Nestle Pakistan

Executive Summary

Nestlé has been serving for over one hundred and fifty years. It has differentiated itself
through its high-quality product mix and positioned itself as health and Nutrition
Company.

Nestlé is the largest food selling company. It manufactures food and beverages. It gives a
briefing about all the brands of Nestlé.

Nestle Pakistan Limited (NPI.), formerly known as Nestle Milpark Limited is a

subsidiary of Nestle SA – a company of Swiss origin headquartered in Vevey,
Switzerland. It is listed on Karachi and Lahore stock exchanges. The food products
include dairy, confectionery and culinary products, coffee and beverage and drinking
water. The major brands include Milpark UHT, Nestle Every day, Lactogen and Nescafe.

Nestlé has set its manufacturing plants in Karachi, Lahore, Islamabad and Kabir Wala.
The milk processing plant at Kabir Wala district is the Nestlé’s world largest milk
processing plant.
Nestle running many brands and are operating separately. Each of the brand department
is further categorized in different departments according to the product development.
Strengths and Weaknesses are being analyzed on the basis of internal environment and
internal organizational factors. Whereas Opportunities and Threats are being identified on
the basis of external and internal environment and factors.

History of Nestle

Nestlé is the world’s leading nutrition, health, and wellness company. “Good Food, Good
Life” is the promise we commit to everyday, everywhere – to enhance lives, throughout life,
with good food and beverages.

Nestlé is now the world’s largest food company. It is present on all five continents, has an
annual turnover of 74.7 billion Swiss francs. It runs almost 509 factories in 83 countries
and employs about 231,000 people.

Nestlé covers almost every food and beverage category, giving consumers tastier and
healthier products. Our most popular brands include Nescafé, Milk Pak, Nesvita, Fruita
Vitals, Maggi, Milo and KitKat. Our products are available worldwide in supermarkets,
grocery shops, through online retailers and also in smaller local stores.

Nestlé has set its manufacturing plants in Karachi, Lahore, Islamabad and Kabir
Wala. The milk processing plant at Kabir Wala district is the Nestlé’s world
largest milk processing plant.
Quality and safety for our consumers is Nestlé top priority. This applies to all products
across the world, across all our products from food and beverages to all our system and
services. To ensure the quality and safety of product we have a Quality Management
System. We use this globally to guarantee food safety and compliance with quality
standards. Our internal Quality Management System is audited and verified by
independent certification bodies to prove conformity to internal standards, ISO norms,
laws and regularity requirements.

Nestlé encourages its national operations to adapt products locally, in order to respect the
local, regional and national habits and the taste, culture and the religious backgrounds of
the consumers as well as their purchasing power. While all products must correspond to
our quality requirements, they vary extensively in composition, recipe, packaging and
branding.

History & Background of Nestlé

1866-1905: The pioneer years

Our history begins in 1866, with the foundation of the Anglo-Swiss Condensed Milk
Company. Henri Nestlé develops a breakthrough infant food in 1867, and in 1905 the
company he founded merges with Anglo-Swiss, to form what is now known as the Nestlé
Group. During this period cities grow, and railways and steamships bring down
commodity costs, spurring international trade in consumer goods.

1905-1913: The Belle Époque

In 1905, Nestlé & Anglo Swiss has more than 20 factories, and starts using overseas
subsidiaries to establish a sales network that spans Africa, Asia, Latin America and
Australia. As World War One approaches, the firm benefits from the period of prosperity
known as the Belle Époque or ‘Beautiful Age’ and becomes a global dairy company.

1914-1918: Survival during wartime

The outbreak of war in 1914 leads to increased demand for condensed milk and
chocolate, but a shortage of raw materials and limits on cross-border trade hamper
production for Nestlé &Anglo-Swiss. To solve this problem, the company acquires
processing facilities in the US and Australia, and by the end of the war it has 40 factories.

1919-1938: Crisis and opportunity

After the war military demand for canned milk declines, causing a major crisis for Nestlé
& Anglo-Swiss in 1921. The company recovers but is rocked again by the Wall Street
Crash in 1929, which reduces consumer purchasing power. However, the era carries
many positives: the company’s management corps is professionalized, research is
centralized and pioneering products such as Nescafé coffee are launched.
1939-1947: Riding out the storm

The outbreak of World War Two in 1939 affects virtually every market, but Nestlé &
Anglo-Swiss continues to operate in difficult circumstances, supplying both civilians and
armed forces. In 1947, the company adds Maggi soups and seasonings to its product
range and adopts the name Nestlé Alimenting.

