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AKZO NOBEL 2017-18 Annual Report Analysis

Sat, 31 Mar

AKZO NOBEL has announced its results for the year ended March 2018. Let us have a look at the detailed performance review of the company during FY17-18.

AKZO NOBEL Income Statement Analysis

• Operating income during the year rose 14.0% on a year-on-year (YoY) basis.
• The company's operating profit decreased by 10.9% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 10.8% in FY18 as against 13.8% in FY17.
• Depreciation charges increased by 7.2% and finance costs increased by 9.4% YoY, respectively.
• Other income grew by 376.5% YoY.
• Net profit for the year grew by 62.0% YoY.
• Net profit margins during the year grew from 9.7% in FY17 to 13.8% in FY18.

AKZO NOBEL Income Statement 2017-18

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Net Sales	Rs m	25,390	28,947	14.0%
Other income	Rs m	489	2,330	376.5%
Total Revenues	Rs m	25,879	31,277	20.9%
Gross profit	Rs m	3,509	3,125	-10.9%
Depreciation	Rs m	543	582	7.2%
Interest	Rs m	32	35	9.4%
Profit before tax	Rs m	3,423	4,838	41.3%
Tax	Rs m	953	837	-12.2%
Profit after tax	Rs m	2,470	4,001	62.0%
Gross profit margin	%	13.8	10.8
Effective tax rate	%	27.8	17.3
Net profit margin	%	9.7	13.8

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AKZO NOBEL Balance Sheet Analysis

• The company's current liabilities during FY18 stood at Rs 21 billion as compared to Rs 8 billion in FY17, thereby witnessing an increase of 165.0%.
• Long-term debt down at Rs 29 million as compared to Rs 29 million during FY17, a fall of 0.0%.
• Current assets rose 130% and stood at Rs 28 billion, while fixed assets rose 3% and stood at Rs 7 billion in FY18.
• Overall, the total assets and liabilities for FY18 stood at Rs 35 billion as against Rs 19 billion during FY17, thereby witnessing a growth of 84%.

AKZO NOBEL Balance Sheet as on March 2018

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Networth	Rs m	10,096	12,909	27.9
Current Liabilities	Rs m	7,926	21,000	165.0
Long-term Debt	Rs m	29	29	0.0
Total Liabilities	Rs m	18,845	34,635	83.8
Current assets	Rs m	12,023	27,613	129.7
Fixed Assets	Rs m	6,818	7,020	3.0
Total Assets	Rs m	18,845	34,635	83.8

AKZO NOBEL Cash Flow Statement Analysis

• AKZO NOBEL's cash flow from operating activities (CFO) during FY18 stood at Rs 2 billion, an improvement of 27.4% on a YoY basis.
• Cash flow from investing activities (CFI) during FY18 stood at Rs -56 million on a YoY basis.
• Cash flow from financial activities (CFF) during FY18 stood at Rs -1 billion, an improvement of 68% on a YoY basis.
• Overall, net cash flows for the company during FY18 stood at Rs 514 million from the Rs -240 million net cash flows seen during FY17.

AKZO NOBEL Cash Flow Statement 2017-18

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-17	Mar-18
Cash Flow from Operating Activities	Rs m	1,433	1,826	27.4%
Cash Flow from Investing Activities	Rs m	2,251	-56	-
Cash Flow from Financing Activities	Rs m	-3,924	-1,256	-
Net Cash Flow	Rs m	-240	514	-

Current Valuations for AKZO NOBEL

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 85.7, an improvement from the EPS of Rs 52.9 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,798.0, stands at 39.8 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 6.3 times, while the price to sales ratio stands at 2.9 times.
• The company's price to cash flow (P/CF) ratio stood at 19.3 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Sales per share (Unadj.)	Rs	544.1	620.4
TTM Earnings per share	Rs	52.9	85.7
Diluted earnings per share	Rs	54.2	87.9
Price to Cash Flow	x	28.8	19.3
TTM P/E ratio	x	35.1	39.8
Price / Book Value ratio	x	7.4	6.8
Market Cap	Rs m	74,701	88,258
Dividends per share (Unadj.)	Rs	22.0	22.0

Ratio Analysis for AKZO NOBEL

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.3x during FY18, from 1.5x during FY17. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio improved and stood at 139.2x during FY18, from 108.0x during FY17. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 31.0% during FY18, from 24.5% during FY18. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 37.7% during FY18, from 34.1% during FY17. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at 11.7% during FY18, from 13.3% during FY17. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Current ratio	x	1.5	1.3
Debtors’ Days	Days	59	50
Interest coverage	x	108.0	139.2
Debt to equity ratio	x	0.0	0.0
Return on assets	%	13.3	11.7
Return on equity	%	24.5	31.0
Return on capital employed	%	34.1	37.7

To see how AKZO NOBEL has performed over the last 5 years, please visit here.

AKZO NOBEL Share Price Performance

Over the last one year, AKZO NOBEL share price has moved down from Rs 1,904.9 to Rs 1,798.0, registering a loss of Rs 106.9 or around 5.6%.

Overall, the S&P BSE SENSEX is up 12.1% over the year.

(To know more, check out historical annual results for AKZO NOBEL and quarterly results for AKZO NOBEL)

Read: Latest Annual Report Analysis of AKZO NOBEL