BUCHAREST ACADEMY OF ECONOMIC STUDIESMASTER IN BUSINESS ADMINISTRATION

S.C. AUTOMOBILE DACIA S.A.Financial Analysis 2008 - 2012

Coordinating professor:

Prof.univ.dr. Pascu-Nedelcu Maria Students:

Brutaru TudorOglavie DanielPasecinic Artur

Postovan AlexandruRadu Ionut

09.01.2014

Table of Contents1. Company profile.............................................................................................................................3

1.1. Mission and policy of the Company........................................................................................3

1.2. Ownership Structure..............................................................................................................4

2. Product and service – the package.................................................................................................4

3. Market and competition.................................................................................................................5

3.1. SWOT Analysis of the company..............................................................................................5

3.2. Analysis of external environment...........................................................................................7

4. Marketing and sales.......................................................................................................................8

4.1. Customers...............................................................................................................................8

4.2. Evolution of predicted sales...................................................................................................8

5. Business system and organization................................................................................................10

5.1. Economy overview...............................................................................................................10

5.2. The business environment.........................................................................................................10

5.3. The fiscal environment..............................................................................................................11

6. Business schedule.........................................................................................................................11

7. Opportunities and risks................................................................................................................14

8. Financial planning and financing..................................................................................................15

Conclusions..........................................................................................................................................16

References............................................................................................................................................17

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1. Company profile

Dacia is the brand around which the Romanian auto industry was created and

developed, it came into existence in 1966, at Colibasi (now called Mioveni), Arges county. A

close cooperation evolved between Dacia and Renault from the very beginning - 1968.

Dacia has been an integral part of the Renault Group since 1999 and it is currently becoming

more and more visible as an international brand.

1.1. Mission and policy of the Company

The declared primary mission of the company is to support the French group in

entering new markets by taking over production and sales of its products in many countries

around the world. In addition, Dacia is a company that puts great emphasis on innovation,

efficiency and price. Dacia has a dynamic thinking, trusting the future and the organization’s

opportunities to continuously develop.

Dacia defines and implements a profitable growth strategy based on four major objectives:

maintain and strengthen its leading position on the Romanian auto market and to

strengthen ( where case ) and expands its presence on international markets

establish it in emerging auto markets, which will be the main source of growth over

the next ten years. From this perspective, Logan , as expected, has started to generate a

significant rise in its export sales, thus contributing to achieving Renault`s objectives.

constantly improve the quality of its products, to make sure that customers` needs are

satisfied, and at the same time maintaining low costs to create viable solution for

affordable price

ensure the profitability of its investments.

The main values that govern the company’s activities are work, discipline, respect,

responsibility and care towards the environment. Value like the effort submitted by Dacia

employees, the professionalism they proof and their discipline at work, give the company a

distinctive image. The concern for the environment has become a necessity; therefore Dacia

has implemented the program called “Rabla”. Company's long-term efforts to reduce global

warming and pollution encourage the initiatives for producing with minimum waste,

extending the use of products and recycling products at end of use. These initiatives are part

of a program of long-term commitment to society ( the program started in 2010 and rumours

has it that it will end in 2014 ).

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1.2. Ownership Structure

Dacia Group is owned in majority by Renault, having 99.43% of the shares, the other

0.57% is owned by natural persons and small companies.

Dacia announces itself as a company very attentive to environment.

The actual objectives of the project in this respect , are the following:

Guaranteeing the compliance with the labelling instructions and the retaining chemical

products ;

Controlling and then the reducing of electrical energy with 3% in the future

Reducing the attached materials and the chemical consumption of oxygen by

complying with the regulation 35mg/l MES, 70mg/l DCO

Guaranteeing the compliance with waste triage and disposal

Reducing the industrial liquids consumption with 23%v in the future

Modernizing the boilers from the steam power plant which lead to the reduction of

CO2 emissions;

Modernizing the compressors by replacing the cooling towers with open-circuit with

the towers with closed-circuit;

Modernizing the purification station from Davidesti.

Replacing the melting furnaces from the Aluminum Foundry Department

Modernizing the facilities for car body painting and for the plastic parts etc.

The total value of the project is 17,647,000 €. In order to continue these projects, they need

financial resources.

