Essay Sample: Analysis of the Financial Statements of Unilever Pakistan

Secondly, I also want to thank the faculty members of both Kadir Has University and Coventry University, who taught me from first semester till the third semester. It is the knowledge that I have gained throughout which made me able to write dissertation relating it to areas like Finance, Marketing, Business Statistics and Business Strategy. Through my professors teaching style that they demonstrated it encouraged me to go for a challenging topic for writing a dissertation. Apart from faculty members, I would also like to thank the support staff of both the universities who always helped me from small to big problems.

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Lastly, I want to express my deep appreciation and thanks to my family for always giving me moral support and encouraging me throughout my MBA studies which motivated me to work hard in my studies and make them proud.

Abstract

This research is structured to conduct an analysis of the financial statements of a company operating in the Fast Moving Consumer Goods in the Pakistan Market. The chosen company that the research has been undertaken on is Unilever Pakistan.

The research focuses on the importance of financial ratios in assessing the performance of a company. Additionally, the result focused on analyzing the performance of Unilever Pakistan using the financial ratios. Furthermore, the research has analyzed the impact of external and internal factors to the survival and endurance of Unilever in the Pakistan FMCG industry. Another aspect that the research focused on is the standing of Unilever Pakistan in the past, presently and in the future. The research is conducted using a descriptive method utilizing both qualitative and quantitative data. The research has relied on secondary sources of data such as the company annual reports, reference books, and journals. Some factors limited this report however, they were all overcome contributing to the final findings of the report.

Findings of the research have revealed that Unilever Pakistan has less current assets than current liabilities which makes it unable to meet its obligations within the required time. The main challenge, which is highlighted in the analysis of the report, is the rising debt that the company has. The company, however, has strong strengths such as strong international reputation and a wide range of brands enabling it to continue operating in Pakistan amid political and economic instability. It is important to conduct a future study on the marketing strategies that FMCG companies should pursue in international markets.

Table of Contents

The IntroductionThe research is based on one of the top and leading FMCG organizations i.e. Unilever that has its headquarters in the UK. Unilever has its presence in more than 190 countries but for this research, Unilever Pakistan is chosen (Unilever 2015). Unilever is among the worlds most old multinational company owning over 400 brands having a focus on only 14 brands, which generate sales of approximately 1 billion Euros. Unilever is formed initially as a merger between two companies, Lever Brothers that is a British soap-maker and a Netherlands based margarine producer Margarine Unie in the year 1929 (Unilever 2015).

The company started growing in the 1930s when it started launching new ventures into other continents using the strategy of acquisitions. In Pakistan, the company started its operations in the year 1948 after renaming to Unilever Pakistan Limited from the previous name Lever Brothers Pakistan Limited (Unilever 2015). The company chose Rahim Yar Khan as the best site to set up a vegetable oil factory. It happens that Unilever Pakistan is one of the largest Multinational operating in the country as well as being the largest FMCG Company in the country. Presently, the head office of the company in Pakistan is in Karachi after it is moved from Rahim Yar Khan in the 60s (Unilever 2015). In Pakistan, the company offers food and beverages, personal care products, and home care products that are among the numerous categories of products that the company offers in other countries (Unilever 2015).

Among the products, which are offered in the category of personal care, include; Clear, Close-up, Fair and Lovely, Lifebuoy shampoo, Lifebuoy soap, Lux, Rexona, Sunsilk in addition to other products. In the category of Home Care, the company offers; Comfort which is a fabric softener, Rin, which is a detergent, and Surf Excel, which is a detergent, and at the same time a gentle ish (Unilever 2015). The company continues to operate in a country, which is continuously faced with internal political disputes, which makes the country unfavorable for foreign investors to enter the market (The CIA 2015).

Unilever Pakistan has been protective of its employees in terms of provision of quality working conditions. The company has been developing various employees initiatives such as the health passport with the purpose of their well-being. The company provides a gym facility as well as a vitality menu at the cafeteria of the company to enable their people to improve health. The company continues to make emphasis on balancing between their lives and work in addition to providing a day care center for mothers to utilize them. The company also has a talent management and development strategy for skill leadership. Furthermore, Unilever Pakistan has the priority of keeping talent retention as a program in their culture (Unilever Pakistan 2010; p. 17).

Fast moving consumer goods are also referred to as consumer-packaged goods and are defined as products, which are sold in a quick way at low costs (Sean 2002; p. 14). The FMCG often have a short life, which makes these products generate a high demand. These products in this category have a low-profit margin, however; because of the ability to be sold in large quantities, they bring attractive cumulative profits (Ramanuj 2004; pp. 2627). In Pakistan, the FMCG sector has seen some difficulties keeping in consideration the political and economic situation. Pakistans inflation rate in 2010 is recorded as 13%, and Jan 2015 recorded 2.49% (I Economics 2015). This industry has seen some local companies entering which have also become big giants. Among the Worlds, renowned companies operating in the FMCG industry are Unilever, Procter and Gamble, Nestle and Colgate, which have operated in the country for years. In Pakistan after years of fight, the citizens in the country have lead to an increase in consumerism, which is being caused by the rising middle class, health awareness drive, families decreasing in size, growth in the rural income and increment in the literacy levels, which are now at 57.9% (The CIA 2015).

The FMCG industry in Pakistan is expected to do well in the future, as more people are moving into cities to do work that increases the family income, which means having more money to do shopping (Dawn 2011). The population of the country is also rising which is a good sign of the industry estimated to be growing a 2% each year now with approximately 196 million people to feed (The CIA 2015). In the year 2011, Nestle Pakistan Limited, which operates the largest milk collection in the country, works with an estimated 190,000 farmers earning Rs 4.7 billion profit after tax, while Unilever sold more than Rs52 billion worth of consumer products making a profit of Rs 4 billion (Dawn 2011). On the other hand, the biggest pharmaceutical company in Pakistan; Getz Pharma, in the same year 2011, sold drugs, which were worth Rs22, billion earning a profit of Rs 1 billion (Dawn 2011). Despite the stagnating economy, inflation rise and political instability Pakistan consumers appetite for FMCG remains undeterred. A report, which is prepared by Topline Securities after an examination of 25 consumer companies, revealed that in the year 2012 their sales experienced an increase of about 17% while profits grew by around 40% (The Economist 2013).

Financial ratios will play an important role in determining the performance of Unilever Pakistan Limited. The use of financial analysis has been adopted worldwide as one of the key tools of measuring and evaluation of performance. Performing a financial analysis of Unilever is the quickest way of analyzing the past, present and future performance of the company in Pakistan (Chen & Zhao 2006; p. 253). When using financial ratios the debts, profits, assets in place and the market value of the company will be known (Bull 2008; p. 18). Financial ratios are defined as mathematical links, which are obtained from the financial statements of a company such as Unilever with an aim of getting familiar with the financial opera...