sanofi aventis

SANOFI-AVENTIS FINANCIAL ANALYSIS

REPORT

Submitted To: Sohail Sawani

Submitted By: Saba Ilyas Qureshi

Roll Number: 11071

LETTER OF AUTHORIZATION

March 27, 2010

Dear Reader:

As a student of Institute of Business Management, I have been authorized by Mr.Sohail Sawani

to prepare a term report on Analysis of Financial Strength of Sanofi-Aventis for the course of

Financial Management.

The report required an in-depth research to be conducted before compiling a detailed account

of the underlying facts. All attempts have been made to provide you with an informational

report detailing credible data and results to educate you on this subject.

If you have any queries regarding the report or the subject, you may contact at the given email

addresses for further assistance.

Sincerely,

Saba Ilyas Qureshi

Roll Num: 11071

Sanofi Aventis Financial Analysis Report2 | P a g e

LETTER OF TRANSMITTAL

Mr. Sohail Sawani

Course Instructor

Financial Management

Institute of Business Management - CBM

Dear Sir:

Here is the final term report, on the research conducted as a practical implementation of this

course, which you have assigned and authorized me and is now ready for your perusal.

This study helps us to improve our knowledge base pertaining to research techniques and

various problems which may arise during any practical or real life research implementation. This

report gives the details about the nature of the business problem, its relation to our research

objective, and all the possible analysis of the respondents' information which helped us to

simulate the results and findings.

I have tried our best to cover every aspect in this report but if you require any further

clarification or have any queries, it would be brilliant for me to answer your questions and

facilitate your understanding on the report.

Sincerely,

Saba Ilyas Qureshi


LETTER OF ACKNOWLEDGEMENT

Dear Readers:

First of all, I would like to thank the Almighty Allah for giving me the strength and ability

without which I couldn't move forward towards the finalization of this report.

I would like to take this opportunity to express my heartfelt gratitude to the people who have

supported me in the compilation of this comprehensive report.

I would like to thank our teacher, Mr. Sohail Sawani for enlightening me with the requisite

knowledge of the course, Financial Management, and giving an insight significance of research

techniques and methodologies in business and other operations.

Finally, I thank all the people who provided us the required information and data necessary to

fulfill the scope of this report and I specially thank Mr. Shakeel Mapara and Ms. Onaiza Khan for

the tremendous support.

I hope that this report will prove to be a useful source of study in the area of business research

and also the findings specific to this research may be useful for various organizations and also

for the students taking up the course of Financial Management and others in future.

Thank you

Sincerely,

Saba Ilyas Qureshi


C O M P A N Y O V E R V I E W :

Sanofi-Aventis, headquartered in Paris, France, is a multinational pharmaceutical company, the

world’s fourth-largest by prescription sales. Sanofi-Aventis engages in the research and

development, manufacturing and marketing of pharmaceutical products for sale principally in

the prescription market, but the firm also develops over-the-counter medication. Sanofi-

Aventis covers 7 major therapeutic areas: cardiovascular, central nervous system, diabetes,

internal medicine, oncology, thrombosis and vaccines.

Sanofi-aventis, a global leader in the pharmaceutical industry, researches and develops

medicines and vaccines to help improve the lives of the greatest possible number of people.

The company's growth is attributable to a regional approach to business operations, backed by

a comprehensive portfolio of innovative products, mature prescription medicines, consumer

health products, generics, vaccines as well as animal health. By virtue of its commitments,


sanofi-aventis constantly adapts its development model to the world's emerging human and

economic problems.

Vision:

To become a diversified healthcare leader, focused on patients’ needs

• Valued by patients & healthcare providers

• Sought-after as an employer

• Respected by the scientific community & our competitors

Mission:

Our core strategy is to:

• Create value by rapidly launching and successfully marketing innovative pharmaceuticals that

satisfy unmet medical needs in large patient populations.

• Focus commercial resources on strategic brands to drive sales growth and maximize the value

of existing and new global brands.

• Aggressively recruit and retain top talent, enhancing our capabilities in drug innovation and

commercialization.

Sanofi-Aventis Pakistan:

Sanofi-aventis is the 5th largest pharmaceutical company in Pakistan with a market share and

growth rate of 4.5% (2009: 4.4%) and 19.3% (2009: 17%) respectively. Sanofi-aventis S.A.

France is now one of the world's leading diversified health-care company with patient centric

approach offering medicines, consumer health care products generics, and animal health.


