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ABBOTT ANALYSIS

AHMAD BILAL SABIR 26104


RAJA TAHIR HUSSAIN 26439
DANIAL ASGHAR 26625
PARIS FARHAN KHAN 27455
AGENDA

 INDUSTRY PROFILE
 COMPANY PROFILE
 VERTICAL ANALYSIS
 HORIZONTAL ANALYSIS
 PROFITABILITY RATIOS
 LIQUIDITY RATIOS
 SOLVENCY RATIOS
 ACTIVITY/ TURNOVER RATIOS
 CONCLUSION
INDUSTRY PROFILE
HISTORY

 1947, two small units


 Mostly medicines were imported
 1972, a policy made to restrict prices upto 850 of essential drugs
 1976, due to inaccessibility of new researched medications this policy was reversed
 1999, Govt. has invested US$ 133 million in the pharmaceutical industry
 2006, 400 licensed pharmaceutical companies in Pakistan, including 30 multinationals
who had over 53% of market share
 2007, The value of pharmaceuticals sold exceeded US$1.4bn
 Pharmaceutical spending accounts for less than 1% of the country's GDP
COMPANY PROFILE
INTRODUCTION

 Multinational company
 More than 70,000 employees
 More than 130 countries
 Abbott Pakistan is part of Abbott Laboratories, Chicago, USA
 1948, started operating in Pakistan
 Two manufacturing facilities located in Landhi and Korangi in Karachi
 Abbott Pakistan has leadership in the field of Pain Management, Anesthesia, Medical
Nutrition and Anti-Infective
 On June 29, 2005 Abbott Pakistan Achieved Class ‘A’ accreditation against the Oliver
Wight ABCD Check list
COMPETITORS

Glaxo Smith HIGHNOON GETZ SANOFI


Kline LABS PHARMA AVENTIS
VISION
 To be the most admired healthcare company in Pakistan
MISSION STATEMENT
 To deliver consistently superior products and services which
contribute significantly to improve the quality of life of
consumers
VERTICAL ANALYSIS
STATEMENT OF FINANCIAL POSITION
December 31, 2018 December 31, 2017
Rupees in % Rupees in %
‘000 ‘000

Statement of Financial Position


Total Equity 13,235,01 65.3 14,355,83 74.8
1 5
Non-Current Liabilities 429,124 2.1 231,147 1.2

Current Liabilities 6,617,122 32.6 4,601,128 24.0

Total Equity and Liabilities 20,281,25 100.0 19,188,110 100.0


7

Non-Current Assets 7,283,126 35.9 5,492,322 28.6

Current Assets 12,998,13 64.1 13,695,78 71.4


1 8
Total Assets 20,281,25 100.0 19,188,110 100.0
7
STATEMENT OF PROFIT AND LOSS
December 31, 2018 December 31, 2017
Rupees in ‘000 % Rupees in ‘000 %

Statement of Profit or Loss


Sales - net 29,719,279 100.0 26,088,233 100.0
Cost of sales 19,944,014 67.1 15,999,247 61.3

Gross Profit 9,775,265 32.9 10,088,986 38.7

Selling and distribution expenses 4,525,458 15.2 3,611,882 13.9


Administrative expenses 562,771 1.9 468,172 1.8

4,687,036 15.8 6,008,932 23.1


Other income 458,654 1.5 445,317 1.7

Other charges 786,315 2.6 602,244 2.3

4,359,375 14.7 5,852,005 22.4


Finance costs 15,606 0.1 10,060 0.0

Profit before taxation 4,343,769 14.6 5,841,945 22.4


Taxation 1,649,436 5.5 1,636,713 6.3

Profit for the year 2,694,333 9.1 4,205,232 16.1


COMMENT ON VERTICAL ANALYSIS

 Statement of Financial Position:


 Equity of the Company has declined on account of dividends paid during the year
partially offset by profit for the year.
 Non-current liabilities have increased mainly on account of the finance lease liability.
 Current liabilities have increased mainly on account of higher import liability due to
volume, timing as well as the impact of currency devaluation.
 Non-current assets are 35.9% (2017: 28.6%) of the total assets, which increased
primarily on account of increased capital expenditure during the year for expanding
manufacturing capacity, enhancement of productivity and improvement of plant
efficiency. Current assets are 64.1% (2017: 71.4%) of the Company which decreased
mainly due to lower cash and bank balances versus last year.
COMMENT ON VERTICAL ANALYSIS

