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Almarai and Danone

In: Business and Management

Submitted By chawla72
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Executive Summary The executive summary below provides a detailed overview and financial analysis of Danone and Almarai and ‘Group D’ recommendation for investment. The global dairy industry is a highly competitive sector. The analysis of demand from 2002 to 2016 shows a cyclical trend. The demand slowed in last few years due to various factors such as global crisis, rise of milk price and production cost however the forecast of industry shows a positive growth rate of 4% by 2016. According to Rabobank’ market research, significant demand is expected in India (10% CAGR), China (7% CAGR), Middle East and North Africa (MENA, 4% CAGR), Asia (4% CAGR). Danone, the French Multinational, is a well-diversified company and has strong product portfolio and global reach. It is a leader in food and beverage industry and is present in over 140 countries. Over 60% revenues of Danone are generated from dairy products and outside Europe. Almarai on the other hand is a strong regional leader with 50% of revenue generated from dairy products and over 90% revenues generated in GCC market.
Financial analysis was carried out for both firms using common-size balance sheet, income statement and cash flows statements. In balance sheet analysis of Danone, money market funds purchased during 2013 represent the main component in current assets and brands and goodwill represents majority of non-current asset. In comparison, inventory represents 48% of Almarai’s current assets and long term portion of Islamic funding facility Murabaha with an amount of 8.3 B SAR represents the majority of long term liabilities. The analysis of financial results of 2013 of Danone showed higher gross profit and lower net profit percentages in comparison with Almarai. This can be explained due to higher Cost of Sales & SG&A expenses. The cash flow statement of both companies shows that both…...

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