Report on the analyzation of the financial statements of Orion Pharma

GROUP MEMBERS

Name ID
Md. Samit Hossain 1721752
Md. Ibna Alam Refat 1722099
Md. Rahmatullah Tanvir 1720891
Shaike Rahman 1722122

Course ID : ACN 305

Section : 01
 Table of Contents

Part One...............................................................................................................................................1
Composition of the Current Liabilities..........................................................................................1
Current Ratio:.................................................................................................................................2
Quick Ratio......................................................................................................................................3
Net Working Capital.......................................................................................................................4
Part Two...............................................................................................................................................5
Composition of the Non-Current Liabilities..................................................................................5
Debt to Assets Ratio.........................................................................................................................6
Long-Term Debt to Asset Ratio......................................................................................................7
Part Three............................................................................................................................................9
Composition of the composition of shareholders’ equity..............................................................9
Debt to Equity Ratio......................................................................................................................10
Part Four............................................................................................................................................11
Return on equity:...........................................................................................................................11
Return on Assets:...........................................................................................................................12
Gross Profit Margin......................................................................................................................13
Net Profit Margin..........................................................................................................................14
Part Five.............................................................................................................................................15
Composition of the Earnings per Share.......................................................................................15
Earnings Per Share........................................................................................................................15
P/E Ratio........................................................................................................................................16
Part Six...............................................................................................................................................17

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 Part One

Composition of the Current Liabilities:

Year Composition of the Current Liabilities
01 Jan 2015 – 30 June 2015 Short term loan= 1,132,261,469
Trade and Other Payable= 2,014,029,839
Accrued Expenses= 1,140,763,282
Total Current Liabilities= 4,287,054,589

01 July 2015 - 30 June 2016 Short term loan = 833,781,938

Trade and other creditors = 834,243,837
Accrued expenses = 2,342,386,700
Total Current Liabilities = 4,010,412,476

01 July 2016 - 30 June 2017 Short term loan = 1,829,112,606

Trade and other creditors = 2,890,212,047
Accrued expenses = 703,178,936
Total Current liabilities = 5,422,503,589

01 July 2017 - 30 June 2018 Short term loan= 2,238,473,219

Trade creditors = 3,847,473,764
Accrued & others payable = 701,049,192
Total Current liabilities = 6,787,002,174

1
Current Ratio:
Formula Results Comment
2015
9,169,468,306 The current ratio is a liquidity ratio that
4,287,054,589 measures a company's ability to pay short-term
obligations or those due within one year. It
=2.138 times
tells investors and analysts how a company can
2016 maximize the current assets on its balance
sheet to satisfy its current debt and other
Current Ratio = payables. If the current ratio computation
8,603,292,025
results in an amount greater than 1, it means
Current Assets 4,010,412,476
that the company has adequate current assets to
Current Liabilites = 2.145 times settle its current liabilities.
Here, we can see through the calculation that,
the current ratio of Orion Pharma Limited is
2017 decreasing year by year. It means more growth
for the company and is considered as a good
9,963,731,093
thing because it indicates that, the company is
5,422,503,589
utilizing their resource properly.
= 1.837 times
2018
12,300,762,445
6,787,002174
= 1.812 times

Current Rati o
Series 1
2.2 2.138 2.145

2.1
2
1.9 1.837 1.812
1.8
1.7
1.6
2015 2016 2017 2018

Table 1 Trend Analysis of Current Ratio

2
Quick Ratio
Formula Results Comment
2015 The quick ratio or acid test
ratio is a liquidity ratio that
9,169,468,306−623,024,518
measures the ability of a
4,287,054,589
company to pay its current
= 1.99 times liabilities when they come due
with only quick assets. Quick
2016 assets are current assets that
can be converted to cash
Quick Ratio = 8,603,292,025−681,075,164 within 90 days or in the short-
4,010,412,476 term. Cash, cash equivalents,
short-term investments or
(Current Assets−Inventory) /(Current
= 1.975 times Liabilites ) marketable securities, and
current accounts receivable
2017 are considered quick assets.
9,963,731,093−1,017,944,110
Here, we can see through the
5,422,503,589
calculation that, the quick
= 1.649 times ratio of Orion Pharma Limited
is decreasing year by year.
2018 Which means the company
12,300,762,445−1,188,512,467 may not be able to pay off
6,787,002174 their current debts using only
quick assets.
= 1.637 times

