siemens analysis of financial statement

Siemens (Pakistan) Engineering Company Limited


Submitted to:

Ms. Ayesha Zaman

Submitted by:

Neelofar saeed

Submitted on:

Dec 15, 2010


Acknowledgements

First of all I would like to thank Almighty Allah who gave me strength to complete

my assignment on “Siemens”, then I greatly thankful for the efforts of my

respected teacher Ma’am Ayesha Zaman. Without her feedback and guidance, this report would never been completed. She

help me to stay motivated and on schedule. She dealt with all of my day-to-

day problems and questions, and thus deserves the special thanks of Saba

Kanwal for the support and cooperation she had done on this project. And a

special thanks to Mr. Faisal Tahir who gave me the annual report of Siemens.

I wish to thank all my class mates who graciously show their interest and

contribute to this report to improve my final file.

Once again I would thank my graceful teacher who is a source of inspiration for

me and all my class mates.

Acknowledgements

First of all I would like to thank Almighty Allah who gave me strength to complete

my assignment on “Siemens”, then I greatly thankful for the efforts of my

respected teacher Ma’am Ayesha Zaman. Without her feedback and guidance, this report would never been completed. She

help me to stay motivated and on schedule. She dealt with all of my day-to-

day problems and questions, and thus deserves the special thanks of Saba

Kanwal for the support and cooperation she had done on this project. And a

special thanks to Mr. Faisal Tahir who gave me the annual report of Siemens.

I wish to thank all my class mates who graciously show their interest and

contribute to this report to improve my final file.

Once again I would thank my graceful teacher who is a source of inspiration for

me and all my class mates.


Introduction

For 87 years, Siemens has been active in Pakistan, where it holds leading positions in the three application fields: Energy and Environmental Care, Industry & Public Infrastructures and Healthcare. The Siemens IT Solutions and Services Group functions across all three fields. Siemens is the country’s No. 1 supplier of high-voltage grid stations, switchgear products and systems, power distribution and power transformers, and network consultancy. The company has also built a new 220kV Power Transformer factory, and is poised to meet the demand in this sector nationally and in the region. In fiscal 2007 (October 1, 2006 – September 30, 2007), sales to customers in Pakistan amounted to EUR 230 million. New orders totaled EUR 280 million. With a workforce of 1,400 employees, Siemens is one of the most important employers in the country and the largest employer of engineering graduates in the country. Directly and indirectly Siemens provides employment to more than 4000 persons across the country.

Siemens History

From a small back building workshop in Berlin to a global firm - there are few industrial corporations that can look back on such a long history of success as Siemens can.

News

1910–2010 Fábrica Cornella celebrates 100th anniversary

Active in Spain for 115 years, Siemens holds a leading position in the country’s industry, energy and healthcare sectors. One of Siemens’ most important facilities in Spain, its factory in Cornella near Barcelona, has now belonged to the tradition-rich German company for 100 years.

Siemens in Pakistan

Siemens enjoys a leading position in Pakistan in the areas of Power Generation, Power Transmission and Distribution, Automation and Control, Industrial and Infrastructure Solutions, Medical Solutions, Transportation and Information Technology Solutions.


Vision

“To remain market leader and technology pace setter in the engineering and electronics industry by utilizing the high-tech engineering expertise of the Siemens Group worldwide. To maintain our strong and prominent local presence”.

Mission

To realize our vision by: Providing quality to our customers at competitive prices, to their complete satisfaction. Generating earnings sufficient to ensure a secure future for the company and to protect and increase our shareholders/stakeholders' investment. To enhance creativity and job satisfaction of our employees by providing opportunities for personal development, limited only by their own ability and drive. To contribute to the national economy, whilst realizing a strong sense of responsibility to society and the environment. To enhance the investment of our customers through Human Excellence, our Technology, our Processes, our High Standards of Quality and Financial Strength. To support and strive for technology transfer to Pakistan through our global resources and local presence

ANALYSIS OF FINANCIAL STATEMENTS

The process of examining various financial statement items with the objective of performance, and perhaps more importantly, projecting future performance and financial condition.

RATIO ANALYSISDefinition: Taking ratios of financial statement items designed to make indications of profitability, short-term liquidity and long-term solvency for specific firms to make absolute and relative judgments (in relation to other comparable firms).

