Assignment (1) Assignment On Overview of Beximco Pharmaceuticals Ltd.

Financial Statement Analysis of Beximco Pharmaceuticals Ltd
Assignment on
Overview of
Beximco Pharmaceuticals Ltd.
Of Bangladesh

Prepared For:
Mrs. Afsana Pervin
Lecturer
Department of Business Administration

Prepared By:
Sumaia Akter
ID: 113BBA0032
24
th
Batch
Department of Business Administration

Submission Date: 24
th
December, 2013


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Executive Summary

Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company and is a
member of the BEXIMCO Group, the largest private sector industrial conglomerate in
Bangladesh. The companys strategic strengths include strong recognition of its brands,
highly skilled work force and diversified business mix. Two brands - Neoceptin R
(Ranitidine) and Napa (Paracetamol) are the top two selling brands in the Bangladesh
Pharmaceutical market. BPL started its operation in 1980, manufacturing products
under the licenses of Bayer AG of Germany and Upjohn Inc. of USA and now have grown
to become nation's one of the leading pharmaceutical companies, supplying more than
10% of country's total medicine need. Today Beximco Pharma manufactures and
markets its own `branded generics' for almost all diseases from AIDS to cancer, own
`branded generics' for almost all diseases from AIDS to cancer, from infection to asthma,
from hypertension to diabetes for both national and international markets.

Beximco Pharmaceuticals Ltd. manufacture a range of dosage forms including tablets,
capsules, dry syrup, powder, cream, ointment, suppositories, large volume intravenous
fluids, metered dose inhalers etc. in several world-class manufacturing plants, ensuring
high quality standards complying with the World Health Organization (WHO) approved
current Good Manufacturing Practices (cGMP). BPL also contract manufacture for major
international brands of leading multinational companies.

The recipient of three times `gold' national export trophy, Beximco Pharma is the largest
exporter of pharmaceuticals from Bangladesh, Beximco Pharma is the only
pharmaceutical company in Bangladesh received this highest national accolade for
export, for record three times. BPL markets its own brands through its own professional
sales and marketing teams in African, South Asian and other markets. Beximco Pharma
is also supply its products to renowned hospitals and institutions in many countries,
including Raffles Hospital and K K Women & Childrens' Hospital in Singapore, MEDS and
Kenyatta National Hospital (KNH) in Kenya, Jinnah Hospital, Agha Khan Hospital and
Shaukat Khanum Memorial Hospital in Pakistan. Beximco Pharma is also an enlisted
supplier of World Health Organization (WHO) and UNICEF.

Beximco Pharmaceuticals Ltd. have a strong market focus and are anticipating
continued future growth by leveraging business capabilities and developing superior
product brands and markets. In particular BPL is very interested in developing a strong
export market in USA and Europe. To meet the future demand BPL have invested over
US 50 million dollar to build a new state-of-the-art manufacturing plant, confirming to
USFDA and UK MHRA standards. This new plant will also offer contract-manufacturing
facility to leading pharmaceutical companies, especially from Europe and US.


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CHAPTER 1

THE ORGANIZATION PART


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1. INTRODUCTION
Origin of the report
The report prepared attempts to make a thorough analysis of the financial
statements of Beximco Pharmaceuticals Ltd (BPL). The report mainly highlights the
results of various ratio analysis of the company. In order to make the analysis more
informative, inter-firm comparisons have been provided buy also performing ratio
analysis of other leading pharmaceutical companies in Bangladesh. It is hoped that
the report would provide a reliable & effective insight into the performance of the
particular company.

The particular topic has been chosen because ratio analysis enables the business
owner and manager to spot trends in a business by comparing the businesses own
ratio for several successive years. By comparing a companys performance with the
average performance of similar businesses in the same industry, ratio analysis acts
as an early warning indicator that indicates any unfavorable trends that may be
emerging.

Further more, since ratio analysis is a helpful method for determining the financial
status of a company, by completing an analysis of a companys sales, debt, earnings
per share & other factors, potential investors & creditors can gain a better
understanding of how the company is doing financially & thus make more
informative decisions.

Objectives & Goals
The objectives of the report are as follows:-

To identify any existing or emerging trends of the company by comparing the
businesss own ratios for several successive years.
To perform ratio analysis of BPL.
To compare its performance with the average performance of similar
businesses in the same industry.
To identify whether it is a sound decision for investors to invest in the
company & for creditors to lend the company.
To suggest ways of improving the performance of the company.


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Methodology
From the view of writing a comprehensive internship report, the following methods to
collect, analyze and represent the information were used:
Primary information: The considered of documented information collected from the
organization such as annual reports, performance reviews, statistical data etc.
Interviews: interviews of a number of accounts departments of BPL were taken in
order to obtain an insight in to the performance of the company and to identity any
steps taken to improve the companys performance.
Secondary literature: The main sources of secondary data were books, newspaper
articles, journal & the internet.

Scopes & Limitations
Analysis of the financial statements of the last three years was conducted and taken into
consideration in drawing conclusions. However, it is believed that limitations did not
have a significant impact on the conclusions drawn from the analysis.
Major part of the information was collected from the annual reports of the respective
companies and other secondary sources especially books, newspaper articles and the
companys website. However, it is hoped that despite these constrains and limitations
the report would provide valuable insight into BPL and their financial performance.

The Company Profile
Company Background
Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company based in
Dhaka, Bangladesh and is acclaimed for its outstanding product quality, world-class
manufacturing facilities, product development capabilities and outstanding professional
services. Beximco Pharma is the pioneer in pharmaceutical export from Bangladesh and
has received National Export Trophy (Gold), the highest national accolade for export, for
record three times.

