Analysis of Nurpur milk

Introduction
y Noon Group is well reputed business group in Pakistan y Manufacturing and trading business since 1964 y It has emerged as a well established & widely respected

group within the Pakistan industry.

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Businesses successfully under Noon Group management: y Textile Technics (Pvt.) Ltd. y Pioneer Cement Ltd. y Noon Sugar Mills Ltd. y Noon Pakistan Ltd. (Nurpur Milk) y Noon International y Textile Services (Pvt.) Ltd

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y The company was incorporated in 1966 y Paid up capital of Rs.5 Million y Total investment of Rs.18 Million y 1st company in Pakistan to operate a Spray Dryer for

milk powder manufacturing. y Its products namely; milk powder, butter and cheese are marketed throughout Pakistan under the brand name of Nurpur .

Vision
Our vision at Nurpur is to be a transformative force in our community and world at large and to serve as model of a sustainable business alternative that nurtures social and economic well-being in an environmentally sensitive manner.

Mission Statement
Nurpur is committed to supplying the consumer and our customers with the finest, high-quality products and to leading the industry in healthy and nutritious products. Nurpur supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies.

Core Values
y Customers are at the forefront of everything we do. y Ideas are constantly challenged to develop next y y y y y

generation solutions. Business is conducted openly and fairly Team-work Tough goals are set Environment Community

Business Model
Supplier Cash Paid Raw Material (Credit)

Cash Received

Production

Account Receivables Distributors (Credit)

Inventory

Relationship with Debtors

y In 2010 the total receivables was of Rs. 92007.844 Million (2009: Rs. 61764.021 Million, 2008: Rs. 50952.033 Million) y The company is gaining trust of the debtors and increased its credit sales with the passage of time, and debtors purchased more goods. y In 2010 the receivables days is 14 days (2009: 13 days, 2008: 11 days), it is increased from previous years, and that was because of attaining large market shares and new customers, for the new market shares company offer new debtors a relax payback time to maximize its earnings.

Relationship with Creditors

y In 2010 the total payables was of Rs.22826.760 Million y y y y

(2009: Rs. 143963.484Million, 2008: Rs. 151367.052 Million) The creditor have trust on the company They provide raw material to the company for the production. In 2010 the day s payables was 39 days that increased from the previous year 2009; 34 days. The increase in the day s payables is because of company gives bill payables against the good purchased to attain the confidence of new creditors.

SWOT Analysis

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Strengths Having Strong Business Name called NOON Group Provide Best Quality Products Hygienic milk Long term Storage Taste Nutritious Growing sales &Profits Environment Friendly

Weakness Low market campaign Depend upon their own marketing company Lack of research & Development Relatively a small company in comparison to its rivals Dependence on third party for supply of Milk Comparatively weak distribution system

Opportunities Target market has big profit margins Bright scope of dairy products Target Market can easily be located

Threats Strong Competitors Animal diseases Availability of natural Milk Price sensitive people Uncertainty of Economic Conditions

PEST Analysis

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Political Analysis
y The political conditions are not very stable in the

country, but this does not directly influence the trends and spending patterns of the customers. y There are no restrictions or barriers on the growth of this industry. y So the political conditions do not impact of this market because it s a consumer base product and has to be purchase by customer in any condition.

Economic Analysis
y The economical conditions are not very favorable and

the economy is facing problems, but it is directly influencing buying power of consumers, but in our product it not that much that it should be. y If the country is out of its current problems, it will further boost up growth of this industry, as people will feel more secure economically and it will further increase the attractiveness of the market.

Social Analysis
y The social patterns are changing in the country, as the

world is becoming a global village, and mutually share and accept patterns. y People are becoming more attractive towards the branded products. y It is becoming fashion and young generations as well as the children are getting more attracted towards this industry. y People are moving towards branded food / dairy products due to hygienic reason.

Technology Analysis
y High technology is the basic requirement of dairy and

food industry. y The companies that are using latest technology have some cost benefits over the companies, which are not using high technology. y The key to survival for companies in this industry is using high technology for quality, hygienic and cost purposes.

