Corporate Finance - Strategies and Financial Analysis of Altadis

This paper provides an explanation of the strategies that have been undertaken by Altadis in order to enhance their operational activities. The company has introduced several plans and strategies within their financial aspects with the help of which they would be able to increase their extent of profit. The report has even highlighted the economic valuation of the company and the performance reveals that there are chances of improvement. The company has underpinned their valuation in order to provide increased amount of remuneration to their shareholders.

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Author’s Note:

1
CORPORATE FINANCE
Introduction
This paper looks to provide an explanation of the strategies that have been undertaken by
Altadis in order to enhance their operational activities. The company has introduced several
plans and strategies within their financial aspects with the help of which they would be able to
increase their extent of profit. All the aspects as well as the strategies will be addressed and
thereby opinion in accordance to the same would be given in order to provide a brief idea about
the effectiveness of the strategies that have been incorporated by the company.
Answer to Question No 1
Altadis follows a cash flow driven approach and the discounted cash flow driven target
price recommends to have an upside potential of more than 20%. In this manner, the company
has the capability to outperform their European competitors. The main factor as the company
would be able to outperform from their competitors has been due to the fact that Altadis has been
restructuring, buying back their shares and has been making use of the developments that is seen
in the emerging markets.
The company maintains a shareholder remuneration policy with the help of which they
have been able to provide remuneration to their shareholders and the percentage of remuneration
has been increasing as the years pass by. This indicates that the company has been performing
well and therefore has been able to pay for the remuneration out of their profits. The company
due to their shareholder remuneration policy have an underpinned valuation. The company has
undertaken the plan to buy back their share capital and in this manner the organization has been
planning to increase their return.

2
CORPORATE FINANCE
The discounted free cash flow valuation is used and therefore assumptions have been
made by the firm that the risk free rate is 4.5%, while the beta is 0.8 and the equity risk premium
to be 4%. This leads to the overall equity cost to be 7.7%. A long term growth rate estimate has
been made and therefore one can say that the estimation is conservative in nature.
The ratio analysis is some way comparable to the other European manufactures. The
company has been trading at a huge discount on their economic valuation in accordance to the
EBIT and EBITDA. The financial investments and lower leverage has compelled the company to
trade at figures similar to the other rival companies.
The overall financial analysis addresses the fact that the operating outcomes are projected
to grow and this will be assisted with the help of the restructuring plan of the company. The
overall financial performance has revealed that the company has been making profits and would
continue to do the same in the coming years as well. The performance by division as well as the
economic sales has been rising and thereby one can say that the company has been performing in
an effective manner even though further enhancement of their performance is possible.
Answer to Question No 2
The report has even highlighted the economic valuation of the company and the
performance reveals that there are chances of improvement. The company has underpinned their
valuation in order to provide increased amount of remuneration to their shareholders. However,
at this point of time in order to increase their valuation and create a reputation in the market, the
company has to reduce the percentage of remuneration they are giving out to their shareholders.
This percentage can be increased once the company has established themselves in the market and
would be market leader in the product that they manufacture. The incorporation of this strategy

3
CORPORATE FINANCE
would even increase their financial ratios and thereby their ratios would be higher than the
similar companies. This in a way would even increase the extent of financial performance.
Answer to Question No 3
The new strategy that is provided would fit in the evaluation offered due to the fact this
would improve the financial performance of the company and the shareholders of the company
are looking for long term returns and therefore lowering of the remuneration percentage at this
point of time and thereafter increasing the percentage at a later stage would increase the
economic valuation and profit of the company as well satisfy the shareholders with increased
returns.
Conclusion
The assessment that has been made with the help of the report of Atladis explains that the
company has been performing in an effective manner. The opinion or the strategy that has been
recommended if incorporated by the company would even increase their level of performance in
the economy and thereby the company would even develop their operational outcomes further.

4
CORPORATE FINANCE
Bibliography
Majocchi, A., Dalla Valle, L. and D'Angelo, A., 2015. Internationalisation, cultural distance and
country characteristics: a Bayesian analysis of SMEs financial performance. Journal of Business
Economics and Management, 16(2), pp.307-324.
Martínez‐Ferrero, J. and Frías‐Aceituno, J.V., 2015. Relationship between sustainable
development and financial performance: international empirical research. Business Strategy and
the Environment, 24(1), pp.20-39.
Rani, N., Yadav, S.S. and Jain, P.K., 2015. Financial performance analysis of mergers and
acquisitions: evidence from India. International Journal of Commerce and Management, 25(4),
pp.402-423.
Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate
social responsibility contribute to firm financial performance? The mediating role of competitive
advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), pp.341-
350.
Sarlin, P., 2015. Data and dimension reduction for visual financial performance
analysis. Information Visualization, 14(2), pp.148-167.
Shi, Y., Lim, J.M., Weitz, B.A. and France, S.L., 2018. The impact of retail format
diversification on retailers’ financial performance. Journal of the Academy of Marketing
Science, 46(1), pp.147-167.