation = profit after taxation / net sales 100 = 1297080 / 11428104 100 11.3 %

Vertical Analysis Balance sheet

Property, plant and equipment = property, plant and equipment / total assets 100 = 1765365 / 5285176 100 33.3 % Capital work in progress = capital work in progress / total assets 100 = 987851 / 5285176 100 18 . 6 % Employees retirement benefit = employees retirement benefit / total assets 100 = 15784 / 5285176 100 0.3 % Long term loans = long term loans / total assets 100 = 3564 / 5285176 100 0.1 % Stores and spares = stores and spares / total assets 100 = 277972 / 5285176 100 5.2% Stock in trade = stock in trade / total assets 100 = 1166118 / 5285176 100 22 %

Trade debt = trade debt / total assets 100 = 315365 / 5285176 100 5.9 % Loans and advances = loans and advances / total assets 100 = 11840 / 5285176 100 0.2 % Trade deposits and pre payments = trade deposits and pre-payments / total assets 100 = 22227 / 5285176 100 0.4 % Other receivable = other receivables / total assets 100 = 65029 / 5285176 100 1.2 % Cash and bank balances = cash and bank balances / total assets 100
= 673409 / 5285176 100

12. 7 % Trade and other payables = trade and other payables / total liabilities 100 = 734202 / 5304524 100 13. 8 % Mark up accrued = mark up accrued / total liabilities 100 = 8601 / 5304524 100 0.2%

Provision for taxation = provision for taxation / total liabilities 100 = 293670 / 5304524 100 5.5 % Deferred taxation = deferred taxation / total liabilities 100 = 260321 / 5304524 100 4. 9 % Share capital = share capital / total liabilities 100 =92364 / 5304524 100 1.74 % Reserves = reserves / total liabilities 100 = 3915366 / 5304524 100 73. 8 %

Horizontal Analysis Profit and loss account

Sales = =1128104/10746826 100 =106% Cost of sales = = 8992742 / 8005580 100 112 %

Distribution cost = = 116884 / 160563 100 73 % Gross profit = = 2435362 / 2741246 100 89 % Administrative expense = = 187535 / 165510 100 113 % Operating profit = = 2130943 / 2415173 100 88% Other operating income = = 79259 / 90911 100
87 %

Finance cost = = 48766 / 36123 100

135 %

Profit before taxation = = 2011864 / 2299065 100 88 % Other operating expense = = 149572 / 170846 100 88 % Profit after taxation = = 12970810 / 1492365 100
87 %

Taxation = = 714784 / 806700 100 89 %

Horizontal Analysis Balance sheet Non current Assets :

Property plant and equipment =

= 1765365 / 1553156 100

114 % Capital work in progress = = 987851 / 503559 100 106 % Employees retirement benefit = = 15784 / 71957 100 22 % Long term loan secured = = 3564 / 791 100 451 % Stores and spaces = = 277972 / 279768 100 99 % Stock in trade = = 1166118 / 240606 100 48% Trade debts = = 315365 / 343604 100 92 %

Loans and advances = = 11840 / 24498 100 48 % Trade deposits and S.T payments = = 22227 / 26256 100 85 % Other receivables = = 65029 / 63995 100 102 % Cash and cash balances = = 673409 / 13730 100 4905 % Trade and other payables = = 734202 / 765924 100 96 % Mark up accrued = = 8601 / 8552 100 101 %

Provision for taxation = = 298670 / 205502 100 43 % Deferred taxation = = 260321 / 235273 100 111% Share capital = = 92364 / 92364 100 100% Reserves =

= 3915366 / 3486077 100

112%

EFN = [ [

][ ][

] ]

EFN = [2531960/11428104 681278][1036473/11428104 681278] [2109382 21.3][17.27] EFN = 9326424854 12265845.39 EFN = Rs. 9314159009

Corporate Overview:
Q: 1 what is the industry?
Rafhan Maize Products Co. Ltd. manufactures and sells food ingredients and industrial products in Pakistan. The company primarily offers industrial starches, liquid glucose, dextrose, dextrin, and gluten meals. Its products also include corn, maize, modified, oxidized, cationic, and specialty starches; corn flour; powder glues; powder/liquid adhesives; dextrose monohydrate; corn syrup and liquid glucose; maltose and golden syrup; liquid caramel color; hydrol; maize gluten meals/feeds; corn germ meals; maize bran; maize oil cake; and maize steeping liquor. Rafhan products serve various industries, such as confectionery, processed foods, sweet-meats, syrups and squashes, brewing, food, baking, beverages, pharmaceutical, fermentation, tanning, chemicals, confectionery, bakery, poultry feeds, livestock feeds, aqua feeds, cattle feeds and other livestock feedings, poultry, cattle, fish feeds, and antibiotics. The company is headquartered in Faisalabad, Pakistan. Rafhan Maize Products Co. Ltd. operates as a subsidiary of Corn Products International, Inc.

Q: 2 what is the relative size and significance?

The size of this industry is huge and still growing. Its highly significant industry as its having huge profits and high growth rate.

Q: 3 what are the largest companies in the industry?

The largest companies in the industry are NESTLE PAKISTAN, UNI LEVER LTD, NATIONAL FOODS.

Q: 4 what is the geographic presence in this industry (local, U.S only, multi national or global)
This company is geographically present in Pakistan and conducting its operations locally.

Q: 5 how does the business cycle affect this industry?

Q: 6 brief historical perspective on this company? Ans: Since 1953, Rafhan Maize has been the premier provider of refined corn-based products
and ingredients in Pakistan. The company has focused on defending and reinventing traditional markets through delivering the right products at the right prices. Rafhan Maize has the capacity and capability to produce a wide range of food, industrial and animal nutrition and health ingredients.

Important segments of diverse customers' base include textile, paper, food and confectionery, baking, pharmaceutical, livestock feed and edible oil refiners.

Q:7 what is the primary focus of operations ?

The primary focus of operations is the industrial business, animal nutrition and health business, food business, exports and raw material.

Q: 8 what is the most important strategy used by this company? e.g. {low cost producer, product differentiation, quality or service}?
Ans: They mainly focus on the quality of products and services they provide to their customers.

Q: 9 what are the major the operating segments?

Rafhan maize operations are split between consumers and businesses. It has expanded its products for business purposes.

Q: 10 what is the forecast for this company (over 1 to 5 years)?

This company is showing considerable growth in sales and earning per share for the last 10 years so we can say that this company will be a going concern in the next year.