Fsa Assignment

Financial Statement Analysis Report on Goodman Fielder Ltd (GFF)

Student ID: 17259191 Page 1

TABLE OF CONTENTS

LETTER OF TRANSMITTAL ..............................................................................................1

EXECUTIVE SUMMARY ....................................................................................................2

1. INTRODUCTION ..............................................................................................................4

1.1. Purpose .............................................................................................................................4

1.2. Scope ................................................................................................................................4

1.3. Methodology ....................................................................................................................4

1.4. Limitations .......................................................................................................................5

1.5. Assumption ......................................................................................................................6

2. COMPANY OVERVIEW ..................................................................................................7

2.1. Business description ........................................................................................................7

2.2. History..............................................................................................................................8

3. ECONOMIC FRAMEWORK ............................................................................................9

4. INDUSTRY ANALYSIS .................................................................................................10

4.1. Bread manufacturing industry........................................................................................10

4.2. Cake and Pastry Manufacturing industry .......................................................................11

4.3. Cooking oil and Margarine Manufacturing industry .....................................................12

5. FINANCIAL ANALYSIS ................................................................................................13

5.1. Segment analysis ............................................................................................................13

5.1.1. Fresh Baking division .................................................................................................14

5.1.2. Fresh Dairy division ....................................................................................................14

5.1.3. Home Ingredients ........................................................................................................14

5.1.4. Asia Pacific .................................................................................................................15

5.2. Common size analysis....................................................................................................15

5.2.1. Income statement ........................................................................................................15

5.2.2 Balance sheet ...............................................................................................................17

5.3. Ratio analysis .................................................................................................................18

5.3.1. Activity analysis..........................................................................................................18

5.3.2. Profitability analysis ...................................................................................................20

5.3.3. Liquidity analysis ........................................................................................................21

5.3.4. Long-term debt and solvency analysis .......................................................................22

5.3.5. Five-factor DuPont analysis ........................................................................................23

5.4. Cash flow analysis .........................................................................................................24

6. PROSPECTIVE ANALYSIS ...........................................................................................26

6.1. Sales Forecast.................................................................................................................26

6.2. Cost of sales forecast .....................................................................................................27

6.3. Earning forecast .............................................................................................................27

7. CONCLUSION AND RECOMMENDATION ................................................................28

REFERENCES .....................................................................................................................30

APPENDICES ......................................................................................................................31



LETTER OF TRANSMITTAL

Dear Judy,

With due respect it is my pleasure to present the report entitled Financial Statement Analysis

on Goodman Fielder Ltd (GFF). While doing this research, I have tried my best to creating

the most objective opinion on GFFs financial health, profitability as well as its potential

earning power in order to suggest the most appropriate investing strategy in the near future. I

hope this report may provide a clear scenario of Goodman Fielder and its industry,

furthermore giving investors an opportunity to buy, sell or hold this stock.

This paper is produced based on GFFs financial data, public announcements, its competitors

and industry accumulated during the period from 2007 to 2012. To prepare this report, I have

admitted to give the best effort to collect needed information.

I shall be available to answer any question for clarification and really appreciate your advice,

so please fell free to contact me.

Sincerely yours,



EXECUTIVE SUMMARY

The main purpose of this report is to provide a comprehensive analysis of Goodman Fielder

Limited, based on audited financial data collected from GFFs annual reports during the

observed period FY2007-FY2012. A broad range of financial techniques is applied to

evaluate and compare profitability, operating efficiency, financial health of Goodman

Fiedersto those of firms running business in the same industries.

Multi-step process of analysis will be run in the light of assumptions which are made to do

this report more simply and easily. Accordingly, segment analysis, common size analysis,

cash flow analysis and prospective analysis is taken to provide a whole picture of Goodman

Fielder businesses. Additionally, this report will also assess some key factors of the

prevailing economy and industry framework which may affect to the companys operations

from now to the near future. In the end of this report, short-term investing strategy of GFF is

given to personal investors in order to for them to make a suitable decision whether they

should buy, strong buy, or sell, strong sell this stock.

Goodman Fielder, which is the main object of this paper, is known as the Australian biggest

baker. Its core business place in 3 industries: Bread Manufacturing, Cake and Pastry

Manufacturing and Butter and Other Dairy Products Manufacturing. Established in 1909, this

over-hundred-year old food supplier plays a significant role in every sector it is operating. It

was listed on December 2005 and is now traded at $0.545 a share. Through analyzing

process, there is an opportunity for investors to estimate GFFs intrinsic value and determine

whether it is overvalued or undervalued.



1. INTRODUCTION

1.1. Purpose

The main purpose of this paper is to analyze the financial position of Goodman Fielder Ltd.

based on its historical audited data, directors announcements and public news related to its

operations, competitors and industries. The report presents a trend analysis from FY2007 to

FY2012 to value GFFs sustainability during the Global Financial Crisis and under such

highly intensive industries as Break, Dairy, Cake and Pastry Manufacturing, thus estimating

its position in the foreseeable future. By conducting these tasks, the report may lead to a

decision whether investor should buy, sell or hold GFF and time frame for each decision.

1.2. Scope

Theoretically, this report is derived from GFFs annual reports from FY2007 to FY2011, its

2012 financial statement and reliable public information related to its running operations

during this period. Any information previous to this period may be excluded as if their

impacts have no longer influenced Goodman Fielder Ltd.s current business activities. Any

information released after the end of FY2012 may be included with the best effort to keep the

report updated.

Although Goodman Fielder is running its business operations on many industrial fields, this

paper only keeps evaluating its efficiency on three main sectors: fresh baking, dairy, home

ingredient in comparison with Patties Food (PFL), which turns out to be the most appropriate

GFF peer company. Prevailing economic framework and industry analysis are also taken into

account to provide a clear scenario where Goodman Fielder is operating. Due to the primary

purpose of this report which is mentioned about, estimating GFF intrinsic value are not

covered.

1.3. Methodology

To produce a comprehensive report on Goodman Fielders financial health, profitability and

performance, the following quantitative and qualitative methodologies are applied:

- Top-down approach to provide an entire picture of Australia business environment

and industries that Goodman Fielder is located in.



- GFFs public financial statements are adjusted to exclude nonrecurring items,

eliminate discontinued operations and reflect its business performance more

accurately.

- Horizontal and vertical common size analyses are constructed to observe the trend on

Goodman Fielder activities and evaluate its strategies to face the difficulty of Global

Financial Crisis and giant competitors such as Coles and Woolworths.

- Financial ratios of liquidity, profitability, solvency and cash flow are calculated based

on adjusted financial statements then running an analysis with a comparable company

and industry average to locate Goodman Fielders position.

- Based on historical data and current situation forecasting Goodman Fielders potential

earning power and future business performance, and then making decision under a

personal investors point of view.

1.4. Limitations

Although best effort is given when writing this report, there are still several obstacles that

keep it away from practice, consisting of:

- Adjustments such as removing nonrecurring and immaterial items as well as

estimation of financial trend are made based on authors point of view which may be

subjective and biased.

- Financial figures were not identical year by year because they were restated in every

following financial statement to reflect the accounting policy changes. There would

be a difficulty in choosing which resource is more accurate.

- Financial statement format was inconsistent during the observed period from FY2007

to FY2012, thus leading to a difficulty in comparison and doing common size

analysis.

- Depreciation method and inventory cost method are not mentioned clearly. According

to GFFs financial reports, deprecation was charged on a straight line basis or

diminishing value basis. Meanwhile, inventory cost was determined on the basis of

first in first out or average cost whichever is the most appropriate for each individual

business.

- There is lack of available financial data of GFFs peer companies and industry

average figures in Australia market because Goodman Fielders operations range

widely from bread, dairy to edible oil manufacturing and it is also a market leader in



many sectors. Furthermore, Patties Food Limited (PFL), which is chosen to be GFFs

peer company, is not comparable to Australias biggest baker in some categories such

as market value, total asset and business scope. PFLs financial statements are also

not adjusted because of limited time and data resources.

- GFFs annual reports did not provide enough needed information of other income,

other expenses or cash flow, etc. to evaluate exactly its performance.

- Business transactions and events occurring after the end of FY2012 were not recorded

then not be evaluated although they could play an important role in forecasting GFFs

future performance. Integro Food business, one of the main segments, which was sold

to GrainCorp for $170 million in August 28th

2012, must have been deducted from

Goodman Fielders previous annual reports. However, Integro business was not

separately presented than it is difficult to keep it away from GFFs financial

statements.

