Murree Brewery Company Ltd

VISION STATEMENT
Our office is in the market

MISSION STATEMENT
We the people of Murree Brewery Co. make personal commitment to first

understand our customers requirement then to meet & exceed their expectations,

by performing the correct tasks on time and every time through with care.

Continuous improvement

Alignment of our Mission & goals

Responsibility and respect of our jobs and each other

Educating one another

Motto
We respect our past. We are the industry leaders in present and accept the challenge of the
future.

Business Profile:
Manufacturers of Juices, Squashes, Jams, Ketchups, etc. Parent company Murree Brewery Co.
Ltd. also manufacturing Beers and Liquors and soft drinks. Another subsidiary company
manufacturing glass container.

Principal shareholders: Public Limited Company.

Subsidiaries: Public.

Share type: ordinary

Listed stock exchange: Karachi.

History:
Consequent to the British annexation of the Punjab in 1849 from Sikh rule, and more so after
1857 when the British Crown formally extended its sovereignty over India, a structured
administration commenced in the Punjab.

To meet the beer requirements of British personnel (mainly army), the Murree Brewery was
established in 1860 and incorporated a year later at Ghora Galli, located in the Pir Punjal range
of the Western Himalayas at an elevation of 6000' above sea level, near the resort town of
Murree.

Between 1885 & 1890 the Company established Breweries in Rawalpindi & Quetta & acquired
an interest in the Oticumand (South India) & Norailiya (Ceylon) breweries. A distillery was also
established in the above period in Rawalpindi next to the Brewery

Tops Food and Beverages a division of the Company was established in 1969. It processes fruits
and markets fruit juices and allied food products. Two manufacturing units are located in
Rawalpindi and Hattar (NWFP) respectively. A Tetra Pak packaging facility was added in 2001.
The Hattar plant was installed in 1992.

Murree Glass, the glass container division of the Company, established in 1974, manufacturer
glass containers of all types for the Company and other food and beverage consumers. It is also
located in Hattar (NWFP)

The plant is based on a Recuperative Melter and two Emhart I.S. container manufacturing
machines and has the latest quality control equipment for online inspection of containers.

The Murree Brewery is one of the oldest public companies of the sub-continent. Its shares were
traded on the Calcutta Stock Exchange as early as 1902, and are now the oldest continuing
industrial enterprise of Pakistan.

In 1997-1998 and 1998-1999, the company was judghed among the top 25 performing public
companies by the Karachi Stock Exchange.
Ratios Analysis of Murree Brewery Company Limited
Liquidity Ratios

Current Ratio:

The Current ratio is the first liquidity ratio which helps to measure the liquidity position of any
firm. It can calculate by dividing current assets with current liabilities.

An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the
more liquid the company is. If the current assets of a company are more than twice the current
liabilities, then that company is generally considered to have good short-term financial strength.
If current liabilities exceed current assets, then the company may have problems meeting its
short-term obligations. Current ratio of Murree Brewery Company Ltd is shown in comparison
with the last year’s current ratio.

Year Current Ratio Current Liability Current Assets

2008 2.546105026 390760 994916
2009 2.790440282 369718 1031676

Current Ratio
2.85
2.8
2.75
2.7
Current Ratio
2.65
2.6
2.55
2.5
2.45
2.4
2008 2009

It indicates the extent to which current liabilities are covered by those assets expected to be
converted to cash in the near future. It shows that current assets of this company are good enough
to meet its current liabilities. So the current ratio provides the best signal to measure the short
term solvency.

Quick Ratio

Quick ratio is obtained by dividing Quick assets by current liabilities.

Where, Quick Assets=Current Assets - Current Liability

The quick ratio often referred as the acid test ratio. It is similar to current ratio but excludes
inventory from the current assets. By excluding inventory, the quick ratio focuses on the more-
liquid assets of a company. Quick Ratio is a measure of a company's liquidity and ability to meet
its obligations. Quick ratio is viewed as a sign of company's financial strength or weakness
(higher number means stronger, lower number means weaker). In general, a quick ratio of 1 or
more is accepted by most creditors; however, quick ratios vary greatly from industry to industry.

