financial analysis of kay chemicals and gulf chemicals

NED University of Engineering and

Technology- MEM (Energy Management)

Section: A

Term Project Finanical Accounting and

Management

Course Instructor: M. Faizan

Yaqoob

1. Muhammad Umair, 2. Danish Qamar, 3. Owais Kafeel, 4. Arsalan Ahmed, 5. Adnan Arian

Acknowledgement

Nothing concentrate can be achieved without an optimum combination of inspiration

and preparation. No work can be accomplished without guidance of experts. It is only

the intellectual genius that can transfer a product into a quality product.

I own this movement of satisfaction & deep guidance to Mr. Faizan Yaqoob my Financial

Accounting and Management teacher for imparting the knowledge whenever required

& for giving a wide view of concepts.

Table of Contents

1. Introduction to Company

2. SWOT Analysis

3. Board of Directors

4. Balance Sheet

5. Profit & Loss Account

6. Ratio Analysis

7. Graphs

8. Recommendation

9. Conclusion

Introduction to company

Kay Chemicals:

The Company was incorporated in Pakistan on December 8, 1981 as private limited company. The

principal activity of the company is indenting Business. Production plant and head office is situated in

Karachi.

Gulf Chemicals:

Gulf Chemicals Private Limited established in the year 1993. Production plant and head office is situated

in Karachi. Over the years, the company expanded significantly and built warehouses and application

laboratories in Karachi, Kasur and Sialkot. Gulf is also marketing products of several European

Companies and also enjoys technical collaboration with these companies. Many of their products are

produced in Gulf Chemical Plant under their guidance and according to European standards.

GULF is also operating a well-equipped tannery, under the name Gulf Leather Works Private Limited,

where Gulf technicians take full advantage of a running tannery and are conducting bulk trials of new

products, which are developed by Gulf laboratory research and development department.

SWOT Analysis of Company of Kay Chemical:

Strength:

High turnover of receivable which can eventually increase the option and potential to increase standard

and productivity

Weakness:

Took a long time to enter the highly productive and blooming chemical manufacturing market. As a

result the company lost a lot of its once huge market share.

Opportunities:

Expansion in collaboration with Multinational companies to improve quality and to offer wide range of

products

Threats:

Low Cost manufacturing and import from Chinese companies and other competitors

Board of directors of Kay Chemical:

The current members of the Board are listed below:

Mr. Abdul Majid

Mrs. Rahima Majid

Mrs. Nighat Sultana

Mrs. Nuzhat Sultana

Mrs. Tehseen Majid

KAY CHEMICALS (PRIVATE) Limited

Balance Sheet

As On June 30,2013

Equity & Liabilities

2013 (Rs)

2012 (Rs)

Share Capital and Reserves

Authorized Capital 2,000 Ordinary Shares of Rs. 1000/- each 200,000

200,000

Issued, Subscribed & Paid up Capital 1,101,000

1,101,000

Accumulated profit

313,640

249,454

1,414,640

1,350,454

Current Liabilities Trade & other payables

331,584

75,251

Provision for taxation

265,760

214,267

597,344

289,518

Total Equity & Liabilities

2,011,984

1,639,972

Assets

Non-Current Assets Property, Plant & Equipment

113,674

133,735

Current Assets Trade Debts

203,977

89,642

Advances & Deposits

604,105

559,629

Cash and bank balances

1,090,228

856,966

1,898,310

1,506,237

Total Assets

2,011,984

1,639,972

GULF CHEMICALS (PRIVATE) LIMITED

Balance Sheet

As At June 30, 2013


2013 (Rs)

2012 (Rs)


Authorized Capital 1,000,000 (2011:1,000,000) ordinary shares of Rs.10 each

10,000,000

10,000,000

Issued, Subscribed & Paid up Capital

5,000,000

5,000,000

Unappropiated Profit

35,357,954

30,819,522

40,357,954

35,819,522

Non Current Liabilities Subordinated Loan

30,000,000

30,000,000

Liability against assets subject to finance lease

1,475,505

2,302,859

Provision for gratuity

6,232,575

6,085,938

37,708,080

38,388,797

Current Liabilities Trade and other payables

36,800,893

37,145,707

Short term loan - unsecured

216,186,962

234,004,000

Current maturity of liability against assets subject to finance lease

827,354

1,427,202


2,227,169

2,792,706

256,042,378

275,369,615

Total Equity and Liabilities

334,108,412

349,577,934

Assets


14,601,882

17,020,402

Long term deposits

1,269,450

1,508,700

Deferred Tax

831,906

920,702

16,703,238

19,449,804

Current Assets Stock in trade

88,050,770

140,205,640

Trade debtors - unsecured considered good

133,735,208

117,954,029

Advances and deposits

574,965

2,612,419

Short term prepayments and balances with statutory authorities

72,485,101

56,736,900

Income tax refundable

3,492,018

3,139,383


19,040,113

9,479,759

317,378,175

330,128,130

Total Assets

334,081,413

349,577,934


Profit & Loss Account (Income Statement)

As On June 30,2013

2013 (Rs)

2012 (Rs)

