10 FINANCE AND ACCOUNTING 10 FINANCE AND ACCOUNTING Introduction

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Finance and Accounting

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Table of Contents
Introduction................................................................................................................................2
Nestle..........................................................................................................................................2
Almarai.......................................................................................................................................2
External Analysis.......................................................................................................................3
PESTLE Analysis...................................................................................................................3
Porter Five Forces...................................................................................................................4
Financial Analysis......................................................................................................................5
DuPont Analysis.........................................................................................................................8
Conclusion..................................................................................................................................9
Recommendations......................................................................................................................9
References................................................................................................................................10

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Introduction
Financial analysis is considered as the process of evaluating projects, businesses,
budgets and other financial transactions with the motive of knowing their suitability and long
term performance (Schroeder, Clark & Cathey,2019). Mainly financial analysis is done to
know whether an entity is solvent, stable, liquid and profitable for investors (Robinson,2020).
This report helps to understand the concept of financial analysis and tools used to analyze the
position of companies. The financial analysis of Almarai is done and comparison is done
with one of the leading players in the industry that is Nestle. In the below sections, some of
the tools are used such as pestle analysis, porter five forces, and ratio analysis in order to
know the market position and financial position of both companies from the perspective of
creditors and investors. At last, recommendations are given for management regarding value
creation and to investors about the company that gives a good return in the near future.
Nestle
Nestle is an organized business as it covers three geographic zones and many
businesses on a global platform (Yahoo Finance,2019). Nestle manufactures and distributes
beverage and food products in some of the categories that are liquid and powdered beverages,
milk products and water and ice cream, cooking aids and instant dishes and pet care and
confectionary items. Nestle Group has manufacturing units in 85 countries and distributes its
products across 190 countries with employee strength of 308,000 people (Nestle,2020).
In the region, the sales of Nestle products rose by 2.3% in 2019 and registered growth
of 2.8%. Further, the company sales mainly rise in the organic food segment due to the shift
of people towards the consumption of organic food and changing lifestyles (Djarum, Kee,
Azmin & pandit,2019). Some of the main products that are growing and capturing the market
are wafer biscuits, caramel chocolate, chilled and cereals. Nestle has a huge market presence
across the world with a diversified product portfolio as the company offers many brands in
each of its segments. Nestle is planning to triple its sales by 2020 in the Middle East region
(Galalae & George,2018).
Almarai
Almarai Company based in Saudi Arabia and was founded in 1977 by Irish Agri
Pioneers and Paddy McGuckian (Fabbe, Kindred & AlAmin,2018). .The company mainly

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operates in the segment of beverage and food manufacturing and distribution. Almarai is
amongst the leading FMCG brand in North Africa and the Middle East region (Singh and
Hagahmoodi,2017). The company is providing healthy and nutritious products to consumers
of all ages from the last 40 years with the principle of “Quality you can trust” (Fabbe,
Kindred & AlAmin,2018).
Further, Almarai offers a diversified product portfolio to its customers that include
bakery, juices, infant formula, and poultry. As of 31 December 2018, the paid-up share
capital of the company was SAR 10.0 billion and tradable share at the end amounted to 216
million that represented 21.7% of the capital of Almarai with that market capitalization was
SAR 48 billion (Fabbe, Kindred & AlAmin,2018). The net profits of the company dropped in
2019 by 10% and stood at SAR 1.81 billion and market capitalization in December 2019 was
47 billion Almarai has a strong workforce and the company focuses on retaining, attracting
and developing talent by investing in people. At present, the company has 42,971 employees
from its 8,766 are Saudi employees and 750 are female employees (Fabbe, Amin, Cekin &
Kindred,2018).
External Analysis
PESTLE Analysis
Political: The political factors that are affecting the business in the Gulf region or in the
Middle East are; increasing investment by the government in the food and beverage industry
as this segment in Saudi Arabia valued at $45 billion (Muazu, Blaisi, Naji & Alquanthny,
2019). The government provides import subsidies to companies in order to increase the
market in 2020 (Alsukait, Bleich, Wilde & Folta,2020). Hence this is an opportunity for
companies that are operating in the food and beverage industry in Saudi Arabia (Hassen &
ElBilali,2019).
Economic: Economic factors include economic growth, consumption and spending pattern of
people and income level. Saudi Arabia has the largest population in the GCC that is 29
million residents and a growth rate of 3.3 percent Arabia (Hassen & ElBilali,2019). On an
average $70 billion was spent by people on food and beverage consumption in 2019 Arabia
(Hassen & ElBilali,2019). Further, Saudi Arabia's General Investment Authority (SAGIA)
going to invest $59 billion in the food industry by 2021 as the food industry contributes 10