2. Product and service – the package

After signing a license agreement between Renault and the Romanian state in 1968,

Automobile Dacia SA has began the manufacturing of Dacia 1100 and Dacia 1300. Since

1978, it continued the production independently. Year 1995 marked the launch of its first

concept: Dacia Nova. In 1998, the anniversary year of three decades since producing the first

ever Dacia car, the vehicle number 2,000,000 came out of the plant. That same year, the

company obtained the ISO 9001 Quality Management System Certification.

The privatization agreement was signed on July the 2nd  1999 and Dacia became officially a

brand of the Renault Group.

The year 2000 brought the launching of the Dacia SuperNova model, the first tangible

result of the French-Romanian cooperation, a vehicle fitted with a Renault engine and

gearbox.

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In 2005, Dacia surpassed all previous production (172,000 units) and sales records

(164,000 units) with its Logan model.

The most successful model was considered Dacia Sandero, launched on the Romanian market

in June 2008.

The company was extremely active on producing new models and

improving/,,facelifting” old models .In 2010 Dacia lauched Duster and Lodgy in 2012

In 2013 Dacia brought on the market some new models : Dokker but most important , new

and improved versions on Logan, Sandero, Duster and MCV.

3. Market and competition

3.1. SWOT Analysis of the company

Strengths

Dacia is a major player for the Romanian National Economy. Following the

privatization process, the company has undergone a groundbreaking modernization program:

upgrading the industrial installations

reconstruction of the commercial network

reorganization of the suppliers’ network

radical improvements in product quality

staff training

range renewal

The equipment used to manufacture cars, the constantly improvement, despite the

cheap labour force and cheap spare parts. Also the existing distribution, with its channels, the

information and processing systems can give the company a competitive advantage.

A major component of the company’s strengths is the communication mix composed of TV

ads, games, competitions; out-door advertising and participation in national and international

fairs, exhibitions and direct communication with show rooms advisers.

Weaknesses

Taking into consideration that Dacia cars are also available for export, a weakness can

be represented by the high distribution costs. These expenses, besides the physical transport

also include taxes, custom duties and insurance.

The infrastructure of community space can also represent a weakness as it slows down

the distribution process.

Even though the small prices of Dacia vehicles and small production costs imply poor

design and blunt aspect, but most importantly cheap parts can represent poor quality or less

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security for drivers and passengers (in car accident Dacia vehicles are more easily destroyed

than other more expensive cars).

Opportunities

Dacia is developing at a very rapid rhythm. Their market quotas are increasing in all

Western Europe, starting from May 2009 also in Germany with a percentage of 3.5%.

Unquestionably, Dacia is currently the most dynamic car brand in Europe. This performance

is explained through the pertinence of their offer of different models, which benefit of a good

interior space/performances/good price ratio.

In Romania, Dacia has consolidated the leader position even in the current difficult

environment being the only company from the car market which succeeded to fully use the

allocated quota in the first phase of the “Rabla” program.

Dacia innovates and is heading towards the future, developing new models which are

more economical and ecological.

All assembly of evolutions will help Dacia to progressively conquer new market

segments, gain over younger customers and answer new needs of the Romanian and European

customers through product diversification.

There also exist vertical integration opportunities. This involves the acquisition of

companies which accounted as Dacia suppliers of raw materials or which represented

strategic points on the market.

Through concluding new alliances or advantageous and profitable agreements with

various companies such as Dacia-Renault-Nissan alliance, Dacia Group seeks to reduce the

economies of scale.

Threats

One of the main threats is represented by the adoption of legislative or restrictive

regulations may have a negative impact over the company’s sales. Also the sales may be

affected by a change in needs, taste and preferences of the clients which may prefer the

competitors’ products.

Dacia faces the threat of increased competition and the entry of new competitors on

the market which may have better quality in relation to the price or better marketing strategy.

Other threats can be represented by the following:

The decrease of the purchasing power and of the prices due to the economic crisis and

the customers preference for used cars at half of the price for a new one

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The withdrawal of customs tax for EU cars

The campaigns of discrediting of the brand through the making of some ”objective”

tests with the purpose of protecting some international producers or the second-hand

market.

Dacia brand is associated in Romanians minds with low-quality products.