Profitability ratios operating risk/efficiency Liquidity ratios financial price risk, operating risk Solvency ratios risks of financial distress, financial structure risk

VERTICAL ANALYSIS OF BALANCE SHEET As at September 30, 2009


Vertical Analysis Composition of Balance Sheet

Particulars 2009 2008 2009 2008(Rupees in ‘000) % %

Share capital and reserves

Share capital

Authorized

20,000,000 (2008: 20,000,000) Ordinary shares of Rs 10 each

200,000 2000,000

Issued, subscribed and fully paid-up 82,470 82,470 0.33 0.33

Reserves

Capital 624,192 624,192 2.57 2.51 Revenue 6,204,531 5,581,595 25.57 22.52

6,828,723 6,205,787

Total equity 6,911,193 6,288,257 28.48 25.38

Non-current liabilitiesRetention money payable 175,719 87,010 0.72 0.35Other non-current liabilities 22,138 19,081 0.09 0.07

197,857 106,091 0.82 0.43

Current liabilitiesTrade and other payables 11,493,64

613,974,64

147.37 56.40

Provisions 2,092,935 2,031,788 8.62 8.20Short - term running finances 1,674,696 907,909 6.90 3.66Provision for taxation 1,888,118 1,466,696 7.78 5.91

17,149,395

18,381,034

Total liabilities 17,347,252

18,487,125

71.51 74.19

Total equity and liabilities 24,258,445

24,775,382

100 100


VERTICAL ANALYSIS OF BALANCE SHEET As at September 30, 2009

Vertical Analysis Composition of Balance Sheet


Assets

Non- current assets

Property, plant and equipment 1,662,500 1,589,664 6.85 6.42Intangible assets 6,032 6,051 0.024 0.024Long-term receivables, deposits and prepayments

1,196,984 1,179,717 4.93 4.76

Deferred tax asset 1,012,666 851,611 4.17 3.433,878,182 3,627,043 15.99 14.64

Current assets

Inventories 4,367,431 4,588,682 18.00 18.52Trade receivables 13,583,39

211,127,28

555.99 44.91

Loans and advances, deposits, prepayments and other receivables

1,026,346 2,025,133 4.23 8.17

Cash and bank balances 1,403,094 3,407,239 5.78 13.7520,380,26

321,148,33

984.01 85.36

Total assets 24,258,445

24,775,382

100 100


HORIZONTAL ANALYSIS OF BALANCE SHEET As at September 30, 2009

Horizontal Analysis Composition of Balance Sheet

Particulars 2009 2008 2009 vs 2008(Rupees in ‘000) %

Share capital and reserves

Share capital

Authorized

20,000,000 (2008: 20,000,000) Ordinary shares of Rs 10 each

200,000 2000,000

Issued, subscribed and fully paid-up 82,470 82,470 0

Reserves

Capital 624,192 624,192 0 Revenue 6,204,531 5,581,595 11.16

6,828,723 6,205,787

Total equity 6,911,193 6,288,257 9.90

Non-current liabilitiesRetention money payable 175,719 87,010 101.9Other non-current liabilities 22,138 19,081 16.02

197,857 106,091 86.50

Current liabilitiesTrade and other payables 11,493,64

613,974,64

1(17.75)

Provisions 2,092,935 2,031,788 3.00Short - term running finances 1,674,696 907,909 84.45Provision for taxation 1,888,118 1,466,696 28.73

17,149,395

18,381,034

(6.70)

Total liabilities 17,347,252

18,487,125

(6.16)


Total equity and liabilities 24,258,445

24,775,382

(2.09)

HORIZONTAL ANALYSIS OF BALANCE SHEET As at September 30, 2009

Horizontal Analysis Composition of Balance

Sheet


Assets

Non- current assets

Property, plant and equipment 1,662,500 1,589,664 4.58Intangible assets 6,032 6,051 (0.31)Long-term receivables, deposits and prepayments

1,196,984 1,179,717 1.46

Deferred tax asset 1,012,666 851,611 18.913,878,182 3,627,043 6.92

Current assets

Inventories 4,367,431 4,588,682 (4.82)Trade receivables 13,583,39

211,127,28

522.07

Loans and advances, deposits, prepayments and other receivables

1,026,346 2,025,133 (49.31)

Cash and bank balances 1,403,094 3,407,239 (58.82)20,380,26

321,148,33

9(3.63)

Total assets 24,258,445

24,775,382

(2.09)


VERTICAL ANALYSIS OF PROFIT AND LOSS ACCOUNTFor the year ended September 30, 2009

Vertical Analysis Composition of

P&L


Net sales and services 36,149,390 26,880742

100 100

Cost of sales (32,164,974)

(22,850,583)

(88.9) (85.0)

Gross profit 3,984,416 4,030,159 11.02 14.99

Commission and allowances earned 186,822 161,395 0.51 0.604,171,238 4,191,554 11.54 15.59

