Introduction We’re chosen the Fast Moving Consumer Goods
Introduction
We’re chosen the Fast Moving Consumer Goods (FMCG) under Food and Beverages industry in this group project which is consist of five companies as below :-
Theoretical Discussions On Financial performance.
1.1 Fraser ; Neave Holdings Berhad
Financial performance can be defined as the financial position for firms in their industries. According to Choi and Jung (2008), financial performance reflects a measurement from historical financial positions of companies. Firm performance is a term applied to an organisation’s conduct and activities over a period, with reference to cost efficiency and accountability. It is also used to determine any success or loss for firms. Financial performance is the monetary term for measuring firms’ operations and policies, and to assess financial conditions, income statements, and the balance sheets of companies (Adam, 2014). Firm performance can also reflect a firm’s values (Rouf, 2011). The effectiveness and efficiencies of a firm’s operations can be measured by financial performance (Neely, 2005). Firm performance is used to determine the success or loss for firms. According to Meigs (1978), analysis of a firm’s financial performance is the process of selecting, relating, and evaluating the firm’s operations, management, and decisions in monetary forms. Most corporate organisations measure their performance by analysing the sales-to-assets ratios, ROE, and ROA. For example, the study by Kabajeh, Al-Nu’aimat, and Dahmash (2012) utilised firms’ financial performance ratios, which are ROA and ROE in their study. Bhunia, Mukhuti, and Roy (2011) used firm liquidity, solvency, profitability, and stability in the pharmaceutical sector to measure the weaknesses and strength of financial positions among public listed companies in India. They used the liquidity test, solvency, and profitability and accounting ratios in determining the financial performance.
Fraser ; Neave Holdings Bhd (F;N) reported lower income of RM323.37mil in the financial year ended Sept 30, 2017. It’s announced that 2017 income fell 16% from RM385.37mil in 2016. Its revenue dipped nearly 1.6% to RM4.10bil from RM4.17bil.
1.2 Nestle Malaysia Berhad
1.3 Cocoaland
1.4 Dutch Lady Milk Industries Berhad
1.5 Oriental Food Industries Holdings Berhad
Oriental Food’s current sales are mainly contributed by export markets with 63% topline contribution to the Group, of which, the Asia Pacific region constitutes 43% sales whilst the Middle East, Europe, America and Africa amount to 20%. Meanwhile, local market only contributed 37% of total sales. In terms of individual country’s contribution, major markets for the Asia Pacific region are China, Indonesia, South Korea and Thailand; whilst ‘Other countries’ consist of Russia, Brazil, and the Middle East.
In addition, the company also have established good firm’s size in terms of their Total Asset per year. Whereby, the Total Asset of the company in year 2011 is about RM66,178,281, RM67,287,311 in year 2012, RM68,748,994 in year 2013, RM67,169,455 in year 2014 and RM67,260,906 in year 2015. This is shows that, the company have a quite higher range of their firm’s size, which give the ability to the company in order to main in the industry. While in terms of financial and operation review, it shows that the company continuing growth in revenue for the group for the year ended 31 March 2015. Whereby, the revenue increased 4.5% on a year basis as RM237.0 million in financial year 2015 as compared to previous year which is RM226.9 million. Therefore, the increasing in for the revenue was largely attribute to the increasing of the volume in business.
Company analysis
Background of company – F & N Holdings Berhad
Founded by John Fraser and David Chalmers Neave in 1883, from whom our instantly recognizable initials ‘F;N’ has evolved into associate painting house complete and also the F&N cluster nowadays is among the oldest, most recognised and most sure-fire businesses in Singapore and Malaysia with core experience and leadership within the Food & Beverages, nutrient, Property and business enterprise & Printing sectors.
Listed on the Singapore securities market and Bursa Malaysia, Fraser and Neave, restricted and Fraser & Neave Holdings Bhd put together operate in over twenty countries throughout Asia Pacific, Europe and also the USA, using regarding 10,000 individuals worldwide.
As a complete that has been entwined among the nation’s material for over a century, F;N enjoys a special place within the hearts of Malaysians, fulfilling its promise of ‘Pure Enjoyment, Pure Goodness’. In fact, nearly each Malaysian enjoys F;N at some purpose, every day, because of its wide portfolio of merchandise.