1.5. Assumption

- Depreciation was calculated based on the straight line basis and inventory cost was

charged on the basis of first in first out consistently during the observed period.

- The more recent financial statement, the more accurate information it contains. This

assumption provides a manner to choose efficient data resource.

- Any adjustments in income statement will lead to relative changes in retained earning

account each year. In order to keep balance sheet balanced, contributed equity account

is adjusted as if Goodman Fielder has repurchased or issued shares.

- Only operating lease is capitalized. Others items such as internally generated assets

for use are classified as expenses because of lack of information and data. Effects of

the capitalization of interest cost are not adjusted because its account is immaterial.

- Patties Food Ltd. is chosen to compare with Goodman Fielder with the assumption

that PFLs financial information described in annual report and Morningstar

DatAnalysis Database are accurate and not necessary to be adjusted. Also, PFL is

assumed to be GFFs most appropriate peer company although differences in market

share, market value and total assets. Industry averages derived from IBISWorld

database are assumed to be precise.

- Financial ratios are assumed not being affected by differences in accounting policy

changes during the period, thus may not limit comparisons made overtime or between



firms. Financial data which is published annually is also assumed to reflect normal

operating conditions of Goodman Fielder.

- Cash and cash equivalents account, dividend paid are assumed not being influenced

by any adjustments.

- Market value of GFFs asset and liabilities seem not to be well divergent from their

book value.

2. COMPANY OVERVIEW

2.1. Business description

Goodman Fielder Limited (ASX

code: GFF), Australias biggest

baker, is the owner of major

grocery brands Meadow Lea,

White Wings, Praise, Pampas,

Helgas, Mighty Soft, Meadow

Fresh and Irvines. The leading

publicly listed food company

employs over 7,500 people,

manufactures its products in

almost 90 locations in Australia,

New Zealand, Asia and the

Pacific and delivers to over

30,000 outlets including

supermarkets, convenience

stores, food manufacturers and

wholesalers every day, according

to GFF FY2012 annual report. Its

stock was listed on Australia

Securities Exchange on

December 19th

2005 and is now

trading at about $0.55 a share.

The North Ryde-based food

Graph 1

Source: Morning star DatAnalysis

Graph 2

Source: GFFs adjusted financial statements



company primarily offers broad products covering bread, milk, margarine, flour, dressings,

condiments, dips, mayonnaise, frozen pastry, cake mix, pies, savories, small goods, chilled

and frozen pizza, desserts, sauces, vinegar and cooking oils. By the end of FY2012, GFFs

operations were divided into five main segments including Fresh Baking, Fresh Dairy, Home

Ingredients, Integro Foods and Asia Pacific division. However, in August 28th

2012, Integro

Foods, New Zelands largest refiner and packager of edible fats and oils, was sold to

GrainCorp for $170milion in order to primarily reduce debt and strengthen Goodman

Fielders financial health. In fact, while trading conditions in Australia and New Zealand are

now challenging and high input costs such as labor and logistics costs are impacting margins

and earnings, Goodman Fielder has responded them by restructuring its cost base, improving

efficiency and especially, divesting non-core businesses.

2.2. History

- 1909 Geo Fielder & Co. Ltd. incorporated in Australia, based in Tamworth NSW.

- 1951 Geo Fielder & Co. Ltd. becomes public company

- 1986 Goodman Fielder Ltd established with merger of Goodman Group Ltd (New

Zealand) and Allied Mills Ltd.

- 1992 Name changed to Goodman Fielder Ltd following divestment of Wattie Foods

Ltd to H J Heinz.

- 1996 New Zealand milling and baking operations consolidated into Milling and

Baking Australasia.

Bluebird Foods (New Zealand) and Uncle Tobys joined to form Cereals and Snacks

division.

Goodman Fielder International formed.

- 2003 Goodman Fielder Limited is acquired by Burns, Philp & Company Limited.

- 2005 Initial Public Offering of shares in Goodman Fielder Limited on ASX and NZX.

- 2009 Goodman Fielder celebrates its Centenary year.

- 2010 Opening of new head office and research facility in North Ryde, NSW.

Opening of new corporate office and research facility in Auckland, New Zealand.



3. ECONOMIC FRAMEWORK

Graph 3

Source: Australia a wealth of opportunities-Report 2011

The Australian economy has completed a

remarkable 21 consecutive years of economic

growth. No advanced economy comes close to

our extraordinary streak of growth over this

period, which is over twice as long as the next

best performer. said Wayne Swan, the

Australian Federal Treasurer.

As the global economy surfaced from the

2008-2009 financial crisis, the slow recovery

process still challenges significant risk and

uncertainties. However in Australia, the

response to the global financial crisis (GFC) in

comparison to other developed countries

revealed to be better, largely due to Chinese-

led demand for its resources and strong

business investment in mining industry. In

addition, the resource-rich economy also

gained momentum from consumption

Graph 4

Source: tradingeconomics.com



expenditure, which was supported by low unemployment rate and rising household incomes.

Although Chinese demand tended to be slow and retail sales showed decline in household

consumption in the first half of 2012, Australian economy is expected to perform

impressively compared to the rest OECD.

4. INDUSTRY ANALYSIS

4.1. Bread manufacturing industry

Graph 5: Insight the Bread manufacturing industry

Source: IBISWorld

Over the past decade, demand for bread and bakery products has been stimulated by the

emergence of health and nutrition-conscious consumers. According to IBISWorld report,

industry sales are estimated to rise by 2.5% per annum over the past five years and forecast to

increase 2.1% to reach $2.8billion in 2011-2012.

The bread market is now witnessing a broad range of baking products and a high level of

competition which resulted from the vast majority of small and medium-sized bakers. A high

density of competitors and identical products has caused industry profitability to decline. In

addition, greatly fluctuation in commodity prices such as wheat and sugar, combined with

increasing labor cost over the past five year has dampened baking industry growth and

reduced profit margin. Furthermore, the increased availability of substitute foods and greater

buying power by the industrys key client base have contributed to the saturation of the

domestic bread market. Thus, industry revenue growth rate is expected to be 1.8% per annum

in the next five year, to total $3.1billion in 2016-2017.



The industry is dominated by the top four bakers which are estimated to account for 68.4% of

the market share in 2012. The two largest players, Goodman Fielder and its rival George

Weston Foods, are predicted to account for 31.4% and 31% of market respectively.

Concentration increased in the past period as a consequence of strength of major players

brands and M&A activities. However, challenging trading conditions in Australia and New

Zealand have caused giant bakers to divest and scale down their operations, and the industry

has returned to being more fragmented.

4.2. Cake and Pastry Manufacturing industry

Graph 6: Insight the Cake and Pastry Manufacturing industry

Source: IBISWorld

The Australian Cake and Pastry Manufacturing industrys revenue is estimated to rise at an

annualized rate of 1.4% during the period from 2007 to 2012, to reach the total of

$1.64billion. Over the same period, real GDP grew by 2.8% and disposable incomes

increased by 3.2%. This indicates a mature and stagnant industry. IBISWorld also predicts

that in 2012, industry revenue would decrease by 0.6%.

Although this industry has a total of 256 businesses running their operations, 65% of industry

sales are generated by the top four manufacturers. This medium concentration is primarily a

result of M&A activity, product innovation, aggressive marketing and strong customer

loyalty. Consequently, industrys major players can pass on unexpected cost increases down

the supply chain to final consumer.

Similar to the Bread manufacturing industry, this industrys key inputs consist of wheat and

sugar, and variations in their prices will make a significant impact on the performance of the

industry. Cake and Pastry industry has also faced a rising level of competition from bread and

cake retailing, including hot-bread shops, and on-site baking shops. Additionally, increased

public awareness about health has led to declining sales of high calorie content such as cakes

and sweet pastry products.



According to IBISWorld, industry sales will increase by 2.2% per annum to reach to total

$1.82 billion in 2018. The revenue growth rate over the next five years is estimated to be

higher than that in the last five years. It may be because of the expected downward trend

toward the price of wheat and sugar due to oversupplied, some niche growth opportunities

and a widening range of healthy, convenient or protein-rich products to satisfy a new

generation of high awareness consumers.

4.3. Cooking oil and Margarine Manufacturing industry

Graph 7: Insight the Cooking oil and Margarine Manufacturing industry

Source: IBISWorld

Goodman Fielder had used to be the leading player in this industry before it sold Integro

Foods, New Zealands largest refiner and packager of edible fats and oils to GrainCorp.