Year of Establishment: 1976
Commercial Production: 1980
Status: Public Limited Company
Business Lines:
Manufacturing and marketing of Pharmaceutical Finished Formulation Products, Large
Volume Parenterals, Small Volume Parenterals, Ophthalmic Preparations, Nebulizer
Solutions and Active Pharmaceutical Ingredients (APIs)


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Overseas Offices & Associates:
Australia, Bhutan, Cambodia, Chile, Ghana, Hong Kong, Indonesia, Jordan, Kenya,
Kuwait, Malaysia, Myanmar, Nepal, Pakistan, Philippines, Saudi Arabia, Singapore,
Srilanka, Vietnam and Yemen.
Authorized Capital (Taka): 2,000 million
Paid-up Capital (Taka): 1,259.57 million
Number of Shareholders: Around 66,000
Stock Exchange Listings:
Dhaka Stock Exchange,
Chittagong Stock Exchange and
AIM of London Stock Exchange
Number of Employees: 2,310

Table 1: Timeline of the Company

1976 Registration of the company
1980 Started manufacturing and marketing of license products Bayer AG of
Germany & Upjohn Inc. of USA.
1983 Launched own brands
1985 Listed with Dhaka stock exchange
1990 Commissioning of Basic Chemical (APIs) unit
1992 Started export operation with Act5ive Pharmaceuticals Ingredients (APIs)
1993 First export market operation with finished formulations
1996 Introduction of sustained release dosage form
1997 Introduction of suppository dosage form; Commission of Metered Dose
Inhaler (MDI) plant; Introduction of Metered Dose Nasal Spray
1998 First pharmaceutical company of the country achieving National Export
Trophy (Gold) for 1994-1995
1999 UNICEF approval of BPL as an enlisted supplier
2000 Agreement to manufacture Metered Dose Inhaler (MDI) for
GlaxoSmithKline
2001 Introduction of Small Volume Parenteral (SVP) products; Establishment of
Analgesic-Anti-inflammatory bulk drug plant
2002 Won the first prize of ICAB National Awards 2000 for Best Published
Accounts and Reports in Non-Financial Sector category
The first Bangladeshi company to supply pharmaceuticals of Raffles
Hospital-the most prestigious hospital in Singapore
2003 Received National Export Trophy (Gold) for consecutive 2 years
(1998-99, 1999-2000)

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Wonder a tender to supply Neoceptin R & Neofloxin to Raffles Hospital
of Singapore for the whole years consumption
Introduced Anti-HIV drugs for the first time in Bangladesh
Diversification into Anti-Cancer therapeutic class
2004 Signed contract with Novartis to manufacture their liquid and suppository
products under Toll Manufacturing agreement
2005 Merger of Beximco Infusion Ltd. with Beximco Pharmaceuticals Ltd.
Admission to Alternative Investment Market (AIM) of London Stock
Exchange (LSE)
2006 Launched CFC free ozone-benign HFA based inhalers as the first
company in Bangladesh
2007 The US FDA standard oral solid plant commissioned
2008 Only Bangladeshi company to receive GMP Certification from Gulf
Central Committee for Drug Registration, Executive Board of the
Health Ministers' Council for GCC states.
First Bangladeshi company to receive GMP Clearance from
Therapeutic Goods Administration (TGA), Australia.
Became first Bangladeshi pharmaceutical company to enter Latin
America.
45 new products registered in 10 countries and entered into 7 new
countries.
Entered into a Long Term Arrangement (LTA) with the Global Supply
Division (Copenhagen, Denmark) of the United Nations Childrens Fund
(UNICEF), to supply metered dose inhaler products.

Mission Statement
The following is the mission statement of BPL:
Each of our activities must benefit and add value to the common wealth of our society.
We firmly believe that, in the final analysis we are accountable to each of the
constituents with whom we interact, namely: our employees, our customers, our
business associates, our fellow citizens and our shareholders.

Vision
The vision of Beximco Group is also the strategic vision of BPL is as follows:
If there is one characteristic that has typified the BEXIMCO approach it is the vision to
get the best out of our natural & human resources. The vision is to establish our group
and country as having a respected and valued regional presence.


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Organizational Structure

Beximco Pharma employs a sound system of internal control including internal financial
control to ensure compliance of its activities with the desired objectives. Over the
years, BPL has successfully implemented a well designed corporate management
structure with clearly defined responsibility, delegation of authority and proper
accountability.

Corporate Strategies
Quality
The BPL believes that being in the business which deals with human health makes us
more responsible. This sense of responsibility compels BPL to keep the highest
standards of its products. Through these products we seek to deliver clear health
benefits and higher values to the patients. With this in mind BPL has commissioned
state-of-the-art manufacturing facilities with innovative new technologies. Beximco
Pharma use the most modern equipment for quality control and stringent quality
assurance procedure and the manufacturing process conforms strictly to the current
Good Manufacturing Practices.

Research & Development
From its inception till date, BPLs research & development (R&D) capabilities continue to
be one of the essential core strengths for leading the industry in both formulation R&D
and API R&D. BPLs formulation R&D capability is proven not only by the consistent
quality of its products but also by its ability to introduce hi-tech, specialized niche
products and dosage forms. The reverse engineering capability of BPLs R&D team has
enabled us to introduce innovative new products to serve the ailing people at home and
a broad. The reverse engineering capability of the R&D team and the drive towards new
product development and innovation are central to building a proprietary research
operation within Beximco Pharma. In formulation R&D, the company focuses principally
on developing new formulations, predominantly through reverse engineering
techniques and on simplifying manufacturing processes and improving cost efficiency.
Over the years, the R&D team has successfully formulated different high-tech
formulations like multi-layer tablets, long acting formulations, dispersible tablets etc.
Beximco Pharma also the pioneer in introducing anti-retroviral drugs and anti-cancer
drugs in Bangladesh. Recently, with long experience in MDI formulations, BOLs R&D
team has successfully developed a range of CFC-free HFA MDIs. The R&D team consists
of qualified scientists with background in pharmaceutical sciences and allied areas and
has a strong network with global companies and scientific community with similar
expertise.