Marketing and selling expenses (1,308,787)

(1,132,642)

(3.62) (4.21)

General administration expenses (542,949) (535,643) (1.50) (1.99)Other operating income 7,644 76,696 0.02 0.28

(1,844,092)

(1,591,589)

(5.10)

(5.91)

Operating profit 2,327,146 2,599,965 6.43 9.67

Financial income 153,937 218,030 0.42 0.81Financial expenses (336,644) (253,792) (0.93) (0.94)Net finance costs (182,707) (35,762) (0.50) (0.13

3)Profit before tax 2,144,439 2,564,203 5.93 9.53

Income tax expense (779,270) (885,135) (2.15) (3.29)Profit for the year 1,365,169 1,679,068 3.77 6.24


Basic and Diluted earning per share (Rupees) 165.53 203.60

HORIZONTAL ANALYSIS OF PROFIT AND LOSS ACCOUNTFor the year ended September 30, 2009

Horizontal Analysis Composition of P&L


Net sales and services 36,149,390 26,880742

34.48

Cost of sales (32,164,974)

(22,850,583)

40.76

Gross profit 3,984,416 4,030,159 (1.14)

Commission and allowances earned 186,822 161,395 15.754,171,238 4,191,554 (0.48)

Marketing and selling expenses (1,308,787)

(1,132,642)

15.55

General administration expenses (542,949) (535,643) 1.36Other operating income 7,644 76,696 (90.03)

(1,844,092)

(1,591,589)

15.86

Operating profit 2,327,146 2,599,965 (10.49)

Financial income 153,937 218,030 (29.40)Financial expenses (336,644) (253,792) 32.65Net finance costs (182,707) (35,762) 410.90


Profit before tax 2,144,439 2,564,203 (16.37)

Income tax expense (779,270) (885,135) (11.96)Profit for the year 1,365,169 1,679,068 (18.69)

Basic and Diluted earning per share (Rupees) 165.53 203.60

RATIO ANALYSIS

Particulars Formulae 2009 2008

a) Current Ratio Current assetsCurrent liabilities

20,380,263 = 1.18

17,149,395

21,148,339 =1.1518,381,034

b) Quick Ratio Current assets- inventoryCurrent liabilities

20,380,263-4,367,431

17,149,395= 0.93

21,148,339-4,588,682

18,381,034= 0.90

c) Working Capital Current assets – Current liabilities

20,380,263-17,149,395

= 3,230,868

21,148,339-8,381,034

=2,767,305

d) Debt to total assets ratio

Total debtsTotal assets

17,347,252 = 0.71

24,258,445

18,487,125 = 0.74 24,775,382

e) Debt to Equity ratio Total debtTotal S.H.Equity

17,347,252 = 2.51

6,911,193

18,487,125 = 2.93 6,288,257

f) Long term debt to equity ratio

Long term debtTotal S.H.Equity

197,857 = 0.028 6,911,193

106,091 = 0.016 6,288,257

g) Inventory turnover SalesInventory of finished

36,149,390=8.27 4,367,431

26,880,742= 5.85 4,588,682


goods

h) Fixed assets turnover

SalesFixed Assets

36,149,390 = 9.32

3,878,182

26,880,742 = 7.411

3,627,043

i) Total assets turnover

SalesTotal Assets

36,149,390 = 1.49

24,258,445

26,880,742 =1.084

24,775,382

j) Gross profit margin Sales- COGSSales

36,149,390-32,164,974 36,149,390

= 0.11

26,880,742-22,850,583

26,880,742

= 0.149

k) Operating profit margin

EBITSales

2,144,439 = 0.059

36,149,390

2,564,203 = 0.09526,880,742

l) Net profit margin Net IncomeSales

1,365,169 = 0.037

36,149,390

1,679,068 = 0.06 26,880,742

m) Return on total assets(ROA)

Net IncomeTotal Assets

1,365,169 = 0.056

24,258,445

1,679,068 = 0.06 24,775,382

n) Return on equity (ROE)

Net IncomeTotal SHE

1,365,169 = 0.19 6,911,193

1,679,068 = 0.26 6,288,257

o) Network EquityTotal assets

6,911,193 24,258,445

=0.28

6,288,257

24,775,382

=0.25

p) Return on capital employed

Profit before taxTotal assets-current

liabilities

2,144,43924,258,445-

17149,395

=0.301

2,564,20324,775,382-

18,381,034

= 0.401

RATIO INTERPRETATIONs

a) Current ratio

Current Ratio of Siemens is slightly increased from 1.15 to 1.18 in Financial Year 2009 as compare to Financial Year 2008.

