Abbot's Financial Analysis

INVESTMENTS MANAGEMENT PROJECT REPORT FINANCIAL RATIO ANALYSIS: ABBOTT LABORATORIES PAKISTAN (2003-2007)

Dated: 29th May, 2008.

DEPARTMENT ADMN. SCIENCES QUAID-E-AZAM UNIVERSITY, ISLAMABAD

Abbott Laboratories (Pakistan) Ltd - Company Profile Snapshot Company Profile:

Abbott Laboratories (Pakistan) Ltd

Ticker:

ABOT

Exchanges:

BOM

2007 Sales:

6,584,500,000

Major Industry:

Drugs, Cosmetics & Health Care

Sub Industry:

Ethical Drug Manufacturers

Country:

PAKISTAN

Employees:

1350

General Information Abbott Laboratories(Pakistan) Limited Opposite Radio Pakistan Transmission Hyderabad Road Karachi Sindh PAKISTAN www.abbott.com.pk T: 92 21 501 50 45 9 F: 92 21 501 32 45 Karachi Stock Exchange Ticker: ABOT

Turnover (PKR Mn): 5,887.7 Financial Year End: November

Company Overview: Abbott Laboratories (Pakistan) is a subsidiary of Abbott Laboratories, and focuses on manufacturing and marketing pharmaceutical products. The company also manufactures diagnostic equipment; diabetes cares products, molecular devices, related testing kits, and consumer health and hospital products. In addition, it markets pediatrics and medical nutritional products. The company operates primarily in Pakistan. It is headquartered in Karachi, Pakistan and employs 1,500 people. The company recorded revenues of PKR5, 887.7 million (approximately $98 million) during the fiscal year ended November 2006. The net profit of the company was PKR 1, 000 million (approximately $16.7 million) in fiscal year 2006.

Principal Activities: The Company's principal activities are to manufacture, import and market research based pharmaceutical, nutritional, diagnostic, hospital and consumer products and provides toll manufacturing services. It operates through three segments: •

Pharmaceutical,

•

Nutritional and

•

Others

The Pharmaceutical segment manufactures, import and markets research based pharmaceutical products registered with the Ministry of Health and provides toll manufacturing services. The Nutritional segment is into importing and marketing of pediatrics nutritional products and medical nutritional products. Other segment includes importing, manufacturing and marketing diagnostic equipment, testing kits, consumer healthcare, nutritional and hospital products.

Analysis of Company Data: The financial information regarding Abbott laboratories was collected and analysed and the significant ratios were calculated in order to determine the financial situation of thee company during last 5 years, a report is presented below.

OPERATING & LIQUIDITY RATIOS (All calculations are done on MS-Excel using formuals, sheets are attached)

Net Working Capital Net Working Capital= Current Assets – Current Liabilities 2003 Rs. 1233297 2004 Rs. 1809510 2005 Rs. 2211893 2006 Rs. 2814730 2007 Rs. 2247448

Acid test ratio: Cash+ Marketable securities+ Net Receivables / Current Liabilities

2003 0.8911 2004 2.1108 2005 1.8971 2006 2.4253 2007 0.7088

Current Ratio Current Assets/ Current Liabilities 2003 2.6523 2004 4.2611 2005 4.1774 2006

4.7558 2007 3.5490

Receivables as a Percentage of Sales : Net Receivables / Net Sales * 100 2003 2.27% 2004 1.91% 2005 2.85% 2006 3.55% 2007 1.97%

Total Asset turnover: Sales / Average Total Assets 2003 1.4460 times per year

2004 1.3650 times per year 2005 1.2536 times per year 2006 1.1693 times per year 2007 1.3984 times per year

Earning Power of Total Investment: EBIT / Total Assets * 100 2003 30.52% 2004 34.84% 2005 33.16% 2006 28.67% 2007

37.86%

PROFITABILITY RATIOS (All calculations are done on MS-Excel using mathematical formulas, sheets are attached)

Net Profit Margin (%) = Net Profit/ Sales * 100 2003 12.30% 2004 16.25% 2005 18.59% 2006 16.98% 2007 18.48%

Earning Power (%) = EBIT/ Total Assets * 100 2003 28.20%

2004 32.15% 2005 33.16%, 2006 28.67% 2007 37.86%

Rate of Profit on Owner's Equity (%) = Net Profit/ Owner's Equity * 100 2003 24.09% 2004 26.78% 2005 28.20% 2006 23.57% 2007 32.79%

