Cyclon Hellas Sa in the Industrial Production of Lubricants Finance Essay

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PART 1
Cyclon Hellas is a company that operates in Greece in the industrial production of lubricants and the production and trade of packaged lubricants as also at the distribution of liquid fuels. Cyclon Hellas main target, is to provide quality products and services that respect both the needs of consumers and the environment. Since the beginning of the company which is estimated around 1981, through research and technological performance the company archived a high quality and ecological dimension of the products it developed.A  Even the high competition not only in Greece but also in rest of Europe and Middle East, Cyclon Hellas has achieved to expand and play a great role among these markets only by maintaining the same philosophy, which springs not only from its consumer’s liability and satisfaction but also their partner’s collaboration.
PART 2




INCOME STATEMENT (Amounts in A¢”šA¬ 000)






YEAR
YEAR



2009
2008
Turnover
372.651
403.615
Cost of Sales
349.536
377.393
Gross Profit/Loss
23.115
26.222


Selling Expenses
15.891
16.669
Administrative Expenses
4.725
4.529
Plus/ Minus Other Operating Income/Expenses
3.778
3.362


Profits before Interest/Depreciation
6.277
8.386
And Taxes/EBITDA



Plus/Investments income/Profits
3.78
591
From Associate Companies



Minus Financial Expenses
2.084
2.976
Profit before Depreciation and Taxes
4.571
6.001
Minus Total Depreciation
2.697
2.409


Net Profit before Tax
1.874
3.592
Minus Taxes
820
1.436


Profit after Tax
1.054
2.156


ATTRIBUTABLE TO:

Equity Shareholders
1.060
2.147
Minority Interest
(6)
9
Net profit/(loss) after tax
1.054
2.156


Basic earnings/(losses) per Share – EPS (in euro)
0,0397
0,0807
Diluted earnings/(losses) per share (in euro)



Other State revenue

Foreign Currency Translation
(8)
1
TOTAL


1.046
2.157





ANNUAL BALANCE SHEET (Amounts in A¢”šA¬ 000)


YEAR
YEAR

2009
2008
ASSETS

Non-Current Assets

Tangible Assets
33.090
32.752
Investments in Real Estate
2.007
2.015
Intangible Assets
603
844
Participation in Subsidiaries and Affiliated Companies
33
33
Goodwill
467
467
Other Long Term Receivables
4.288
4.792
Total non-Current Assets
40.488
40.903
Current Assets

Investments

Inventories
8.510
9.295
Trade and Other Receivables
49.028
57.538
Cash and Cash Equivalents
4.243
6.034
Total Current Assets
61.781
72.867
TOTAL ASSETS
102.269
113.770


SHAREHOLDERS EQUITY AND LIABILITIES

SHAREHOLDERS EQUITY

Share Capital
12.532
12.532
Reserves
2.105
2.113
Retained earnings
14.705
13.645
Total Shareholders equity attributed to shareholders of the parent
29.342
28.290
Minority Interest
18
24
Total Equity
29.360
28.314
Long Term Liabilities

Long Term loans /(Leasing Liabilities)
373
16.745
Deferred Tax Liabilities
3.740
3.510
Employee Benefits
3.735
3.750
Grants
92
310
Trade and Other Long Terms Paybles
85
74
Total Long Term Liabilities
8.025
24.389
Short Term Liabilities

Trade and Other Sort Terms Paybles
35.686
33.906
Short Term Loans
29.198
29.198
Long Term Liabilities (payable next year)
0
4.000
Other payables and Accrued Expenses

Total Short Term Liabilities
64.884
61.067


TOTAL LIABILITIES
72.909
85.456
TOTAL LIABILITIES AND EQUITY


102.269
113.770
CASH FLOW (Amounts in A¢”šA¬ 000)




YEAR
YEAR

2009
2008
Profit/(losses) before Taxes and Minority Interest
1.874
3.592
Plus / (minus) adjustments for

Depreciation
2.697
2.409
Forecasts
142
(678)
Grants Depreciation
(165)
(147)
Transaction Changes
(235)
(6)
(Profit)/loss from sale of fixed assets
(268)
(52)
Interest charges
2.024
2.590
Operating Profit before adjustments in Working Capital