A key associated distinct person for F;N is our ability to apace deploy an unequalled nationwide distribution system to make sure the generality of the brands and merchandise in marketplaces and townships throughout the length and breadth of Malaysia’s 329,750 sq. kilometre area. The enduring partnership with a robust distribution network of ancient and fashionable trade customers ensures a seamless flow of deliveries, stocks and inventories to their combined operations and repair of 90,000 retailers across Malaysia.
The core strengths of our 133-year enterprise, specifically our vision, brands and merchandise, network, resources, and skill, is what distinguishes F&N in delivering property performance and growth, consonant with the well-being of communities and also the setting, to fulfil our consumer’s gift and future expectations.
The merchandise have glad the tastes and appetites of generations and that we can still deepen the reference to our shoppers and supply excitement and delight in bicycle-built-for-two with our complete promise of ‘Pure Enjoyment, Pure Goodness’.
F;N Beverages Marketing Sdn Bhd (Soft Drinks)
Over 130 years, the F;N whole 1st created its look within the kind of Associate in Nursing aerated water product. Today, the nutrient brands underneath the umbrella of the F;N cluster became the popular thirst quenchers for numberless generations of Malaysians. Their multiple brands square measure leaders in most of their several segments and supply customers the country’s most comprehensive vary of sentimental drinks, line of work to each occasion.
F&N Beverages Marketing Sdn Bhd (FNBM) is Malaysia’s largest soft drinks distributor. The corporate operates four producing plants nationwide, together with its progressive facility at its headquarters in Shah Alam, Selangor.
The company commenced operations in 1936 once Fraser and Neave, restricted secured the franchise of Coca-Cola in Singapore and Malaysia,F;N Coca-Cola (M) Sdn Bhd (F;NCC) was born as a results of this. The licensee agreement led to Sep 2011 and therefore the company was renamed as F;N Beverages (M) Sdn Bhd.
FNBM has glad the tastes and appetites of generations and that they can still deepen the reference to their customers and supply excitement and pleasure in bicycle-built-for-two with the whole promise of ‘Pure Enjoyment, Pure Goodness’
F;N Dairies (M) Sdn Bhd – Dairy Products
F;N’s dairy farm business grew out of a venture with fictional character Foods of Chicago, USA in 1959 with the development of Southeast Asia’s initial sugary milk plant in Petaling Jaya, Malaysia. The Carnation Company, also come from the America, joined the partnership in 1965 to make Premier Milk because the producing arm. This partnership well-tried enterprising as among that year, the extremely triple-crown milk was launched.
In 1989, the cluster non inheritable the interests of fictional character Foods and restructured its dairy farm operations underneath F;N Dairies (Malaysia) Sdn Bhd. It had been distended any with the acquisition of Magnolia in 1995. In 1998, the cluster commenced its change integrity business.
In 2007, the corporate with success non inheritable the Tea Pot whole and also the licensing and distribution of the Carnation, Cap Junjung, and Ideal brands in Malaysia, marking the start of a brand new era of additional success for F;N Dairies Malaysia in a very extremely competitive landscape.
It is by no sheer coincidence that F;N Dairies (M) Sdn Bhd is that the undisputed leader within the sugary milk and milk market, genuine to by the countless Malaysians of all walks of life UN agency relish their daily precious moments with a cup of teh Tarik or occasional, cakes or confectionery or the wide and delectable vary of Malaysian preparation made up of F;N’s broad vary of dairy farm product.
Today, F&N is one among the biggest producers of dairy farm product within the world, commerce to over forty countries worldwide, and a number one market player within the canned milk, change integrity milk and juice section with its sturdy portfolio of well-loved brands like F&N, Tea Pot, Carnation, Ideal, Gold Coin, F&N Magnolia, Farmhouse, Sunkist and flowering tree contemporary.
F&N Properties Sdn Bhd – Property
F&N Properties may be a business unit of Fraser & Neave Holdings Bhd, shaped to unlock the worth of land non heritable and control by the corporate for several years. Their initial foray, the previous F&N manufacturing plant land at Jalan Foss, has been developed into a spirited industrial spot these days known as the Fraser Business Park.