Current Ratio
2015 1.99

2016 1.975

2017 1.649

2018 1.637

0 0.5 1 1.5 2 2.5

Series 1 Linear (Series 1)

Table 2 Trend Analysis of Quick Ratio

3
Net Working Capital

Formula Results (BDT) Comment

2015 Net working capital is a liquidity calculation
that measures a company’s ability to pay off its
9,169,468,306−4,287,054,589
current liabilities with current assets. This
= 4,882,413,717 measurement is important to management,
vendors, and general creditors because it shows
2016 the firm’s short-term liquidity as well as
management’s ability to use its assets
8,603,292,025−4,010,412,476
efficiently.
Net Working = 4,592,879,549
Capital = Current In here, we can see that, the year by year, the
Assets – Current Net working capital is decreasing, because
Liabilities 2017 Orion Pharma Limited’s short-term loans and
accrued expense are increasing mostly. It’s not
9,963,731,093−5,422,503,589
a good emblem for the company to decreasing
= 4,541,227,504 net working capital.

2018
12,300,762,445−6,787,002174
= 5,513,760,271

Net Working Capital

6,000,000,000
5,513,760,271

5,000,000,000 4,882,413,717
4,592,879,549 4,541,227,504

4,000,000,000

3,000,000,000

2,000,000,000

1,000,000,000

0
2015 2016 2017 2018

Series 1 Linear (Series 1)

Table 3 Net Working Capital Trend

Part Two

4
Composition of the Non-Current Liabilities
Year
01 Jan 2015 – 30 June 2015
01 July 2015 - 30 June 2016
01 July 2016 - 30 June 2017
01 July 2017 - 30 June 2018
Composition of the Non-Current Liabilities
Redeemable Preference Share=
1,000,000,000
Provision for Decommissioning of Assets=
128,019,733
Long term loan= 5,488,829,069
Employee Benefits Provision= 28,087,134
Deferred Tax Liability= 71,720,808
Non-current liabilities = 6,716,656,744
Redeemable Preference Share=
500,000,000
Provision for Decommissioning of Assets=
143,405,563
Long term loan= 5,197,391,244
Employee Benefits Provision= 19,989,957
Deferred Tax Liability= 74,536,715
Non-current liabilities = 5,935,323,480
Redeemable Preference Share=
500,000,000
Provision for Decommissioning of Assets=
143,405,563
Long term loan= 4,428,289,449
Employee Benefits Provision= 23,666,139
Deferred Tax Liability= 79,787,507
Non-current liabilities = 5,175,148,658
Redeemable Preference Share=
500,000,000
Provision for Decommissioning of Assets=
143,405,563
Long term loan= 5,055,763,515
Employee Benefits Provision= 29,919,147
Deferred Tax Liability= 78,995,050
Non-current liabilities = 5,808,083,274
5
Debt to Assets Ratio
Results Comment
Debt to asset ratio 2015 The Debt to Asset Ratio is a leverage ratio that
indicates the percentage of assets that are being
Total debt 11,003,711,333
= financed with debt. From the calculation, we
Total assets 27,820,631,179
can see that the debt-to asset ratio is decreasing
=0.4 in 2016 compared to 2015 but then started
increasing minimally from 2016 to 2018.
2016
A lower value of the ratio is better than a
9,673,779,241
higher number. A lower ratio signals a stable
26,889,905,259
company with a lower proportion of debt. This
= 0.36 was reflected on the ratios of 2016 and 17. A
high ratio also indicates that a company may be
2017 putting itself at risk of defaulting on its loans if
10,597,652,247 interest rates were to rise suddenly. This
28,162,786,455 translates into higher operational risk as
financing new projects will get difficult. This
= 0.38 was the case for the ratios of 2015 and 18.
2018
12,595,085,448
30,714,695,724
= 0.41