Year Quick Ratio Quick Assets Current Liability

2008 1.285320913 502,252,000 390,760,000
2009 1.428821426 528,261,000 369718000

Quick Ratio
2.85
2.8
2.75
2.7
Quick Ratio
2.65
2.6
2.55
2.5
2.45
2.4
2008 2009

It indicates that the financial strength of this company is strong and should be acceptable to most
of the creditors. The company has improved its financial strength from the previous year.

Cash ratio

Cash Ratio is most the conservative liquidity ratio for judging the financial stability of a
company on a short-term basis To calculate cash ratio, add the value of the company’s cash and
cash equivalents and divide by current liabilities.

This ratio shows the ability of the company’s cash on hand to fund short-term liabilities. It is an
indication of the firm ability to pay of its current liabilities if for some reasons immediate
payments are required.
The cash ratio is the most stringent and conservative of the three short-term liquidity ratios
(current, quick and cash). It only looks at the most liquid short-term assets of the company,
which are those that can be most easily used to pay off current obligations. It also ignores
inventory and receivables, as there are no assurances that these two accounts can be converted to
cash in a timely manner to meet current liabilities.

Year Cash Ratio Cash equivalents and Cash Current Liability

2008 0.29094329 113689000 390760000
2009 0.600836313 222140000 369718000

Cash Ratio
0.7
0.6
0.5
Cash Ratio
0.4
0.3
0.2
0.1
0
2008 2009

Cash Ratio Murree Brewery Co. Ltd of 2008 and 2009 is shown above which shows the
company’s strong strength of paying short term liabilities.

Net Working Capital Ratio

Net working Capital ratio is calculated by dividing net working capital by total assets.

Whereas, Net working Capital= Current assets - Current liabilities

Net working capital is used for the cash conversion cycle of a business, which uses cash for raw
materials, converts into the finished product, sells the product, then receives payment for it. This
conversion cycle may vary depending on the type of business, but net working capital is
essentially the cash needed to run the business. Working Capital is the amount that is left free
and clear after all current debts and paid. Working capital is important because without sufficient
working capital, a company is not able to sustain itself for long.

Net Working Capital

Year Ratio Net Working Capital Total Assets
 2008 0.154625896 604,156,000 3907211000
2009 0.163050107 661,958,000 4,059,844,000

Net Working Capital Ratio

0.16
0.16
0.16
0.16 Net Working Capital Ratio

0.16
0.15
0.15
0.15
2008 2009

We can see that the net working capital ratio of the company has increased from the last year’s
value. However a high working capital ratio isn't always a good thing, it could indicate that they
have too much inventory or they are not investing their excess cash.

Profitability Analysis Ratio

Return on Assets

The ratio of net income to total assets measures the return on total assets (ROA) after interest
and taxes.

The relationship between profitability and investment is considered the key ratio by many
analysts. It provides a broad measure of management’s operating and financial success of a
company. An indicator of how profitable a company is relative to its total assets. ROA gives an
idea as to how efficient management is at using its assets to generate earnings. This low return
might results from the company’s low basic earning power. ROA tells you what earnings were
generated from invested capital (assets).

Average Total
Year Return on Assets Net Income Assets
4,059,
2008 0.0482 195,845,000 844,000.00
2009 215,832,000 4,059,
 0.0532 844,000.00

Return on Assets
0.05
0.05
0.05
0.05
0.05 Return on Assets
0.05
0.05
0.05
0.05
0.05
2008 2009

Past two years record of the company shows that the company has shown a bit improvement in
converting its assets into profitable earnings which can be considered good for the company’s
financial record.

Return on Equity

Ultimately, the most important, or “bottom line”, accounting ratio is the ratio of income to
common equity, which measures the return on common equity. Stock holders invest to get a
return on their money, and this ratio tells how well they are doing in accounting sense.

ROE is the amount of net income returned as a percentage of shareholders equity. Return on

equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.  