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Diversification into Respirator solutions, Ophthalmics and Small Volume
Parenterals (SVP) market
Beximco Pharmaceuticals Ltd. has now completed new projects to manufacture
Respirator solutions, Ophthalmics and Small Volume Parenterals (SVP). Entering into
these three segments will boost local and international market share significantly.
Products (e.g. Azmasol respirator solutions) from this plant have already started rolling
BPL into the market. Like all other products, BPL is committed to introduce quality
ophthalmic products very soon. This will help the Ophthalmologists to treat the patients
in a better way. At present the value of ophthalmological market is Tk. 542 Mil with a
growth rate of 6.55%. The market has consistent growth over the last 4 years. As a
growth strategy for coming years we are also going to launch Small Volume Parenterals
(SVP) during this year. This segment will also help consolidate the companys market
presence in the parenteral market.

Regulatory Capabilities and International Recognition
The regulatory team of Beximco Pharmaceuticals Ltd. has a good understanding of
international regulatory requirements and has received a number of international
regulatory approvals, including approvals from highly regulated markets. After
commissioning of the new US FDA standard Oral Solid Dosage (OSD) plant in late 2007,
BPL started the regulatory approval process for certification from stringent regulatory
authorities of the developed countries. Within the very short span of time companys
trained and committed team has been able to add a number of key regulatory approvals
to its credit. Among others, BPL has received GMP Clearance from Therapeutic Goods
Administration (TGA) of Australia and from Gulf Central Committee for Drug
Registration, Executive Board of the Health Ministers' Council for Gulf Cooperation
Council (GCC) states (representing Saudi Arabia, Kuwait, Bahrain, United Arab Emirates,
Qatar and Oman). The company also in the process of obtaining approvals from several
other regulatory authorities including National Health Surveillance Agency (ANVISA) of
Brazil, Medicine and Healthcare Regulatory Agency of United Kingdom (UK MHRA), US
FDA etc.

Strengthening Global Presence
In its long operation of more than 25 years, Beximco Pharma has always been the leader
and the flagship of Bangladesh pharmaceutical industry by setting new trends and
exploring newer horizons of export opportunities. Beximco Pharma is pioneer in
exporting APIs, IV Fluids and hi-tech specialized products. It is the first pharmaceutical
company from Bangladesh to enter the CIS countries and also to Singapore, which is
considered to be one of the most stringently regulated markets in South-East Asian
region. BPL is also the pioneer in expanding export operation to Africa, Pacific Island,
Middle East, Central and Latin American countries. As recognition of its pioneering role

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in pharmaceutical export from Bangladesh, Beximco Pharma is the only pharmaceutical
company of Bangladesh to receive 'National Export Trophy (Gold)' for record three
times. Although the company has presence in 26 countries, its current export sales
contribute to a small part of the overall company revenues, as until this year BPLs
predominant presence has been in moderately or semi regulated markets of Asia and
Africa. As the new US FDA standard OSD plant has been commissioned and the
regulatory approvals from several developed markets received or will be receiving soon,
Beximco Pharma is now at a stage to enter into another 30 countries, including several
highly developed markets within the next year or so. Product registration is under
process in these countries and the management expects that full potential of these new
markets plus the existing markets can be utilized within next few years, contributing
significantly to company's sales and profit turnover.

Corporate Social responsibility
Corporate social responsibility (CSR), also known as corporate responsibility, corporate
citizenship, responsible business, sustainable responsible business (SRB), or corporate
social performance, is a form of corporate self-regulation integrated into a business
model. Ideally, CSR policy would function as a built-in, self-regulating mechanism
whereby business would monitor and ensure its adherence to law, ethical standards,
and international norms. Business would embrace responsibility for the impact of their
activities on the environment, consumers, employees, communities, stakeholders and
all other members of the public sphere. Furthermore, business would proactively
promote the public interest by encouraging community growth and development, and
voluntarily eliminating practices that harm the public sphere, regardless of legality.
Essentially, CSR is the deliberate inclusion of public interest into corporate decision-
making, and the honoring of a triple bottom line: People, Planet and Profit.
Corporate Social Responsibility (CSR) is an integral part of Beximco Pharmaceuticals
business strategy. Some of the CSR activities undertaken by the company are showing as
follows:-
As a first Bangladeshi Pharma company BPL introducing anti-retroviral medicines for
HIV/AIDS treatment, medicine to combat the virus of bird flu and an oral anti-
smoking drug to help chronic smokers quit smoking.

Food and Medicine donation during different natural disasters.

Sponsoring, organizing & participating many cultural and sports events like
Corporate Cricket League, Saaf Football Championship, Inter-School Handball
tournament, Open air concert etc.


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Publishing posters-banners-festoons, arranging rallies-seminars-conference etc. on
AIDS, Diabetes, Smoking, Cancer, Asthma, Birds Flu etc.

Beximco Pharmaceuticals Ltd. manufactures CFC-free Metered Dose Inhalers among
the few pharmaceuticals in the world.

SWOT Analysis
SWOT Analysis is a strategic planning method used to evaluate the Strengths,
Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It
involves specifying the objective of the business venture or project and identifying the
internal and external factors that are favorable and unfavorable to achieving that
objective. The technique is credited to Albert Humphrey, who led a convention at
Stanford University in the 1960s and 1970s using data from Fortune 500 companies.
A SWOT analysis must first start with defining a desired end state or objective. A SWOT
analysis may be incorporated into the strategic planning model. Strategic Planning,
including SWOT and SCAN analysis, has been the subject of much research.
Strengths: attributes of the person or company that is helpful to achieving the
objective.