Sector Analysis

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Companies Nestle Halee food ltd Vita Halla Prime Nirala airy Crest Butt airies Munno airies Karachi airies Military airy Farms Nurpur Total

Capacity (Million liters)

1.3 0.9 0.05 0.15 0.1 1.0 0.15 0.04 0.06 0.1 0.18 0.15 4.22

Capacity Utilization

Capacity Utilization

Flush 1.3 0.9 0.03 0.15 0.15 0.1 0.15 0.06 0.02 0 0.18 0.15 3.19

Lean 0.78 0.54 0.018 0.09 0.06 0.06 0.09 0.036 0.012 0 0.105 0.09 1.881

Average Monthly
1.04 0.72 0.042 0.12 0.08 0.08 0.12 0.048 0.016 0 0.144 0.12 2.53

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y Nestle is the largest company in milk industry with the production y y y

capacity of 1.3 Million liters with average monthly capacity of 1.04 Million liters. Haleeb Food limited is the second largest company in milk industry with the production capacity of 0.9 Million liters with average monthly capacity of 0.72 Million liters. Nurpur Milk is the 5th largest milk producing company in Pakistan with the production capacity of 0.15 Million liters with the average monthly capacity of 0.12 Million liters according to 2005 data. Now Nestle is remained at the top in this industry with the average monthly capacity of 99.5 Million liters (2009: 80.58 Million liters) and average monthly production 62.5 Million liters in 2010 (2009: 53.33 Million liters). 2010 Nurpur is with the average monthly capacity of 0.487 Million liters (2009: 0.487 Million liters) and average monthly production 0.222 Million liters in 2010 (2009: 0.147 Million liters).

Financial Analysis

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Ratios
2010
Sales (Rs. Million) Current Ratio Quick Ratio Gross Profit Operating Profit Net Profit/(loss) after tax Debt Equity ratio Interest coverage Ratio Admin and distributed Expenses ratio

2009 1,745.609 0.81 0.6 12.43% 4.45% 2.76% 1.43 1.90 7.98%

2008 1,615.387 0.85 0.6 13.08% 4.13% 2.16% 1.79 2.37 8.96%

2,436.416 0.73 0.7 10.91% 3.67% 1.12% 1.21 2.24 7.78%

Risk associated with the company

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Capital Risk
2010 2009 2008

Rupees(000)
Total Borrowings Less: Cash and alances Net debt Total Eq it Total capital Gearing Ratio ank 23,350.614 264,775.841 , . 10,842.562 288,301.606 , . 29,292.255 274,299.299 , . 288,126.455 299,144.168 303,591.554

502,238.734 53%

498,105.262 58%

444,135.501 62%

Financial Risk
Credit Risk 2. Liquidity Risk 3. Market Risk
1.
a)

Currency risk b) Interest rate risk

Credit Risk
2010 2009 2008

Rupees (000) Security deposits Trade e ts ue from associated companies Other receiva les Bank Balances Total 11,011.268 92,007.844 1,003.924 314.005 23,248.63 127,585.67 7,222.851 61,764.021 1,265.054 422.465 10,824.551 81,498.94 5,342.498 50,952.033 0 770.716 29,263.505 86,328.75

2.Liquidity Risk
y Liquidity risk is the risk that an entity will encounter difficulties

in meeting obligations associated with financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The Company's treasury department maintains flexibility in funding by maintaining availability under committed credit lines.
2010 2009 2008

Rupees (000)
Not past due Past due 1-45 days Past due 45-180 days Past due 180 days Total 63,131.992 11,800.335 3076.027 13999.49 92007.844 44,415.533 744.306 6460.297 10143.885 61764.021 38,512.745 1169.509 70.516 11199.263 50952.033

3. Market Risk
Risk that changes in market price y Foreign exchange rates y Interest rates y Equity prices will affect the Company's income or the value of its holdings of financial instruments.

a. Currency Risk
y The Company is exposed to currency risk on import of

stores and spares denominated in Euro and plant & machinery denominated in US Dollar. y The Company's exposure to foreign currency risk for Euro and US Dollar are commitments against irrevocable letters of credit outstanding as at 30 June, 2010 amounting Rs.49.350 Million (2009: Rs.0.365 Million).

b. Interest Rate risk

y There is lot a fluctuations in the interest rate by the

government and great risk for companies to make plans accordingly.

Proposal with credit terms and conditions

2008 Rs.
Working Capital Funds Stuck in inventory (Days inventory*Daily cost of sales) Funds Stuck in Receivables (Days receivables* Daily sales) Funds available from payables (Days payables * daily cost of sales)

2009 Rs.
7,730.10 87,945.226

2010 Rs.
(43,319.55) 83,251.9914

(28,250.62) 73,086.8486

48,682.9044

62,172.3861

93,451.5773

150,020.374

142,387.509

220,023.12

Production
2010 2009 2008

Securities/Collateral
y In the end of 2010 the company has free hold Land of

Rs.18807.460 Million and building on free hold Land was Rs.35047.068 Million, the company can use both Land and Building as collateral for the loan from bank. As a bank we prefer freehold Land as collateral.

Conclusion
y The company has no need of running finance facility

for the working capital requirement but it need for the buy and installation of new plants, and from the company s detail analysis it is clearly shown that the company management have capability to increase its production and market share, and also there is potential in the industry to groom. From the detailed analysis we come to point that the company needs finance for new machinery, and our bank should give it the facility.

Operating Profit

Net Profit/(loss) after tax