Return on Equity = Net Income/Shareholder's Equity

Avg. Stockholder
Year Return on Equity Net Income Equity

2008 0.1566 195845000 1,250,248,500.00

2009 0.1726 215,832,000 1,250,248,500.00

 Return on Equity
0.18

0.17

0.17
Return on Equity
0.16

0.16

0.15

0.15
2008 2009

ROE has also shown a bit increase in the percentage of shareholder’s equity adding more value
to its financial record and attracting investors to invest.

Profit Margin

Gross profit (sales minus cost of sales) as a percentage of sales is an indication of the
management’s ability to mark up its products over their cost.

Year Profit Margin Sales Cost of Sales

506,725,000.
2008 0000 1713574000 1,206,849,000.00
629,330,000.
2009 0000 2,220,715,000 1,591,385,000

Profit Margin
700000000
600000000
500000000
Profit Margin
400000000
300000000
200000000
100000000
0
2008 2009

The table and graph clearly shows that the company has increased its profit margin as compared
to year 2008 which is a good sign for the company’s image and reputation.
Earnings Per Share

Oustanding
Year Earnings Per Share Net Income Shares

2009 14.9500 215,832,000 14,433,400

Activity Analysis Ratio

Assets Turnover Ratio

The asset turnover ratio is an indicator of how efficiently management is using investments in
total assets to generate sales. It is calculated by dividing average total assets over sales.

Assets Turnover Ratio= Sales/ Average Total Assets

Indicates how successful a firm is in utilizing its assets in generation of sales revenue. A high
ratio is considered desirable which can be seen below that the company’s Assets turnover ratio
has increased considerably which is desirable for many investors.

Assets Turnover
Year Ratio Sales Average Total Assets
4,059,844,0
2008 0.4221 1713574000 00.00
4,059,844,0
2009 0.5470 2,220,715,000 00.00
 Assets Turnover Ratio
0.6

0.5

0.4
Assets Turnover Ratio
0.3

0.2

0.1

0
2008 2009

Accounts Receivable Turnover Ratio

This ratio indicates the average length of time the firm must wait after making a sale before it
receives cash.

Accounts Receivable Turnover Average

Year Ratio Sales Receivables
28,
2008 59.5260 1713574000 787,000.00
28,
2009 77.1430 2,220,715,000 787,000.00

Accounts Receivable Turnover Ratio

90
80
70
60 Accounts Receivable
50 Turnover Ratio
40
30
20
10
0
2008 2009

Here we can see a considerably high ratio which implies either that a company has started
operating on cash basis or that its extension of credit and collection of accounts receivable is
efficient because accounts receivable turnover ratio has increased by 17.5%.
Capital Structure Analysis Ratio

Debt to Equity Ratio

The relationship of borrowed funds to ownership funds is an important solvency ratio. Ccapital
from debt and other creditor sources is more risky for a company than equity capital.

Debt capital requires fixed interest payments on specific dates. If payments to a company’s
creditors become overdue, the creditor can take legal action which may lead to the company
being declared bankrupt. Ownership capital is less risky.

The Debt to Equity Ratio measures how much money a company should safely be able to borrow
over long periods of time. It does this by comparing the company's total debt (including short
term and long term obligations) and dividing it by the amount of owner's equity. Generally, any
company that has a debt to equity ratio of over 40 to 50% should be looked at more carefully to
make sure there are no liquidity problems.

Year Debt to Equity Ratio liabilities Total Equity

2008 0.5026 506,886,000 1008,532,000

2009 0.4452 524,088,000 1,177,324,000

Debt to Equity Ratio

0.51
0.5
0.49
0.48
0.47 Debt to Equity Ratio
0.46
0.45
0.44
0.43
0.42
0.41
2008 2009

This company has a very good Debt to Equity ratio in the year 2008 and they have further
improved the ratio by another 5.74% in the year 2009. The company therefore, has a good
financial background.

Interest Coverage Ratio

It is a calculation of a company's ability to meet its interest payments on outstanding debt.