Overall, industry revenue is estimated to increase by 2.0% per annum over five years to reach

$2.38billion in 2012. During the current year, revenue is anticipated to grow by 2.3%.

There are a broad range of fats and oils manufactured by this industry such as sunflower seed

oil, olive oil, canola oil and lard. Rising public awareness of health and nutrition has a

dramatic impact on demand for this industrys products. The past five years have seen

demand for animal fats decline while oils with lower saturated-fat content have grown in

sales. During the same period, the margarine segment, another main product segment in the

industry, has faced competition from other sorts of fats and oils, particularly butter which is

not included in this industry. Over the next five years, consumption of fats and oils is



expected to decrease as health concerns continue to affect sales. IBISWorld forecasts industry

increase at an average annual rate of 2.3% over the five years to reach $2.68 billion.

5. FINANCIAL ANALYSIS

5.1. Segment analysis

Graph 8: Segment revenue


Graph 9: Revenue attributable to segments


Because of its large scale of business, Goodman Fielder has experienced a lower revenue

growth rate than industry averages during the past period. An annualized rate of 0.84% for

the five years through to FY2012 was much smaller than 2.5% in Bread Manufacturing, 2%

in Cooking oil and Margarine Manufacturing and 1.4% in Cake and Pastry Manufacturing.

Except for Integro Foods which was sold after the end of FY2012, Goodman Fielders

operations are divided into four divisions: Fresh Baking, Fresh Dairy, Home Ingredients and

Food supplier in Asia Pacific. As can be seen from Graph 9, Fresh baking was the most

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

2007 2008 2009 2010 2011 2012

Fresh Baking

Fresh Dairy

Home Ingredients

Asia Pacific

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012

Fresh Baking Fresh Dairy Home Ingredients Asia Pacific



significant segment which accounted for over 40% of the Groups revenue every single year

from FY2007 to FY2012. Besides that, there has been a movement of revenue flow to Asia

Pacific division, the potential market that Goodman Fielder targeted while trading conditions

in ANZ market are challenging. Revenue attributable to Asia and Pacific region took off

gradually from 9.5% in FY2007 to about 15% after six years.

5.1.1. Fresh baking division- 1.69% growth rate, worse than industry average

As an Australias biggest baker, Goodman Fielder has three of the top five bread brands in

Australia and six of the top ten in New Zealand. Its bread products account for 31.4% market

share of Bread Manufacturing industry in Australia in 2012 while its main rival and the

second biggest player, Food Investments Pty Limited, contributes 31%.

Revenue in Baking division declined in two consecutive years to $979million in FY2012,

impacted by volume and price reductions under a high competition of both inside and outside

the industry. Additionally, greater buying power and negotiating strength by the industrys

key clients such as Coles and Woolworths is resulting in increasing complex demands and

decreasing wholesale prices. In fact, price level of GFFs products is often higher than other

bread brands displayed in supermarkets, convenience stores or other outlets. This would have

been a disadvantage of Goodman Fielder in comparison with other low-price baking products

in the stage of economic downturn, when disposable income decreases and people tend to

spend less on consumer staples.

5.1.2. Fresh Dairy division- -3.28% growth rate, worse than industry average

The Fresh Dairy division is a major participant in the New Zealand dairy and small goods

industries. The business distributes fresh dairy products to almost 13,000 customer points

every day. From FY2008, the companys Dairy business in New Zealand has suffered an

annualized 3.28% decrease in sales in five consecutive years, reflecting lower volumes and

pricing in key product categories such as milk, meats and cheese.

5.1.3. Home Ingredients division- 7.54% growth rate, better than industry average

The Home Ingredients division is the leading supplier of consumer food products to

supermarkets in Australia and New Zealand. The Australian part of this segment placed in the

Cake and Pastry Manufacturing industry, which is valued at $1.6billion in 2012.



Over the past six year, revenue generated from this division has experienced an upward trend

to reach $540.6million, accounting for 23.9% of the Groups total revenue in FY2012.

Running business in the mature and stagnant industry, Goodman Fielder would still have an

opportunity to grow in some niche markets by developing a range of healthy, convenient or

protein-rich products to satisfy a new generation of high awareness consumers and achieve an

estimated average growth rate of 2.2% per annum during the period from 2012 to 2018.

5.1.4. Asia Pacific- 11.46% revenue growth rate

The business exists in the East Asian market with a core focus on China, the Philippines and

Indonesia, and also exports to over 20 countries. Its products vary from bakery ingredients,

dairy and spread. Core brand volume growth of 5%, price increases and growth in new

customer channels has assisted revenue to grow by 15.28% per annum during the past five

years. While Asian way of food consuming is changing to converge with Western style,

Goodman Fielder with its broad range of high quality products is expected to seize the chance

and accelerate its sales in this region.

5.2. Common size analysis

5.2.1. Income statement

Graph 10: Cost of sales ratio and Gross margin


During the observed period, Goodman Fielder has experienced a significant increase in cost

of sales, causing its gross margin falling down from 39.43% to 32.88% in FY2012. Flour and

sugar are the key input to bread manufacturing, and any fluctuations in their prices may affect

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

2007 2008 2009 2010 2011 2012

Cost of sales ratio Gross margin



baking industrys profitability significantly. Unfortunately, the most recent years have seen a

dramatic upward trend in both wheat and sugar price (see Graph 11). Whether such major

player as Goodman Fielder might or might not pass on this unexpected input price increase to

its customers, demand was influenced. Furthermore, another main input cost such as labor

and logistic costs also increased and impacted margins and earnings. Its cost of sales was also

affected by write-downs of inventories to net realizable in two most recent years and the

Christchurch earthquakes (FY2011: $11.8m; FY2012: $6.2m). Besides cost of sales, neither

SGA expense, depreciation and amortization expense nor interest expense have fluctuated

greatly relative to revenue over the reporting period. Thus, net income in FY2012 only

accounted for 1.04% of total revenue, sharply decreasing from 8.55% in FY2007.

Graph 11: Wheat and Sugar price from Sep.2007 to Sep.2012

Source: indexmundi.com

Graph 12: Cost structure of Goodman Fielder and its industries in FY2012

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

GoodmanFielder

Breadindustry

Cake andPastry

industry

Cooking oiland

Margarine

Butter andother dairy

profit

other expense

Depreciation expense

SGA expense

Cost of sales

Source:GFFs adjusted financial statements and IBISWorld



In comparison with four industry averages in FY2012, cost structure of Goodman Fielder was

much less effective (see Graph 12). Its profit of 1.04% was the lowest compared to 2.5%,

7.10%, 6.2% and 1.4% from Bread, Cake and Pastry, Cooking oil and Margarine and Butter

manufacturing industry respectively. Cost of sales of the average company operating in Bread

manufacturing, the main sector of Goodman Fielder, was far better than the Australia biggest

baker (69.9% compared to 67.1%).

In response to market challenges, the company has made significant progress in restructuring

its cost base, reducing overheads and implementing plans to improve manufacturing and

supply chain efficiency. In the companys fresh dairy division located in New Zealand, there

was a significant overhead cost reduction with the removal of 119 positions in FY2012.

Goodman Fielders has also committed to restrict its business scope and focus on core

business by the divestment of Integro and NZ Milling and closure of many brands. The

restructuring plan is expected to strengthen GFFs financial health while the most current

financial statements reported losses in two consecutive years FY2011and FY2012.

5.2.2 Balance sheet

Graph 12: Percentage of total assets


The past few years balance sheets present a decrease in total assets as Goodman Fielder has

started its reducing plan to face the challenging market conditions and high level of

competition. Except for FY2009, GFFs total assets have sunk during the reporting period

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

2007 2008 2009 2010 2011 2012

Total current assets Total non-current assets Total current liabilities

Total non-current liabilities Total equity



and decreased by 19.25% from FY2007 to FY2012. This was caused by three amounts of

impairment expense occurring in FY 2008 ($170million), FY2011 ($300million) and FY2012

($187.8million) when GFF revaluated its goodwill.

Over 100 years of Goodman Fielders history presented M&A activity as one of its main

operations, with many records of investments and divestments. Acquisition was also the

GFFs strategy to become the leading player of the food manufacturing industry. A huge

amount of intangible assets was derived from those transactions and this item often accounted

for more than 50% of GFFs total assets over the past decade. However, when a level of

competition inside and outside the saturated industry increased, GFFs advantage turned out

to be its disadvantage because its goodwill assets devalued.

