SDPK Financial Position Project Final

SIDPEC FINANCIAL POSITION (THROUGH
2016-2018)
MBA Project_Miami_AAST MBA Project_Miami_AAST
Project Presented To:

Prof. Dr.: Ashraf Salah
Presented by (on 25 November 2019):
Mohamed Ibrahim Gamal El Deen.
Angie Mohamed Ashraf
Mohamed Mahmoud Mohamed Hassan.
Jaidaa Taha Salem
Sidi Kerir Petrochemicals Company Financial Position Analysis Thursday, July 28, 2022
 Introduction:
 SIDPEC a leading company in petrochemicals’ industry in Egypt, its primary
objective is the production of value-added products by using the available
raw materials as well as developing related local industries.
 Located in Al-Ameria industrial area in Alexandria, SI DPEC complex consists
of two major plants which are Polyethylene and ethylene plants, it also has a
utility plant which covers the production facility’s needs. Two other
intermediate production units are the LPG unit and the Butene1 unit.
 The company products include Polyethylene (high density & linear low-
density grades) sold under the trade name of “Egyptene”, which is produced
under license of BP-Innovene. Polyethylene is produced using Ethylene which
is produced by the processing of Ethane/Propane feed in the Ethylene plant
under license of ABB-Lumuse.
 The company also produces intermediate products such as LPG & Butene-1.
SIDPEC utilizes the finest technologies in production which are also
environment-friendly and energy saving. Its production capacity is 300 KTA of
Ethylene, 225KTA polyethylene, 50KTA of LPG and 10 KTA Butene-1. The
company is one of the companies working under the Egyptian Petrochemical
holding Company ECHEM
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1st - SDPK Financial positions for years 2016, 2017, 2018:

Sidi Kerir Petrochemical Co. (Sidpec)
Consolidated Balance Sheet MH_08NOV
at 31 December - 2016 through 2018
In Egyptian Pounds
2016 2017 2018
Assets
Long Term Assets
Land 93,955,097 93,955,097 175,661,848
Buildings 61,389,092 61,358,708 144,696,859
Equipment 255,218,056 447,487,603 395,866,621
Transportation 1,323,481 2,278,611 83,594,739
Tools 4,264,011 3,576,661 86,826,302
Furniture 15,047,569 16,987,827 88,853,300
Total Fixed Assets 431,197,306 625,644,507 975,499,666
Projects under construction 54,687,905 407,806,690 390,463,401
Real Estate Investment 14,921,514 14,921,514 14,921,514
Long Term Investment 895,884,000 895,884,000 949,401,956
Labors Long term (Loan Receivable)
Total Long Term Assets 1,396,690,725 1,944,256,711 2,330,286,537
Short Term Assets / Current Assets
Inventory 345,739,086 393,038,134 664,287,863
Accounts Receivables
Customers / Credit Sales 237,571,693 359,579,627 206,310,794
Other related Companies / Credit 364,905,116 824,814,203 1,024,139,622
Sales
Deferrals / Down payments 72,271,760 3,110,264 42,677,061
(Unearned Expenses)
Accounts Receivables & Other 153,907,339 138,561,702 294,424,665
receivables
Short Term Investment 577,821,246 254,883,641 46,484,109
Total Accounts Receivables 1,406,477,154 1,580,949,437 1,614,036,251
Total Cash & Cash Equivalent 1,032,392,186 980,987,366 1,069,926,897
Total Short Term Assets / Total 2,784,608,426 2,954,974,937 3,348,251,011
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Current Assets
Total Assets 4,181,299,151 4,899,231,648 5,678,537,548
Liabilities
Non-Current Liabilities
Provisions 220,000,000 239,000,000 285,000,000
Deferred tax liabilities 14,370,940 38,606,213 81,658,259
Total non-Current Liabilities 234,370,940 277,606,213 366,658,259
Current liabilities
Suppliers Accounts Payable 46,683,333 59,751,908 66,746,352
Related Companies Accounts 562,313,945 1,087,673,945 1,297,194,496
Payable
Total Credit Accounts / Other Payables 147,777,779 206,657,608 211,593,667
Short term facilities 147,551,251 -25
income tax Payable (159,178,002) (81,878,780) (43,121,528)
Total Current Liabilities 745,148,306 1,272,204,656 1,532,412,987
Total Liabilities 979,519,246 1,549,810,869 1,899,071,246
Stockholders’ Equity
Issued and paid capital 1,050,000,000 1,050,000,000 1,050,000,000
Legal reserve 525,000,000 525,000,000 525,000,000
other reserve 104,296,589 624,775,375 904,775,375
Retained Earnings 94,954,605 17,974,141 964,549
Revenues 1,427,528,711 1,131,671,263 1,298,726,378
Total Stockholders’ Equity 3,201,779,905 3,349,420,779 3,779,466,302
Total Liabilities & S/E Equity 4,181,299,151 4,899,231,648 5,678,537,548
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2nd - SDPK Income statement for years 2016, 2017, 2018
Sidi Kerir Petrochemical Co. (Sidpec)