Weaknesses: attributes of the person or company that is harmful to achieving the
objective.

Opportunities: external conditions those are helpful to achieving the objective.

Threats: external conditions which could do damage to the objective.


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SWOT Analysis of BPL

No. Strengths Weakness Oppurtunities Threats
1.
Low cost of production Fragmentation of
installed capacities
Aging of the world
population
Containment of rising
health
2.
Large pool of installed
capacities
Non-avaiability of major
intermediaries of bulk
drugs
Growing incomes High cost of
discovering new
products
3.
Efficient technologies
for a large number of
generic people
Lack of experince to
exploit efficiently the
new patent regime
Growing attention for
health
Stricter regulation
procedures
4.
Large pool of skilled
technical manpower
Low technology level New diagnose & new
social deseases
High entry cost in
newer markets
5.
Excellent corporate
image
Low key of Reseach &
Development
Spreading preventine
treatments to
deseases
High cost of sales and
marketing
6.
Strong presence in the
market
Lack of experience in
international trade
Saturation point of
market is far away
Competition,
particularly from
generic products
7.
Partnership with
reputed foreign
companies
Low level of strategic
planning for future &
technology forecasting
New therapy
approaches
More potential new
drugs and more
efficient therapies
8.
High-quality products New delivery systems Low share of
Bangladeshi in world
pharmaceutical
production
9.
Spreading attitude for
soft medication
Bargaining power of
suppliers
10.
Increased use of
generic drugs
Political instability
11.
Globalization means
new markets

12.
Easier international
trading


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CHAPTER II

Financial Statement Analysis


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2. Financial Statement Analysis
Financial Statement analysis is the art of transforming the data from financial
statements into information that is useful for informed decision making. The analysis is
used to determine the firms financial position so as to identify its current strength and
weakness. To take the rational decisions in keeping with the objective of the firm, the
financial statement is too much significant for the managements. Financial statement
analysis is not only important for the firms managements, but also for the firms
investors and creditors internally, financial managers use the information provides by
financial analysis to help make financing and investing decisions to maximize the firms
value. Externally,
Stockholders and creditors use financial statement analysis to evaluate the
attractiveness of the firm as an investment by examining its ability to meet its current
and expected future financial obligations. Financial analysis involves the use of various
financial statements.

How to measure the stock price:-

Stock Price

Expected
Cashflows
Timing of
Cashflows
Risk of
Cashflows

NPV
MVA
EVA
Market
Conditions
Stock Price

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Financial Analysis

Need for financial analysis:
Assessment of the firms past, present and future financial conditions

Done to find firms financial strengths and weaknesses

Primary Tools:
Financial Statements
Comparison of financial ratios to past, industry, sector and all firms

Financial Statement

Four basic financial statements:
Balance Sheet
Income Statement
Cash flow Statement
Statement of Retained Earnings

Major Balance Sheet Items

Assets

Current assets:
Cash & securities
Receivables
Inventories
Fixed assets:
Tangible assets
Intangible assets

Liabilities and Equity

Current liabilities:
Payables
Short-term debt
Long-term liabilities
Shareholders' equity


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3. Financial Statement Analysis of BPL

The performances of various devices are used in the Beximco Pharmaceuticals Ltd.
analysis of Financial Statement data to bring out the comparative and relative
significance of the financial information presented. This are include in the below:

1. Comparative analysis
2. Percentage (common size) analysis
3. Ratio analysis

1. Comparative analysis:

In Comparative analysis the same information is presented for two or more different
dates or periods so that like items may be compared. In Comparative analysis an
investment analyst can concentrate on a given item and determine whether it appears
to be growing or diminishing year by year and the proportion of such change to related
items.

2. Percentage analysis:

Percentage analysis consists of reducing a series of related amounts to a series of
percentages of a given vase. All items in an income statement are frequently expressed
as a percentage of sales or sometimes as a percentage of cost of good sold. This analysis
facilitates comparison and is helpful in evaluating the r4elative size of items or the
relative changes in items. It may facilitate comparison between companies of different
sizes. Analyst can use this analysis to evaluate and compare companies.

3. Ratio analysis:
Ratio analysis is the starting point in developing the information desired by the analyst.
Ratio analysis provides only a single snapshot, the analysis being for one given point or
period in time. In the ratio analysis it is possible to define the company ratio with a
standard one. Ratio analysis can be classified as follows:

1) Liquidity ratio
2) Activity ratio
3) Profitability ratio
4) Debt-coverage ratio
5) Price Earnings ratio


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1. Liquidity ratio:
Liquidity ratio measures the ability of the firm to meet its obligations. These ratios
establish relation between cash and other current asset and current liabilities. Creditors
to evaluate the creditworthiness of the firm use these ratios. These ratios also provide
revels managements policy in managing liquidity position of the firm.

The Liquidity ratio we can satisfy on the three ratios, those are:

1. Current ratio
2. Quick ratio or acid test
3. Current cash debt coverage ratio.

Ratio Analysis - Activity ratio
2. Activity ratio:
Activity ratios are used to evaluate the competence, which the company manages and
utilizes on its asset. This ratio also calls the turnover ratios because they indicate the
speed with which the assets are transformed or turnover into sales. A proper balance
between assets and sales generally reflects on that the assets.
The Activity ratio we can satisfy on the three ratios, those are:
1. Receivable turnover.
2. Inventory turnover.
3. Assets turnover.