Debt to Asstes Rati o

Debt to Asstes Ratio

0.41

0.4

0.38

0.36

2015 2016 2017 2018

Table 4 Debt to Assets Ratio Trend Analysis

6
Long-Term Debt to Asset Ratio
Results Comment
Long-Term Debt to 2015 Long Term Debt to Total Asset Ratio is the
Asset ratio ratio that represents the financial position
6,716,656,744
of the company and the company’s ability
= 27,820,631,179
to meet all its financial requirements. It
Total Long−Term debt
= 0.24 shows the percentage of a company’s assets
Total assets
that are financed with loans and other
2016 financial obligations that last over a year.
5,935,323,480
As this ratio is calculated yearly, decrease
26,889,905,259
in the ratio would represent that the
= 0.22 company is doing well, and is less
dependent on debts for their business needs.
2017
In year 2015, the Debt to Asset Ratio is
5,175,148,658 0.24, which means the company has 24%
28,162,786,455 long-term debt in for every currency it has
= 0.18 in assets. And, the Ratio is decreasing from
year 2016 to 2018. However, it peaked a
2018 little in 2018 compared to previous year
5,808,083,274
30,714,695,724
= 0.19

Long-Term Debt to Assets Ratio

0.3

0.25

0.24
0.2 0.22
0.19
0.18
0.15

0.1

0.05

0
2015 2016 2017 2018

Table 5 Long-Term Debt to Assets Ratio

7
Here we have performed an analysis of Orion Pharma Limited’s debt to assets ratio and long-
term debt to assets ratio. These ratios are the key components in determining the solvency
position of the company from year to year. The debt to asset ratio is used to determine the
amount of debt in a company, the ability to repay its debt, and whether additional loans will
be extended to the company. On the other hand, Long term debt to total asset ratio is a
measure of the extent to which a company is using long term debt to finance its total Asset. It
measures the ability of the business to pay off its long-term debts and interest on debts and
how well the business sustains itself in the long run. Both of these ratios are vital in
evaluating a company’s solvency position.
Looking at our Analysis, we can see that, the company is having different scenario in its two
ratios. First, the debt-to asset ratio has decreased from 2015 to 2016, which indicates that the
company has less exposure to risk compared to 2015 and effectively constraining itself from
risk of defaulting on its loans. Moreover, it peaked a little in 2017 but then increase a bit from
2017 to 2018. From the trend we can say the company is not fully at any insolvent position as
the ratios were less in 2016 and 2017 however the increase of ratio in 2018 must resolved by
decreasing their ongoing liabilities. Otherwise this strain can lead to the company’s exposure
to insolvent position in upcoming years which if becomes high can lead to bankruptcy.
On the other hand, in long-debt to assets ratio, the ratio keeps decreasing year to year but
peaked a little in 2018. This trend is a good indicator for the company. Because, as they are
using less long-term loans in their business and increasing its solvency position.

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 Part Three

Composition of the composition of shareholders’ equity

Year Composition of the Non-Current Liabilities

01 Jan 2015 – 30 June 2015 Share Capital 2,340,000,000

01 July 2015 - 30 June 2016
01 July 2016 - 30 June 2017
01 July 2017 - 30 June 2018
Share Premium 8,016,892,026
Reserves 2,045,297,378
Retained Earnings 3,582,152,413
Shareholders' Equity 15,984,341,817
Share Capital 2,340,000,000
Share Premium 8,016,892,026
Reserves 2,083,239,547
Retained Earnings 3,937,687,989
Shareholders' Equity 16,377,819,561
Share Capital 2,340,000,000
Share Premium 8,016,892,026
Reserves 1,976,561,162
Retained Earnings 4,269,065,599
Shareholders' Equity 16,602,518,787
Share Capital 2,340,000,000
Share Premium 8,016,892,026
Reserves 1,944,512,923
Retained Earnings 4,752,806,311
Shareholders' Equity 17,054,211,260

A share premium is the excess pay-out of a share’s par value from a shareholder. This
premium is the excess paid-capital that adds to the shareholder’s equity section that acts as a
reserve but cannot be distributed and can only be used for purposed established by the
company’s bylaws such as paying off equity expenses like underwriter fees. Here Orion
Pharma has a share premium of BDT 8,016,892,026.