While GFFs total assets and fixed asset was on downward trend, cash account recorded a

dramatic increase in FY2012 due to the November and October issues of over 574 million

ordinary shares at $0.45, ending up with normal balance of $161.7 million. The fact that

Goodman Fielder maintained its high cash level may lead to assumption that the main

purpose of share issuing was to meet its short term obligation and GFF did not have plan to

reinvest or expand its business.

5.3. Ratio analysis

5.3.1. Activity analysis

Table 1: The Operating Efficiency Ratios of GFF

2008 2009 2010 2011 2012 Average

Inventory Turnover Ratio 8.00 8.31 9.78 8.95 8.67 8.74

Days of inventory on hand 45.61 43.93 37.33 40.79 42.12 41.95

Receivable Turnover Ratio 8.51 9.98 11.85 11.67 11.71 10.75

Days of sales outstanding 42.90 36.57 30.79 31.27 31.17 34.54

Payable Turnover ratio 5.18 5.42 5.58 5.27 6.12 5.51

Days in account payable 70.51 67.33 65.41 69.22 59.64 66.42

Working Capital Turnover Ratio 12.60 16.93 24.76 34.01 25.72 22.80

Asset Turnover Ratio 0.69 0.76 0.82 0.83 0.87 0.79



Table 2: The Operating Efficiency Ratios of PFL

2008 2009 2010 2011 2012 Average

Inventory Turnover Ratio 9.09 9.13 6.63 6.98 6.19 7.60

Days of inventory on hand 40.14 39.99 55.09 52.27 58.98 49.29

Receivable Turnover Ratio 5.37 4.98 6.24 5.77 4.92 5.46

Days of sales outstanding 67.95 73.35 58.51 63.23 74.13 67.43

Payable Turnover ratio 11.92 10.31 9.22 8.28 8.62 9.67

Days in account payable 30.61 35.39 39.57 44.10 42.35 38.41

Working Capital Turnover Ratio 5.00 4.78 5.22 5.45 4.09 4.91

Asset Turnover Ratio 0.80 0.86 0.92 0.95 0.95 0.89

In general, there has been an upward trend in inventory turnover ratio, resulting in a decrease

in number of days of inventory on hand from 45.61 days in FY2008 to 42.12 days in FY2012.

As Goodman Fielders is operating in Food industry, this trend may suggest an increase in

number of orders during the period and a reduction in inventory caring cost. Meanwhile, it

took Patties Foods Limited- the biggest player in Cake and Pastry Manufacturing industry-

over 49 days to spend up its inventory and 63.1 days for average company in the industry.

Average days of sales in receivable were 34.54 days while GFFs policy shows that only

receivables past due over 90 days were classified as doubtful debts. On the other hand, its

payable turnover ratio was always lower than receivable turnover ratio during the period, and

it took Goodman Fielder 66.42 days in average to repay its short term liabilities. This

suggests the negotiating strength of Goodman Fielder, one of the biggest food companies in

ANZ to deal with its key suppliers. Obviously, GFF has competitive advantage compared to

PHL, which is about 9 times smaller in total assets and had to spend up to 67.43 days to

collect its receivables and only 38.41 days to meet its short term obligations.

GFFs working capital turnover ratio has improved every year from 12.6 times to 25.72

times. However, this trend was not contributed by revenue growth, but a decrease in its

working capital during the observed period except for FY2012. Similarly, a decrease in total

assets caused by impairment test on goodwill assets has led its asset turnover ratio to rise

while sales have not fluctuated greatly during the same period.



5.3.2. Profitability analysis

Table 3: The Profitability Ratios of GFF

2008 2009 2010 2011 2012 Industry

Return on Equity (ROE) 8.68% 7.51% 8.90% 8.12% 1.98% 18.69%

Gross Margin 38.79% 36.64% 37.14% 36.59% 32.88% 38.68%

Return on Sales (ROS) 6.49% 4.85% 5.44% 4.66% 1.04% 5.88%

Return on Assets (ROA) 6.26% 5.85% 6.50% 6.31% 3.31% 7.96%

Table 4: The Profitability Ratios of PFL

2008 2009 2010 2011 2012

Return on Equity (ROE) 13.75% 10.62% 14.39% 14.30% 14.32%

Return on Sales (ROS) 9.21% 6.61% 8.78% 8.51% 8.29%

Return on Assets (ROA) 8.76% 7.43% 9.54% 9.53% 9.22%

Both gross margin and return on sales of the Sydney-based food provider had been quite

stable from FY2008 to FY2011 although it has suffered from the 2008 Global recession and

the less consuming trend. However, in FY2012 as trading conditions in ANZ challenged and

commodity prices increased sharply, Goodman Fielder experienced the dramatic drop on its

margin and ROS to 32.88% and 1.04% respectively. As mentioned above in Common size

and Segment Analysis, an increase in wheat and sugar price as well as higher labor and

logistic costs led its cost of sales to jump up.

Additionally, the ordinary shares issues in October and November 2011 also caused the ROE

ratio to drop to 1.98% in FY2012, much lower than 14.32% of Patties Foods, 18.69% of

industry average and 12.31% of sector average. Processing the restructuring plan to cut back

on number of employees, divest in many non-core brands and reduce overhaul cost, GFFs

board of directors expected to improve its profitability as commodity prices such as wheat

and sugar has been predicted to fall down in the following years due to oversupplied.



5.3.3. Liquidity analysis

Table 5: The Liquidity Ratios of GFF

2008 2009 2010 2011 2012 Industry

Current Ratio 1.44 1.28 1.24 1.11 1.31 1.38

Quick Ratio 0.86 0.82 0.78 0.67 0.84 0.97

Cash Ratio 0.13 0.16 0.18 0.17 0.35 0.20

Operational Cash Flow Ratio 0.71 0.82 0.99 0.62 0.50 0.73

Table 6: The Liquidity Ratios of PFL

2008 2009 2010 2011 2012

Current Ratio 1.94 2.6 2.32 2.13 2.55

Quick Ratio 1.27 1.73 1.22 1.23 1.49

Cash Ratio 1.21 1.63 1.18 1.17 1.36

Operational Cash Flow Ratio 0.68 0.58 0.82 0.66 0.26

Although compared to current ratio of PFL and industry average, that of Goodman Fielder

was well slower than, the Group still guaranteed the ability to meet its short term obligations

by liquidating its current assets. Both of its quick ratio and cash ratio were lower than 1

which might indicate lack of ability to repay current debt by its cash and receivables amount.

However, its inventory which consists of bread, dairy and ingredients is quite liquid and easy

to transfer to cash without affecting its value. Furthermore, it took only about 34.54 days for

Goodman Fielder to collect its receivables due to its competitive advantage and large

business scale in any industries Goodman Fielder placed in.

However, operational cash flow ratio has been lower than 1 during the observed period. This

indicates cash generated from operating activities was not enough to cover its short term

obligations. Similar, its peer company PFL and an average company in its industry still could

not meet their current obligations by its operational cash. In FY2012, operational cash flow

ratio was 0.26 for PFL and 0.73 for industry average.



5.3.4. Long-term debt and solvency analysis

Table 7: Leverage and coverage ratio of GFF

2008 2009 2010 2011 2012 Average

Total Debt to Total Cap 49.33% 49.53% 47.69% 54.63% 49.61% 50.16%

Long-Term Debt to Total Cap 39.11% 38.51% 36.70% 39.92% 35.58% 37.96%

Total Debt to Equity 97.36% 98.13% 91.18% 120.43% 98.46% 101.12%

Asset Leverage 194.49% 203.88% 200.07% 210.64% 217.48% 194.49%

EBIT Times Interest Cover 2.10 1.58 2.19 1.46 0.36 1.54

CFO Times Interest Cover 3.28 3.39 4.28 2.75 2.34 3.21

Table 8: Leverage and coverage ratio of PHL

Over the past five years, approximately 50% of Goodman Fielders long-term capital has

been funded by interest bearing debt, particularly long-term debt has accounted for 37.96% of

its total capitalization. It also can be seen from the above table than there has been a

movement from long-term to short-term source of capital. During the reporting period, there

was two times its short-term obligations increased dramatically by reclassified the companys

current position of long-term debt. However, adjustment was made to put these excess

amounts back to long-term debt because Goodman Fielder was expected to refinance these

facilities by issuing bond and starting new syndicated debt due to its reputation and industrial

position.