The 12.72-acre web site that housed the Group’s previous dairy farm mill in Section 13, Petaling Jaya, has been earmarked for AN integrated residential and industrial development encompassing flat blocks, a hotel, stores and workplace heaps with a complete gross development price of RM1.6 billion. The project, supported a complete lifestyle thought, is being undertaken by a venture (JV) company between FCL Centre purpose Pte Ltd (FCL), a wholly-owned subsidiary of Fraser and Neave Ltd (Singapore), and Fraser ; Neave Holdings Bhd.
2.1.1 SWOT analysis
Strengths
Unwavering consumer confidence and loyalty on the back of an enduring brand heritage.
A well-established distribution network and strong sales infrastructure ensure amarket-wide presence of F;N brands.
A commitment to product quality and innovation has secured F;NHB’s leadingposition in Malaysia’s beverage sector.
Sustained levels of promotional spending have led to F;NHB’s relative resilience during the economic downturn and dampened consumer demand.
Weaknesses
Dominance in a hugely dynamic drinks sector such as that of Malaysia’s will necessitate high levels of marketing investment in order to secure market dominance.
Heavy exposure to Malaysia, which is characterised by relatively low levels of per capita food consumption, restricts the scope for high returns in the food and beverage sector.
F;NHB needs new avenues of growth after non-renewal of a Coca-Cola franchise agreement.
Opportunities
Malaysia’s thriving tourism industry boosts sales opportunities for soft drinks manufacturers.
Growing health consciousness represents an emerging opportunity for F&NHB to diversify its product lines.
A new UHT processing line in East Malaysia will allow F&NHB to save on transportation costs and tap into the region’s growing demand for soft beverages.
Threats
Consumer price sensitivity prevents the company from passing on rising production costs to consumers.
Fluctuating raw material prices such as milk powder and sugar threaten profitability in the soft drinks and dairy sectors.
2.2 Background of company – Nestle Malaysia Berhad
2.2.1 SWOT analysis
Strength
Weaknesses
Opportunities
Threats
2.3 Background of company – Cocoaland
2.3.1 SWOT analysis
Strength
Weaknesses
Opportunities
Threats
2.4 Background of company – Dutch Lady Milk Industries Berhad
2.4.1 SWOT analysis
Strength
Weaknesses
Opportunities
Threats
2.5 Background of company – Oriental Food Industries Holdings Berhad
Oriental Food Industries Holdings Berhad (OFI) is a long-established household name in the local snack food industry with solid presence in Melaka incorporated in 1978. OFI holding the leading position in the snack food and confectionery industry in Malaysia. In a crowded marketplace, company’s remain focused on placing the needs and interests of our customers’ first by manufacturing products that focuses on quality. OFI believe that the key focus for success in this business depends on product quality, product range, research and development, a highly quality workforce right from top management to the operator level, sound marketing strategy, effective sales and advertising policies, competitive pricing, good domestic and international distribution network and most importantly the commitment to excellence in all aspects of the company business, all of which are being implemented and practiced in our organization.
Generally OFI products can be divided into four (4) broad categories, which are snack food, wafer, potato snacks and bakery products. Most of which are commercially strong and generating the required sales and profit. Product brand names like Rota, Super Ring, Jacker and Oriental are well-known household brand names in Malaysia.
2.5.1 SWOT analysis
Strength
Leading local snack food manufacturer with proven track record.
Having long-time relationship with its customers in overseas and local markets.
Experienced management as the founder has over 40 years of experience in the industry.
Strong track record in terms of earnings delivery.
Diversified topline contribution from local and overseas markets (30-40%:60-70%).
Weaknesses
Forex risk with strengthening of MYR against USD as revenue is mostly denominated in foreign currencies whilst raw material costs are mostly in local currency.
Hike in minimum wage effective July 16.
Surge in soft commodity prices mainly on RBD Olein (cooking oil), potato (snack), wheat (flour), sugar and egg.
Operate in a highly competitive snack food and confectionery industry.
Opportunities
Rising demand from overseas market.
Favourable forex as strengthening of USD against MYR shall benefit the Group as revenue is mostly denominated in foreign currencies whilst raw material costs are mostly in local currency.
Threats
The Group’s earnings could be affected by unfavourable economic conditions in Asia region.
Sluggishness in domestic consumption as a result of GST implementation and rising cost of living.
Shortage of foreign workers.
Sudden surge in raw material and packaging costs (resin price).
