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Business Analysis: Nestle And Dutch Lady

3147 words - 13 pages

1. INTRODUCTION

In this assignment, we will be conducting a business analysis on two major corporations in the same industry. Nestle and Dutch Lady. The analysis will be based on the companies’ performance for both the years 2011 and 2012 and the data will be extracted from the companies’ financial reports.

2. PROFITABILITY

2.1 Return on ordinary shareholder’s fund (ROSF)

According to the chart above, there is an increase on Nestlé’s ROSF of 6.63%. Such that, in 2011 the ROSF was 65.36% while in 2012 was 71.99%. Analytically, in 2011 for every RM 1 of ordinary shares contributed, it was able to generate RM 65.36 on the net profit. While in 2012, for every RM 1 of the ordinary share, it was able to generate RM 71.99 on the net profit. However, according to the balance sheet, in 2012 the ordinary share capital (RM 751.2 million) was more than that of 2011 (RM 652.7 million). Actually, this is a great improvement experienced by Nestlé berhad of RM 98.5 million on the share capital have strong asset productivity, structure of finance and most importantly the business is growing, rapidly, (Sander & Haley, 2008).
However, on the other hand; Dutch Lady has also experience an increase in it ROSF. The ROSF increased by 4.58% from the year 2011 to 2012. Moreover, from the annual report on the financial summary (p. 4), it shows that Dutch Lady experience a decline in its shareholders’ funds from the 2011 (RM 259.2 million) to the 2012 (RM 216.1 million). Thus, the growth of ROSF was less affected by the decline in the shareholders’ funds.

2.2 Return on capital employed (ROCE)

ROCE refers to the net operating profit of a company to its capital employed, (Peavler, 2009).The chart above shows the return on capital employed (ROCE) of Nestlé and Dutch Lady for the past two years. By referencing to the chart, we see that Nestlé’s ROCE has increased by 10.53% from 2011 to 2012. It also shows that in 2012 (2011) the ROCE was 64.86% (54.33%). By considering that, we would say that in 2012 (2011), for RM 1 was capital employed contributed, it was able to generate RM 64.86 (RM 54.33) of net profit.
Apart that, Dutch Lady experienced an increase in its ROCE for the past two years of 29.58%, such that, in 2011 the ROCE was 38.91% while in 2012 was 68.49%. The growth shows that in 2012 the company performed far better than in 2011, meaning for every RM 1 contributed by capital employed in 2012 (2011) the company was able to generate RM 68.49 (RM 38.91).
Again, a higher value of ROCE indicates that Nestlé generates more money per capital employed. This is worth-highlighting that their ROCE has rose 10.53% compared to 2011 which is a good sign as the company’s value is keep increasing.

2.3 Net profit margin

From the chart above, shows that there is an increase in Nestlé’s net profit margin from the 2011 to 2012 by 4.3%. From the income statement of Nestle, it indicates that there is increase of 309.7 million from 2011 (4.3 billion) to...

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