(Increase)/decrease in receivables
9.016
(14.268)
Decrease/ (Increase) in Inventories
736
(1.164)
Increase/(decrease) in liabilities
1.616
381
Interest Paid
(2.024)
(2.454)
Income Tax Paid
(335)
(394)
Cash flows from operating activities
15.078
(10.953)


Investing Activities

Receipts from sales of Tangible and Intangible Assets
2.919
4.422
Interest received
262
158
Receipts from sale of Subsidiaries
0
83
Cash flow from Investing Activities
2.534
3.981


Financing activities

Proceeds from loans
0
16.919
Payment of Liabilities from Financial Leasing
238
131
Receipt from fixed assets grants
0
91
Repayment of Loans
14.097
0
Cash flow from financing activities
14.335
16.839


Net increase in Cash and Cash Equivalents
(1.791)
1.905
Cash and Cash Equivalents at 1st of January
6.034
4.129




Cash and Cash Equivalents at the end of December

4.243
6.034
PART 3
Group Ratios for Years 2009-2008
YEAR
2009
2008
RETURN ON CAPITAL EMPLOYED


27,8
21,5
RETURN ON EQUITY


12,8
24,5
RETURN OF SHAREHOLDER’S CAPITAL (CAPITAL AFTER TAX)

7,2
14,7
RETURN ON ASSETS


1,83
3,15
GROSS PROFIT MARGIN


6,2
6,5
CURRENT RATIO


0,95
1,19
QUICK RATIO


0,48
0,58
DEBT / EQUITY RATIO


0,03
1,34
STOCK TURNOVER PERIOD


9,3
8,6
DEBTORS TURNOVER


26,2
26,7
CREDITORS TURNOVER


37,2
32,8
A PART 4

STOCK MARKET RATIOS



CAPITALAIZATION



12.532.474,80 A¢”šA¬
PRISE PER SHARE (price taken from Athens Stock Market DD 20/01/2010)
0.72 A¢”šA¬
TOTAL SHARE AMOUNT



17.406.215,00 A¢”šA¬


EARNINGS PER SHARE

0.04 A¢”šA¬



P/E RATIO

18.0




DIVIDENTS IN YEAR 2009
1.060.000,00 A¢”šA¬

DIVIDENTS PER SHARE
0.017 A¢”šA¬

DIVIDEND YIELD
2.36%







PART 5





A INCOME STATEMENT (Amounts in A¢”šA¬ 000)
A (FORECAST FOR 1 YEAR)




YEAR
YEAR
YEAR
YEAR

forecast
% change


2010
2009-2010
2009
2008
Turnover
354.018
-5,0%
372.651
403.615
Cost of Sales
333.000
-6,0%
349.536
377.393
Gross Profit/Loss
21.018
-9,0%
23.115
26.222



Selling Expenses
15.500
-2,5%
15.891
16.669
Administrative Expenses
4.900
3,7%
4.725
4.529
Plus/ Minus Other Operating Income/Expenses
3.900
3,2%
3.778
3.362



Profits before Interest/Depreciation
4.518
-28,0%
6.277
8.386
And Taxes/EBITDA





Plus/Investments income/Profits
700
85,0%
378
591
From Associate Companies





Minus Financial Expenses
1.530
-26,5%
2.084
2.976
Profit before Depreciation and Taxes
3.688
-19,3%
4.571
6.001
Minus Total Depreciation
2.750
5,7%
2.697
2.409



Net Profit before Tax
938
-50,0%
1.874
3.592
Minus Taxes
430
-52,0%
820
1.436



Profit after Tax
508
-52,4%
1.054
2.156
It is expected a decrease of 5.0% concerning the Turnover of year 2010 due to the global financial crisis
and the inflation change (plus the huge economical crisis in the Greek Markets)
The Sales are also decreased since the increase of the gasoline, lubricants and fuel prise.
The group has no problems with exchanges differences, due to the physical hedging policy.
Selling Expenses will continue to grow (-2.5%).
Administrative Expenses are also growing(3.7%)
Longterm Loan on a euribor rate and fixed spread
Financial Expenses are Decreasing (26.5%)payment for Leasing
Taxation Rate is 25% for Years 2008-2009-2010
PART 6
ANNUAL BALANCE SHEET (Amounts in A¢”šA¬ 000)