Siemens has currently have sufficient current assets to pay of it current liabilities.

b) Quick ratio


Quick Ratio of Siemens is increased from 0.90 to 0.93 in Financial Year 2009 as compare to Financial Year 2008.

It shows Siemens financial strength is stronger in 2009 than 2008.

c) Working Capital ratio

The Working Capital of year 2009 shows growth as compared to year 2008 and, this shows Working capital is increasing per year. The increment in working capital is increasing the worth of the Siemens.

d) Debt to total assets ratio

Debt to total assets ratio of Siemens is slightly decreased from 0.74 to 0.71 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens debts as compare to its total assets decrease in Financial Year 2009.

Currently Siemens has Rs.71 debts over each Rs.1000 of its Total Assets.

e) Debt to Equity ratio

Debt to Equity ratio of Siemens is decreased from 2.93 to 2.51 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens debts as compare to its Equity decreases in Financial Year 2009.

f) Long term debt to equity ratio

Long term debt to Equity ratio of Siemens is slightly increased from 0.016 to 0.028 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens Long term debts as compare to its Equity increases in Financial Year 2009.

Currently Siemens has Rs.160 long term debts over each Rs.1000 of its Equity.

g) Inventory turnover ratio

Inventory turnover ratio of Siemens is increased from 5.85 to 8.27 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens Sales over its Inventories increases in Financial Year 2009.

h) Fixed assets turnover

Fixed Assets turnover ratio of Siemens is increased from 7.411 to 9.32 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens

Sales over its Fixed Assets increases in Financial Year 2009.

In Financial year 2009 Siemens made Sales of Rs.932 over each Rs.1000 of its fixed assets.

i) Total assets turnover


Total Assets turnover ratio of Siemens is increased from 0.084 to 0.49 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens Sales over its Total Assets increases in Financial Year 2009.

In Financial year 2009 Siemens made Sales of Rs.490 over each Rs.1000 of its Total assets.

j) Gross profit margin

Gross profit margin of Siemens is decreased from 0.149 to 0.11 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens Cost of Goods Sold expense increases in Financial Year 2009.

In Financial year 2009 Siemens earned Rs.110 as Gross profit on Sales of Rs.1000.

k) Operating profit margin

Operating profit margin of Siemens is decreased from 0.095 to 0.059 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens

Operating Expenses decreases in Financial Year 2009.

In Financial year 2009 Siemens earned Rs.59 as Operating profit on Sales of Rs.1000.

l) Net profit margin

Operating profit margin of Siemens is slightly decreased from 0.06 to 0.037 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens Operating Expenses increases in Financial Year 2009.

In Financial year 2009 Siemens earned Rs.37 as Operating Profit on Sales of Rs.1000.

m) Return on total assets(ROA)

Return on total assets (ROA) of Siemens is slightly decreased from 0.06 to 0.056 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens Return on its Total Assets employed decreases in Financial Year 2009.

In Financial year 2009 Siemens earned Rs.56 as Net Income on Rs.1000 of its Total Assets employed.

n) Return on equity (ROE)

Return on Equity (ROE) of Siemens is decreased from 0.26 to 0.19 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens return on its Equity employed decreases in Financial Year 2009.

In Financial year 2009 Siemens earned Rs.190 as Net Income on Rs.1000 of its Equity employed.

o) Network Ratio


The network ratio describe that in year 2009 ratio increases and in year 2008 it decreased, so we can say that it is increasing yearly because its total assets and equities is increasing than the year 2008.

p) Return on Capital Employed ratio

Return on capital employed of Siemens is decreased from 0.401 to 0.301 in Financial Year 2009 as compare to Financial Year 2008. This means Siemens return on its capital employed decreases in Financial Year 2009.

Interpretation of VERTICAL ANALYSIS OF BALANCE SHEET

The statement presented for analysis belongs to Siemens (Pakistan) Engineering Co. Ltd. and the financial statement under consideration is Balance Sheet, presenting financial position till Sep, 2009. Finding such analysis is that the balance sheet shows that its total assets are 84.01% in 2009and 85.36% were in 2008, so its current assets decrease in 2009. Noncurrent assets are 15.99% in 2009 and 14.64 in 2008, which shows its fixed assets are increasing in 2009.