 Statement of Profit or Loss:


 Gross profit margin of the Company declined to 32.9% from 38.7% in
2017 on account of currency devaluation and inflation.
 Net profit margin of the Company decreased to 9.1% from 16.1% in
2017 mainly on account of depleting gross profit margin (as explained
above), sales and promotion expenditure and exchange losses.
HORIZONTAL ANALYSIS
STATEMENT OF FINANCIAL POSITION

% increase / (decrease) over preceding year


December 31, 2018 December 31, 2017

Statement of Financial Position

Total Equity (7.8) (1.6)

Non-Current Liabilities 85.6 13.6

Current Liabilities 43.8 61.5

Total Equity and Liabilities 5.7 8.7

Non-Current Assets 32.6 21.4

Current Assets (5.1) 4.4

Total Assets 5.7 8.7


STATEMENT OF PROFIT AND LOSS

% increase / (decrease) over preceding year

December 31, 2018 December 31, 2017


Statement of Profit or Loss
Sales – net 13.9 11.5
Cost of sales 24.7 14.1
Gross Profit (3.1) 7.7
Selling and distribution expenses 25.3 10.9
Administrative expenses 20.2 4.0
(22.0) 6.2
Other income 3.0 5.8
Other charges 30.6 23.9
(25.5) 4.6
Finance costs 55.1 48.8
Profit before taxation (25.6) 4.6
Taxation 0.8 4.6
Profit for the year (35.9) 4.6
COMMENT ON HORIZONTAL ANALYSIS

 Statement of Financial Position:


 Non-current assets increased as compared to last year on account of
capital expenditure for expanding manufacturing capacity, enhancement
of productivity and improvement of plant efficiency.
 Increase in non-current liabilities is attributable to finance lease liability.
 Current liabilities increased primarily on account of higher import liability
due to currency devaluation, timing of shipments and increased volume.
COMMENT ON HORIZONTAL ANALYSIS

 Statement of Profit or Loss:


 Net sales for the year increased by 13.9% over previous year driven mainly by
sustained volume growth of established brands.
 Cost of sales increased by 24.7% mainly on account of currency devaluation and
inflation.
 Selling and distribution expenses increased by 25.3% mainly due to advertising and
sales promotion expenditure.
 Other charges increased by 30.6% mainly on account of currency devaluation.
 The profit after tax of the Company decreased by 35.9% in line with the reasons
mentioned above.
PROFITABILITY RATIOS
PROFITABILITY RATIOS

2018 2017

NET PROFIT MARGIN 9.1% 16.1%

GROSS PROFIT MARGIN 32.9% 38.7%

OPERATING PROFIT MARGIN 15.8% 23.1%

RETURN ON TOTAL EQUITY 20.4% 29.3%

RETURN ON TOTAL ASSETS 13.3% 21.9%


Net Profit Margin Gross Profit Margin
Net Profit Margin Gross Profit Margin

9.10%

32.90%
38.70%
16.10%

2018 2017 2018 2017


COMMENTS ON PROFITABILITY RATIOS

 Profitability ratios of the Company, in general, have declined versus last


year, mainly on account of currency devaluation, inflation, advertising
and sales promotion expenditure and inadequate price adjustments in
the pharmaceutical segment.
 Gross profit margin declined to 32.9% versus 38.7% last year.
 Net profit margin declined to 9.1% versus 16.1% during 2017 in line with
the reasons mentioned above
TOTAL ASSET TURNOVER

COMMENT
2018 2017  Total assets turnover ratio
(average assets) increased
to 1.51 in 2018 from 1.42 in
TOTAL 1.51 1.42 2017 mainly due to increase
in sales during the year.
ASSET times times
TURNO
VER
DUPONT ANALYSIS