GFFs asset leverage has also presented a slight upward trend to reach 217.48% in FY2012.

A decrease in total equity due to impairment loss, while Goodman Fielder has tried to

maintain a high level of both sort-term and long-term debts, has caused its asset leverage

2008 2009 2010 2011 2012 Average

Total Debt to Total Cap 41.48% 39.34% 34.96% 32.53% 34.54% 36.57%

Long-Term Debt to Total Cap 35.89% 38.03% 33.73% 31.38% 33.50% 34.51%

Total Debt to Equity 64.70% 63.49% 52.76% 47.40% 51.94% 56.06%

Asset Leverage 187.59% 186.98% 178.82% 177.86% 182.51% 182.75%

EBIT Times Interest Cover 5.64 4.06 5.96 6.16 6.47 5.66

CFO Times Interest Cover 4.34 2.55 4.85 4.68 1.92 3.67



increasing and made its business activities risker and more vulnerable. In comparison with

PFL and industry average, Goodman Fielder has used a higher leverage to finance its

business operations. Industry average and PFLs debt to equity ratio were 56.06% and

42.17% respectively while total debt of GFF was almost equal to its equity.

The coverage ratio shows a downward trend over last five years. EBIT times interest cover

ratio has reduced from 2.1 in FY2008 to 0.36 in FY2012. Although the interest charge has

remained stable, a sharp decrease in EBIT caused this downward trend. In other words, the

companys earning seemed not be able to cover interest expense in the most recent year, due

to a reduction in sales and an increase in input costs. On the other hands, cash generated from

operating activities has always ensured GFFs ability to pay its financial charge. In

comparison, the PFLs coverage ratios show the greater ability to cover interest cost than

GFF.

5.3.5. Five-factor DuPont analysis

Table 9: Five-factor DuPont

2008 2009 2010 2011 2012

Tax burden 82.97% 75.46% 69.33% 75.32% 73.60%

Interest burden 68.25% 62.17% 69.20% 61.94% 26.89%

EBIT margin 11.47% 10.34% 11.34% 9.98% 5.27%

Assets turnover 0.69 0.76 0.82 0.83 0.87

Leverage 1.94 2.04 2.00 2.11 2.17

ROE 8.68% 7.51% 8.90% 8.12% 1.98%

Tax burden: because the tax burden reflects the relation of after-tax profits to pretax profits,

the decrease from 82.97% in FY2008 to 73.60% in FY2012 indicates tax increase. Although

the corporate income tax rate has remained at 30% during the period, the increase in effective

tax rate from 17.03% to 26.40% was caused by the variation of deferred tax accounts.

Interest burden: smaller than 100% means that interest expense and financial charge

excessed non-operating income in all five years. This ratio illustrates a fluctuation around 60-

70% from FY2008 to FY2011 before dropping dramatically to 26.89% in FY2012. Goodman

Fielders debt structure has not changed greatly, leading to interest expense stable during the



period. Meanwhile, its earning power weakened in FY2012 due to difficulties in trading

conditions and input costs. Consequently, its EBT was far smaller than EBIT in FY2012.

Operating margin: has decreased in two consecutive FY2011 and FY2012, indicating the

companys operations were less profitable. The reasons are already mentioned in Common

size analysis.

Asset turnover has improved over the past five years, from 0.69 in FY2008 to 0.87 in

FY2012, showing the companys efficiency increased each year as did its leverage. This

improvement has not resulted from a sales increase but a decrease in total assets due to

goodwill write-downs.

Hence, a dramatic drop on ROE ratio after a fluctuation from FY2008 to FY2011 did result

from such aspects of the companys performance as: higher effective tax rate, decreasing

operating profits and rising interest burden. Greater efficiency and increased used of leverage

might have kept Goodman Fielder ROE at 1.98% instead of being negative.

5.4. Cash flow analysis

Graph 13: Net cash flows


The graph above illustrates the main source of GFF cash was from operating activities, which

had increased to $407.60 million by FY2010, followed by a downward trend in two years

thereafter. While cash received from customers has dropped from FY2010 onward due to a

decrease in revenue, payment to suppliers and employees was affected by an increase in input

costs. Neither trade receivables nor payables have fluctuated greatly, indicating GFFs

(450.00)

(300.00)

(150.00)

0.00

150.00

300.00

450.00

2007 2008 2009 2010 2011 2012

Net cash from operating activities Net cash from investing activities

Net cash from financing activities



efficiency to collect cash from its customers and control cash from its suppliers. Over the

reporting period, GFFs operational cash inflow has also been improved by a downward trend

in working capital, resulting from its poor financial performance.

Except for the first two year of the observed period, cash outflow from investing activities

has been stable to the most recent year. Cash was spent up to $170million and $164.8million

in FY2007 and FY2008 for Goodman Fielders M&A activity and PPE purchase to expand

its business. However, as a result of the Global Crisis and high level of completion inside and

outside the saturated industry, the Group has narrowed its operations, reduced its M&A and

started to liquidate its fixed assets. Additionally, GFF also received insurances in FY2011

and FY2012 to cover the majority of losses caused by two Christchurch earthquakes. These

above reasons have helped the net cash from company investing activities improved during

the past four years.

Graph 14: Cash paid for investing activities


Net cash generated from financing activities was always negative over the period, especially

in FY2012 when GFF spent up to $317.3million which accounted for 78% of cash generated

from its operations. It has been noticed that dividends were paid every single year although

GFF reported losses in FY2011 and FY2012. Some items such as payment of deferred

consideration and dividends paid to outside equity interests are not mentioned clearly in

either Cash Flow statements or Note to financial statements.

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012

Payment for subsidiaries, net of cash acquired Payments for property, plant and equipment

Payments for business acquired



By reviewing GFFs cash flow statement over the reporting period, it can be seen that cash

inflow from its operating activities was enough to cover its financing and investing activities.

Cash inflow from new borrowings has been used almost for repaying current debts.

Furthermore, GFF has always used its cash generated from operations to pay dividend and

invest in new fixed assets despite of reported losses.

6. PROSPECTIVE ANALYSIS

6.1. Sales Forecast

Based on Industry analysis and Segment analysis which are mentioned above, the following

assumptions are made to estimate sales of each Goodman Fielders segment over the next

five years:

- Fresh baking division, which is the largest segment of Goodman Fielder and the

biggest player in the Bread Manufacturing industry, is expected to grow by 1.8% per

annum- the industry growth rate.

- Fresh dairy division has suffered from challenging trading conditions in New Zealand

market, is predicted optimistically to grow at 0%.

- Home Ingredients division which is operating in ANZ market is expected to grow as

the same rate of its industry, 2.22% per annum.

- Asia Pacific is the target market of Goodman Fielder. The historical average grow rate

is at 15.28% per annum. The Group is expected to process its expansion plan in this

region and the revenue grow rate is predicted to be 12%.

Table 10: Sales forecast

($mil) FY2012 FY2013E FY2014E FY2015E FY2016E FY2017E

Fresh Baking 979 996.62 1014.57 1032.82 1051.41 1070.34

Fresh Dairy 411.1 411.1 411.1 411.1 411.1 411.1

Home Ingredients 540.6 552.49 564.65 577.07 589.77 602.74

Asia Pacific 333.5 373.52 418.34 468.54 524.77 587.74

Total Revenue 2264.2 2333.74 2408.67 2489.53 2577.05 2671.92



6.2. Cost of sales forecast

An abnormal increase in cost of sales ratio in FY2012 is well explained by an upward trend

in commodity prices such as wheat and sugar, key input of the industry. Additionally,

Goodman Fielder has also suffered from increasing labor and logistic cost, leading its cost of

sales ratio rising to 67.12% in FY2012.

In 2012-2013, the Department of Agriculture, Fisheries and Forestry (DAFF) expected that

global wheat and sugar prices will drop by 13% and 11% respectively due to excess supply in

the previous year. In Australia, wheat and sugar production is also expected to increase,

resulting in a decrease in domestic prices. Bread and cake industries are sure to benefit from

that. Furthermore, the company has made significant progress in restructuring its cost base,

reducing overheads and implementing plans to improve manufacturing and supply chain

efficiency. For these above reasons, cost of sales ratio is predicted to return to its previous

level at about 62.28%.