Revenue Receipt

5,315,190

4,285,338

Administrative Expenses

4,969,247

4,649,379

Financial Charges

10,687

14,465

4,979,934

4,663,844

335,256

(378,506)

Other Income

-

750,000

335,256

371,494

Taxation Prior

5,310 -Current

265,760

214,267

Profit after Taxation

64,186

157,227

Accumulated Profit/ (Loss) B/F 249,454

92,227

Accumulated Profits C/F

313,640

249,454


Profit & Loss Account (Income Statement)

As At June 30, 2013

2013 (Rs)

2012 (Rs)

Sales

319,358,141

279,270,585

Cost of Sales

(257,621,992)

(223,945,165)

Gross Profit

61,736,149

55,325,420

Administrative and general expenses

19,454,867

17,643,911

Selling and distribution expenses

34,622,685

28,803,193

Finance cost

286,286

321,513

(54,363,838)

(46,768,617)

Operating Income

7,372,311

8,556,803

Other Income

-

48,284

Profit before statutory provisions

7,372,311

8,605,087

Workers' profit participation fund

(368,615)

(430,254)

Workers' welfare fund

(130,530)

(162,106)

(499,145)

(592,360)

Profit before Taxation

6,873,166

8,012,727

Taxation

(2,334,732)

(3,107,116)


4,538,434

4,905,611

KAY CHEMICALS (PRIVATE) Limited Balance Sheet

Common Sized Balance Sheet for Kay Chemicals As On June 30,2013


2013 (Rs)

2012 (Rs)

2013 (Rs)

2012 (Rs)


Authorized Capital 2,000 Ordinary Shares of Rs. 1000/- each 200,000

200,000

10%

12%

Issued, Subscribed & Paid up Capital 1,101,000

1,101,000

55%

67%

Accumulated profit

313,640

249,454

16%

15%

1,414,640

1,350,454

70%

82%

Current Liabilities Trade & other payables

331,584

75,251

16%

5%


265,760

214,267

13%

13%

597,344

289,518

30%

18%

Total Equity & Liabilities

2,011,984

1,639,972

100%

100%

Assets


113,674

133,735

6%

8%

Current Assets Trade Debts

203,977

89,642

10%

5%

Advances & Deposits

604,105

559,629

30%

34%


1,090,228

856,966

54%

52%

1,898,310

1,506,237

94%

92%

Total Assets

2,011,984

1,639,972

100%

100%

GULF CHEMICALS (PRIVATE) LIMITED Balance Sheet

Common Sized Balance Sheet for

Gulf Chemicals As At June 30, 2013


2013 (Rs)

2012 (Rs)

2013 (Rs)

2012 (Rs)


Authorized Capital 1,000,000 (2011:1,000,000) ordinary shares of

Rs.10 each

10,000,000

10,000,000

3%

3%

Issued, Subscribed & Paid up Capital

5,000,000

5,000,000

1%

1%

Unappropiated Profit

35,357,954

30,819,522

11%

9%

40,357,954

35,819,522

12%

10%

Non Current Liabilities

Subordinated Loan

30,000,000

30,000,000

9%

9%

Liability against assets subject to finance lease

1,475,505

2,302,859

0.4%

1%

Provision for gratuity

6,232,575

6,085,938

2%

2%

37,708,080

38,388,797

11%

11%

Current Liabilities

Trade and other payables

36,800,893

37,145,707

11%

11%

Short term loan - unsecured

216,186,962

234,004,000

65%

67%

Current maturity of liability against assets

subject to finance lease

827,354

1,427,202

0.2%

0.4%


2,227,169

2,792,706

1%

1%

256,042,378

275,369,615

77%

79%

Total Equity and Liabilities

334,108,412

349,577,934

100%

100%

Assets

Non-Current Assets

Property, Plant & Equipment

14,601,882

17,020,402

4.4%

4.9%

Long term deposits

1,269,450

1,508,700

0.4%

0.4%

Deferred Tax

831,906

920,702

0.2%

0.3%

16,703,238

19,449,804

5.0%

5.6%

Current Assets

Stock in trade

88,050,770

140,205,640

26.4%

40.1%

Trade debtors - unsecured considered good

133,735,208

117,954,029

40.0%

33.7%

Advances and deposits

574,965

2,612,419

0.2%

0.7%

Short term prepayments and

balances with statutory authorities

72,485,101

56,736,900

21.7%

16.2%

Income tax refundable

3,492,018

3,139,383

1.0%

0.9%


19,040,113

9,479,759

5.7%

2.7%

317,378,175

330,128,130

95.0%

94.4%

Total Assets

334,081,413

349,577,934

100%

100%

KAY CHEMICALS (PRIVATE) Limited Profit & Loss Account (Income Statement)

As On June 30,2013

2013 (Rs)

2012 (Rs)

2013 (Rs)

2012 (Rs)

Revenue Receipt

5,315,190

4,285,338

100%

100%

Administrative Expenses

4,969,247

4,649,379

93%

108%

Financial Charges

10,687

14,465

0.2%

0.3%

4,979,934

4,663,844

94%

109%

Operating Income

335,256

(378,506)

