Scribd
Upload
27 views2 pages

Balance Sheet Structure

Unilever's current ratio of 0.6286 indicates it may have difficulty meeting current obligations due to low current assets, though low ratios do not necessarily indicate a critical problem. Net debt increased after Unilever purchased shares that simplified its capital structure and eliminated shareholder dilution. Unilever's return on equity of 0.3939 is comparable to peers, though it was artificially boosted by taking on more debt in 2014. Unilever saw a 2.7% decline in turnover in 2014 due to weak emerging markets and trade destocking in China, though it grew net income through cost reductions.

Uploaded by

radhika1992
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
27 views2 pages

Balance Sheet Structure

Unilever's current ratio of 0.6286 indicates it may have difficulty meeting current obligations due to low current assets, though low ratios do not necessarily indicate a critical problem. Net debt increased after Unilever purchased shares that simplified its capital structure and eliminated shareholder dilution. Unilever's return on equity of 0.3939 is comparable to peers, though it was artificially boosted by taking on more debt in 2014. Unilever saw a 2.7% decline in turnover in 2014 due to weak emerging markets and trade destocking in China, though it grew net income through cost reductions.

Uploaded by

radhika1992
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Balance sheet structure `

Asset:
With a current ratio of 0.6286, Unilever is doing as well as its peers in an industry where the inventories are
easily saleable and debtors may be as good as liquid cash, such a ratio is good. It indicates that the company
may have difficulty meeting its current obligations. Low values, however, do not indicate a critical problem. If
Unilever PLC has good long-term prospects, it may be able to borrow against those prospects to meet current
obligations. However, its current assets are low due to low amount of cash and short term investments and its
receivables/payables ratio is approximately 0.4 which is extremely low and we can see that the current assets
of the firm are the lowest since 2009.
Net debt increased since the firm purchased the Leverhulme Estate shares which increased the earnings per
share. The firm simplified its capital structures with the conclusion of this deal and eliminated ahead of time
the burden of a significant dilution of shareholder’s interests.
Return on Equity:
The ROE of 0.3939 is comparable to that of its peers in the industry and higher than the market in general.
Since the firm increased its debt to equity ratio in 2014 by taking more debt, this factor could have artificially
boosted the ROE.
Return on Assets:
The ROA of 0.1186 is favourable and higher than the industry’s range of 0.07 to 0.10.In this regard, it is
important to note that the peers of Unilever are doing better than the firm on its ROA.

Sales/Revenues:
Unilever has had a decline in turnover in 2014 of 2.7%. This decline was in part due to weak growth in merging
markets, flat growth in developed markets. Trade destocking in China adversely impacted the revenues.
Efficiency in marketing and advertising products increased and overheads reduced to contribute to a high
competitive intensity. Year on year Unilever PLC had relatively flat revenues (49.80bn to 48.44bn), though the
company grew net income 6.79% from 4.84bn to 5.17bn. A reduction in the selling, general and administrative
costs as a percentage of sales from 24.45% to 22.95% was a component in the net income growth despite flat
revenues.

Segment wise Sales/Revenues:


Personal Care: Turnover of personal care products increases thanks in part to new product launches
and acquisitions of Camay and Zest brands which will strengthen the portfolio of the firm, especially in
emerging markets like Mexico. Reduced overhead and increase efficiencies also helped this segment incur
favourable turnovers in spite of weaker markets conditions.
Foods: While a few newly launched products performed well and helped increase market share, the
decline in spreads was enough to offset the growth incurred in terms of revenues in other food categories.
Refreshment: The acquisition of Talenti and positive contributions from Ben & Jerry’s Cores and
Breyer’s Gelato in US established the firm as the market leader. Across the segment, a few products registered
growth in a few markets and decline in others. Higher diary and chocolate costs led to lower gross margins.
Home Care: Cost increases from weaker currencies in emerging markets led top a decrease in the
gross margins but strong margin improvement in the second half contributed to growth in this segment.

Equity & Liabilities:


Long-term debt to debt ratio: The long-term debt is a major part of the total debt of Unilever and this part
increased over the last year. The cash flow from operating activities of Unilever decreased which is justified
given its acquisitions and mergers of 2014 and purchase of Leverhulme shares.

Year on year, both dividends per share and earnings per share excluding extraordinary items growth increased
5.95% and 8.33%, respectively. The positive trend in dividend payments is noteworthy since only some
companies in the Personal & Household Prods. industry pay a dividend. Additionally when measured on a five
year annualized basis, dividend per share growth is above the industry average relative to its peers, while
earnings per share growth is in-line with the industry average.
In 2014, cash reserves at Unilever PLC fell by 134.00m. However, the company earned 5.54bn from its
operations for a Cash Flow Margin of 11.44%. In addition the company used 341.00m on investing activities
and also paid 5.19bn in financing cash flows.

Unilever PLC has a Debt to Total Capital ratio of 49.20%, a lower figure than the previous year's 55.65%.

You might also like