9
Debt to Equity Ratio
Formula Results Comment
2015 The debt to equity ratios shows the
proportionality of debt in a company
11,003,711,333
to its equity and acts as a signal on
16,816,919,845
whether or not can the company meet
= 0.65 its short- and long-term obligations in
the time on a business decline.
2016
The D/E ratio for Orion Pharma is less
9,673,779,241
than 1, showing that the company is
17,216,126,018
funded more through the equity from
Debt to Equity Ratio its shareholders that debt from external
= 0.56
Total Liabilities sources. Now, it’s debatable on which
= 2017 is better but each has its own perks.
Total Equity
10,597,652,247 High D/E signifies that more interest
17,565,134,208 payouts and riskier business
conditions, but a lesser payout for
= 0.60 shareholders through dividend. Lower
2018 D/E signifies lower interest payout and
less risks in the business tasks but
12,595,085,448 profit would be shared by larger
18,119,610,276 quantities of shareholders.
= 0.70 Here, a ratio of less than one means
Orion is more leaning towards the
funding of its shareholder than
external sources and has a pretty
steady capital structure over the years.

Debt to Equity Rati o

0.8
0.7 0.7
0.65
0.6 0.6
0.56
0.5
0.4
0.3
0.2
0.1
0
2015 2016 2017 2018
Debt to Equity Ratio

Table 6 Debt to Equity Ratio

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 Part Four

Return on equity:
Formula Results Comment
2015 The general indication
of the usage of Return
578,645,944 on Equity is how
∗100
(15,793,919,753+15,984,341,817)/2 effective the
= 3.64 percent management is in using
the company’s assets to
make profit. As ROE is
2016 equal to a company’s
assets minus its debt,
1,552,194,218
Return on equity = ∗100 ROE could potentially
(15,793,919,752+16,377,819,562)/2
be thought as a return
Net income = 9.65 percent on net assets of the
'
∗100
Avg . Shareholde r s Equity company. Now, an
acceptable range of
2017 ROE varies from an
919,089,209 industry to another but
(16,377,819,561+16,602,518,787)/2 from the assessed data
it’s visible that Orion
*100 Pharma has been
under-performing with
= 5.57 percent
an exception in the
2018 year 2016 where there
was a sudden boom in
904,547,400
∗100 their return only to
(16,602,518,787+17,054,211,260)/2
under-perform again.
= 5.38 percent And there has very
little increase in their
ROE over the years.

Return on Equity

9.65

5.57 5.38
3.64

2015 2016 2017 2018

Return on Equity
Table 7 Return on Equity trend

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Return on Assets:
Formula Results Comment
2015 Return on assets (ROA), in simple
terms, is an indicator to a
578,645,944
*100 company’s profitability relative to
27,820,631,179
its total assets. This signals the
= 2.07 percent management or external users on
the efficiency of the company at
using its assets to generate
2016 earnings. ROA for public
Return on assets = companies varies drastically over
1,552,194,218
*100 the industry so it wouldn’t be
Net income 26,889,905,259
*100 feasible to directly compare it with
Total Assets
= 5.77 percent a competitor, rather it would be
better to compare ROA of current
2017 year to ROA from prior years of
the company. And the higher the
919,089,209 ROA percentage, the better for the
*100
28,162,786,455 company as it means more return
= 3.26 percent on less investment. Over here,
Orion Pharma shows a significant
2018 improvement in profitability from
the year 2015 to 2016 only to
904,547,400
*100 plummet lower in the consequent
30,174,695,724
years. So overall, in these studied
= 2.99 percent years the profitability of Orion
Pharma is quite dissatisfactory.

Return on Assets

5.77

3.26 2.99
2.07

2015 2016 2017 2018

Return on Assets

Table 8 Return on Assets trend

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Gross Profit Margin

Formula Results Comment

2015 Gross profit margin is a
profitability indicator that tells
2,062,101,624
*100 external users how good the
5,502,452,557
company is at creating a
= 37.48 percent product or providing a service
in comparison to its rivals.