1948-1959: Greater consumer convenience

The post-war period is marked by growing prosperity, and people in the US and Europe
spend money on machines that make life easier, such as refrigerators and freezers. They
also favor convenience foods, and Nestlé Alimenting meets this need with new products
including Nesquik and Maggi ready meals.

1960-1980: Frozen foods to pharmaceuticals

Acquisitions enable Nestlé to enter fast-growing new areas such as frozen foods, and to
expand its traditional businesses in milk, coffee and canned foods. In the 1970s the
company diversifies into pharmaceuticals and cosmetics. It starts to attract criticism from
activist groups that allege its marketing of infant food is unethical. Nestlé later becomes
one the first companies to apply the WHO code on breast-milk substitutes across its
business.

1981-2005: Towards Nutrition, Health and Wellness

Following years of growth, Nestlé disposes of unprofitable brands and promotes those
that satisfy increasingly health-conscious consumers, in line with its new ‘Nutrition,
Health and Wellness’ ambition. The company expands in the US, Eastern Europe and
Asia, and targets for global leadership in water, ice cream and animal food.

2006-Today: Creating Shared Value

Nestlé articulates its Creating Shared Value approach to business for the first time and
launches its Nestlé Cocoa Plan and Nescafé Plan to further develop sustainable supply
chains in cocoa and coffee. While strengthening its position in traditional segments,
infant formula and frozen foods, Nestlé strengthens its focus on medical nutrition.

Nestle Pakistan

Nestle Pakistan is a subsidiary of Nestle S.A- a company of Swiss origin headquartered in

Vevey, Switzerland. Nestlé begins its long relationship with South Asia when the Nestlé
Angle-Swiss Condensed Milk Company starts importing and selling finished products in
the Indian market. Production of long shelf-life UHT milk begins at MILKPAK Ltd.
Sheikhupura factory, Pakistan. Along with the milk the Sheikhupura factory starts the
production of NESTLÉ NIDO milk powder and cereals so, a new plant is acquired at
Kabir Wala in the Punjab. The milk processing plant at Kabir Wala district is the Nestlé’s
world largest milk processing plant. Nestlé takes over the running of the company and
begins to develop its milk collection network. Later, MILKPAK Ltd. is renamed Nestlé
Milpark Ltd.

NESTLÉ PURE LIFE bottled water is premiered in Pakistan. Within a few years it
becomes one of the world’s leading brands of bottled water. Nestlé Pakistan acquires the
Fontalia and AVA water companies which specialize in supplying water to homes and
offices. Meanwhile, Nestlé milk collection system in the Punjab matures and the
company is able to buy all its milk from farmers instead of relying on contractors.

Nestlé Pakistan today is the leading Food & Beverages Company in Pakistan with key
focus on Nutrition, Health and Wellness and reaching the remotest of locations
throughout Pakistan to serve the consumers. Nestlé Pakistan also prides itself in being the
leaders in Nutrition, Health & Wellness. Ever since 1867, when Henri Nestlé invented the
first infant food, nutrition has been in our DNA. Today more and more consumers mirror
our emphasis on nutrition, as they realize that food choices affect their health and quality
of life.

Nestlé Pakistan operates in many ways, but people, products and brands are the main flag
bearers of the Company’s image, and we continue to enhance the quality of life of
Pakistanis.

Products.

Global Brands of Nestlé

Following are the categories in which Nestlé global is manufacturing its products.