Year Interest Coverage Ratio EBIT Finance Cost

 2008 27.7963 19,652,000.00 707000

2009 49.3278 220298000 4,466,000

Interest Coverage Ratio

60

50

40
Interest Coverage Ratio
30

20

10

0
2008 2009

In the above table we can see that the interest coverage ratio of the company has shown a drastic
increase over the year 2008. Since the company has registered an overall increase of over 10%
in Net Profit (after Tax) for the year 2009, the increase in the financial cost during the year 2009
is not a matter of concern. It may have happened due to the following factors:

1. The company turnover has increased by almost 30% during the year 2009; the company
may have obtained short term financing to meet the extra volume requirements.
2. The company their liquid cash may have tied up in some other long-term investments and
may have obtained short-term loan to meet their financial requirements.
3. High inventory to Turnover ratio during the year 2009

Capital Market Analysis Ratios

Price Earnings (PE) Ratio

The P/E ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative
to the annual net income or profit earned by the firm per share. It is a financial ratio used for
valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so
the stock is more expensive compared to one with lower P/E ratio. The P/E ratio has units of
years which can be interpreted as "number of years of earnings to pay back purchase price",
ignoring the time value of money.
In other words, P/E ratio shows current investor demand for a company share. The reciprocal of
the PE ratio is known as the earnings yield. The earnings yield is an estimate of expected return
to be earned from holding the stock if we accept certain restrictive assumptions

Earnings Per
Year Price Earnings (PE) Ratio Share price Share
2009 0.004961331 74.19 14953.65

A valuation ratio of a company's current share price compared to its per-share earnings in shown
in the table.

Inventory turnover ratio

Inventory turnover ratio is one of the Accounting Liquidity ratios, a financial ratio. This ratio
measures the number of times, on average, the inventory is sold during the period. Its purpose is
to measure the liquidity of the inventory. A popular variant of the Inventory turnover ratio is to
convert it into an average days to sell the inventory in terms of days. Remember that the
Inventory turnover ratio is figured as "turnover times" and the average days to sell the inventory
is in "days".

This ratio indicates how fast inventory items moves through a business. It is an indication of how
well the funds invested in inventory are being managed.

Average
Year Inventory turnover ratio Cost of Sales Inventories

2008 2.4232 1,206,849,000 498,039,500

2009 3.1953 1,591,385,000 498,039,500

Inventory turnover ratio

3.5
3
2.5
Inventory turnover ratio
2
1.5
1
0.5
0
2008 2009

The above table shows that that Inventory to turnover ratio during the year 2009 has increased
that may result unnecessary holding up of capital or may result in higher financial costs.
Conclusion
After analyzing the financial statements of Murree Brewery Company limited we came to know
that financial ratios help us to know the strong and weak performance of the company in
different areas according to available data.

The overall performance of the company is given as follows.

Liquidity Ratio: Current ratio, quick ratio, cash ratio and bet working capital ratio shows the
liquidity position of the company which in this case is very good and compared to the previous
year ratios are increased which means the improved liquidity position of the company.

Profitability Ratio: Return on assets and return on equity of the company was studies which
also shows improvement as compared to the last year. Profit margin also showed a great
improvement which shows that the company is has tried to maintain its strong financial position
in the market.

Capital Structure Analysis Ratio: Debt to equity ratio has also shown improvement but interest
coverage ratio has also increased at the same time which may not be good for the company
financial situation but since the company’s net profit margin has increased so much so increase
in the financial cost is not a matter of concern and can be disregarded.

Capital Market Analysis Ratios: Price Earnings (PE) Ratio of the company has been has been
calculated to know the current investor demand for the company. On the other side Inventory
turnover ratio has increased which is not desirable for any company and may be a result of
unnecessary holding up of capital or increased financial costs.

Activity Analysis Ratio: Assets Turnover Ratio has increased significantly showing that the
company is utilizing its utilizing its assets in generating revenue and accounts Receivable
Turnover Ratio has also improved showing that the company has improved its policy for
collection of accounts receivable.