Graph 15: Sales of good and Cost of sales ratio

6.3. Earning forecast

Except for cost of sales, other items on income statements are assumed to remain stable

compared to sales of good. As shown in Table 11 below, GFFs net income is expected to

reach $133.4million in FY2013, over five times better than that in FY2012. Through to

FY2017, it is predicted to grow by 3.44% per annum to reach to $152.77million.

0.00

500.00

1000.00

1500.00

2000.00

2500.00

3000.00

2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E

Sales of good Cost of sales Log. (Sales of good)



Table 11: Forecasted income statement

($ million) 2013E 2014E 2015E 2016E 2017E

Sales of good 2333.74 2408.65 2489.54 2577.05 2671.92

Cost of sales -1453.45 -1500.11 -1550.48 -1604.99 -1664.07

Gross operating income 880.28 908.54 939.05 972.06 1007.85

SGA expenses -510.67 -527.06 -544.76 -563.91 -584.67

Depreciation and Amortization -97.44 -100.57 -103.95 -107.60 -111.56

Net other income (expense) -8.29 -8.55 -8.84 -9.15 -9.49

EBIT 263.89 272.36 281.51 291.40 302.13

Interest income 3.79 3.92 4.05 4.19 4.34

Interest and financial charges -88.73 -91.58 -94.65 -97.98 -101.59

EBT 178.95 184.70 190.90 197.61 204.89

Income tax expense -45.52 -46.98 -48.56 -50.26 -52.12

Net income 133.44 137.72 142.34 147.35 152.77

7. CONCLUSION AND RECOMMENDATION

Goodman Fielders financial statement has been analyzed via multi-step process consisting of

segment analysis, common size analysis, cash flow analysis and prospective analysis. This

report also presents Australias economic framework and analyses industries that Goodman

Fielder is running its operations in. During the process, it can be seen that GFF is operating in

the saturated industry with a relatively low margin and earning as well as high density of

competitors and identical products. Goodman Fielder, as the market leader, also has certain

advantages compared to firms operating in the same industry such as negotiating strength,

broad range of products or wide channel of distribution. Nevertheless, facing high

competition both inside and outside the industry and challenging trading conditions in ANZ

market have led to the Groups poor performance the recent years. During the process, it is

identified that in such categories as profitability, leverage and interest coverage, Goodman

Fielder did not perform well. Large business scale might have helped the company to

maintain its activity efficiency and liquidity at high degree. However it also caused Goodman

Fielder reported losses the past two years.

Optimistically, Goodman Fielder is expected to grow by 3.44% per annum in net income over

the next five years with the assumption that its core business will grow at the same rate with

industry average. However, this grow rate may not come until its restructuring plan really

works. In a risk aversion point of view, with a high level of uncertainty GFF is not a good

stock to invest in a short-timeframe. Goodman Fielders reputation and market position may



help it to recover what was lost, however it is a story of restructuring and repositioning in the

far future. In conclusion, my recommendation for this stock is moderate sale.



REFERENCES

1. Annual reports of Goodman Fielder Limited from 2007 to 2012. Retrieved October 1st,

2012 from website: http://www.goodmanfielder.com.au/index.php?q=node/91

2. Financial statements of Goodman Fieder Limited in 2012. Retrieved October 1st, 2012

from website: http://www.goodmanfielder.com.au/index.php?q=node/95

3. Financial statements of Patties Foods Limited from 2007 to 2012. Retrived October 1st,

2012 from website:

http://0-

datanalysis.morningstar.com.au.alpha2.latrobe.edu.au/af/company/annualreport?ASXCode=P

FL&daterange=all&subtype=03001&subtype=03017&subtype=03011&anntypes=0,1,2,3&xt

m-licensee=dat

4. IBISWorld Industry Report C2162, Cake and Pastry Manufacturing in Australia

5. IBISWorld Industry Report C2161, Bread Manufacturing in Australia

6. IBISWorld Industry Report C2140, Cooking Oil and Margarine Manufacturing in

Australia

7. IBISWorld Industry Report C2129, Butter and Other Dairy Product Manufacturing in

Australia

8. Robinson, T.R., H. van Gruening, E. Henry, M.A. Broihahn, 2009, International Financial

Statement Analysis, Hoboken, NJ: John Wiley (ISBN: 9780470287668). 657.3 I6155

9. White, G.I., A.C. Sondhi and D. Fried (2003), The Analysis and Use of Financial

Statements (3rd edition), Hoboken, N.J.: John Wiley. ISBN: 0471375942. 657.3 W584an

2003


Student ID: 17259191

APPENDIX 1: LIST OF ADJUSTMENTS

Item Account Amount

($mil) Nature Adjustment

FY 2007

Trade receivable Trade & other

receivable 274.2

Trade receivable should be presented

separately in the balance sheet

Present separately on the balance

sheet

Other receivable Trade& other

receivable 33.6

Other receivable should be presented



sheet

Depreciation and

Amortization

Selling-General-

Administration

expenses

55.2

Depreciation and Amortization should

be presented separately in the balance

sheet


sheet

Foreign exchange gains Finance income 52.1 Non- recurring item Subtracting from finance income

Foreign exchange losses Finance costs 20.7 Non- recurring item Subtracting from finance costs

Operating lease

PPE, deferred tax

asset, current

borrowing, non-

current borrowing

and income

statement

132.7 Capitalizing present value of leasing

expense as asset on balance sheet

Reclassified to PPE (130.9),

deferred tax asset (1.8), current

borrowing(28.1), non-current

borrowing (108.7), depreciation

expense (-26.8), SGA expense

(23.6), income tax expense (1.8),

interest expense (-2.8)

Cash flow statement Rebuilding from adjusted balance

sheet and adjusted income statement

FY 2008


receivable 260.4




sheet


receivable 30




sheet

Depreciation and

Amortization

Selling-General-

Administration

expenses

48.9



sheet


sheet

Borrowing- non current

liabilities

Borrowing- current

liabilities 170.7

The long-term borrowing that mature

in less than 12 months should be

Remove from Borrowing- current

liabilities to Borrowing- non



reclassified to long-term borrowing in

order to forecast relatively the

continue operating of the company.

current liabilities

Net gain on disposal of

property, plant and

equipment

Other income 7.7 Non- recurring item Exclude from other income

Discount on acquisition

through business

combination


Operating lease

PPE, deferred tax

asset, current

borrowing, non-

current borrowing

and income

statement












Impairment charge Other expenses 170 Non- recurring item Excluding from other expenses

FY 2009


receivable 227.4




sheet


receivable 48.2




sheet

Depreciation and

Amortization

Selling-General-

Administration

expenses

55.5



sheet


sheet


property, plant and

equipment


Net gain on sale of

brands Other income 9.4 Non- recurring item Exclude from other income

Net realized foreign

exchange gains Other income 1 Non- recurring item Exclude from other income



Assets classified as held

for sale

Assets classified as

held for sale 140.8

Assets classified as held for sale are

inventories, intangible assets and PPE

before the group sell them and the

money from the selling them may be

reinvested in the same classes.

Reclassify to inventory ( 45.3),

PPE (68.6) and Good will (26.9)

Liabilities classified as

held for sale

Liabilities

classified as held

for sale

6.9 Liabilities are provisions before the

group sell them Reclassify to current provisions

Sale of goods Sale of goods 377.3 Sale of good of discontinued operation

of Fats and Oils Subtract from sale of goods

Cost of sales Cost of sales 315.9 Cost of sales of discontinued

operation of Fat and Oils Subtract from cost of sales

Selling- General-

Administration

expenses

Selling- General-

Administration

expenses

38.2

Selling- General- Administration

expenses of discontinued operation of

Fats and Oils

Subtract from Selling- General-

Administration expenses

Operating lease

PPE, deferred tax

asset, current

borrowing, non-

current borrowing

and income

statement







expense (-46), SGA expense


interest expense (-6)



Other income Other income 0.7 Other income of discontinued

operation of Fats and Oils Subtract from other income

FY 2010


receivable 214.7




sheet


receivable 32.7




sheet

Depreciation and

Amortization

Selling-General-

Administration

expenses

61.3



sheet


sheet



Borrowing- non current

liabilities

Borrowing- current

liabilities 691.3

The long-term borrowing that mature

in less than 12 months should be

reclassified to long-term borrowing in

order to forecast relatively the

continue operating of the company.