With professionally qualified managers in the sales, marketing and medical departments, who

are well versed in marketing products ethically, coupled with our extensive distribution

network through 16 regional distributors, we cater to the needs of chemists, doctors, and

hospitals across patients through Pakistan. It is based on this belief that sanofi-aventis in

Pakistan, in alliance with the local clinicians, has forged a partnership to undertake measures to

improve the standards of health care across Pakistan.

The sanofi-aventis portfolio of marketed products includes several medicines that are world

leaders in their respective classes, in the areas of thrombosis, cardiovascular disease, sleep

disorders, epilepsy, diabetes and cancer.


Finance Department Of Sanofi Aventis:

The finance department of Sanofi Aventis is headed by the Finance Director. He is a permanent

position looking after the 19 people under him. The total head count for the finance

department is 20. Mostly the positions are permanent, however the employees have also been

hired by third party and company contracts.

The major positions in the finance department are as follows:

Organogram:

Finance Directoro Assistance Finance Director

Financial Controller Assistant Financial Controller Senior Costing Manager Costing Manager Senior Sales & Payable Manager Payroll Manager General Accounts Manager Senior Audit Manager

o Treasurer Senior Treasury Manager Treasury Manager

o Senior Planning & Budgeting Manager Senior Financial Analyst

The Job descriptions described below have been written by me, and the representative from Sanofi Aventis had relayed the information. The Job descriptions mentioned below are of some of the leading positions in Sanofi-Aventis Pakistan. Due to company policy no organogram has been provided.


Job Description- Finance Director

To regulate, supervise and implement a timely, full and accurate set of accounting books of the firm reflecting all its activities in a manner commensurate with the relevant legislation and regulation in the territories of operation of the firm and subject to internal guidelines set from time to time by the Board of Directors of the firm.

To implement continuous financial audit and control systems to monitor the performance of the firm, its flow of funds, the adherence to the budget, the expenditures, the income, the cost of sales and other budgetary items.

To timely, regularly and duly prepare and present to the Board of Directors financial statements and reports as required by all pertinent laws and regulations in the territories of the operations of the firm and as deemed necessary and demanded from time to time by the Board of Directors of the Firm.

To comply with all reporting, accounting and audit requirements imposed by the capital markets or regulatory bodies of capital markets in which the securities of the firm are traded or are about to be traded or otherwise listed.

To prepare and present for the approval of the Board of Directors an annual budget, other budgets, financial plans, business plans, feasibility studies, investment memoranda and all other financial and business documents as may be required from time to time by the Board of Directors of the firm.

Job Description-Finance Controller:

To prepare reports that include monthly financial statements, cost reports, budgeting, forecasting reports and SEC reporting if the company is publicly traded.

To ensure the books are accurate and that everything is accounted for in the company

Analyzes and interprets financial data and recommends changes to improve systems and financial performance.


Job Description- General Accounts Manager:

To compile and analyze financial information to prepare financial statements including monthly and annual accounts ensuring financial records are maintained in compliance with accepted policies and procedures and also to check if the deadlines are met.

To prepare financial management reports and ensure accurate and timely monthly, quarterly end year close end.

To establish and monitor the implementation and maintenance of accounting control procedures

Financial audit preparation and coordinate the audit process and ensuring accurate and appropriate recording and analysis of revenues and expenses

To analyze financial information to recommend or develop efficient use of resources and procedures, provide strategic recommendations and maintain solutions to business and financial problems


Financial Performance


Sanofi Aventis

Ratio Analysis for the past 4 Years 2010 Industr

y 2009 Industry 2008 Industry 2007 Industry

LIQUIDITY RATIO

Current ratio

2 : 1.41

2 : 0.98

2 : 0.98

2 : 1.31

The Current Ratio is little on the lower side but still acceptable. It has been increased in 2010 from previous years indicating good management of current assets & current liabilities. This shows that the current assets can easily cover current liabilities

Quick ratio

1 : 0.57

1 : 0.43

1 : 0.37

1 : 0.42

Likewise Quick Ratio has also increased indicating better liquidity then the previous years. This is due to decreased in liabilities and increase in tax provisions

Cash Ratio

1 : 0.334

1 : 0.181

1 : 0.187

1 : 0.192

Organization maintained cash ratio as per last year there is no any change

Working Capital 555,195.00

(38,124.00)

(27,776.00)

382,834.00

The Working capital has increased from last year due to decrease in


liabilities from the previous years and increase in current assets.

