Rafhan Maize Products Company Limited and Mitchell’s Fruit Farms Ltd - Case Study

FINAL PROJECT[pic 1]

SUBJECT: FINANCIAL STATEMENT ANALYSIS

SUBMITTED TO: SIR HAFEEZ QAZI

SUBMITTED BY:

ZUBAIR UL HAQ 150087

NIDA ULFAT 150100

DEPARTMENT: AUSOM

DATE: 15TH NOVEMBER, 2018

TABLE OF CONTENTS

In this project we have picked two companies which were listed on KSE 100 Rafhan Maize Products Company Limited (RAMZ) and Mitchell’s Fruit Farms Ltd (MITF), which fall in sector of food and beverages. We have calculated their liquidity, solvency, profitability, and efficiency ratios for two years 2016 and 2017. And on the basis of ratios we have analyzed their individual performance. Then we have done a comparative analysis so that we can suggest the investor in which company he should invest. And conclusion is that RAMZ is performing relatively better than MITF on basis of ratios so the investor is recommended to invest in RAMZ.

MITCHELL’S FRUIT FARMS LTD (MITF)

Mitchell’s is the oldest food company in Pakistan. It was established in 1933 by Francis J. Mitchell under the name of Indian Mildura Fruit Farms Ltd. After the country gained independence in 1947, the company's name was changed to "MITCHELL’S Fruit Farms Ltd." with the brand name of "MITCHELL’S”.

Mitchell's was one of the first food products companies to get an ISO 9001 quality accreditation in Pakistan. It manufactures and packages grocery items including fruit drinks, canned fruits and vegetables, sauces, pickles, jams and squashes. The company exports its products to the US, UK and the Middle Eastern countries. Mitchell's is one of the leading food products manufacturers and exporters in Pakistan. Its listed on KSE 100 and its ticker symbol is “MITF”.

RATIOS ANALYSIS

LIQUIDITY RATIOS: 

They measure a company's ability to pay off its short-term debts as they come due using the company's current or quick assets. A high liquidity ratio indicates that a business is holding too much cash that could be utilized in other areas. A low liquidity ratio means a firm may struggle to pay short-term obligations.

From analysis, liquidity ratio has shown a decrease in it which is not good for company’s point of view as well as from investor point of view because investor should not invest to in a company which has low liquidity who may face struggle to pay short term obligations.

SOLVENCY RATIOS:

Also called financial leverage ratios, they compare a company's debt levels with its assets, equity, and earnings to evaluate whether a company can stay afloat in the long-term by paying its long-term debt and interest on the debt. The low company’s solvency ratio is, the greater the probability that it will default on its debt obligations. So, higher solvency ratios are favorable.

Our analysis indicates that, the company is not performing well in solvency term because only two of its ratios have shown good results. On the other hand, all of them have shown riskiness in them, so, from investor point of view it is not good to invest in this company.

PROFITABILITY RATIOS:

These ratios show how well a company can generate profits from its operations.

From analysis, company has shown a nonprofit ratio which is indicating that company is unable to generate profits from its operations.

From investor point of view, investor will not prefer to invest in a company which is not generating profit because investor’s major concerns are with return/profits. The more the company generates profits, the more the investors will be attracted.

EFFICIENCY RATIOS:

Also called activity ratios, it evaluates how well a company uses its assets and liabilities to generate sales and maximize profits. The lower the ratio, the better (50% is generally regarded as the maximum optimal ratio). An increase in the efficiency ratio indicates either increasing costs or decreasing revenues.

From analysis, it indicates that the company is not performing good in efficiency ratio as maximum ratios are have shown a decrease compare to the previous year. Total asset turnover, account receivable collection, fixed assets turnover has shown that the company is performing well; on the other hand, all other ratios are indicating that company is not performing well.

From investor point of view, if investor is looking in these ratios and making a decision either to invest or not, then investor should not invest in it.

Overall analysis of MITCHELL’S FRUIT FARMS LTD (MITF)

If we analyze the company’s performance based on the four major ratios, company hasn’t shown a good performance at all. And from investor point of view, it is not good to invest in this company because of company’s overall performance.

RAFHAN MAIZE PRODUCTS CO LTD (RAMZ)

INTRODUCTION

Rafhan Maize Products Company Limited manufactures and sells industrial products, such as industrial starches, liquid glucose, dextrose, dextrin and gluten meals using maize as the basic raw material. The Company provides integrated solutions for industrial applications, such as textile, paper, corrugation, chemicals, laundry and personal care. It offers portfolio of solutions, products and services to the textile industry, which includes Rafhan, Penetrose, Amisol, Tex-o-Film and Coratex. Its Animal Nutrition product lines include Prairie Gold and Rafhan maize gluten meals, Bualo Maize Bran, Rafhan Maize Germ Cake and Enzose Hydrol. Its food segment includes a range of products, such as Globe, Snowflake, Rafhan Liquid Glucose, Flow Sweet EE Liquid Glucose, Cerelose Dextrose Monohydrate, Rafhan Liquid Caramel and Golden Syrup. It focuses on corn refining in Pakistan, and the Company has three plants, of which two are located in Central Punjab and a plant located in Interior Sindh.