Ratio Analysis - Profitability ratio
3. Profitability ratio:

There are many measures of profitability, which relate the returns of the firm to its
sales, assets, or equity. As a group, these measures allow the analyst to evaluate the
firms earnings with respect to a given level of sales, a certain level of assets, or the
owners investment. This ratio specify the capacity of the company to survive difficult
circumstances, which might occur from a number of basis, such as declining price,
increasing cost and declining sale.
The Profitability ratio we can justify on the three ratios, those are as follows:
1. Gross Profit margin on sales.
2. Return on asset or Return on Investment.
3. Return on common stock equity.

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Ratio Analysis - Debt coverage ratio
4. Debt Coverage Ratio
Debt ratios are calculated to judgment the long-term financial position of the company.
This ratio indicate, mix of funds provided by owners and lenders, the manner in which
the assets are finance, the extent of earning that is magnified or leveraged by use of
debt and finally the extent of limited stakeholders control over the company.
The Debt-coverage ratio we can satisfy on the three ratios, those are:
1. Debt to total assets.
2. Time interest earned.
3. Book value per share.
5. Price earnings ratio:
Price earnings ratio does analysis in discussing the investment possibility of a given
enterprise uses an off-quoted statistic? This is computed by dividing the market price of
stock by its earnings per share.
Price earnings ratio = Market price of stock / Earning per share
Ratio 2008 2007 2006
Market Price of
Stock
167.70 58.89 53.70
Earnings per share 4.33 2.80 4.11
Price earnings
ratio
38.73 21.04 13.06

Analysis:
As a well-established organization its earning per share is increasing day by day. In 2007
it was 2.80 Tk and in the 2008 it has increased to 4.33. Its a good sign for company
reputation and investors will be interested to invest on this company.


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4. Company Overview
The growth of this company is discussed based on the 3 years summery data:
1. Authorized capital:
From the year of 2006 to 2008 the Beximco Pharmaceuticals Ltd. Companys authorized
capital is constant 2000 Million Taka.
2. Paid up capital:
The last 3 years paid up capital is increased (BDT) 1040.97 Million Taka to 1259.57
Million Taka.
3. Net turnover:
Beximco Pharmaceuticals Ltd. Company the net turnover of this company is
4010167000 tk. over than that of 2006. This is because the recession on the worlds
economy.
4. Export turnover:
Beximco Pharmaceuticals Ltd. Company is playing a vital role for the economy of this
country. The export turnover is 170604000 tk. higher than 2006. From the 2006
Beximco Pharmaceuticals Ltd. managed to maintain an increasing trend on export
turnover.
5. Contribution to Government treasury:
During the year of 2008 Beximco Pharmaceuticals Limited has to contributed TK. 453
million to national exchequer in the form of import related taxes value added tax and
income tax.
6. Net profit:
Although net sales increased 3702317159tk. to 41010167059tk. compare to the 2006,
the company earned a net profit of 545341000tk. in 2008 as against 2006 the profit of
470659000tk. So, we have an idea about the Companys profitability.
7. New products for 2008:
The project on new product lines- Small Volume Parentals (SVP), ophthalmic
preparations & Nebulizer solutions is now completed. Product introductions from this
new manufacturing line began in May 2009 with a goal to contribute significantly to
companys sales turnover.
8. Gross tangible assets:
Gross tangible assets stand to the year 2008 at 1481965441 TK as against 11953418940
TK of 2007 and in 2006 it was 11912512487TK.
9. Shareholders equity:
Total shareholders equity at the end of 2006 was 7949920425tk. and at the end of 2008
it is 10450202145tk. So it is increased year by year.


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10. Dividend:
During the financial year Beximco Pharmaceuticals Ltd. Company declared 10% cash and
20% stock dividend to its shareholders. In 2006 it was 5% cash & 10% stock dividend.
11. Earning per share:
Earnings per share increased by 0.22% to compare the year 2006, which is also, indicate
the continuous growth of Beximco Pharmaceuticals Ltd. Company.

5. Pharmaceutical Industry Analysis of Bangladesh

In Bangladesh Pharmaceutical sector is one of the most developed hi tech sector which
is contributing in the country's economy. After the promulgation of Drug Control
Ordinance - 1982, the development of this sector was accelerated. The professional
knowledge, thoughts and innovative ideas of the pharmacists working in this sector are
the key factors for this development. Due to recent development of this sector we are
exporting medicines to global market including European market. This sector is also
providing 95% of the total medicine requirement of the local market. Leading
Pharmaceutical Companies are expanding their business with the aim to expand export
market. Recently few new industries have been established with hi tech equipments and
professionals which will enhance the strength of this sector.

Bangladesh, currently having more than a couple of hundred manufacturing facilities
with huge potential in pharmaceutical formulations, is heading on a new path of
industry economics for self-reliance. Aiming at minimizing the import dependency on
basic drugs, the country's prime concern is about building up of own capability in the
manufacturing of active pharmaceutical ingredients(APIs), base materials and other
allied industry inputs.

In the diagram we see that pharmaceutical sector is capturing near about 12% of market
capitalization which is the second largest. This position also indicates the positive sign
for investment in pharmaceutical sector.

The combined capacity of the industry for the pharmaceutical formulation is huge and a
number of companies have recently got approval from UNICEF as its global as well as
local supplier of pharmaceutical products.

Besides, out of the total domestic requirement of medicines almost 95 per cent is met
by the local manufacturing and Bangladesh also exports formulations to 27 countries
around the world. The current turnover of the industry in Bangladesh is Tk. 3,000 crore.
According to industry sources, the formulation industry in Bangladesh currently grows at
the rate of 22 per cent. With this estimate, the expected business in year 2005 is 50,000
million Tk. Today, Bangladesh is dealing with USA, India, China, Taiwan, Hong Kong,
European Union, Singapore, Malaysia, Pakistan, Sri Lanka, Thailand, Burma, Bhutan,

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Nepal, Yemen, Mauritius, Vietnam, Kampuchea, Laos, Mexico, Columbia, Ecuador,
Kuraso Russia, Uzbekistan, Tazakistan, Kenya, Tunisia, Maldives, etc. as well as with the
least developing countries where there is hardly any industry for the production of
pharmaceutical formulations.