Vulnerability to the business environment fluctuations

The emergence of unforeseen events such as strikes which brought upon Dacia

negative consequences. For instance, in 2007 during the strike the production

stagnated, causing losses of $ 30 million.

3.2. Analysis of external environment

Competitors

Dacia Group played the pioneer role in creating a new concept of low-cost cars by

launching the Logan model in 2004 and in only a couple of year started competing with a

series of low-cost cars produced by competitors. Some of these competitors are: Toyota,

Volkswagen, Nissan, Fiat or Skoda, producers which offer models from low class to big mono

volumes. A few years ago, premium cars were really sought after, but nowadays car producers

from all over the world compete in building cars under 10,000€ and some ever try to obtain a

price below 3,000€.

To this competition, Renault replied by launching Logan MCV in October 2006 is one

of these models, with its 7 seats and roomy design it had such a high demand that buyers had

to wait up to 6 months to receive their cars. The price for the basic version was of only

8,200€, 40% less than similar models produced by Skoda, Volkswagen or Opel. The superior

version, with air conditioning and power steering had a starting price of 11,600€.

The huge success Dacia cars had on external emergent markets determined the

opening of production centres in Columbia, Morocco, Iran, Russia, India and Brazil and also

determined competitors like Fiat, Volkswagen and Toyota to initiate similar projects.

Dacia is considered the European champion in the low-cost category from a while

now, its products crossing the Romanian boarder, Dacia-Renault Group having such a great

success with their latest model that Dacia Duster, the most accessible SUV on the market, was

included in the finalists of the “Europe’s Car of the year 2011” competition.

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4. Marketing and sales

4.1. Customers

In the current financial and economic climate, customers who are on the lookout for

smart buys are turning increasingly to Dacia which gives them the ability to acquire only what

they really need at the right price.

Dacia is attracting two types of customers:

• they are mainly customers who previously purchased used cars, generally of five years

of age or more,

• pragmatic new car buyers who see Dacia as a logical choice that delivers purely what

they are looking for. For these customers, price continues to stand out as the

predominant factor in their purchase decision

Dacia remains faithful to the low-cost segment. Francois Fourmount, a previous CEO

of the Romanian company, stated that Dacia does not have the resources to build an

approximately 30.000 Euros car series. Their philosophy it is to remain focused on the

production of reliable, roomy car at an incomparable price on the market, and compared to

these expectations, Dacia has the ability in time to overcome the Skoda image.

4.2. Evolution of predicted sales

In the tables below is presented Automobile Dacia’s evolution between 2008 and

2012. Also, for the future years 2014, 2015, 2016, taking into consideration the evolution

from the previous years, Dacia’s turnover it is expected to increase with almost the same

values, since Dacia faced a constant evolution regarding its turnover.

Year 2008 2009 2010 2011 2012 2014 2015 2016

Turnover

(Mil RON)

7642 9004 11403 13178 12742 15914 17508 20480

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1 2 3 4 5 6 7 8

2008 2009 2010 2011 2012 2014 2015 2016

76429004

1140313178 12742

1591417508

20480

Turnover evolution ( million RON )Year Turnover

From the chart above, we can see some interesting evolution in 2010 and 2011.

On the Romanian market, in 2011 the sales volume dropped with 20,4%, Dacia

selling only 36,730 vehicles. Over two thirds from the sales were delivered through the

renewal of the Romanian Auto park program. Another important contribution to the 2011

sales had the fleet sales (almost 4000 units) to important Romanian and international

corporations on the Romanian market.

For Dacia, the year 2010 was marked by the launching of Duster model. Duster made

its mark on the market with 4,826 units sold. What is more remarkable is that the buyers

chose the most expensive available option, Laureate. This model had also a remarkable

success on the international market, with 100 000 orders until 31st of December 2010.

Dacia Duster obtains a series of prizes in Romania: “Autobest 2011”, “Car of the year

2011 in Romania”, “2011’s SUV”.

On the international market, Dacia sales were over 311 000 units, with 15% more

than 2010. The Romania brand consolidated its success in Western Europe where in 2011

where registered 228,865 Dacia cars.

France became last year, the first export market with more than 110,000 sold units.

Dacia being on the 6th place of the most sold cars in France.