2016 A healthy and stable gross

Gross Profit Margin (18 months) profit margin allows the
= company to pay for its
3,861,261,325 operating expense with ease.
*100
Gross Profit 14,799,743,435
*100 For Orion Pharma, over the
Net Sales
= 26.09 percent years, the Gross profit margin
2017 has been at a constant downhill
showing that their cost of
2,419,249,934 production has been increasing
9,534,345,195
*100
in respect to their revenue and
= 25.37 percent thus decreasing their overall
gross profit by a significantly
2018 large margin.
2,376,198,593
∗100
10,423,101,099
= 22.79 percent

Gross Profit Margin

37.48

26.09 25.37
22.79

2015 2016 2017 2018

Gross Profit Margin

Table 9 Gross Profit Margin trend

13
Net Profit Margin

Formula Results Comment

2015 Net profit margin is the most
popular profitability indicator
578,645,944 that tells external users about a
*100
5,502,452,557 company’s financial health.
Management and external users
can use the net profit margin to
= 10.52 percent
assess if the company’s
2016 operating and overhead costs
Net Profit Margin = are being contained.
Net Profit 1,552,194,218 Orion Pharma’s net profit
*100 *100
Net Sales 14,799,743,435 margin is in general at a
respectable position but over
= 10.49 percent
the years, the margin has only
2017 seemed to have decreased
which isn’t a positive indicator.
919,089,209
9,534,345,195
*100 It is concerning for the
management and investors to
= 9.64 percent witness such a constant
downfall in profitability, which
2018 indicates possible rise in
904,547,400 operating costs or reduction in
∗100 the company’s revenue.
10,423,101,099
= 8.68 percent

NET Profit Margin

10.52 10.49
9.64
8.68

2015 2016 2017 2018

Net Profit Margin

Table 10 Net Profit Margin Trend

14
 Part Five

Composition of the Earnings per Share

Year Composition of the Earnings Per Share

01 Jan 2015 – 30 June 2015 Net Income 502,891,180

01 July 2015 - 30 June 2016
01 July 2016 - 30 June 2017
01 July 2017 - 30 June 2018
Number of Common Stock 234,000,000
Net Income 1,323,072,165
Number of Common Stock 234,000,000
Net Income 794,495,811
Number of Common Stock 234,000,000
Net Income 801,763,805
Number of Common Stock 234,000,000

Earnings Per Share

Formula Results Comment
2015 The earnings per share signifies the
profit made by the company in
502,891,180
respect to per share. Here there was a
234,000,000
sudden jump in the EPS from 2015-
= 2.15 16 but then a sudden decrease in EPS
on the following years.
2016
1,323,072,165
234,000,000
Earnings Per
= 5.65
Share =
Net Profit 2017
Number of Shares
794,495,811
234,000,000
= 3.40
2018
801,763,805
234,000,000
= 3.43

15
 P/E Ratio

Formula Results Comment

2015
28.90
2.15
= 13.44
Price
Price/EPS = 2016
EPS
28.90
Table 11 Market Info. of Orion Pharma's Stock
5.65
= 5.12
2017
28.90
3.40
= 8.50
2018
28.90
3.43
= 8.43

Note: The company has no convertible bonds or preferred share hence it was not possible to
deduce its diluted earnings per share. From note 3.06 of the financial statements

Part Six

The analysis consisted of various measurements that shows Orion Pharma’s liquidity, capital
structure, profitability and its share price. All strong indicators of the company’s current
position in the industry and its attractiveness to new investors.
In terms of liquidity, Orion Pharma’s current assets was sufficient enough to meet its short-
term obligations but it also showed that a lot of its current assets were sitting idle and not
being utilized to its full extent. This could mean inadequacy in terms on the company’s

16
management because it is losing possible income through short-terms investments which
bears minimal risks.
In terms of the company’s capital structure, the computed ratios showed that the company
relies more on the fund from its shareholders rather than debt financing to run its business.
This means the company is at a lesser chance to potential bankruptcy because of its lower
debt to equity ratio. Though this also means that the profit is being divided between
shareholders, but the company seems to have chosen the safer route for themselves.
The most concerning part of the analysis was the profitability section, where the company
exhibited constant downfall over the years possibly due to their increased cost of production
and operating expenses or even a decrease in their overall turnover in respect to its costs.
So, in retrospect, Orion Pharma should utilize its idle assets and participate in various
investments or develop/adapt technology that reduces their increasing cost of production and
operating expenses and increase profitability.

17