Baby Food

Drinks

Bottled Water

Food Service

Cereals

Chocolate & confectionary

Coffee

Culinary, chilled & frozen food

Dairy

Food Service

Health care nutrition

Ice-cream

Pet care
Food Management

Brands in Pakistan

Nestle product line is divided into following major categories:

1-Ambient Dairy

NESTLÉ MILKPAK

NESTLÉ MILKPAK Cream

NESTLÉ BUNYAD

NESTLÉ MILO

NESTLÉ EVERYDAY

NESTLÉ NESVITA Calcium Plus

NESTLÉ NIDO FORTIGROW

2-Chilled Dairy

NESTLÉ Yogurt Sweet ‘N’ Tasty

NESTLÉ RIWAYATI MAZAA YOGURT

NESTLÉ ACTIPLUS Yogurt

NESTLÉ MILKPAK YOGURT

NESTLÉ ZEERA RAITA

NESTLÉ PODINA RAITA

3-Juices

NESTLÉ FRUITA VITALA

NESTLÉ NESFRUTA

4-Bottled Water

NESTLÉ PURE LIFE

5-Culinary & Food

NESTLÉ MAGGI NOODLES

MAGGI CHOTOO

6-Infant Nutrition

NESTLÉ CERELAC

7-Breakfast Cereals
NESTLÉ KOKO KRUNCH

NESTLÉ MILO CEREAL

NESTLÉ CORN FLAKES

8-Coffee

NESCAFÉ CLASSIC

NESCAFÉ GOLD

9-Confectionery

KITKAT

NESTLE FRUITA VITALS:

As we already know that Health. Fitness and nutrition are the basic plan of Nestle. And
Nestle Fruita Vitals fulfills the needs of its consumers with vitamin, calcium and
minerals, all the necessary Vitamins. Calcium and minerals are filled in fruit juices.
Nestle Fruita Vitals includes Apple Nectar, Red Grapes, Pineapple Nectar, Guava Nectar,
Orange Nectar and Peach Nectar.

Nestle Nescafe:

Nescafe is the instant coffee. It Keep you fresh, awake your soul and keep you active is
the ultimate goal of Nescafe, what I think. Nescafe Classic, Nescafe Gold and Nescafe
Cold Coffee are here to keep you fresh with its taste.

Nestle Cereals:

A delicious breakfast cereal made with whole grain with a rich chocolate taste that kids
love. Plus, it includes important vitamins, iron and calcium. The whole grain tick on our
breakfast cereals with the green banner – this is your guarantee that they contain at least
8g of whole grain in every delicious serving. Our breakfast cereals also typically provide
25% of the recommended daily allowance (RDA) of vitamins and minerals per serving.

Nestle bottled Water:

Due to its brand name Nestle Pure Life is the most favorite of Pakistani people. Every
bottle of Nestle is very safe & secure to keep you healthy and the important thing is that
Nestle bottled Water is processed under safety Security System (SSS).

Pakistan is the proud birthplace of the NESTLÉ PURE LIFE brand; it was first launched
in 1998.

Today, NESTLÉ PURE LIFE takes pride in being the world’s most popular bottled water
brand.

The NESTLÉ PURE LIFE brand is now one of NESTLÉ’s billionaire global brands,
present in 30 countries spanning 5 continents.
NESTLE BABY FOOD

Nestle Cerelac

As we know from the initial stage of child its safe food is vital and from innate to 3 years
old child Nestle is providing Cerelac for your baby, A perfect food for your baby. It is in
different stages/levels.

Nestle Culinary Products

Nestlé’s commitment to healthier eating includes helping to address issues such as

micronutrient deficiencies and improving nutritional understanding. For example, Maggi
is very popular in Pakistan and India, Child and under teenagers like Maggi Very much.
Maggi is very good for health as well.

Nestle Confectionery:

Nestle also gives their customer’s sweet foods/product like POLO and KITKAT are here
too fresh your mouth and keep your moments lively, through these sweet products you
can enjoy your special moments of like whether you are in sport, or party, it is there to
keep you and your child lively. Apart from all things KitKat is favorite of all ages around
the globe, especially in our country Pakistan.

Operations.

Regional Offices

Company has ten regional sales offices in following cities of Pakistan:

1-Karachi

2-Hyderabad

3-Sukkar

4-Lahore

5-Multan

6-Faisalabad

7-Gujranwala

8-Quetta

9-Islamabad

10-Peshawar
Board of Directors.

Mission Statement of Nestle

Our mission of “Good Food, Good Life” is to provide consumers with the best tasting, most
nutritious choices in a wide range of food and beverage categories and eating occasions, from
morning to night.”
Vision statement of Nestle
“To be a leading, Competitive, Nutrition, Health and wellness company delivering
improved shareholder value by being a preferred corporate citizen, preferred employer,
preferred supplier selling preferred products.”