Turnover from pharmaceutical sector is encouraging which is about 14% of total
industry turnover is. This position also indicates the positive sign for investment in
pharmaceutical sector.

Though the country has all the potential to become a major global source of APIs and
will also be able to produce drugs, which are still under patent protection, as the TRIPS
Council meet at Doha has declared the least developed country (LDC) status to remain
without patent regime till 2016, it needs active participation and contribution from local
as well as foreign companies to build upon the capability.

However, the trend now seems to be favorable to the country as the domestic
pharmaceutical industry as well as the companies from neighboring countries like India,
China and even MNCs have queued up to put in investments on this front as every
stakeholder will benefit of vast potential that Bangladesh can offer. The local
entrepreneurs are capable and willing to invest and collaborate with suitable foreign
partners in order to develop the existing API manufacturing facilities.

According to S M Shafiuzzaman, president, Bangladesh Aushad Shilpa Samity
(Bangladesh Association of Pharmaceutical Industries - BAPI), since 1972 the Association
has been the only recognized association for pharmaceutical manufacturers in
Bangladesh playing pivotal role in the development of pharmaceutical sector. BAPI, as
the apex and premier pharmaceutical trade and promotion body of Bangladesh, has
been very actively working on the industry development programs to enhance the
existing capabilities and also to promote the country's industrial opportunities among
the developed world by attract prospective collaborators in terms of technology,
product sourcing, infrastructure etc.

Presently top pharmaceutical companies in Bangladesh are also in the process of getting
into bulk drug production with collaborative technology, technology transfers and joint
venture basis. The large-scale players in the Bangladesh pharmaceutical industry
currently include Square Pharma, Beximco, Alma, Acme, Incepta, Renata, Apson
Chemicals, FEI, Araneta, General Pharma, Hudson Pharma and SKF among others. The
MNCs that have a major presence in the country's pharma sector are Aventis, Pfizer,
Novartis and Astra Zeneca.


Page 22
Four Bangladeshi pharma firms double-digit sales growth
Four pharmaceutical companies out of top Ten Bangladeshi Companies achieved
double-digit growth in sales during the January-March period of this year, said global
pharmaceutical market intelligence agency IMS in its first quarter report. The report
published recently said the fifth largest pharmaceutical company in the country Eskayef
posted the best 21.12 percent growth followed by Renata 16.19 percent, ACI 16.17
percent and Drug International 13.79 percent.
IMS is the global source for pharmaceutical market intelligence. It provides critical
information, analysis and services that drive decisions and shape strategies of the
pharmaceutical companies. It publishes such report regularly and pharmaceutical
companies in the world uses the report in optimising portfolios, ensuring successful
launches, managing brands and improving the effectiveness of sales teams. The other
players Incepta Pharma achieved 6.77 percent growth and Square Pharma only 2.32
percent. Two other members on the top ten companies list, Beximco experienced a
huge 42.04 percent fall in growth, while Acme faced a 4.89 percent fall in growth during
the period.
According to the IMS report, Square continued as the top player of the market with a
18.77 percent share and Tk 181.04 crore sales in the first quarter. Despite a huge fall in
sales and other performance, Beximco ranked second with a 6.94 percent market share
and Tk 66.96 crore sales during the period.
Incepta Pharma ranked the third largest pharma company with a7.82 percent market
share and sales of Tk 75.39 crore. Acme stood fourth with Tk 51.73 sales and 5.36
percent market share, Eskayef ranked fifth with Tk 51.61 crore sales and 5.35 percent
market share.
Drug International, ACI, Aristopharma, Renata, Sanofi Aventis ranked sixth, seventh,
eighth, ninth and tenth respectively in terms of sales and market share. The total market
share of the top ten companies is around 63.83 percent. According to the IMS report,
the overall sales of the industry reduced by Tk 17 crore during the first quarter of 2008
compared with the previous year. The overall sales of the industry reached Tk 964 crore
during the January March period, 2008 while the sales was Tk 981 crore the previous
year. The Industry leaders admitted the fall in sales of the products, blaming the
governments over regulation and sometime unwanted interruption. M Shafiuzzaman,
president of the Bangladesh Association of Pharmaceutical Industries (BAPI), said it is
not important how the growth of sales has increased or decreased, but it is most
important than how the industry became matured in terms of quality of the products.
The improvement in overall quality of medicine will help grab the international market
swiftly besides expanding local market, he added.

Page 23

CHAPTER 3

Assessment,
Recommendation &
Conclusion


Page 24

6. Assessment on Financial Statement Analysis

The firm itself and the outside providers of capital (creditors & investors) all undertake
financial statement analysis. The analysis varies according to the specific interests of the
party involved and the results of the analysis have some implications.

Implications for Internal Management
The internal comparison of liquidity ratios reveals improvements in both the current
ratio and quick ratio. This is good news for internal management as it shows an
increased capability to meet current obligations. To the firm, a high current ratio
indicates liquidity, but it may also indicate an inefficient use of cash and other short-
term assets.
Also the trend analysis for activity ratios shows that the companys collection of
receivables has improved greatly. However, all the activity ratios values are extremely
low. This implies that it takes Beximco a much longer time to manufacture a product,
sell it and collect cash from sales. These ratios thus also suggest an inefficient collection
of receivables, inventory management and asset utilization practices by the company.
The debt ratio shows that there is a sufficient margin of protection for creditors and
thus a low financial risk for the company which is desirable. However, management
should look into the falling debt ratio trends it may indicate a lack of confidence on the
part of creditors to lend to the company.
The very low interest coverage ratio value and the decreasing trend of the ratio are
disappointing as it may limit companys capacity to take on new debts. An inability to
meet interest payments without difficulty also raises the risk of the company going
bankrupt.
Since the debt ratios show a sufficient margin of protection, yet the interest coverage
are very low; the conclusion is that the company will have difficulty in obtaining short-
term funds as its short-term solvency is not satisfactory. However, its long-term
solvency is acceptable.