December December
31,2018 31,2018

EBIT Margin 14.7% 22.4%


Asset turnover 1.51 1.42
Interest burden / efficiency 99.6% 99.8%
Interest burden / efficiency 62.0% 72.0%
Leverage 1.49 1.28
Net profit margin 9.1% 16.1%
Return on equity 20.4% 29.3%
COMMENT ON DUPONT ANALYSIS

 Return on equity has declined to 20.4% from 29.3% during 2018 driven
by devaluation of Pakistani Rupee coupled with inflation.
 Interest burden / efficiency remained relatively stable since the
Company has a very minor portion of debt in its capital structure.
 Tax efficiency has deteriorated on account of the impact of Super tax
charges for Tax year 2018 and 2019 and higher tax under the final tax
regime.
 Assets turnover increased to 1.51 in 2018 from 1.42 in 2017 mainly due
to increase in sales during the year.
LIQUIDITY RATIOS
 COMMENT ON LIQUIDITY RATIOS
2018 2017
 Cash inflows from operating activities
declined versus last year primarily on
CURRENT 1.96 times 2.98 times account of decrease in profitability and
working capital changes. The Company,
RATIO however, remains sufficiently liquid and has
Rs. 5,678.14 million of cash and cash
equivalents as of 31st December 2018 to
QUICK / ACID 1.27 times 2.19 times meet its investment and operational cash
TEST RATIO requirements.
 Current ratio (2018: 1.96, 2017: 2.98),
CASH TO 0.86 times 1.86 times quick / acid test ratio (2018: 1.27, 2017:
2.19) and cash to current liabilities (2018:
CURRENT 0.86, 2017: 1.86) have declined versus last
LIABILITIES year mainly on account of higher payable
balances.
SOLVENCY RATIOS
2018 2017
DEBT RATIO 34.7% 25.2%

DEBT/EQUITY RATIO 53.3% 33.7%

TIMES INTEREST EARNED 279.34 times 581.71 times


COMMENT

 Total equity decreased by 7.8% to Rs. 13.24 billion comprising of share capital
amounting to Rs. 979.003 million which consists of issued share capital of 97,900,302
shares of Rs. 10.00 each. Abbott Asia Investments Limited, UK is the major
shareholder of the Company, having 76,259,454 shares being 77.90% of total paid-up
capital.
 The Company entered into a finance lease arrangement during the year, which carries
markup at the rate of 6-month KIBOR plus 0.5% per annum.
 Interest cover ratio has declined versus last year on account of decrease in profit
before interest and tax and increase in interest costs due to finance lease.
ACTIVITY / TURNOVER RATIOS
2018 2017
DAYS’ SALES IN RECEIVABLES 14.6 days 13.2 days

ACCOUNTS RECEIVABLE TURNOVER 27.9 times 28.1 times

ACCOUNTS RECEIVABLE TURNOVER IN 13.1 days 12.9 days


DAYS

DAYS’ SALES IN INVENTORY 81.1 days 79.3 days

INVENTORY TURNOVER 5.05 times 4.54 times

INVENTORY TURNOVER IN DAYS 72.3 days 80.4 days

OPERATING CYCLE 85.4 days 93.3 days


COMMENT

 Net sales for the year increased by 13.9% over previous year. Pharmaceutical sales
increased by 12.0% driven by sustained volume growth of established brands.
Nutritional sales increased by 23.6% mainly due to volume growth in PediaSure and
Ensure. General Health Care (GHC), Diagnostic and Diabetes Care cumulatively grew
by 12.1%.
 Cost of sales of the Company increased primarily on account of increase in volumes,
currency devaluation and inflation.
 The decrease in current assets is mainly due to lower cash and bank balances
primarily on account of decrease in profitability. This has been partially offset by
increase in inventory balances to cater for future sales requirements.
CONCLUSION

 Abbott laboratories conducts its business in a responsible manner, with honesty and
integrity. The company is earning profit. The company Assets are more than its
liabilities.
 Gross profit and Net profit decreases as compared to pervious years due to mainly on
account of currency devaluation, inflation, advertising and sales promotion expenditure
and inadequate price adjustments in the pharmaceutical segment.
 Equity declined from prior year primarily due to final (2017) and interim (2018)
dividends paid during the year, partially offset by profit for the year.