(FORECAST FOR 1 YEAR)
YEAR
YEAR
YEAR

2010
2009
2008
ASSETS


Non-Current Assets


Tangible Assets
32.000
33.090
32.752
Investments in Real Estate
2.000
2.007
2.015
Intangible Assets
580
603
844
Participation in Subsidiaries and Affiliated Companies
33
33
33
Goodwill
467
467
467
Other Long Term Receivables
4.100
4.288
4.792
Total non-Current Assets
39.180
40.488
40.903
Current Assets


Investments


Inventories
8.7460
8.510
9.295
Trade and Other Receivables
47.672
49.028
57.538
Cash and Cash Equivalents
3.700
4.243
6.034
Total Current Assets
59.832
61.781
72.867
TOTAL ASSETS
99.012
102.269
113.770
SHAREHOLDERS EQUITY AND LIABILITIES


SHAREHOLDERS EQUITY


Share Capital
12.532
12.532
12.532
Reserves
2090
2.105
2.113
Retained earnings
14.200
14.705
13.645
Total Shareholders equity attributed to shareholders of the parnt
29.500
29.342
28.290
Minority Interest
17
18
24
Total Equity
29.939
29.360
28.314
Long Term Liabilities


Long Term loans /(Leasing Liabilities)
150
373
16.745
Deferred Tax Liabilities
3.900
3.740
3.510
Employee Benefits
3.700
3.735
3.750
Grants
70
92
310
Trade and Other Long Terms Paybles
100
85
74
Total Long Term Liabilities
7.920
8.025
24.389
Short Term Liabilities


Trade and Other Sort Terms Paybles
33.939
35.686
33.906
Short Term Loans
27.214
29.198
29.198
Long Term Liabilities (payable next year)