The decrease in the profitability ratios of the company is highly undesirable, would
indicate the companys overall ineffectiveness of business operation. The decrease in
the gross and net profit margin shows that the companys cost of goods sold and selling,
general and administrative expenses have increased relative to sales. The extremely
poor return on investment ratio implies inefficiency in assets management and the
equally poor return on equity ratios implies that the company is not taking advantages
of investment opportunities and that5 it needs to be more efficient at managing its
expenses.
The companys exceptionally low values for EPS DPS would respectively imply that a low
amount of profits were earned per ordinary share and that the amounts of dividend

Page 25
paid out to the shareholders were very small. The decrease in the DPS from 2007 to
2008 would imply a change in the financial condition or some other changes in the
business or its capital structure.
Although there has been an increase in the dividend payout ratio from 2006 to 2008,
the DPS has remained constant during the period. This would imply that a larger portion
of net income is being distributed as dividend and thus a smaller portion is being left for
investment to provide for future earnings growth of the company.
The implications of the findings of the ratio analysis mentioned above would suggest
that the company has performed very poorly. They imply that the short-term creditors
would have second thoughts about the companys liquidity; creditors would be
discouraged to lend money to the company despite the large margin of protection
because of the very low interest coverage ratio and that investors would be highly
discouraged to invest in the company due to its extremely low profitability and investors
ratios.
The company has one of the highest P/E ratios. This may be desirable for existing short-
term investors who can sell these overpriced shares and make a profit. However, it is
not desirable for existing long term shareholders and potential shareholders. It is not
always true that P/Es equate high growth. The company has the highest book-to-market
value ratio which would make the shares of Beximco undervalued. Although this is not
good for the existing investors, it may attract potential investors.

Implications for Short-Term Creditors
The analysis reveals that liquidity ratio of BPL is satisfactory and acceptable from the
short-term creditors (suppliers or trade creditors) viewpoint. Although, inventory is a
major current assets item for pharmaceuticals companies in general, the findings
suggest that there is scope for further improvement.
The activity ratios of the company are all extremely low and thus very disappointing for
the short-term creditors and would cause them to have second thought about the
companys liquidity.

Implications for Lenders or Creditors
The debt ratios should be satisfactory for lenders or creditors as they are in line with
those of the other companies and show that there is a large creditor cushion or margin
of protection. Unfortunately, the same cannot be said for the interest coverage ratio. It
is very low and most probably would not be deemed acceptable by creditors.

Implications for Investors
The low interest coverage ratio would disappoint the investors as it shows an inability to
meet interest payments without difficulty and thus raises the risk of the company going
bankrupt.


Page 26
Investors would also find the profitability ratios, especially the extremely poor ROI and
ROE values to be highly discouraging. This is because they imply low earning power of
invested capital and low earning power on shareholders book-value investment
respectively.

The companys exceptionally low values for EPS and DPS would be discouraging for the
shareholders as it suggests very low earnings. The decrease in DPS from 2004 to 2005
would also be disappointing as it shows that the shareholders are now getting paid even
less than before. The increase in the dividend payout ratio in order to maintain a
constant DPS would is also undesirable. All these would suggest that investors would be
highly discouraged to invest in the company.

The company has one of the highest P/E ratios. This may be desirable for existing short-
term investors who can sell these overpriced shares and make a profit. However, it is
not desirable for existing long-term shareholders and potential shareholders. It is not
always true that P/E equate high growth. The company has the highest book-to-market
value ratio which would make the shares of Beximco undervalued. Although this is not
good for the existing investors, it may attract potential investors.

7. Recommendations
Financial statements are most significant part of a company because financial statement
analysis involves a comparison of a firms performance with that of other firms in the
same line of business, which usually identified by the firms industry classification. The
analysis is used to determine the firms financial position so as to identify its current
strength and weakness and to suggest actions the firm might pursue to take advantage
of the strengths and correct any weakness.

The recommendations suggested to BPL can be summarized as follows:

BPLs quick ratio of slightly below 1 is reasonable but the company should try to
improve it through better inventory management.

Better inventory management would also improve the companys extremely low
inventory turnover ratio. The company could compute turnover of the major
categories of inventory to see if there is excessive investment in any specific
components of the inventory and then take the appropriate action to rectify the
problem.

It needs to be more efficient in collecting receivables. It should review its credit
policy and make any necessary adjustments to encourage prompt payment.


Page 27
BPL needs to strike a healthy balance between debt and equity; too much debt
financing would mean a high financial risk, while too little debt financing would
mean that the company may have difficulty raising sufficient funds.

BPL also needs to improve its earnings before interest and taxes (EBIT). This can be
achieved by increasing sales revenue or decreasing production and operating
expenses.

To improve its return on investment (ROE), the company needs to take advantage of
profitable investment opportunities and be more efficient at managing its expenses.

The company needs to improve i9ts earning per share (EPS) and dividend per share
(DPS) significantly. It also needs to lower its dividend payout ratio as it may g limit
the companys growth potential. To achieve these changes BPL needs to increase
net income and utilize its assets more efficiently.

8. Conclusion

The study of the financial statement is fascinating one for analyzing a firms liquidity,
profitability and solvency. It provided us essential information to companys relative
performances within the industry as well as determining the companys competitive
competence position. Financial statement analysis helps us to take appropriate financial
decision in the business field at the right time.