Corporate Structure.
Share Price

SWOT ANALYSIS.
Nestle has less than 12% of debt over the total assets. This will keep the cost of borrowing low and
more borrowing sources available in case of needs. In addition, during the time of market crises,
Nestlé is less likely to be forced into bankruptcy because it can sell some of its assets to pay off
debt (if necessary) without impairing the whole operation.
ANALYSIS OF NESTLE:
Strengths and Weaknesses are being analyzed on the basis of internal environment and
internal organizational factors. Whereas Opportunities and Threats are being identified on
the basis of external and internal environment and factors.
Strengths:
Nestle has following strengths:
Strong brand image.
▪ Having strong brands like NESCAFE, MAGGIE, CERELAC etc. had given
Nestle a strong position in the industry. Nestle is world reputed and recognized
organization which has positive impact on people perception about it.
Loyalty from customers

▪ Loyalty from customers is also the major strength for the company.
Strong financial position
▪ Nestle has strong financial position which enable it to attract more new investors
and help it to raise funds from banks.
Strong core competencies
▪ Nestle has strong core competencies i.e., highly expert human resources which
enable it to produce new high quality innovative products.

▪ Company has the ability to compete in a dynamic environment.

Modern operation facilities
▪ They have highly developed websites. They are always ready to answer any query
online. Nestle modern operation facilities are also important strength which enable
it to produce high standardized quality products.
Own distribution network
▪ Nestle has its distribution network which make it easy to provide Nestle products
at all possible places on time.
Parent company support
▪ Nestle has strong support from its parent company (Situated in Switzerland). So,
this support helps the company to flourish.
Good quality products
▪ The world largest processed food and beverages Company. And the good quality
of the products has given it a strong position.
Worldwide existence
▪ A presence in almost every country. This worldwide existence (Africa, America,
Asia, Europe, and Oceania) is a key strength of Nestle.
Introducing new products
▪ Continuously introducing new products on frequent basis thus expanded its
products offering. Example, coffee capsules of different flavors.

Weaknesses:
Dependent on the outside Milkmen
▪ Raw material is basic input for every organization and milk is core raw material of
Nestle for which it is dependent on the outside Milkmen. Nestle has no single its
own dairy form which provide high quality milk to the firm.
Packaging dependence
▪ Another weakness of Nestle Milkpak Ltd. is that its total packaging depends upon
Packages (Pvt.) limited.
Complex supply chain
▪ Having complex supply chain management.
Advertisement
▪ Company mostly advertises its milk products, advertisement of
confectionary products is not so better
Opportunities:
Following are some opportunities for Nestle Pakistan Limited:
Can establish its own diary forms
▪ Nestle can go for “Backward integration” and establish its own diary forms.
Currently, nestle is dependent on the outside Milkmen. Nestle should open its own
diary forms because nestle has strong financial position.
Potential to expand to smaller towns
▪ Potential to expand to smaller towns and other geographies. The company has the
option to expand its product folio by introducing more brands.
Open stores
▪ Company is trying to open new stores in universities. Company can enter in ice
cream products and snacks.

Threats:
Followings are the major threats for Nestle Milk Pakistan Ltd.
High Price
▪ Purchasing power of people in Pakistan is decreasing day by day and prices of
Nestle products are comparatively high. So, in long run, nestle may face
problem if such trend continues.
Fierce competition
▪ In some products Nestle is facing fierce competition. For example, in Milkpak
Nestle is facing competition from Chaudhary Dairies Limited who has launched
“Dairy Queen” at lower prices which has decreased market share of Milkpak.
CDL has also launched “N’rish” milk powder at lower prices, it also has
capability to decrease the market share of “NIDO”. So, in long run, if nestle do
not respond to such competitors, they may create a lot of problems in other
products also.
Instability of Government
▪ Pakistan politics structure is very instable and is depressing economic activities
and volatile business environment in the state. Such instable environment may
 influence the performance of all industries operating in state and nestle may also
be influenced from such trends of instability.