40 35 30 25

Net Profit Margin

20

Earning Power

15

Profit on Equity

10 5 0

2003

2004

2005

2006

2007

Rate of Profit on Paid-up Capital (%) = Net Profit/ Paid-up capital * 100 2003 111.45% 2004 131.87% 2005 141.52% 2006 102.15% 2007 123.55%

Rate of Profit on Total Investment = Net Profit/ Total Investment 2003

164.18 2004 224.23 2005 194.50 2006 294.64 2007 275.35

300 250 Rate on paidup capital Rate on Investments

200 150 100 50 0

2003

2004

2005

2006

2007

SHARE PRICES

(All calculations are done on MS-Excel using mathematical formulas, sheets are attached)

Book value of ordinary shares = Total common equity/ No. shares outstanding 2003 $9.9999 2004 $9.9999 2005 $9.9999 2006 $10.00 2007 $10.00

Earning per Share = Net Income/ Number of Shares 2003 11.15 2004 10.99

2005 14.15 2006 10.21 2007 12.36

Dividend per Share = Net Income/ Number of shares outstanding 2003 Rs. 3.00 2004 Rs. 3.00 2005 Rs. 3.50 2006 Rs. 3.55 2007 Rs. 3.99

Payout Ratio = DPS/EPS 2003

26.99% 2004 27.30% 2005 24.73% 2006 34.77% 2007 32.28%

Dividend Yield (%) = DPS/ Market price per share 2003 0.53% 2004 0.34% 2005 0.27% 2006 0.21% 2007

1.20%

35 30

Bookvalue of share

25

EPS

20

DPS

15 10

Payout

5 0

Dividend Yield 2003

2004

2005

2006

2007

Leverage & Capital Structure Ratios (All calculations are done on MS-Excel using mathematical formulas, sheets are attached)

Total debt to equity ratio = Total Debt/ Total equity 2003 1.6393% 2004 0.1040% 2005 0.1055% 2006

0.0811% 2007 0.1013%

Total Debt to Total Capital = Total Debt/ Total debt+ total equity 2003 26.1640% 2004 17.1887% 2005 17.3699% 2006 15.7591% 2007 21.1924%

Long term debt to equity ratio = Long term debt/ total common equity 2003 0.93% 2004 0.87%

2005 0.62% 2006 1.04% 2007 2.99% 3 2.5 2 Debt to Equity

1.5

Debt to Capital

1

LTD to Equity

0.5 0

2003

2004

2005

2006

2007

Tangible Assets Debt Coverage = Total Assets – Intangibles- Current Assets/ LTD 2003 35.54 times per year 2004 41.59 times per year 2005 57.92 times per year

2006 33.36 times per year 2007 14.06 times per year

Times Interest Earned Ratio = EBIT/ LTD Interest 2003 51.2069 times per year 2004 344.6738 times per year 2005 471.7715 times per year 2006 394.4344 times per year 2007 553.4760 times per year

Cash flow times interest earned ratio = EBIT+ Depreciation/ Interest 2003 59 times per year

2004 392 times per year 2005 523 times per year 2006 438 times per year 2007 612 times per year

700 600 500

Tangible Asset Debt Coverage

400

Times Interest earned

300 200

Cash flow times interst earned

100 0 2003

2004

2005

2006

2007

Asset Relation Ratios (All calculations are done on MS-Excel using mathematical formulas, sheets are attached)

Plant & Equipment to Total Assets = Net Plant + Net Equipment/ Total Assets 2003 805219/2958071 = 27.22% 2004 972968/3368623 = 28.89% 2005 1187749/4129055 = 28.76% 2006 963726/ 5035425 =19.14%

2007 912435/ 4681368 = 19.49%

Inventory to Total assets= Average Inventory / Total Assets 2003 791608/2958071 = 0.2676 2004 837784.5/3368623 = 0.2487 2005 1067760.5/4129055 = 0.2586 2006 1237020.5/5035425 = 0.2457 2007 1309824.5/4681368 = 0.2798

Receivables to Total Assets = Average Receivables/ Total Assets 2003 97057/2958071= 0.0328 2004 92553.5/3368623 = 0.0275 2005 117673.5/4129055 = 0.0285 2006

178019.5/5035425 = 0.0353 2007 168779.5/ 4681368 = 0.0360

0.3 0.25 Plant&Equipment to totalAssets

0.2 0.15

Inventory to total assets

0.1

Receivable to total asset

0.05 0 2003 2004 2005 2006 2007