The conclusion dawn from the financial statement analysis were rather unexpected as
one would not normally associate such poor outcomes with a company which holds the
second position in the industry in terms of market share.

Beximco Pharmaceuticals LTD is a well-established and leading Pharmaceuticals firm of
the country. The company is run by an experienced and innovative management group,
who utilize their knowledge, talent and experience to the best of their ability for the
development of the company. The 3 years financial data show a slow growing trend of
the company. The net profit after tax (NOPAT) indicates the companys excellent
performance in operation, turnover, management and competitive business statically.
Thus, it seems very likely that the company will be able to improve its performance in
the coming years. As the inventors expectation is to earn more money over their
investment - Beximco Pharmaceuticals LTD is playing an important role to set the
investors on it.


Page 28
Appendix A: Departments at Beximco Pharmaceuticals Ltd.

ABBREVIATION

DEPARTMENT

MIS
BRD
PLN
FC
PUR
CPMD
MRC
MMD
MD
HR
FSD
SLS
ACC
LCO
SLD
PRP
PRD(INF)
WH
ENG
QC
QA
PD

Management Information System
Business Research and Development
Planning
Fine Chemical
Purchase
Central Product Management Department
Market Research Sell
Multimedia Department
Medical Department
Human Resource
Financial System Department
Sales
Accounting
Liquid Cream and Ointment
Solid
Production Planning
Production (Infusion Unit)
Warehouse
Engineering
Quality Control
Quality Assurance
Product Development


Page 29
Appendix B: Ratio Calculation- Beximco Pharmaceuticals Ltd.

BEXIMCO PHARMACEUTICALS LIMITED
Balance Sheet
As at 31 December 2008 to 2006

PARTICULARS 2008 2007 2006
ASSETS:
Non-Current Assets 11957773787 902943482 8,555,119,221
Property, Plant and Equipment- Carrying Value 11921072697 8992942392 8,513,136,381
Investment in Shares 36701090 36701090 41,982,840
Current Assets 2861891654 2923775458 3,357,393,266
Inventories 1505288093 1470152242 1,754,440,288
Spares & Supplies 234530326 182328049
Accounts Receivable 503916401 499680792 430,240,095
Loans, Advances and Deposits 544509109 685915465 591,613,938
Cash and Cash Equivalents 73647728 8598910 581,098,945
TOTAL ASSETS Tk. 14819665441 11953418940 11,912,512,487
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' Equity 10450202145 8250939647 7,949,920,425
Issued Share Capital 1259577470 1145070430 1,040,973,120
Share Premium 1489750000 1489750000 1,489,750,000
Excess of Issue Price over Face Value of GDRs 1689636958 1689636958 1,689,636,958
Capital Reserve on Merger 294950950 294950950 294,950,950
Revaluation Surplus 1711174747
Tax-Holiday Reserve 442354953 394,834,828
Retained Earnings 4005112020 3189176356 3,039,774,569
Non-Current Liabilities 1767431029 2074506357 1,435,171,264
Long Term Borrowing-Net off Current Maturity (Secured) 1446600500 1776449778 1,159,409,947
Liability for Gratuity & WPPF 274419253 246704610 213,357,859
Deferred Tax Liability 46411276 51351969 62,403,458
Current Liabilities and Provisions 2602032267 1627972936 2,527,420,798
Short Term Borrowings 1461666227 907582327 1,302,816,980
Long Term Borrowing-Current Maturity 648165841 343604498 1,302,816,980
Creditors and Other Payables 263176822 271814118 365,255,938
Accrued Expenses 81776450 60052739 117,936,620
Dividend Payable 3169568 3285324 13,012,146
Income Tax Payable 144077359 41633930 16,276,184
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY Tk.
14819665441.00 11953418940.00 11,912,512,487.00


Page 30
BEXIMCO PHARMACEUTICALS LIMITED

Profit and Loss Account

For the year ended 31 December 2008

2008 2007

NET SALES REVENUE 4,010,167,059 3,597,024,812
Cost of Goods Sold (2,002,871,181) (1,967,509,975)
Gross Profit 2,007,295,878 1,629,514,837

Operating Expenses: (1,008,501,030) (974,736,690)
Administrative Expenses (153,464,243) (145,544,701)
Selling, Marketing and Distribution Expenses (855,036,787) (829,191,989)

Profit from Operations 998,794,848 654,778,147
Other Income 686,510 19,625,795
Finance Cost (249,654,298) (254,742,392)
Profit before Contribution to WPPF 749,827,060 419,661,550
Contribution to Workers' Profit Participation/ Welfare Funds (35,706,050) (19,983,883)

Profit Before Tax 714,121,010 399,677,667
Income Tax Expense (168,779,737) (46,609,789)
Current Tax (173,720,430) (57,661,278)
Deferred Tax Income/(Expense) 4,940,693 11,051,489

Profit After Tax Transferred to Statement of Changes in Equity Tk. 545,341,273 353,067,878
Earnings Per Share (of Tk. 10 /- each) (Adjusted EPS of 2007) Tk. 4.33 2.80
Number of Shares used to compute EPS 125,957,747 125,957,747


Page 31

Refferences

1. Annual Reports 2006-2008, Beximco Pharmaceuticals Ltd.

2. http://www.pharmabiz.com

3. http://www.beximcopharma .com

4. http://ims-global.com

5. Rahman, A. Pharmaceutical Sector in a Crucial Phase.

6. http://www.banglapedia.com

7. http://www.wikipedia.com

8. The Analysis and Use of Financial Statements. Virginia: John Wiley & Sons, Inc.

9. http://www.pharmadu.net.

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