Financial Analysis of Nestle

1: Horizontal Analysis

2: Vertical Analysis

3: Profitability Ratios

3.1: Gross Profit Ratios

3.2: Net Profit Ratios

4: Liquidity Ratio

4.1: Current Ratios

4.2: Quick Ratios

5: Efficiency Ratio

5.1: Asset Turnover Ratios

5.2: Inventory Turnover

5.3: Account Receivable

6: Return on Investment

7: Leverage
7.1: Operating Leverage
7.2: Financial Leverage

8: Value Analysis

8.1: Market/Book Ratio

9: Cash Flow Analysis

10: Rate of Return

11: Growth Rate

12: Variance
12.1: Budget Variance

13: Valuation Analysis

14: Sensitivity Analysis

1: Horizontal Analysis

Horizontal analysis is used in financial statement analysis to compare historical data,

such as ratios, or line items, over a number of accounting periods. Horizontal analysis

can either use absolute comparisons or percentage comparisons, where the numbers

in each succeeding period are expressed as a percentage of the amount in

the baseline year, with the baseline amount being listed as 100%. This is also known

as base-year analysis.

FORMULA.

[(Amount in Current Year – Amount in Base Year) / Amount in

Base Year] * 100

horizontal analysis 2016 2017 2018 2019 2020

Profit loss account

net sales 100 108.73 110.87 103.16 105.6

Cost of goods sold 100 106.67 204.63 113.77 115.71

Gross profit 100 112.4 103.99 0.01 87.38

Distribution and selling expenses 100 102.97 103.33 82 79.79

Administration expenses 100 99.34 106.02 132.87 161.83

Operating profit 100 123.29 104.32 78.47 83.88

Finance cost 100 114.24 189.63 323.39 292.49
other operating expenses 100 121.71 96.72 88.92 65.19
Other income 100 92.86 64.68 131.9 89.89
Profit before taxation 100 213.3 99.3 62.96 73.98
Taxation 100 122.68 103.52 64.98 71.66
Profit after taxation 100 123.56 97.45 62.08 75

2016 2017 2018 2019 2020

Balance sheet

Share capital and reserves 100 52.6 55.6 37 47.6

Non-current liabilities 100 150.35 152.15 98.66 182.26
Current liabilities 100 121.91 148.73 161.06 121.56
Total equity and liabilities 100 141.89 131.23 128.53 119.93

Non-current assets 100 10.64 108.87 108.8 105.58

Current assets 100 128.39 168.43 159.71 142.83
total assets 100 141.89 131.23 128.53 119.93

2: Vertical Analysis

Vertical analysis is a method of financial statement analysis in which each line item is listed as a
percentage of a base figure within the statement. Thus, line items on an income statement can be
stated as a percentage of gross sales, while line items on a balance sheet can be stated as a
percentage of total assets or liabilities, and vertical analysis of a cash flow statement shows each
cash inflow or outflow as a percentage of the total cash inflows.

FORMULA

Vertical analysis formula =

(Statement line item / Total base figure) X 100

vertical anaylsis 2016 2017 2018 2019 2020

profit and loss account

net sales 100 100 100 100 100

Cost of goods sold -64 -63.37 -66.79 -71.24 -70.73

Gross profit 35 36.62 33.2 28.75 29.26

Distribution and selling expenses -15 -15.06 -14.82 -12.63 -12

Administration expenses -2.45 -2.24 -2.34 -3.16 -3.74

Operating profit 17.03 19.31 16.2 12.95 13.52

Finance cost -0.85 -0.89 -14.45 -2.74 -2.36
Other operating expenses -1.39 -1.5 -1.21 -1.19 -0.85
Other income 0.35 0.25 0.2 0.23 0.29
Profit before taxation 15.14 17.17 13.36 9.24 10.6
Taxation -4.6 -5.19 -4.29 -2.89 -3.12
Profit after taxation 10.54 11.9 9.23 6.34 7.47

Balance sheet 2016 2017 2018 2019 2020

Share capital and reserves 7.8 3.7 3.1 2.8 3.5

Non-current liabilities 7.95 11 10.91 7.6 13.94
Current liabilities 29.38 32.94 39.41 45.87 33.8
Total equity and liabilities 45.18 47.74 53.47 56.28 51.27
Non-current assets 27.77 27.18 27.27 29.33 27.74
Current assets 17.41 20.55 26.2 26.95 23.53
total assets 45.18 47.74 53.47 56.28 51.27

3: Profitability Ratios

Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings relative to its revenue, operating costs, balance sheet assets, or shareholders'
equity over time, using data from a specific point in time.

