ANALYSIS OF FINANCIAL STATEMENTS

Final Presentation Unilever Financial Statement Analysis (Horizontal, Vertical and Ratio Analysis)

GROUP MEMBERS:

Miqdad Hussain
Syed Saad Ul Haq

SUBMITTED TO: Mr. NAUMAN ALI SAEED

SUBMISSION DATE: 08th May, 2011

Introduction to Unilever
No matter who you are, or where in the world you are, the chances are that our products are a familiar part of your daily routine. Every day, around the world, people reach for Unilever products.
Their brands are trusted everywhere and, by listening to the people who buy them, they've grown into one of the world's most successful consumer goods companies. In fact, 150 million times a day, someone somewhere chooses a Unilever product. Peoples lives are changing fast. As the way we all live and work evolves, our needs and tastes change too. At Unilever they aim to help people in their daily lives. So they keep developing new products, improving tried and tested brands and promoting better, more efficient ways of working.

Unilever at a glance
People
167000 employees at the end of 2010.

Nationalities
22 Nationalities among our top tier managers.

Opportunities
53% of our business comes from emerging markets.

Countries
180 in which our products are sold.

R&D
928m spent on R&D worldwide in 2010.

Environment
12 years as sector leader of the Dow Jones Sustainability Indexes.

UNILEVER PAKISTAN LIMITED COMPANY INFORMATION

BOARD OF DIRECTORS Mr. Ehsan A. Malik Chairman & Chief Executive Mr. Imran Husain Executive Director / CFO Mr. M. Qaysar Alam Executive Director Ms.Shazia Syed Executive Director Mr. Amir R. Paracha Executive Director Ms. Fariyha Subhani Executive Director Mr. Zaffar A. Khan Non - Executive Director Mr. Khalid Rafi Non - Executive Director

COMPANY SECRETARY Mr. Amar Naseer

REGISTERED OFFICE Avari Plaza Fatima Jinnah Road Karachi 75530

WEBSITE ADDRESS www.unileverpakistan.com.pk

Financial Statements

Balance Sheet (Excel File) Horizontal Analysis Vertical Analysis

Income Statement (Excel File) Horizontal Analysis Vertical Analysis

Ratio Analysis
Ratios

Forecasted 2011 32.8 11.3 8.3 26.6 93.8

2010 32.6 10.7 7.3 24.2 91.9

Actual 2009 34.9 11.8 8.0 26.7 92.8

2008 34.7 9.4 6.4 17.4 89.6

Profitability Ratios Gross Profit Margin Pre Tax Profit Margin Post Tax Profit Margin Return on Assets Return on Equity Liquidity or Short-Term Solvency ratios Working Capital Ratio Current Acid-test Asset Management or Activity Ratios Fixed Asset Turnover Total Asset Turnover Inventory Turnover Financial Structure or Capitalization Ratios Debt to Equity Ratio Debt to Total Asset Ratio Equity Ratio

(1,154,345) 0.9 0.8

(1,546,745) 0.8 0.8

(1,544,407) 0.8 0.7

(2,480,565) 0.7 0.6

0.6 0.3 77.0

0.5 0.2 84.2

0.5 0.3 93.6

0.4 0.2 83.6

2.5 71.5 28.4

2.8 73.5 26.4

2.5 71.1 28.8

4.1 80.4 19.5

Profitability Ratios
Gross Profit Margin The GP margin is increasing by 0.2% as compared to the previous year which is due to increase in the companys sale. This shows that the company is getting more profitable and is reducing its costs to produce its goods. This is translated into the Gross profit of the company. Net Profit Margin The NP after tax is 8.3% which is 1% higher than the last year that shows that the profit of the company is increasing Return on Asset The ROA shows the percentage of profit that a company earns in relation to its overall resources. The ROA has increased by 2.4% than the previous year. The ROA suggest that the management performance has become effective in using its assets. Return on Equity The ROE has increased by 1.9% than the previous year and now is 93.8% which shows the market stability of company. The ROE is increasing which shows that the company is generating more revenue from its equity then the previous year.

Liquidity or Short-Term Solvency ratios

Working Capital Ratio The current liabilities are greater than current assets. The working capital ratio is increasing but with a decreasing margin which is a good sign for the company compared to previous years Current Ratio The current ratio states that for 1 rupees of liability the company has 0.9 rupees of current assets. This is showing that the company is currently unable to pay off its current liabilities with its current assets. The Current Ratio is less than the acceptable standard but it is better than the previous year and is almost equal to the acceptable standard hence we will say the company is progressing.

Acid Test The acid test ratio is also below the acceptable standards but it is also increasing comparatively to last 3 years. These show the immediate ability of a company to pay off its current liabilities with its cash or immediate cash equivalents.

Asset Management or Activity Ratios

Fixed Asset Turnover Fixed Asset Turnover has increased showing more sales being generated from fixed asset usage. Total Asset Turnover The total asset turnover has been following a same pattern for the last 3 years and remains almost the same. Inventory Turnover The Inventory turnover is 77% which is 7.2% less than the previous year. Hence, the company is being unable to sell its inventory very efficiently. But it is still not that bad.

Financial Structure or Capitalization Ratios

Debt to Equity Ratio The D\E ratio is 2.5:1 for 2011; this is relatively the same for the previous years as well. This shows that the company is using more debt to finance its assets then equity. This makes the company more risky to invest in. Debt to Total Asset Ratio The Debt to Total Asset is a mechanism to calculate how much of the companys assets are finance by debt. In 2011 it is 77% which is a relatively large amount but the company is maintaining this percentage similar to this in all the previous years. Hence, it must be there policy. Equity Ratio The equity ratio determines how much of percentage of the total assets have been sponsored by equity. In 2011 it is 28.4%. This is not so good but seeing that it has increased 2% from the previous year. We can speculate that the company is trying to buy more assets on equity now.

GDR Capability
Can Unilever issue a Global Depository Receipt? Yes, we think it is would be quiet possible for Unilever to issue a GDR in UK because they require the issuing company to present their reporting standards on the basis of IFRS (International Financial Reporting Standards). But it would be difficult for Unilever to issue DRs in America because American stock exchanges require the issuing companies to have three years of their financial statements reported on the principles of GAAP. Unilever Pakistan reports its financials on the basis of IFRS. Secondly Unilever is a very big international company hence it will be very easy for a company like this, who is already established in many countries, to issue a GDR. It will be easier for Unilever to have a fresh issue of shares as well as sell the existing shares available in the Pakistani market in UK. Because people already know the brand name they will be willing to purchase the GDRs as well. Due to its well renown brand name and any bank would easily become the representative of this company locally and internationally. So we think that it is very much possible for Unilever to issue a GDR. It has currently not issued any GDRs.