The second export destination for Dacia is Germany, with 40,500 sold units. The 3 rd

one is Italy with 21,903 sold units, followed closely by Spain. Other important market for

Dacia are: Turkey, Algeria, Morocco, Belgium, Austria, Poland and Netherlands.

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5. Business system and organization

5.1. Economy overview

In order to underline the characteristics of the economic environment where Dacia Group

activates, here is the presentation of the main macroeconomic factors:

Inflation evolution (%) is characterized by the index of consumption prices in

Romania (ICPR) established by The National Statistics Commission:

ROL/USD and RON/EURO parity

Year ROL/USD

exchange rate

evolution

ROL/EUR

exchange rate

evolution

RON/USD

exchange rate

evolution

RON/EUR

exchange rate

evolution

2007 32,595 41,117 - -

2008 29,067 39,663 - -

2009 - - 3.4093 4.2373

2010 - - 3.1779 4.2099

2011 - - 3.0486 4.2379

2012 - - 3.4682 4.4560

2013 - - 3.3279 4.4190

2014 - - 3.37 4.5

5.2. The business environment. Mostly determined by the economic financial

crisis accentuated, this affecting firstly the constructions domain and the automobile industry.

In the context of an unfavourable years, when the majority of the automobile producers

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Year ICPR

2008 14.1

2009 9.3

2010 8.6

2011 4.9

2012 4.95

2013 3.5

2014 3

reduced the production level, Automobile Dacia managed to maintain an even increase the

production volumes. This was possible, in the condition of some programs of automobile

parks’ renewal in many countries of the EU and also because of the quality and

competitiveness of the series of vehicles produced by Dacia.

5.3. The fiscal environment. As a member state of the EU, Romania adapted and

is continuing to adapt the national legislation to the EU Directives, but in the same time, is

amplifying the number of fiscal reports.

In this way, the company had to implement internal procedures of surveillance of the

deliveries and acquisitions, to receive and centralize the transport documents and revise all

deliveries contracts in order to secure the fulfilment of the VAT obligations. Also, the

accounting and IT systems are subjected to specific adaptations to register and extract all

these compulsory information to issue new fiscal reports.

6. Business schedule

Main financial ratios

In the tables below, is presented the evolution of the financial results of Automobile

Dacia over a 5-year period.

Balance Sheet 2008 2009 2010 2011 2012

Total fixed assets

2,803,218,907 3,071,866,131 2,930,047,197 3,222,180,936 3,807,911,767

Total current assets

1,445,294,622 1,840,944,098 2,614,241,294 2,866,492,095 2,777,315,777

Inventory 554,116,674 367,570,310 443,376,904 421,606,303 344,860,759

Cash and deposits 540,948,124 621,361,454 900,413,092 1,532,591,860 1,346,823,186

Total receivables 350,229,824 852,012,334 1,270,451,298 912,293,932 1,085,631,832

Total capital2,961,131,29

6 3,184,276,086 3,314,805,657 3,534,107,612 2,497,167,857

Paid-in capital2,541,719,93

9 2,541,719,939 2,541,719,939 2,541,719,939 2,541,719,939

Loss provisions 127,877,572 130,057,595 124,389,214 105,504,419 114,066,073

Total debts1,125,693,06

5 1,508,335,244 2,038,475,925 2,400,670,328 2,888,361,782

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Profit and Loss

2008 2009 2010 2011 2012

Annual turnover 7,642,296,976 9,004,409,833 11,403,296,221 13,177,841,584 12,742,145,319

Total revenues 8,402,861,521 9,081,004,000 11,606,030,655 13,433,362,621 12,946,397,843

Total expenses 8,143,469,504 8,790,115,384 11,271,963,072 13,065,263,846 12,602,606,812

Profit before tax 259,392,017 290,888,616 334,067,583 368,098,775 343,791,031

Net profit 222,018,211 230,276,035 300,015,819 275,111,397 277,239,794

No of employees 13,274 12,698 13,823 13,652 13,640

The cash flow situation for the year 2012 is the following:

 Amount at 1 January

2012 (RON)

Amount at 31 December 2012

(RON)