In liabilities portion current liabilities are decreasing in 2009 as compared to previous year because 70.67% in 2009 and in 2008 it was 74.17 % on the other hand the situation is inverse because total equity is increasing from 25.38% to 28.48% as comparison of 2009 with 2008. So the overall Siemens position is going average in 2009 but Siemens fixed assets are increasing from 1.35% than last year and current liabilities are decreasing in 2009 from 3.5% as compare to 2008.

Interpretation of HORIZONTAL ANALYSIS OF BALANCE SHEET

The statement presented for analysis belongs to Siemens (Pakistan) Engineering Co. Ltd. and the financial statement under consideration is Balance Sheet, presenting financial position till Sep, 2009. Finding such analysis is that the balance sheet shows that the current assets are decreasing by 3.63% and its noncurrent assets are increasing by 6.92%.

Liabilities portion shows that its current liabilities are decreasing by 6.70% and its total noncurrent assets are increasing by 86.50% but deferred tax is increasing 18.91% and equity portion shows the total equity is increasing 9.90%. So the balance sheet shows its total assets are decreasing 2.09% and total liabilities & equities are also decreasing 2.09% as well.

Interpretation of VERTICAL ANALYSIS OF PROFIT AND LOSS ACCOUNT

The statement presented for analysis belongs to Siemens (Pakistan) Engineering Co. Ltd. and the financial statement under consideration is Income Statement, presenting financial position till Sep, 2009.Finding such analysis is that the income statement shows that according to the


operating revenue in 2009. Its cost of revenue is increased 88.9% as compare to 2008 it was 85.0% and gross operating profit is decreased 11.02% in 2009 because in 2008 it was 14.99%, general administration expenses is 1.50% in 2009 its decreasing in 2009, in 2008 it was 1.99%. EBT is 5.93% in 2009 and 9.53% in 2008 its decreasing in 2009. Income tax is 2.15% it also decreased, net income from continuing operation is 3.77% in 2009 it decreases so the net income from total operations is 3.77% in 2009 and total net income is 6.24% in 2008. It decreased in 2009.

Interpretation of horizontal ANALYSIS OF PROFIT AND LOSS ACCOUNT

The statement presented for analysis belongs to Siemens (Pakistan) Engineering Co. Ltd. and the financial statement under consideration is Income Statement, presenting financial position till Sep, 2009.Finding such analysis is that the income statement shows that according to the operating revenue in 2009 it is increasing from 34.48%. Its cost of revenue is increased 40.76% and gross operating profit is decreased by 1.14% in 2009. General administration expense is 1.36% increased in 2009. EBT is 16.37% decreased in 2009. Other operating income is 90.03% it’s decreasing. Income tax is 11.96% it also decreased; Net Income from continuing operation is 18.69% in 2009 it decreases.

Analysis of cash flow statement

A Siemens Cash and cash equivalent decreases from Rs.2, 499,330 to Rs. (271,602) in Financial Year 2009 as compared to Financial Year 2008.

Cash Flow From Operating Activities:

The Net Cash Flow from Operating Activities in 2009 decreases by a great, extent as compared to 2008 (from Rs. 2,.727,427 to Rs.-1,871,088). The reasons for decreasing Net Cash Flow from Operating Activities is that the cash generated from Operation decreased from Rs. 4,222,784 to Rs. -834,156 and the financial expenses, payment to worker’s profit participation fund and payment to gratuity fund increased by very large percentage as compared to previous year 2008 and income tax decreases from Rs. 1,097,239 to Rs. 518,903. These are the factors which decreased cash flow of 2009. This is negative sign for the company because net cash flow from operating activities going down and company is decreasing its operating activities by increasing sale of goods and services and cost of sales as well.

Cash Flow From Investing Activities:

In financial year 2009 Net cash outflow Rs. (157,611,000) is from Investing Activities. While in Financial Year 2008 Net cash inflow Rs. (109,946,000) is from Investing Activities. Capital expenditure increased than year 2008, is the main reason and is responsible for negative net cash outflow from investing activities and no dividend income. Proceeds from sale of


property, plant and equipment decreased from Rs. 22,978 to Rs. 11,958. Siemens needs more investment in acquiring assets or other business to get high return or be pioneer in its sector.

Cash Flow From Financing Activities:

The Cash Flow from financing activities decreases in 2009 because dividend paid is 742,233 in 2009 and 742,233 in 2008 which shows no changes in no. of stock of Siemens. There is no transaction of shares of Siemens. There is no short term loan in 2009 but in 2008 there was Rs. 330,646 which may takes changes in financing activities.

siemens analysis of financial statement

Documents

payables provisions

2009vertical

2009horizontal

engineering

net cash flow

income statement

total assets

current assets