Income Statement
Jan/Dec to From 2014 through 2017
In Egyptian Pounds
2016 2017 2018
3,421,941,03 4,995,205,41
Net sales/ Sales revenues 0 7
5,779,897,959
2,364,410,02 3,526,810,03
Cost Of Sales 1 0
4,085,459,360
1,057,531,00 1,468,395,38
Gross Profit 9 7
1,694,438,599
Other Operating Revenues 6,655,828 7,015,791 14,824,038

Expenses
Distribution & sales Exp 23,196,033 29,154,004
General & Administrative Exp 73,721,735 84,965,984
Total Operating Expenses (96,917,768) (114,119,988) (178,084,000)
1,361,291,19
Operating Income 967,269,069
0
1,548,958,599
Other Expenses / Loss 38,199,107 35,551,000 91,906,437

Donations Currency
1,338,332 14,229,000 45,906,437
differences/Expenses
Provisions 36,860,775 21,322,000 46,000,000
Provisions for Debate Taxes 21,322,000
Investment Risk In Alex Fiber Co.
Other Revenues / Gains 740,135,385 157,616,325 202,999,466
Investment Revenues 8,895,640 81,236,259 80,186,000
Currency valuation differences 645,521,110 20,414,824
Investment in securities (deposits
73,200,025 68,605,000 90,111,642
interests, Treasury bills, bonds)
Capital Gain
Miscellaneous Revenues 12,063,339 7,775,066 12,287,000
obsoleted provision 455,271
1,669,205,34 1,483,356,51
EBIT 7 5
1,660,051,398
Interests (Finance Expenses) 3,017,000 6,248,000 34,522,000

EBT 1,666,188,34 1,477,108,51 1,660,051,398
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7 5
Taxes 238,659,636 345,437,313 361,324,994
Income Taxes 244,236,439 321,202,039 318,272,974
Deferred Taxes (5,576,803) 24,235,273 43,052,020
1,427,528,71 1,131,671,20
Net Income 1 2
1,298,726,378
Profit shares for Employees and BOD 148,035,000 118,497,000 136,113,000

1,279,493,71 1,013,174,20
Net Income after profit share 1 2
1,162,613,634
Number Of Shares 525,000,000 525,000,000 525,000,000

EPS (Earnings per share) 2.44 1.93 2.21
3rd - Financial analysis using sources and uses:

Sources and Uses for the year 2016 vs. 2017
%Source
2016 2017 (+/-) Sources Uses
s %uses
Assets
Long Term Assets
Land 93,955,097 93,955,097 0
Buildings 61,389,092 61,358,708 -30,384 30,384 0.00%
192,269,54 11.45
Equipment 255,218,056 447,487,603 192,269,547
7 %
Transportation 1,323,481 2,278,611 955,130 955,130 0.16%
Tools 4,264,011 3,576,661 -687,350 687,350 0.15%
Furniture 15,047,569 16,987,827 1,940,258 1,940,258 0.21%
194,447,20
Total Fixed Assets 431,197,306 625,644,507
1

