ACC 10007 Financial Information for Decision Making

Added on - 16 Oct 2020

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ACC 10007Financial Information forDecision MakingA Financial Analysis on Nestle (Malaysia) BerhadGroup Assignment (Report)Group Name:MILOGroup Memebers:1.Chio Kay Jean1012165782.Grace Lee Ying Ying1012139223.Kiing Kiu Yong1012166044.Oh Xiu Feng1012146665.Sarah Binti Supahan101214284Tutorial Group:09, Thursday 0930-1030Tutor:Dr. Yii Kwang Jing
Executive summaryThe purpose of this report is to analyse the financial position of Nestle (Malaysia) Berhad whichdetermines whether Nestle is currently at a favourable financial position in the market and to thecompany itself. Not only that, a company overview has been done and in short, the company’shistory dates back to the 19th century up until today and was the result of a merge between twofood and beverage companies. With that said, an industry overview was conducted and it wasfound that the food and beverage industry is one of the fastest growing industries globally, withUS taking the lead as main importer back in 2017. For the analysis, four areas were analysed;profitability, efficiency, liquidity and gearing. These are vital in determining the financial state ofNestle. For profitability, Nestle (Malaysia) Berhad had been proven to be efficient in convertingits sale into profits. The efficiency however showed that the company may be facing a financialdistress. Nestle (Malaysia) Berhad has indicated that it has not been liquid and are possiblyunlikely to meet its current obligations. Moreover, the company operates at a normal or optimalfinancial level even though there is an increase in gearing ratios. The cash flow however, thecompany made a repayment of borrowings, causing a massive cash outflow in financingactivities. This report also covers other relevant information about the company in a non-financial aspect such as nutrition, water and environment and the people. Recommendations havealso been given on how to improve the company’s financial status.i
Table of ContentsExecutive summary....................................................................................................................................i1.0 Introduction and Purpose of Analysis................................................................................................12.0 Company and Industry Background..................................................................................................12.1 Company..........................................................................................................................................12.2 Industry............................................................................................................................................23.0 Analysis of Financial Report Data......................................................................................................33.1 Profitability......................................................................................................................................33.2 Efficiency..........................................................................................................................................53.3 Liquidity...........................................................................................................................................73.4 Gearing.............................................................................................................................................94.0 Cash flow analysis over the 3 years..................................................................................................115.0 Assessment of Other Relevant Information.....................................................................................135.1 Nutrition.........................................................................................................................................135.2 Water and Environment...............................................................................................................145.3 Our People......................................................................................................................................156.0 Conclusion..........................................................................................................................................16Appendices.................................................................................................................................................1Appendix A: Profitability......................................................................................................................1Appendix B: Efficiency.........................................................................................................................3Appendix C: Liquidity..........................................................................................................................6Appendix D: Gearing............................................................................................................................7Bibliography..............................................................................................................................................8List of FiguresFigure 1: ROE and ROA of Nestle (Malaysia) Berhad from 2016 to 2018.................................................3Figure 2: Net Profit Margin of Nestle (Malaysia) Berhad from 2016 to 2018.............................................4Figure 3: Asset Turnover Ratio of Nestle (Malaysia) Berhad from 2016 to 2018.......................................5Figure 4: Remaining Efficiency Ratios of Nestle (Malaysia) Berhad from 2016 to 2018............................6Figure 5: Liquidity Chart of Nestle (Malaysia) Berhad from 2016 to 2018.................................................7Figure 6: Gearing Ratio of Nestle (Malaysia) Berhad from 2016 to 2018...................................................9
List of TablesTable 1: Profitability Ratios of Nestle (Malaysia) Berhad from 2016 to 2018.............................................3Table 2: Efficiency Ratios of Nestle (Malaysia) Berhad from 2016 to 2018...............................................5Table 3: Liquidity Ratios of Nestle (Malaysia) Berhad from 2016 to 2018.................................................7Table 4: Gearing Ratio of Nestle (Malaysia) Berhad from 2016 to 2018....................................................9Table 5: Net Cash Flows of Nestle (Malaysia) Berhad from 2016 to 2018...............................................11
1.0 Introduction and Purpose of AnalysisThe team has been assigned to develop a report regarding the financial and non-financialperformance of Nestle (Malaysia) Berhad for both internal and external stakeholders who mightbe interested in investing in the company. The purpose of this report is to prepare an analysis onthe company’s performance within a 3-year span, particularly from 2016 to 2018. To start off,the financial aspects of the report will be based on several factors which are the profitability,efficiency, liquidity and lastly gearing. Additionally, an analysis of Nestle (Malaysia) BerhadGroup’s non-financial aspects which are the environmental and social responsibilities have beenconducted. Furthermore, some considerations on potential outlook are made based thecompany’s current financial situation and provides recommendations to improve it. The contentof this report is to assist stakeholders in their investment decision making.2.0 Company and Industry Background2.1 CompanyNestle is a multinational food beverage company based in Vevey, Switzerland has beenoperating since 1905 after the merging of the Anglo-Swiss Milk company which was founded in1886 by brothersGeorge and Charles Page, and the famously known Farine Lactée HenriNestlé’s founder, Henri Nestle which was founded 20 years prior to Anglo-Swiss. Nestle firststarted their operations back in 1912 in Penang, after the expansion of operations, it moved itsheadquarters to Kuala Lumpur in 1935 (Star Media Group Berhad 2016).According to McGrath (2018), Nestle was ranked the world’s second largest food and beveragecompany. The company operations include producing around 200 brands, and their mainproducts are the categories of tea, coffee, bottled water, baby food, milk products, cereals,confectionery goods and many more.1
2.2 IndustryThe industry allocated for this report is the Food and Beverage Industry which is one of thefastest-growing industries globally. It is an industry whereby it produces edible goods andbeverages through way of agriculture or processing (GlobalEdge 2019). In 2017, the USA wasleading in food and beverage exports and imports alike. Although the imports of the countryoutweighed the exports, incurring a trade deficit. Additionally, the statistics such as userpenetration, revenue and many more are increasing every year. For example, the expectedrevenue growth for the industry in 2019 is expected to grow by 22% in contrast to 2018 (Statista2019).However, there are many strong competitors who offer similar goods like Nestle products to themarket. One of the top Nestle rivals, Mondelez which produces various products like chocolate,beverages, cookies, and confectionary (Bhasin 2018). Due to their great market dominance byproviding products that suit to particular place of customers plus the goods sold are mostlysimilar to Nestle company, Mondelez is considered to be a strong competitor to Nestle. Inaddition, other companies like Mars, Kraft, Lindt, Hershey’s, Kellogg and Unilever also competeaggressively in the food and beverage industry.2
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