Operating cash flows 532.177.867 753.073.172

Investment cash flows -390.593.025 -687.504.695

Financial cash flows 540.948.123 621.361.454

From the info below , we can calculate some important indicators, present in the following

tables :

Profitability Ratios

2008 2009 2010 2011 2012

Profit before tax margin (%) 3.3942 3.2305 2.9296 2.7933 2.6981

Net profit margin (%) 2.9051 2.5574 2.631 2.0877 2.1758

Before tax ROE (Return On Equity) 8.3063 8.5443 9.529 9.981 9.2995

Operating Ratios

2008 2009 2010 2011 2012

Inventory turnover (days) 26.4649 14.8997 14.1917 11.6777 9.8786

Receivables turnover 14.0564 29.0226 34.1722 21.2342 26.1328

Total assets turnover (times) 0.4016 0.491 0.6957 0.745 0.7585

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But the ratios considered to be the most relevant to this analysis are:

 Ratio 2008 2009 2010 2011 2012

Current ratio 1.28 1.22 1.28

1.22 1.20

Liquidity ratio 2.49 2.04 1.44

1.22 1.22

operating profit margin 3.09 3.20 2.88

2.28 2.34

equity ratio 69.70% 64.82% 59.79%

67.41% 67.41%

ROE 8.30 8.54 9.53

7.64 7.43

ROA 5.23 4.69 5.41

5.15 5.01

the current ratio: which indicates that Dacia’s ability to meet short-term debt

obligations is dropping. As the figures below show, the company was in a good short-

term financial standing over the years but it has decreased in the last 2 years.

the liquidity ratio: indicates by how much the total assets of the business exceed the

total liabilities. The figures tell us that the company potential for easy covering the

debts has decrease dramatically.

the operating profit margin: measures what proportion of a company's revenue is left

over after paying for variable costs of production such as wages, raw materials, etc.

Dacia is still a strong company

the equity ratio: measures the proportion of the total assets that are financed by

stockholders and not creditors. Dacia has started borrowing again money from the

capital market.

the return on equity (ROE): measures a corporation's profitability by revealing how

much profit a company generates with the money shareholders have invested – Dacia

is less profitable for the shareholders.

the return on assets (ROA): is an indicator of how profitable a company is before

leverage. In the last years, Dacia has faced a good level of profitability in 2011 due to

new launches and goods sales, but in 2012, the sales dropped, the investments were

bigger and this lead to less profit.

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7. Opportunities and risks

Future Strategies

As stated previously in this paper, Dacia’s growth strategy is based on four major

objectives:

Maintain and strengthen its leading position on the Romanian auto market and to

strengthen and broaden its presence on international markets

Establish it in emerging auto markets, which will be the main source of growth over

the next ten years. From this perspective, Logan is expected to generate a significant

rise in its export sales, thus contributing to Renault`s objectives

Constantly improve the quality of its products, to make sure that customers` needs are

satisfied, and at the same time maintaining low costs

Ensure the profitability of its investments.

In order to accomplish these objectives, the strategies of the Romanian producer to get

though the financial crisis effects were based on two major axis, the first is the direct

responsibility of the Group and the second the Romanian Public Authorities’ responsibility.

Francois Fourmont, the CEO of Automobile Dacia SA declared that the company’s

responsibilities are divided between three levels:

the products: the company has a young range of products which fosters its presence on

the national and international market

the extension on new markets: with the aid of new products / lines , Dacia models will

be sold on over 60 international markets

the increase in products’ quality keeping a very competitive level of price

Dacia Renault Group launched 9 Dacia models: Dacia Logan, Dacia Logan MCV,

Dacia VAN, Dacia Logan Pick-up, Dacia Sandero, Dacia Sandero Stepway , Dacia Lodgy ,

Dokker and Dacia Duster - a 4x4 model. They all maintain the same low-cost strategy.

As mentioned Dacia renewed design and improved fiability for almost all of this

models. The first ones were New Dacia Logan (a Sedan with huge success ) and one a MPV

(multi purpose vehicle) with 7 seats. The difference between the new model and Logan MCV

is that the back doors are sliding and the design is more ergonomic. The MPV is specially

designed for people transportation plus the associated luggage. Dacia brand has registered a

rapid increase on the international market. Continuing this trend, Dacia was launched on the

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British market at the end of 2012. The first model to have been sold in the UK will be Dacia

Duster 4x4.

