Nestl is a Swiss-German word which means Little Nest which is its trademark

Nestl is the worlds number one food company 5th largest company of the world according to its turn over 283000 people employed from all over the world Present in 81 countries of the globe having 522 factories

Date of Establishment-1959 Revenue-Rs 63773.18 Million Market Capital-Rs 420468.93 Million Business Operation-Consumer Food FinancialsTotal Income-Rs 62973.966 Million Net Profit-Rs 8186.648 Million

INSTANT NOODLES- 80% COFFEE- 55% MILK- 23% CHOCOLATE- 14%

Milk Products and Nutrition 43% Beverages 20% Chocolates and Confectionary 21% Prepared Dishes and Cooking Aids 16%

Causes of Worry for Nestle India in the next 3-5 year time frame
1
Nestles employee costs rose by 65% to Rs138 cr during the quarter, over the year-ago period in 2008, chiefly due to provisions for retirement benefits. While Nestle has not disclosed the actuarial component in employee costs, employee cost in the previous quarter was only Rs 97 cr.

2
Nestles material costs Milk, sugar, coffee seeds, flour and vegetable oils are some of the key material inputs. Milk and sugar costs have been rising sharply. Consumer non-durable companies have been spending heavily on advertising, Nestle being no exception.

3
The bottom line was also hit by 65% y-o-y. It is the first time in the past three years that the company reported a y-o-y drop in its quarterly net profit. At 14.6%, the company has logged its lowest operating profit margin in the past eleven quarters.

Strong Service Offerings The company is acknowledged amongst India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India'. The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. Call for Action Nestle's Senior Management should make strategic decisions and acquisitions and carry assets that maximize expected value, even if near-term earnings are negatively affected as a result
11

PARTICULARS Share Capital Reserves & Surplus Secured Loans Plant, Machinery etc Investments Inventories Sundry Debtors Cash Other Current Assets Current Liabilities Other Liabilities Sales & Other Revenue Material Consumed Manufacturing & other expenses Excise Duty Interest Expense

2006 964157 2924722 162676 5800369 777732 2762185 5567569 763560 1270424 3135917 3952808 29648063 13366621 9574238 1281317 4408

2005 (In Rs ooo) 964157 2577176 143045 4965953 1044276 2530993 305247 366453 1424272 3198326 3654969 26676305 11280564 8390049 1669862 2122

 Prepare

financial statement Comment on Nestle Indias performance in 2006. What additional information might be useful?

particulars
Revenues sales and other revenues Excise duty

2006

2005

29648063 1281317 28366746

26676305 1669862 25006443 11280564 8390049 19670613 5335830

Expenses Material consumed Manufacturing and other expenses Operating profit 13366321 9574238 22940559 5426187

particulars Other expenses

Interest expense Net profit before tax Income tax Net profit after tax

2006
4408 5421779 1654274 3767505

2005
2122 5333708 1594859 3738849

particulars Equity(share holders fund) Share capital Revenues and surplus Secured loans 964,157 2,924,722

2006 (Rs.)

2005 (Rs.)

964,157 2,577,176 3,888,879 162,676 4,051,555 3,541,333 143,045 3,684,378

Fixed assets Plants and machinery

Investments

5,800,369
777,732

4,965,953
1,044,276

2006
Current Assets inventories Sundry Debtors Other current assets Cash Current liabilities Other liabilities 2,762,185 557,569 1,270,424 2,530,993 305,247 1,424,272

2005

763,560 5,353,738 3,735,917 3,952,808 7,688,725

366,453 4,626,965 3,198,326 3,654,969 6,853,295

2005 Revenue from sales in 29648063 26676305 Increase in sales and revenues in 2006 = 29648063-26676305 =2971758 Percentage increase in sales and revenues =2971758/26676305 =0.11140066*100 =11.14%

2006

Net profit after tax in 2006 Net profit after tax in 2005 Increase in profit 3738849 Percentage increase in profit =28656/3738849

=3767505 =3738849 =3767505=28656

=0.00766439*100 =0.76%

The Net Profit of 2006 is greater than that of 2005, which shows that companys performance has enhanced w.r.t. previous year. Also the companys sales and other revenues increased in the year 2006 by 11.1%. Although there was an increase in material consumed as well but the gross profit of year 2006 was higher than that of 2005. Although the sales and other revenues of the company rose by 11.1% the net profit of the company has increased just by 0.76%. Hence we can say that the percentage increase in Revenues is less than percentage increase in expenses hence the net profit increase is not as much as increase in Revenue.

We can also calculate Net Profit Ratio(NPR) of the company and compare its performance in 2 years. NPR = Net Profit/ Revenue x 100 NPR for 2006 =3767505/29648063 =0.127074*100 =12.7% NPR for 2005 =3738849/26676305 =0.1401*100 =14.01%

The NPR for 2006 is 12.7% while for 2005 is 14.01%. Hence the profitability of company was higher in 2005 than in 2006.

Operating margin =operating income / net sales Operating margin for 2006= 5426187/ 29648063

= 18.3%

Operating margin for 2005= 5335830/ 26676305 = 20.2% Hence the operating margin of company was higher in 2005 than in 2006.

Current ratio= current assets/ current liabilities Current ratio for 2006= 5,353,738/ 3,735,91 = 14.33 Current ratio for 2005= 4,626,965/ 3,198,326

= 14.46 Current ratio is almost same for both the years

Quick ratio= total assets/ total liabilities

Quick ratio for 2006= 11931839/7688725 = 1.55321 Quick ratio for 2005= 10637194/6853295 = 1.5527 Quick ratio is almost same for both the years .

To judge the financial position of the company better, we need additional information. We need to enter adjustment entries in the journal which will ultimately affect the financial statements. For examples: 1. We are not given the depreciation charged on plant and machinery. 2. We are not given the opening and closing stock of the inventory and the material consumed. By adjusting the trial balance we would be able to negate the error in balancing the balance sheet.