Remove from Borrowing- current

liabilities to Borrowing- non

current liabilities


property, plant and

equipment


Operating lease

PPE, deferred tax

asset, current

borrowing, non-

current borrowing

and income

statement

166.8

Capitalizing present value of operating

leasing expense as asset on balance

sheet










Net realized foreign

exchange gains Other income 1 Non- recurring item Exclude from other income

FY 2011


receivable 215.4




sheet


receivable 30.7




sheet

Depreciation and

Amortization

Selling-General-

Administration

expenses



sheet


sheet

Insurance recoveries

relating to Christchurch

earthquakes

Other income 12.1 Non- recurring item Subtract from other income

Operating lease

PPE, deferred tax

asset, current

borrowing, non-

current borrowing









and income

statement






Impairment charges Other expenses 300 Non- recurring item Subtract from other expenses

FY 2012


receivable 207.9




sheet


receivable 19.7




sheet

Depreciation and

Amortization

Selling-General-

Administration

expenses



sheet


sheet

Assets classified as held

for sale

Assets classified as

held for sale 177.1

Assets classified as held for sale are

inventories, intangible assets and PPE

before the group sell them and the

money from the selling them may be

reinvested in the same classes.

Reclassify to inventory ( 65.2),

PPE (9.3) and Good will (18.9)

Liabilities classified as

held for sale

Liabilities

classified as held

for sale

7.6 Liabilities are provisions before the

group sell them Reclassify to current provisions

Insurance recoveries Other income 7.1 Non- recurring item Subtract from other income

Impairment charges Other expenses 187.8 Non- recurring item Subtract from other expenses

Operating lease

PPE, deferred tax

asset, current

borrowing, non-

current borrowing

and income

statement














APPENDIX 2: ADJUSTED INCOME STATEMENT

APPENDIX 3: COMMON SIZE OF INCOME STATEMENT

Percentage of Sales 2007 2008 2009 2010 2011 2012 Average

Sale of goods 100.% 100.% 100.% 100.% 100.% 100.% 100.%

Cost of sales -60.57% -61.21% -63.36% -62.86% -63.41% -67.12% -63.09%

Gross operating income 39.43% 38.79% 36.64% 37.14% 36.59% 32.88% 36.91%

SGA expenses -20.39% -22.20% -22.26% -21.78% -22.03% -22.64% -21.88%

Depreciation -3.38% -3.78% -4.11% -4.09% -4.65% -5.05% -4.18%

Other income 0.07% 0.03% 0.07% 0.06% 0.07% 0.08% 0.06%

Other expenses -1.14% -1.38% 0.00% 0.00% 0.00% 0.00% -0.42%

Net other income

(expense)

-1.07% -1.34% 0.07% 0.06% 0.07% 0.08% -0.36%

EBIT 14.60% 11.47% 10.34% 11.34% 9.98% 5.27% 10.50%

Interest income 0.14% 0.08% 0.16% 0.09% 0.45% 0.07% 0.16%

Interest expense -3.28% -3.72% -4.07% -3.58% -4.24% -3.92% -3.80%

EBT 11.46% 7.83% 6.43% 7.85% 6.18% 1.42% 6.86%

Income tax expense -2.91% -1.33% -1.58% -2.41% -1.53% -0.37% -1.69%

Net income 8.55% 6.49% 4.85% 5.44% 4.66% 1.04% 5.17%

Income Statement ($million) 2007 2008 2009 2010 2011 2012

Sale of goods 2426.7 2317.5 2471.3 2660.1 2556.2 2513.7

Cost of sales (1469.8) (1418.6) (1565.8) (1672.1) (1620.9) (1687.2)

Gross operating income 956.9 898.9 905.5 988.0 935.3 826.5

SGA expenses (494.7) (514.5) (550.2) (579.3) (563.1) (569.0)

Depreciation and Amortization (82.0) (87.5) (101.5) (108.7) (118.9) (127.0)

Other income 1.8 0.8 1.8 1.6 1.8 1.9

Other expenses (27.7) (31.9) 0.0 0.0

Net other income (expense) (25.9) (31.1) 1.8 1.6 1.8 1.9

EBIT 354.3 265.8 255.6 301.6 255.1 132.4

Interest income 3.3 1.8 3.9 2.4 11.4 1.7

Interest and financial charges (79.5) (86.2) (100.6) (95.3) (108.5) (98.5)

EBT 278.1 181.4 158.9 208.7 158.0 35.6

Income tax expense (70.6) (30.9) (39.0) (64.0) (39.0) (9.4)

Net income 207.5 150.5 119.9 144.7 119.0 26.2



APPENDIX 4: ADJUSTED BALANCE SHEET

Statement of Financial Position ($million) 2007 2008 2009 2010 2011 2012

ASSETS

Cash and cash equivalents 85.8 39.3 65.4 73.3 79.9 161.7

Trade receivable 280.1 264.7 230.5 218.3 219.7 209.6

Allowance for doubtful debt (5.9) (4.3) (3.1) (3.6) (4.3) (1.7)

Other receivable 33.6 30.0 48.2 32.7 30.7 19.7

Inventories 153.5 201.0 175.9 166.1 196.2 193.2

Derivative financial instruments 14.7 13.0 0.7 0.1 0.4 1.7

Current tax receivable 22.1 8.2 16.0 8.9 13.7

Other current assets 9.0 10.0 5.0 6.5 3.8 9.0

Total current assets 570.8 575.8 530.8 509.4 535.3 606.9

Receivables 5.1 5.3 3.6 2.4

Investments in jointly controlled entities 1.8 2.8 4.1

Derivative nancial instruments 20.3 10.6 1.6

Property, plant and equipment 623.4 686.1 719.2 761.5 746.2 711.2

Deferred tax assets 70.7 88.4 107.2 62.4 67.5 64.0

Intangible assets 2199.9 1885.1 1893.1 1906.1 1571.2 1430.5

Other non-current assets 7.2 2.5 1.4 2.2 1.9 1.1

Total non-current assets 2921.5 2672.7 2727.6 2739.3 2393.2 2213.3

Total assets 3492.3 3248.5 3258.4 3248.7 2928.5 2820.2

LIABILITIES

Trade and other payables 285.8 283.2 284.2 297.9 313.1 275.2

Borrowings 29.5 31.5 29.4 29.8 79.9 79.9

Derivative financial instruments 4.9 6.0 36.4 19.0 23.2 23.7

Current tax liabilities 8.9 11.3 5.4 13.1 17.6 15.0

Provisions 49.6 68.1 59.2 50.9 49.9 69.2

Total current liabilities 378.7 400.1 414.6 410.7 483.7 463.0

Payables 0.6 1.0

Borrowings 1204.5 1224.7 1215.0 1143.8 1046.5 898.2

Derivative financial instruments 0.7 7.6 13.9 82.1 62.7

Deferred tax liabilities 22.2 25.4 11.0 16.5 17.9 20.5

Provisions 9.5 7.6 7.7 13.9 15.6 15.2

Total non-current liabilities 1236.8 1259.4 1241.3 1188.1 1162.1 996.6

Total liabilities 1615.5 1659.5 1655.9 1598.8 1645.8 1459.6

Net assets 1876.8 1589.0 1602.5 1649.9 1282.7 1360.6

EQUITY

Contributed equity 1770.5 1639.7 1720.2 1771.4 1486.2 1567.7

Reserves (55.6) (186.6) (214.0) (208.2) (259.5) (252.9)