Economic analysis
Demand seasonally on commodities
Supply (based on Export)
Sugar Price stability
Price Earning (P/E Ratio)
National Agriculture Policy
GDP (GDP Statistical)
Industry analysis
Food and Beverages Industry Overview (MITI & BMI report)
Five Porters
Investor Point Of View
Growth
Defensive
Cyclical
Accounting analysis
Operating Performance (Net Profit Margin)
Company Accounting Polices**
Cost management
Minimizing Company Tax
Equity Strategy
Financial Analysis
Computation of Ratio (Remarks: All calculations are located in Appendix)
6.1 Fraser & Neave Holdings Berhad
Liquidity Ratio
YEAR
Ratios 2016 2017
Current Ratio 2.17 1.9
Quick Ratio 1.46 1.2
Cash Ratio 0.19 0.13
Efficiency Ratio
YEAR
Ratios 2016 2017
Inventory Turnover 5.19 5.054
Average Collection Period 54.4 days 46.9 days
Total Asset Turnover 2.99 1.27
Leverage Ratio
YEAR
Ratios 2016 2017
Debt Ratio 37.9% 34%
Debt Equity Ratio 0.19 0.09
Profitability Ratio
YEAR
Ratios 2016 2017
Net Profit Margin 9.25% 7.88%
Return on Asset 12.38% 10.01%
Return on Equity* 19.94% 15.69%
EPS 1.05 0.88
Du-Pont Analysis
YEAR
Ratio 2016 2017
Net Profit Margin 9.25% 7.88%
Asset Turnover 1.34 1.27
ROA 12.38% 10.01%.
Financial Leverage 1.61 1.52
ROE 19.94% 15.69%%
Market Performance
YEAR
Ratios 2016 2017
Price Earning Book Value 5.23 5.76
Cash Flow Analysis
YEAR
Ratios 2016 2017
6.1.1 Interpretation of Financial Performance
Liquidity Ratio
Efficiency Ratio
Leverage Ratio
Profitability Ratio
Du-Pont Analysis
Market Performance
Cash Flow Analysis
6.2 Dutch Lady Milk Industries Berhad
Liquidity Ratio
YEAR
Ratios 2016 2017
Current Ratio Quick Ratio Net Working Capital Networking Capital Ratio Cash Ratio Efficiency Ratio
YEAR
Ratios 2016 2017
Inventory Turnover Account Collection Period Total Asset Turnover Leverage Ratio
YEAR
Ratios 2016 2017
Debt Ratio Debt Equity Ratio Total Inventory Profitability Ratio
YEAR
Ratios 2016 2017
Tax Rate Net Profit Margin Return on Asset Return on Equity EPS Du-Pont Analysis
YEAR
Ratios 2016 2017
Return on Asset Return on Equity Market Performance
YEAR
Ratios 2016 2017
Price Earning Book Value Cash Flow Analysis
YEAR
Ratios 2016 2017
6.2.1 Interpretation of Financial Performance
Liquidity Ratio
Efficiency Ratio
Leverage Ratio
Profitability Ratio
Du-Pont Analysis
Market Performance
Cash Flow Analysis
6.3 Cross sectional analysis between F&N and Nestle for year 2017
Liquidity Ratio
COMPANY
Ratios F&N Dutch Lady
Current Ratio Quick Ratio Net Working Capital Networking Capital Ratio Cash Ratio Efficiency Ratio
COMPANY
Ratios F&N Dutch Lady
Inventory Turnover Account Collection Period Total Asset Turnover Leverage Ratio
COMPANY
Ratios F&N Dutch Lady
Debt Ratio Debt Equity Ratio Total Inventory Profitability Ratio
COMPANY
Ratios F&N Dutch Lady
Tax Rate Net Profit Margin Return on Asset Return on Equity EPS Du-Pont Analysis
COMPANY
Ratios F&N Dutch Lady
Return on Asset Return on Equity Market Performance
COMPANY
Ratios F&N Dutch Lady
Price Earning Book Value Cash Flow Analysis
COMPANY
Ratios F&N Dutch Lady
6.2.1 Interpretation of Financial Performance between F&N and Nestle for year 2017
Liquidity Ratio
Efficiency Ratio
Leverage Ratio
Profitability Ratio
Du-Pont Analysis
Market Performance
Cash Flow Analysis
Conclusions
Consistency
Stability
Company future development
Business environment
References
Appendices