Projects under 353,118,78 20.89
54,687,905 407,806,690 353,118,785
construction 5 %
Real Estate Investment 14,921,514 14,921,514 0
Long Term Investment 895,884,000 895,884,000 0
Labors Long term
0 0
(Loan Receivable)
Total Long Term 1,396,690,72 1,944,256,71 547,565,98

Assets 5 1 6
Short Term Assets /
0
Current Assets
Inventory 345,739,086 393,038,134 47,299,048 47,299,048 2.98%
Accounts
0
Receivables
Customers / Credit 122,007,93
237,571,693 359,579,627 122,007,934
Sales 4 7.48%
Other related
459,909,08
Companies / Credit 364,905,116 824,814,203 459,909,087 27.38
7
Sales %
Deferrals / Down 72,271,760 3,110,264 -69,161,496 69,161,496 4.07%
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payments (Unearned
Expenses)
153,907,339 138,561,702 -15,345,637 15,345,637
& Other receivables 0.90%
-
Short Term
577,821,246 254,883,641 322,937,60 322,937,605
Investment 5 19.25%
Total Accounts 1,406,477,15 1,580,949,43

Receivables 4 7
Cash & Cash

Equivalent
Total Cash & Cash 1,032,392,18
980,987,366 -51,404,820 51,404,820
Equivalent 6 3.12%
Total Short Term
2,784,608,42 2,954,974,93
Assets / Total Current
6 7
Assets
4,181,299,15 4,899,231,64
Total Assets
1 8
Liabilities
Non-Current
0
Liabilities
Provisions 220,000,000 239,000,000 19,000,000 19,000,000 1.31%
Deferred tax
14,370,940 38,606,213 24,235,273 24,235,273
liabilities 1.52%
Total non-Current
234,370,940 277,606,213 43,235,273
Liabilities
Current liabilities
Suppliers Accounts
46,683,333 59,751,908 13,068,575 13,068,575
Payable 0.76%
Related Companies 1,087,673,94 525,360,00
562,313,945 525,360,000
Accounts Payable 5 0 30.94%
Total Credit Accounts /
147,777,779 206,657,608 58,879,829 58,879,829
Other Payables 3.46%
-
Short term facilities 147,551,251 -25 147,551,27 147,551,276
6 8.89%
income tax Payable -159,178,002 -81,878,780 77,299,222 77,299,222 3.92%
Total Current 1,272,204,65 527,056,35
745,148,306
Liabilities 6 0
1,549,810,86 570,291,62
Total Liabilities 979,519,246
9 3
Issued and paid 1,050,000,00 1,050,000,00
0
capital 0 0
Legal reserve 525,000,000 525,000,000 0
520,478,78
other reserve 104,296,589 624,775,375 520,478,786
6 30.60%
Retained Earnings 94,954,605 17,974,141 -76,980,464 76,980,464 2.96%
-
1,427,528,71 1,131,671,26
Revenues 295,857,44 295,857,448 17.60
1 3
8 %
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Total Stockholders’ 3,201,779,90 3,349,420,77 147,640,87

Equity 5 9 4
Total Liabilities & S/E 4,181,299,15 4,899,231,64 717,932,49 1,697,888,97 1,697,888,97
Equity 1 8 7 7 7
Short term Long term

Sources: 4.07% 0.15%
0.90% 1.31%
19.26% 1.52%
3.12% 30.60%
0.76% 33.58
30.94%
3.46%
3.92%
66.42
Uses: 2.98% 11.45%
7.48% 0.16%
27.38% 0.21%
8.89% 20.89%
46.73 2.96%
17.6%
53.27
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 Comment:
 66.78% of the sources from internal sources and 33.22% of the sources are external,
which is a good indicator for the efficiency of uses internal sources and not depending
on external sources (taking into consideration the high cost of borrowing since 2016
due to the devaluation of the Egyptian pound related to USD).
 From the year 2016 to 2017 the company used about 66.42% of the short term
sources to finance 46.73 % of the short term uses and about 33.58% of long term
sources to supply 53.27% of the long term uses.
 The company increased the stockholders, equity by 147,640,874 EP.
Sources and Uses for the year 2017 vs. 2018