(Accumulated losses)/retained earnings 154.7 127.8 86.6 77.5 48.1 39.8

Capital and reserves attributable to

the owners of Goodman Fielder Limited 1869.6 1580.9 1592.8 1640.7 1274.8 1354.6

Non-controlling interest 7.2 8.1 9.7 9.2 7.9 6.0

Total equity 1876.8 1589.0 1602.5 1649.9 1282.7 1360.6



APPENDIX 5: COMMON SIZE OF BALANCE SHEET

Percentage of total assets 2007 2008 2009 2010 2011 2012

ASSETS

Cash and cash equivalents 2.46% 1.21% 2.01% 2.26% 2.73% 5.73%

Trade receivable 8.02% 8.15% 7.07% 6.72% 7.50% 7.43%

Allowance for doubtful debt -0.17% -0.13% -0.10% -0.11% -0.15% -0.06%

Other receivable 0.96% 0.92% 1.48% 1.01% 1.05% 0.70%

Inventories 4.40% 6.19% 5.40% 5.11% 6.70% 6.85%

Derivative financial instruments 0.42% 0.40% 0.02% 0.00% 0.01% 0.06%

Current tax receivable 0.00% 0.68% 0.25% 0.49% 0.30% 0.49%

Other current assets 0.26% 0.31% 0.15% 0.20% 0.13% 0.32%

Total current assets 16.34% 17.73% 16.29% 15.68% 18.28% 21.52%

Receivables 0.00% 0.00% 0.16% 0.16% 0.12% 0.09%

Investments in jointly controlled entities 0.00% 0.00% 0.00% 0.06% 0.10% 0.15%

Derivative nancial instruments 0.58% 0.33% 0.05% 0.00% 0.00% 0.00%

Property, plant and equipment 17.85% 21.12% 22.07% 23.44% 25.48% 25.22%

Deferred tax assets 2.02% 2.72% 3.29% 1.92% 2.30% 2.27%

Intangible assets 62.99% 58.03% 58.10% 58.67% 53.65% 50.72%

Other non-current assets 0.21% 0.08% 0.04% 0.07% 0.06% 0.04%

Total non-current assets 83.66% 82.27% 83.71% 84.32% 81.72% 78.48%

Total assets 100% 100% 100% 100% 100% 100%

LIABILITIES

Trade and other payables 8.18% 8.72% 8.72% 9.17% 10.69% 9.76%

Borrowings 0.84% 0.97% 0.90% 0.92% 2.73% 2.83%


Current tax liabilities 0.25% 0.35% 0.17% 0.40% 0.60% 0.53%

Provisions 1.42% 2.10% 1.82% 1.57% 1.70% 2.45%

Total current liabilities 10.84% 12.32% 12.72% 12.64% 16.52% 16.42%

Payables 0.02% 0.03% 0.00% 0.00% 0.00% 0.00%

Borrowings 34.49% 37.70% 37.29% 35.21% 35.74% 31.85%


Deferred tax liabilities 0.64% 0.78% 0.34% 0.51% 0.61% 0.73%

Provisions 0.27% 0.23% 0.24% 0.43% 0.53% 0.54%

Total non-current liabilities 35.42% 38.77% 38.10% 36.57% 39.68% 35.34%

Total liabilities 46.26% 51.09% 50.82% 49.21% 56.20% 51.76%

Net assets 53.74% 48.91% 49.18% 50.79% 43.80% 48.24%

EQUITY

Contributed equity 50.70% 50.48% 52.79% 54.53% 50.75% 55.59%

Reserves -1.59% -5.74% -6.57% -6.41% -8.86% -8.97%

(Accumulated losses)/retained earnings 4.43% 3.93% 2.66% 2.39% 1.64% 1.41%

Capital and reserves attributable to

the owners of Goodman Fielder Limited 53.53% 48.67% 48.88% 50.50% 43.53% 48.03%

Non-controlling interest 0.21% 0.25% 0.30% 0.28% 0.27% 0.21%

Total equity 53.74% 48.91% 49.18% 50.79% 43.80% 48.24%



APPENDIX 6: FINANCIAL INDICATORS FOR GOODMAN FIELDER LTD.

2008 2009 2010 2011 2012

Valuation Ratios

EPS 0.11 0.09 0.11 0.09 0.01

Dividend per Share 0.1350 0.1050 0.1075 0.0725 -

P/E Ratio 15.50 18.42 15.64 15.66 51.50

P/B (price to book) Ratio 1.42 1.28 1.28 1.25 0.86

Dividend Payout Ratio 1.19 1.19 1.02 0.84 -

Dividend yield 0.08 0.06 0.07 0.05 -

Profitability Ratios


Gross Margin 38.79% 36.64% 37.14% 36.59% 32.88%



Growth Rates

EPS Growth Rate -27.47% -22.10% 19.20% -18.27% -84.46%

Dividend Growth Rate 17.37% -22.22% 2.38% -32.56%

Sales Growth Rate -4.50% 6.64% 7.64% -3.91% -1.66%

EBIT Growth Rate -34.77% -12.40% 31.34% -24.29% -77.47%

Net Income Growth Rate -27.47% -20.33% 20.68% -17.76% -77.98%

Liquidity Ratios

Current Ratio 1.44 1.28 1.24 1.11 1.31

Quick Ratio 0.86 0.82 0.78 0.67 0.84

Cash Ratio 0.13 0.16 0.18 0.17 0.35


Defensive Interval 67.77 61.91 54.65 57.69 67.03

Operating Efficiency Ratios

Inventory Turnover Ratio 8.00 8.31 9.78 8.95 8.67

Receivable Turnover Ratio 8.51 9.98 11.85 11.67 11.71

Payable Turnover 5.18 5.42 5.58 5.27 6.12

Working Capital Turnover Ratio 12.60 16.93 24.76 34.01 25.72

Asset Turnover Ratio 0.69 0.76 0.82 0.83 0.87

Fixed asset Turnover Ratio 0.83 0.92 0.97 1.00 1.09

Leverage Ratios

Total Debt to Total Capitalization 49.33% 49.53% 47.69% 54.63% 49.61%

Long-Term Debt to Total Capitalization 39.11% 38.51% 36.70% 39.92% 35.58%

Total Debt to Equity 97.36% 98.13% 91.18% 120.43% 98.46%

Asset Leverage 204.44% 203.33% 196.90% 228.31% 207.28%

Coverage Ratios

EBIT Times Interest Cover 2.10 1.58 2.19 1.46 0.36

CFO Times Interest Cover 3.28 3.39 4.28 2.75 2.34



APPENDIX 7: FINANCIAL INDICATORS FOR PATTIES FOODS LTD.

2008 2009 2010 2011 2012

Valuation Ratios

EPS 0.10 0.08 0.11 0.13 0.14

P/E Ratio 10.40 8.40 9.56 13.05 11.59

P/B (price to book) Ratio 1.33 0.85 1.25 1.85 1.64

Profitability Ratios




Growth Rates

EPS Growth Rate -0.99% -19.00% 39.51% 15.93% 5.34%

Sales Growth Rate 30.04% 9.07% 10.12% 10.12% 8.67%

EBIT Growth Rate 4.73% -11.04% 29.26% 10.13% 5.72%

Net Income Growth Rate 8.65% -18.66% 39.70% 16.83% 5.99%

Liquidity Ratios

Current Ratio 1.94 2.6 2.32 2.13 2.55

Quick Ratio 1.27 1.73 1.22 1.23 1.49

Cash Ratio 1.21 1.63 1.18 1.17 1.36


Operating Efficiency Ratios

Inventory Turnover Ratio 9.09 9.13 6.63 6.98 6.19

Receivable Turnover Ratio 5.37 4.98 6.24 5.77 4.92

Payable Turnover 11.92 10.31 9.22 8.28 8.62

Working Capital Turnover Ratio 5.00 4.78 5.22 5.45 4.09

Asset Turnover Ratio 0.80 0.86 0.92 0.95 0.95

Fixed asset Turnover Ratio 1.15 1.19 1.31 1.41 1.51

Leverage Ratios

Total Debt to Total Capitalization 41.48% 39.34% 34.96% 32.53% 34.54%

Long-Term Debt to Total

Capitalization 35.89% 38.03% 33.73% 31.38% 33.50%

Total Debt to Equity 64.70% 63.49% 52.76% 47.40% 51.94%

Asset Leverage 187.59% 186.98% 178.82% 177.86% 182.51%

Coverage Ratios

EBIT Times Interest Cover 5.64 4.06 5.96 6.16 6.47

CFO Times Interest Cover 4.34 2.55 4.85 4.68 1.92



APPENDIX 8: ADJUSTED CASH FLOW STATEMENT

Statements of cash flows ($million) 2007 2008 2009 2010 2011 2012

Cash flows from operating activities

Receipts from customers 2597.90 2846.70 2632.10 2851.10 2734.20 2744.60

Payments to suppliers and employees (2216.90) (2424.20) (2161.80) (2322.80) (2294.70) (2382.60)

Interest paid (66.70) (86.30) (93.60) (102.20) (108.00) (97.00)

Income taxes paid (72.70) (53.40) (36.00) (18.50) (32.90) (34.30)

Net cash inflow from operating activities 241.60 282.80 340.70 407.60 298.60 230.70

Cash flows from investing activities

Payment for subsidiaries, net of cash acquired (125.50) (78.50)

Fsa Assignment

Documents

Transcript of Fsa Assignment