ASSETS UTILIZATION

RATIO :

Inventory Turnover

3.86

4.55

3.02

2.61

Inventory turn over has decreased from previous year indicating that the movement of stocks has decreased in this period.

Days Sales in Inv

94.67

80.23

121.01

139.82

Days Sales Inventory has increased in this period indicating that it took more days to sell of the inventory. in 2009 the ratio was decreased to 122.6 to 80.20 indicating excellent management to increase the movement of sales and hence cut down the operating cycle.

Account Receivable Turnover

24.52

27.02

29.99

28.25

Account Receivable Turnover has decreased over the years indicating better management of collections and this free up the liquidity tied up in receivables to be used up in the operations.

Days Sales Uncollected

14.89

13.51 1.45 12.17

12.92

Days sales Uncollected has increase from the past years indicating that company has revised its credit policy to increase sales.

Total Assets Turnover1.81 1.16 2.09 1.61 0.89 1.60 1.17

Total Assets Turn over has


decreased from the previous year but has improved over the years indicating better management practices and effective utilization of resources to generate sales. Against comparison with the industry average, over the years we see that this company has more effectively utilized its assets to generate sales as compared to other companies.

Fixed Assets Turnover

4.37

4.83

3.63

4.92

Total Fixed Assets Turn over has decrease this period & also over the past years due to major investments in fixed assets apparently to increase the capacity of the plant & future growth

SOLVENCY RATION

Time Interest Earned 4.09 9.08 2.93 11.07 1.97 6.27 2.78 20.95Time Interest Earned Ratio has increased a lot from the past years indicating heavy borrowing for the investment in fixed assets & subsequently more interest payments to make. This when compared with the industry shows that this company is relatively under the average of the amount they have to cover their financial charges.

Debt to Equity (L/E)1.29

1.66

1.67

1.18

This ratio has decreased over the past two years due to increase in


both long term liabilities & subsequently more increase in equity to raise capital for investment in assets

PROFITABILTY RATIO

Gross Margin Ratio

28.47%

24.18%

24.29%

27.84%

The gross profit increased from past years indicating better cost effective measures to keep the cost of production down.

Net Profit Margin Ratio

3.64% 11.33% 2.49% 5.99% 0.88% 10.47% 1.93% 12.58%

This ratio has increased from the last three years indicating better profitability of the company due to decrease in expenses and increase in sales. The net profit ratio is this company as compared with the industry average is strikingly low, indicating that other companies are making a better return on their investment and earning more profits due to more sales & lesser cost structures.

Operating Profit Margin Ratio

8.63%

5.71%

3.95%

4.64%

Operating Profit Margin has increased a lot from the previous years indicating effective utilization of resources to keep the cost of operations down which increases profitability

RETURN ON COMMON SHARE HOLDER EQUITY 232.27%

173.53%

39.68%

78.08%

Return on common shares has


increased over the years indicating that the company has been increasing its value to the shareholders & profitability and increase in returns

MARKET RATIOS

EARNING PER SHARE

23.23

17.35

3.97

7.81

Likewise the EPS has increased over the years indicating that profitability and increase in value of the company.

PRICE EARNING RATIO 8.93 25.19

Price Earning Ration is concerned with Market Price which is change on the market Level of News

DIVIDEND YIELD 0.05 #DIV/0!

Dividend Yield is .05 and the last year data is not available

EARNING YIELD 2.48 #DIV/0!

Earning Yield is 2.48 and the last year data is not available

DIVIDEND COVER 2.48 #DIV/0!

Dividend Cover is 2.48 and the last year data is not available


Recommendations

The major concern uncovered by the ratios is that the net profitability of this company is very low when compared with the industry average. Sanofi Aventis has to increase its profitability as it seems there is still untapped potential in the market which the company is forgoing. The data suggest that the company has to curtail it expenses, in order to compete aggressively in the Pharma industry and increase their profit share.

The financial charges are also on the higher side when compared with the industry. Sanofi is not generating enough sales to successfully cover its interest payments as per the industry standards. The operating profit is low to cover the financial charges. Data suggest the cost of operations is on the higher side. Sanofi must cut down its operational cost to increase it profit's base.

The current ratio and the quick ratios indicate that the management of assets to cover the liabilities could be increased. Although Sanofi still has more than adequate assets to cover its liabilities but it’s on the lower side. Sanofi can lower its liabilities to improve standings


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