3.1: Gross Profit Ratios

Gross profit ratio (GP ratio) is a financial ratio that measures the performance and efficiency of a
business by dividing its gross profit figure by the total net sales. The gross profit ratio can also be
expressed in percentage form, multiplying the result by 100. It is then called gross profit percentage
or gross profit margin.

FORMULA

Gross Profit Ratio

Gross profit divided by net sales x 100.

3.2: Net Profit Ratio

The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining
profit after all costs of production, administration, and financing have been deducted from
sales, and income taxes recognized. As such, it is one of the best measures of the overall
results of a firm, especially when combined with an evaluation of how well it is using its
working capital. The measure is commonly reported on a trend line, to judge performance over
time. It is also used to compare the results of a business with its competitors.

FORMULA

Net Profit Ratio

(Net profit ÷ Net sales) x 100

The answer is in percentage

profitbilty ratios 2016 2017 2018 2019 2020

Gross profit ratio 35.4 36.6 32.1 28.7 29.2

Net profit ratio 10.5 11.9 9.6 6.3 7.4

4: Liquidity Ratio

Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to
pay off current debt obligations without raising external capital. Liquidity ratios measure a
company's ability to pay debt obligations and its margin of safety through the calculation of
metrics including the current ratio, quick ratio, and operating cash flow ratio.

4.1: Current Ratio

The current ratio measures a company's ability to pay off its current liabilities (payable within one
year) with its total current assets such as cash, accounts receivable, and inventories. The higher the
ratio, the better the company's liquidity position:

FORMULA

Current Ratio=

Current Liabilities / Current Assets

4.2: Quick Ratio

The quick ratio measures a company's ability to meet its short-term obligations with its most liquid
assets and therefore excludes inventories from its current assets. It is also known as the acid-
test ratio:

FORMULA

Quick ratio=

Current assets – inventory / Current Liabilities

The answer is in times

Liquidity Ratio 2016 2017 2018 2019 2020

Current Ratio 0.5 0.6 0.6 0.5 0.7

Quick Ratio 0.25 0.24 0.27 0.23 0.29
NOTE

Current Ratio it might be that the company is unable to use its current assets efficiently.

A higher current ratio indicates that a company is able to meet its short-term obligations.

Quick Ratio its current liabilities without needing to sell its inventory or obtain additional

financing.

5: Efficiency Ratio

The efficiency ratio is typically used to analyze how well a company uses its assets and liabilities
internally. An efficiency ratio can calculate the turnover of receivables, the repayment of
liabilities, the quantity and usage of equity, and the general use of inventory and machinery. This
ratio can also be used to track and analyze the performance of commercial and investment banks.

5.1: Asset Turnover Ratio

The asset turnover ratio measures a company's ability to efficiently generate revenues from its
assets. In other words, the asset turnover ratio calculates sales as a percentage of the company's
assets. The ratio is effective in showing how many sales are generated from each dollar of assets a
company owns.

FORMULA

Asset Turnover=

Total Sales /Beginning Assets + Ending Assets / 2

Where:

Total Sales=Annual sales Total

Beginning Assets=Assets at start of year

Ending Assets=Assets at end of year

5.2: Inventory Turnover

Inventory turnover is the rate at which a company replaces inventory in a given period due to sales.
Calculating inventory turnover helps businesses make better pricing, manufacturing, marketing,
and purchasing decisions. Well-managed inventory levels show that a company's sales are at the
desired level, and costs are controlled. The inventory turnover ratio is a measure of how well a
company generates sales from its inventory.

FORMULA

Inventory Turnover=
 COGS/ Average Value of Inventory

Where:

COGS = Cost of goods sold

5.3: Accounts Receivable

The accounts receivable turnover ratio, also known as the debtor’s turnover ratio, is an efficiency

ratio that measures how efficiently a company is collecting revenue – and by extension, how

efficiently it is using its assets. The accounts receivable turnover ratio measures the number of times

over a given period that a company collects its average accounts receivable.

