A Study On Financial Performance Analysis of West Coast Paper Mills Ltd Dandeli

Presented by: Alfred Mascarenhas

The Financial Analysis is the Methodological Classification of data given in the financial statements. The financial statements provide a summarized view of the operation of a firm.

It helps in obtaining a better understanding about the financial position and the performance of the firm.

FINANCIAL PERFORMANCE ANALYSIS

Comparative Financial Statements: In these statements, figures of two or more

period are placed side by side to facilitate comparison, which helps in studying the trends in an enterprise.

Ratio Analysis Ratio analysis is defined as the systematic

use of ratios to interpret the financial statements so that the strengths and weakness of firm and the current financial condition can be determined.

The Company was promoted by Shri. Digvijay Cement Company Limited Sikka, Gujarat state in 1955. Originally the plant was designed to manufacture 18000 MT per year of writing, printing and packaging paper.

It is incorporated under the Indian Companies Act 1956, with its registration office in Mumbai and later it was shifted to Dandeli.

INTRODUCTION OF THE COMPANY

The Indian paper industry currently has a turnover of over Rs. 30000 crores and contributes over Rs. 3000 crores to the national exchequer. Even more importantly it is providing employment opportunities to over 1.5 million people, mostly in rural areas.

Indian paper industry has continued to upgrade its capacities and technologies, in spite of huge challenges like shortage of raw material, highly capital intensive nature of the industry, threat of cheaper imports from China, Indonesia etc.

INDUSTRY PROFILE

Competitors of WCPM are Mysore Paper mills ltd, Bhadravati Ballarpur Paper mills ltd, Andhra Pradesh Seesai Paper mills ltd, Andhra Pradesh

MARKET SCANNING

Wood free Writing & Printing Paper Wood free Offset Paper Security paper Accounts Book Paper Duplex Board

PRODUCT SCANNING

Indian Aluminum Co. Ltd. State Bank of India, Bank of Baroda, Central

Bank of India, Syndicate Bank Canara Bank, Corporation Bank, Indian

Bank, Indian Overseas Bank, Standard Chartered Bank, HSBC, etc.

CUSTOMER SCANNING

Problem Identification The company posted gross profit of Rs.

158.66 Crores as against Rs. 189. 18 Crores in the previous year – lower by Rs. 30.52 Crores (16%) whereas there was a net loss of Rs. 33.56 Crores as against profit of Rs. 90.08 Crores in the previous year.

METHODOLOGY

The net loss is due to following reasons; It is observed that the company has procured

10.31 lakhs MT of wood and bamboo as against 6.89 lakh MT in the previous year,

With the Company geared to source more than 10 lakhs MT of raw material per annum on sustained basis which is insufficient to meet the requirements.

Though there was shortage in the supply of raw material the establishment cost remained same.

Increasing rates of wood due to competition among the paper mills.

Other reasons are hike in the price of fuel and transportation cost.

Change in method of calculation of depreciation, resulting in higher depreciation by Rs. 104.42 Crores.

The company has reinstated Foreign Currency Loans/External Commercial Borrowings of USD 141.49 Million at the exchange rate prevailing as on 31st March 2012.

The “Thane” cyclone which hit coasts of Tamilnadu and Pondicherry in December 2011 has had its own share of strains on the supply side.

Paper industry has been removed from Core Sector for supply of coal by subsidiaries of Coal India Ltd. This may increase rates of coal substantially.

The paper industry is one of the 18 highly polluting categories of industries

Problem Formulation

CONTROLABLE

VARIABLES

UNCONTROLABLE

VARIABLES

Electricity.

Raw material.

Safety

Technology

Labor efficiency

Production volume

Quality of paper

Competitors

Instability of government

Lack of adequate fund

Inflation(fuel,power,

transportation)

Understanding the Relationship between Controllable & Uncontrollable variables:-

ELECTRICITY: Electricity is one of the controllable variables in the west coast paper mill because they use to have their own power plant in the industry now they are taking it from HESCOM were HESCOM is providing better price for the industry. Production of Chipping and Pulping it will take more electricity power so they have to pay more taxes to Govt. and also the electricity will be uncontrollable it may cause to short circuit which might lead to fire.

Problem Specification

EMPLOYEES: In production of Chipping, Pulping, Chemical Recovery, Paper Making it requires well educated person with required level of experience there will be a specific period of training for the employees. The company is providing more safety measures for employees to work difficult situation. Safety means avoiding the future unexpected happenings. Globalisation will affect employees because it will leads to job hopping.

To analyze the financial performance of the company for the period 2007 to 2012

To analyze the financial positions, overall growth & stability of the Company.

To analyze organization efficiency based on profitability and liquidity ratios.

OBJECTIVES

Secondary data: The secondary data has been collected from

the company, they include annual reports and financial statements, balance sheet provided by the company for the year 2007 to 2012

DATA COLLECTION METHODS

The study is limited to only five years of financial statements.

The interpretations made are based on the data available from the annual reports of the company.

The study assumes that the information gained by interaction with the company people is true to their knowledge.

Some of the department heads were not so cooperative towards the answering of questions

LIMITATIONS OF THE STUDY

Net Profit Ratio Formula: - EATNet Profit Ratio = --------------- X 100

Net Sales

DATA ANALYSIS AND INTERPRETATION

Particulars 2007-08 2008-09 2009-10 2010-11 2011-12

EAT 8,190.33 9,053.82 5,470.21 9,008.18 (3356.00)

Net Sales 58,322.71 61,975.14 62,390.71 1,06,473.00 1,30,517.00

Net profit

ratio

14.04 14.60 8.76 8.46 (2.57)

2007-08 2008-09 2009-10 2010-11 2011-12

-4

-2

0

2

4

6

8

10

12

14

16

14.0414.6

8.76 8.46

-2.57

Net profit ratio

Years

Rati

o

Findings The company’s liquidity position for the

current year is not healthy. Remarkable decline in the quick ratio of the

company for the present year. Return on capital employed, Return on

shareholder’s fund, Return on total fixed assets is very low compare to past 4 years.

FINDINGS, SUGGESTIONS AND CONCLUSION

The gross profit for the year 2011-12 is decreased compared to previous year.

For the present year 2011-12 the company has posted net loss. The net loss is due to non availability of sufficient raw materials, hike in the price of fuel and transportation cost, high rate of depreciation, high labor turnover, higher training cost, High amount of foreign Currency Loans/External Commercial Borrowings and the highly polluting nature of the company.

Suggestion The company should concentrate on increasing

the current assets in order to have a healthy liquidity position.

Company should take right steps in decreasing the depreciation rate and maintenance charges.

The company should take all possible steps towards the collection of debts.

It is favorable for the company to minimize the establishment cost to earn more revenue.

The company should stress to acquire more land in addition to existing land for the plantation of bamboos which is the main source of raw material for production

Right the company is in a position to get nearly 50% of the raw material requirement from the bamboos already planted in the acquired land by providing little source of income to the farmers engaged in the said land.

 

It is feasible to extend the existing plantation land to cultivate the bamboos to make it available the remaining raw material required per annum.

The company should take necessary steps to get the other raw materials like coal etc on cheaper basis to minimize transportation cost, freight etc.

THANK YOU