6.3%

8.8%

Other Income

-

750,000

17.5%


335,256

371,494

6.3%

8.7%

Taxation Prior

(5,310)

0.1%

0.0%

-Current

(265,760)

(214,267)

5.0%

5.0%

Total Tax

(271,070)

(214,267)

5.1%

5.0%


64,186

157,227

1.2%

3.7%

Accumulated Profit/ (Loss) B/F 249,454

92,227

Accumulated Profits C/F

313,640

249,454

5.9%

5.8%

GULF CHEMICALS (PRIVATE) LIMITED Profit & Loss Account As At June 30, 2013

2013 (Rs)

2012 (Rs)

2013 (Rs)

2012 (Rs)

Sales

319,358,141

279,270,585

100%

100%

Cost of Sales

(257,621,992)

(223,945,165)

81%

80%

Gross Profit

61,736,149

55,325,420

19%

20%

Administrative and general expenses

19,454,867

17,643,911

6.1%

6.3%

Selling and distribution expenses

34,622,685

28,803,193

11%

10%

Finance cost

286,286

321,513

0.1%

0.1%

Total Expenses

(54,363,838)

(46,768,617)

17%

17%

Operating Income

7,372,311

8,556,803

2.3%

3.1%

Other Income

-

48,284

0.0%

0.0%

Profit before statutory provisions

7,372,311

8,605,087

2.3%

3.1%

Workers' profit participation fund

(368,615)

(430,254)

0.1%

0.2%

Workers' welfare fund

(130,530)

(162,106)

0.04%

0.06%

(499,145)

(592,360)


6,873,166

8,012,727

2.2%

2.9%

Taxation

(2,334,732)

(3,107,116)

0.7%

1.1%


4,538,434

4,905,611

1.4%

1.8%


Ratio Analysis

2013

2012

Return on Equity (NI/Avg SE)

22%

18%

Total Asset turnover (Sales/Avg TA)

2.64

2.61

Gross Profit Margin (GP/Sales)

0.06

-0.09

Return on Asset (NI/Avg TA)

16%

15%

Current Ratio (CA/CL)

3.18

5.20

Return on Asset (EBI/Avg TA)

17%

23%

Financial Leverage (Avg TA/Avg SE) 3.37

5.66

Receivable Turnover (Sales/Receivables) 26.06

47.8

Avg. Collection Period (Days in year/Rev. TO) 14.0

7.6

Return on Sales (EBI/Sales) 6.3% 8.7%


Ratio Analysis

2013

2012

Return on Equity (NI/Avg SE)

11%

14%

Total Asset turnover (Sales/Avg TA)

0.96

0.80

Gross Profit Margin (GP/Sales)

0.19

0.20

Return on Asset (NI/Avg TA)

1.5%

1.4%

Current Ratio (CA/CL)

1.24

1.20

Return on Asset (EBI/Avg TA)

2.1%

2.3%

Financial Leverage (Avg TA/Avg SE)

1.05

1.25

Receivable Turnover (Sales/Receivables) 8.68

7.52

Avg. Collection Period (Days in year/Rev. TO) 42.1

48.5

Return on Sales (EBI/Sales) 2.2% 2.9%

Graphical Illustration:

0%

5%

10%

15%

20%

25%

2013 2012

Return on Equity

KAY CHEMICALS(PRIVATE) Limited

GULF CHEMICALS(PRIVATE) LIMITED

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2013 2012

Total Asset Turnover



0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2013 2012

Return on Asset



0.00

1.00

2.00

3.00

4.00

5.00

6.00

2013 2012

Current Ratio



0.00

10.00

20.00

30.00

40.00

50.00

60.00

2013 2012

Receivable Turnover



0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2013 2012

Return on Sales



Recommendation

In comparison with Gulf chemicals, Kay Chemicals is a much better option with reference to return on

investment which can also be seen from above mentioned graphs of Ratios. But along with high return

of Kay Chemical we should not neglect that its Current ratio depicts a drastic decline which shows that

Kay Chemical is drastically increasing its Liabilities it can be because of recent expansion for which Kay

Chemical made a huge investment but if that would have been the case PP&E of Kay chemical Balance

sheet would have increased but we can see that instead of increasing it decreased in 2013.

On other note Gulf chemical is an average but more stable company with Asset to Liability ratio almost

equal to one. But with much stable and constant rate of profit, Thus final verdict about any of the

company cannot be given; Investors should get answers which were raised from Ratio analysis from

both of the companies.

Conclusion

Further analysis in comparisons with each other as well as other competitor companies for both of the

companies is needed. Till then one can opt for less predictive but probably more profitable Kay Chemical

Pvt. Ltd. Or can opt for predictive and stable Gulf Company Pvt. Ltd. for comparatively less profit

(return).

This report just portray the previous year’s profitability, efficiency, Turnover analysis of both the

companies one only predict or forecast the coming year’s profitability based on analysis of previous

years data but real profitability always is dependent on policies for each company which can never be

predicted before time.

financial analysis of kay chemicals and gulf chemicals

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