FORMULA

Accounts Receivable Turnover Ratio =

Net Credit Sales / Average Accounts Receivable

The answer is in times

Efficiency Ratio 2016 2017 2018 2019 2020

Asset turnover Ratio 2.21 2.23 1.99 0.32 3.52

Inventory Turnover ratio 6.47 5.83 4.74 4.28 4.78
Account Recivable 169.95 126.68 67.09 43.18 53.09

NOTE

 Asset turnover ratio, the more efficient a company is at generating revenue from its assets.
Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its
assets to generate sales.

Managing production levels, driving costs lower and sales higher, and removing obsolete inventory
items are some of the ways to increase the inventory turnover ratio.

 When cash payment is received from the debtor, cash is increased and the accounts receivable is
decreased

6: Return on Investment

Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive
in relation to their investment cost. It is most commonly measured as net income divided by the
original capital cost of the investment. The higher the ratio, the greater the benefit earned. This
guide will break down the ROI formula, outline several examples of how to calculate it, and
provide an ROI formula investment calculator to download.

FORMULA
Return on Investment=

Net Income / Cost of Investment

The answer is in times

Return on investment 2016 2017 2018 2019 2020

Return on investment 1.34 3.15 2.95 2.25 2.12

7: Leverage analysis

The term Leverage in general refers to a relationship between two interrelated variables. In financial
analysis it represents the influence of one financial variable over some other related financial
variable. These financial variables may be costs, output, sales revenue, earnings before interest and
tax, earnings before tax, earning per share, etc. 

7.1: Operating Leverage

Operating Leverage is defined as “the firm’s ability to use fixed operating costs to magnify effects
of changes in sales on its earnings before interest and taxes.” In other words, operating leverage is
the tendency of the operating profit to vary disproportionately with sales. It is said to exist when a
firm has to pay fixed cost regardless of volume of output or sales. 

FORMULA

Operating Leverage=
Gross profit / EBIT
WHERE:
EBIT= Earn Before Interest and Tax

7.2: Financial Leverage

The financial leverage is defined as the ability of a firm to use fixed financial charges to magnify
the effects of changes in operating profits, on the firm’s earning per share. In other words, the
financial leverage is the tendency of a residual net income to vary disproportionately with operating
profit. It indicates the change that takes place in the taxable income as a result of change in the
operating income.

FORMULA

Financial Leverage=
EBIT/EBIT-I

WHERE:

EBIT= Earn Before Interest and Tax

Leverage Ratio 2016 2017 2018 2019 2020

Degree of operating leverage 2.33 2.13 2.44 3.11 2.7

Degree of financial leverage 1 1 1 1 1

The answer is in times

NOTE

The DOL ratio helps analysts determine what the impact of any change in sales will be on the
company's earnings.

8: Value Analysis

Value analysis is a systematic review of the production, purchasing and product design
processes to reduce overall product costs. This can be accomplished through a variety of
activities, including the following:

8.1: Market / Book Ratio

The ratio of a stock market price to its book value gives another indication of how investor regards
the company. Company with relatively high rate of return on equity generally sells at higher
multiples of book value than those with low returns. We find book value per share

FORMULA

Book value per share =

Common equity / Number of common share outstanding

Now we divide the market value per share by the book value per share to get a market /book ratio of

1.4 times for Unilate

Market/Book Ratio =

Market Price per Share / Book Value per Share

The answer is in times

Value analysis 2016 2017 2018 2019 2020

market to book ratio 46812.4 89011.16 105444.8 126698.91 9844.28

9: Cash Flow Analysis

There are three cash flow types that companies should track and analyze to determine
the liquidity and solvency of the business: cash flow from operating activities, cash flow
from investing activities and cash flow from financing activities. All three are included
on a company’s cash flow statement.

FORMULA

Cash Flow Analysis=

Operating activities / Sale

Cash flow analysis 2016 2017 2018 2019 2020

0.193 0.13 0.106 0.086 0.184

10: Rate of Return

A rate of return is the net gain or loss of an investment over a specified time period, expressed as a
percentage of the investment’s initial cost. When calculating the rate of return, you are determining
the percentage change from the beginning of the period until the end.