0
4.000
Other payables and Accrued Expenses


Total Short Term Liabilities
61,153
64.884
61.067



TOTAL LIABILITIES
69.073
72.909
85.456
TOTAL LIABILITIES AND EQUITY

99012
102.269
113.770
Creditors Turnover will remain the same as 2009 (37.2)
Inventories Turnover will remain the same as 2009 (9.3)
Debtors Turnover will also remain the same as 2009 (26.2)
Tangible Assets Will decrease equal to the annual depreciation
PART 7
ANALYSIS OF Cyclon Hellas SA (GROUP)
The year of 2009 was marked from :
a) the impact of the global financial crisis (reducing demand, reducing prices, foreign exchange and credit risks, given the uncertainty of the market).
b) The reduction of prices of petroleum products (fuels, base oils) as a result of falling international prices of crude.
c) The Reduction on the demand for lubricants.
Profitability (all amounts in A¢”šA¬000)
The Group’s turnover CYCLON Hellas SA in that year amounted to A¢”šA¬ 372.651 against A¢”šA¬ 403.615 in the corresponding period of 2008, a decrease of 7.98%.The decrease was primarily due to lower prices of petroleum products (fuel) of the parent company and the fall in sales of other activities and in particular lubricants.
Operating earnings before interest, taxes, depreciation and amortization (EBITDA)
In a group operating profit before tax, depreciation and amortization (EBITDA) decreased by 25% and determined the amount of A¢”šA¬ 6.277 compared to A¢”šA¬ 8.386 in fiscal year 2008.This decrease is the result of lower sales of lubricants and the profits.
Net Earnings
The net results of the Group, after taxes, profits amounted to A¢”šA¬ 1.054 thousand compared to profits A¢”šA¬ 2.156 in the corresponding last year 2008.
Net profit after tax
The net profit after tax were detrimental to this use at A¢”šA¬ 244 compared
profit A¢”šA¬ 106 for the corresponding last year.
The Probability Ratios Reveal:
Roce: We have an increase on the level of profits in relation to overall capital employed to produce the profits (27.8 / 21.5). So the performance of the group is increasing.
Roe: The decrease (almost 50%) of the efficiency of shareholders value.
Roa: Since the great amount of decrease in Profit before Taxes from 3.592 to .1874 and the small deference between Total Assets of the 2 years we see that the ratio has decreased from 3.15 to 1.83 so the Group has not achieved its objective, which is the increase in sales volume and increase market share.
Return of Shareholders Capital : We see , the great decrease of the Net Profit after Tax form 2.156A¢”šA¬ to 1.054A¢”šA¬ got us to the result of the simultaneously decrease of the Return of Shareholders Capital ratio from 14.7 to 7.2 (over 50%)
Liquidity (all amounts in A¢”šA¬000)
The company achieves effective management of liquidity risk primarily through the equation to credit period, and secondly by providing sufficient reserves (cash and bank) as well as a rapid means of securing bank financing in the event of an unforeseen emergency.
The Liquidity Ratios reveal:
Current Ratio: Due to the fact that the change of the rate is small (1.19 to 0.95) we assume that the Group will not have any problem to cover all its Short Term Liabilities as its Short Term Assets remain in a great level.
Quick Ratio: Even though we see a low rate in both years 0.48 – 0.58 and the Inventories (8.510A¢”šA¬ – 9.295A¢”šA¬) are not in a level that in an emergency case should be easily converted into cash in order to cover the Liabilities, the Marketable securities (16.490A¢”šA¬ – 21.812A¢”šA¬) and the debtors receivables (26.768A¢”šA¬ – 29.582A¢”šA¬ ) could help the Group to solve an unexpected Liquidity problem.
Capital Structure (all amounts in A¢”šA¬000)
The Group manages its capital to ensure that Group companies will continue to be viable maximizing return to shareholders by optimizing the ratio debt to equity. The Group’s capital structure consists of debt , cash and cash equivalents and shareholders’ equity of the parent company include share capital, reserves and retained earnings. The capital structure of the Group is monitored on an ongoing basis. Part of this monitoring is the review of capital costs and risks.
Debt/Equity Ratio: We see the great deviation between the two periods ratio 0.03 – 1.34 t inflects to the repayment of the loan(16.000A¢”šA¬) in year 2008 and that has helped the Group to come in such a position that can have a health operating function and also a good finance growth.
Working Capital (all amounts in A¢”šA¬000)
Working capital is the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (Current Assets), and cash requirements (Current Liabilities). As a result, the decisions relating to working capital are always current, i.e. short term, decisions. n addition to time horizon, working capital decisions differ from capital investment decisions in terms of discounting and profitability considerations. They are also "reversible" to some extent. (Considerations as to Risk appetite and return targets remain identical, although some constraints – such as those imposed by loan covenants – may be more relevant here).
Current Assets 61.781A¢”šA¬-85.456A¢”šA¬=-11.128A¢”šA¬ (year 2009)
As we have a negative number we assume that the Group will not be able to operate, and that it has no sufficient cash flow to service long term debt, and to satisfy both maturing short-term debt and upcoming operational expenses.
Current Assets 72.867A¢”šA¬-85.456A¢”šA¬=-12.589A¢”šA¬(year 2008)
As we have a negative number also in year 2008 , we assume that the Group will not be able to operate, and that it has no sufficient cash flow to service long term debt, and to satisfy both maturing short-term debt and upcoming operational expenses.
Next we will use the measure of cash flow within the operating cycle. This represents the time difference between cash payment for raw materials and cash collection for sales. The cash conversion cycle indicates the firm’s ability to convert its resources into cash
We use the Ratio from:
Years 2009 2008
Stock Turn Over Period 9.3 8.6 days
Debtors Turnover 26.2 26.7 days
Creditors Turnover 37.2 32.8 days
Operating Cycle 2008 = 8.6+26.7-32.8 = 2.5
Operating Cycle 2009 = 9.3+26.2-37.2= -1.7
Best Inventory managerial at year 2009 which helps the Group for uninterrupted production although it reduces the investment in raw materials , it minimizes reordering costs and hence increases cash flow.
The Operating Cycle has a 4.2 difference between the two operating years , the funding of the Working Capital is inevitable.(Bank loan – Factoring)
The cash balance in year 2008 allows the Group to meet day to day expenses, but reduces cash holding costs.
In year 2009 credit terms may l attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital

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