8. Financial planning and financing

Forecasted sales for Dacia Group

Balance sheet 2011 2012 2013 2014

Intangible fixed assets 2.817.192 3.098.911 3.315.835 3.160.889

Tangible assets   3.122.007.217 3.434.207.939 3.674.602.495 3.502.892.098

Financial assets   315.665.657 347.232.223 371.538.479 354.176.868

Total fixed assets   3.440.490.067 3.784.539.073 4.049.456.809 3.860.229.855

Inventory   411.678.747 452.846.622 484.545.885 461.903.554

Accounts receivable 954.253.814 1.049.679.195 1.123.156.739 1.070.672.779

Cash   699.920.168 769.912.184 823.806.037 785.310.428

Total current assets   2.065.852.729 2.272.438.002 2.431.508.662 2.317.886.762

           

Total assets   5.506.342.796 6.056.977.075 6.480.965.470 6.178.116.617

           

Short term debts   1.689.335.473 1.858.269.021 1.988.347.852 1.895.434.401

Long term debts   0 0 0 0

Deferred revenues   104.953.600 115.448.959 123.530.387 117.757.939

           

Total liabilities   1.794.289.073 1.973.717.980 2.111.878.239 2.013.192.340

           

Provisions   145.664.506 160.230.957 171.447.124 163.435.576

Capital   2.846.726.332 3.131.398.965 3.350.596.892 3.194.026.944

Share Premium   1.979.524 2.177.476 2.329.900 2.221.026

Re-evaluation reserves 281.116.734 309.228.407 330.874.396 315.412.976

Retained earnings   80.988.828 89.087.711 95.323.851 90.869.466

Reported Profit   97.668.639 107.435.503 114.955.988 109.584.213

Profit     257.909.159 283.700.075 303.559.080 289.374.077

           

Total Owners' Equity 3.712.053.723 4.083.259.095 4.369.087.232 4.164.924.277

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Income statement 2011 2012 2013 2014

Sales   10.273.797.713 11.301.177.484 12.092.259.908 12.334.105.106

Cost of goods sold   9.948.002.463 10.942.802.709 11.708.798.899 11.942.974.877

Taxable income   325.795.250 358.374.775 383.461.009 391.130.229

Taxes     67.886.091 74.674.700 79.901.929 81.499.967

Net income   257.909.159 283.700.075 303.559.080 309.630.262

Conclusions

After the privatization of Dacia, the company’s primary mission was to support the

French group in entering new markets by taking over production and sales of its products in

many countries around the world. Renault helped Dacia evolve and follow new and profitable

growth strategies.

Dacia in not only preoccupied with profitability and economic growth, but also with

protecting the environment and that’s why they started implementing a new project for which

they need outside financial resources.

During 2009 and 2010, in the national and international business environment, the

economic financial crisis accentuated this affecting firstly the constructions domain and the

automobile industry. In the context of an unfavourable year, when the majority of the

automobile producers reduced the production level, Automobile Dacia managed to maintain

an even increase the production volumes.

According to the positive results obtained by computing financial ratios and after

calculating the forecasted sales and profits, it can be concluded that Dacia will have a

progressive increase until 2014, explained by the fact that Dacia will penetrate all the

important markets. The net income will have an upward tendency so the investment can be

made in safe conditions and the loaned financial resources can be repaid in time.

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References:

http://www.money.ro/dacia-duster-versus-concurenta-vezi-cine-se-bate-cu-suv-ul-

romanesc_531526.html

http://www.dacia-sandero.org/dacia-sandero-cabrio/

http://www.zercustoms.com/news/Dacia-Sandero-Stepway-Concept.html

http://www.promotor.ro/noutati-auto-dosar-analize/articol-dacia-sandero-analiza-

preturi-si-dotari-2696763/p2

www.daciacars.co.uk

http://www.money.ro/cine-face-piesele-pentru-dacia-duster-si-unde_819466.html

www.daciagroup.com

www.wall-street.ro

www.money.ro

www.ziare.com

Dacia environment declaration

www.bloombiz.ro

www.capital.ro

www.investorwrds.com

www.doingbusiness.ro

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