FORMULA

Rate of Return =

Dn / PO

Dn = Dividend of next year

PO = Price of common stock

Rate of return 2016 2017 2018 2019 2020

0.04 0.026 0.017 0.0178 0.0173

11: Growth Rates

Growth rates refer to the percentage change of a specific variable within a specific time period. For
investors, growth rates typically represent the compounded annualized rate of growth of a
company's revenues, earnings, dividends, or even macro concepts, such as gross domestic
product (GDP) and retail sales. Expected forward-looking or trailing growth rates are two common
kinds of growth rates used for analysis.

FORMULA

Growth Rates=

DO (1+G)

DO= Dividend G = Growth Rate

Growth rate 2016 2017 2018 2019 2021
34.93 49.14 17.41 11.46 17.63
12: Variance analysis

Variance analysis can be summarized as an analysis of the difference between planned

and actual numbers. The sum of all variances gives a picture of the overall over-
performance or under-performance for a particular reporting period. For each item,
companies assess their favorability by comparing actual costs to standard costs in the
industry. 

Budget Variance

A budget variance is an accounting term that describes instances where actual costs
are either higher or lower than the standard or projected costs

FORMULA

Budget Variance=

Actual FOH –Estimated FOH

FOH= Factory Overhead

NOTE

We assumed 20 percent of sale in every years

Varince analysis 2016 2017 2018 2019 2020
budged varince -9046413.8 -11306658.6 -9357102 -8124303.6 -8506563.8

13: Valuation Analysis

Valuation analysis is a process to estimate the approximate value or worth of an asset,

whether it’s a business, equity, fixed income security, commodity, real estate, or other
assets.

FORMULA

Valuation Analysis=

D n / KSE-G

KSE= Required Rate of Return

G= Growth
Valuation analysis 2016 2017 2018 2019 2020
Vcs -5.1 -2.82 -3.82 -4.01 -2.26

14: Sensitivity Analysis

The technique used to determine how independent variable values will impact a
particular dependent variable under a given set of assumptions is defined as sensitive
analysis

FORMULA

Sensitivity Analysis=

RF-B (MR-RF)
RF= Risk Free Required Rate of Return

B= Beta

MR= Market Return

Sensitivity analysis 2016 2017 2018 2019 2020

12.01 12.04 16.09 14.62 11.5

REFERENCE:

1. https://www.nestle.pk/aboutus
2. https://www.nestle.pk/aboutus/nestleinpakistan/nestle-in-pakistan
3. https://www.nestle.com/aboutus/history/nestle-company-history
4. https://www.nestle.com/aboutus/overview/ourbrands
5. https://www.nestle.pk/aboutus/nestleinpakistan/offices-and-factories
6. https://www.slideshare.net/himabindu779/about-nestle
7. https://www.nestle.pk/aboutus/nestleinpakistan/boardofdirectors
8. https://www.nestle.pk/aboutus/nestleinpakistan/management-committee
9. https://www.nestle.com/investors/sharesadrsbonds/stockquoteshttps
10. https://mission-statement.com/nestle/
11. https://bohatala.com/nestle-operations-management-project/
12. https://www.investopedia.com/terms/h/horizontalanalysis.asp
13. https://www.investopedia.com/terms/v/vertical_analysis.asp
14. https://www.indeed.com/career-advice/career-development/gross-profit-ratio
15. https://www.accountingtools.com/articles/2017/5/5/net-profit-ratio
16. https://www.investopedia.com/terms/l/liquidityratios.asp
17. https://www.investopedia.com/terms/e/efficiencyratio.asp
18. https://www.investopedia.com/ask/answers/070914/how-do-i-calculate-inventory-turnover-
ratio.asp
19. https://corporatefinanceinstitute.com/resources/knowledge/accounting/accounts-receivable-
turnover-ratio
20. https://corporatefinanceinstitute.com/resources/knowledge/finance/return-on-investment-roi-
formula/
21. https://www.accountingtools.com/articles/2017/5/8/value-analysis
22. https://www.economicsdiscussion.net/financial-management/leverage-analysis/33338
23. Essentials of Managerial Finance 13th edition page no 456