Sources Uses
2017 2018 (+ / -) Sources Uses
% %
Assets
Long Term Assets
Land 93,955,097 175,661,848 81,706,751 81,706,751 6.66%
Buildings 61,358,708 144,696,859 83,338,151 83,338,151 6.79%
Equipment 447,487,603 395,866,621 -51,620,983 51,620,983 4.21%
Transportation 2,278,611 83,594,739 81,316,128 81,316,128 6.63%
Tools 3,576,661 86,826,302 83,249,641 83,249,641 6.78%
Furniture 16,987,827 88,853,300 71,865,473 71,865,473 5.86%
Total Fixed Assets 625,644,507 975,499,666
Projects under
construction
407,806,690 390,463,401 -17,343,289 17,343,289 1.41%
Real Estate
Investment
14,921,514 14,921,514 0
Long Term
Investment
895,884,000 949,401,956 53,517,956 53,517,956 4.36%
Labors Long term
(Loan Receivable)
0
Total Long Term 2,330,286,53
Assets
1,944,256,711
7
Short Term Assets /
Current Assets

Inventory 393,038,134 664,287,863 271,249,729 271,249,729 22.11
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%
Accounts
Receivables
0
Customers / Credit
Sales
359,579,627 206,310,794 -153,268,833 153,268,833 12.49%
Other related
1,024,139,62 16.25
Companies / Credit 824,814,203 199,325,419 199,325,419
Sales 2 %
Deferrals / Down
payments
(Unearned
3,110,264 42,677,061 39,566,797 39,566,797 3.22%
Expenses)
Accounts
12.70
Receivables & 138,561,702 294,424,665 155,862,963 155,862,963
Other receivables %
Short Term
Investment
254,883,641 46,484,109 -208,399,532 208,399,532 16.99%
Total Accounts 1,614,036,25
1,580,949,437 33,086,814
Receivables 1
Cash & Cash
Equivalent
0
Total Cash & Cash 1,069,926,89
980,987,366 88,939,531 88,939,531 7.25%
Equivalent 7
Total Short Term
3,348,251,01
Assets / Total 2,954,974,937
Current Assets 1
5,678,537,54
Total Assets 4,899,231,648
8
Liabilities
Non-Current

Liabilities
Provisions 239,000,000 285,000,000 46,000,000 46,000,000 3.75%
Deferred tax
38,606,213 81,658,259 43,052,046 43,052,046 3.51%
liabilities
Total non-Current
277,606,213 366,658,259
Liabilities
Current liabilities
Suppliers Accounts
59,751,908 66,746,352 6,994,444 6,994,444 0.57%
Payable
Related Companies 1,297,194,49
Accounts Payable
1,087,673,945 209,520,551 209,520,551 17.08%
6
Total Credit
Accounts / Other 206,657,608 211,593,667 4,936,059 4,936,059 0.40%
Payables
Short term facilities -25 25 25 0.00%
income tax Payable -81,878,780 -43,121,528 38,757,252 38,757,252 3.16%
Total Current 1,532,412,98
Liabilities
1,272,204,656
7
1,899,071,24
Total Liabilities 1,549,810,869
6
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Stockholders’

Equity
Issued and paid 1,050,000,00
capital
1,050,000,000 0
0
Legal reserve 525,000,000 525,000,000 0
other reserve 624,775,375 904,775,375 280,000,000 280,000,000 22.81%
Retained Earnings 17,974,141 964,549 -17,009,592 17,009,592 1.39%
1,298,726,37
Revenues 1,131,671,263 167,055,115 167,055,115 13.62%
8
Total Stockholders’ 3,779,466,30
3,349,420,779
Equity 2
Total Liabilities & 5,678,537,54 1,226,948,12 1,226,948,12
S/E Equity
4,899,231,648
8 9 9 100% 100%
Short term Long term

Sources: 12.49% 4.21%
16.99% 1.41%
0.57% 3.75%
17.08% 3.51%
0.4% 22.81%
3.16% 13.62%
50.69% 49.31%
Uses: 22.11% 6.66%
16.25% 6.79%
3.22% 6.63%
12.7% 6.78%
7.25% 5.86%
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61.53% 4.36%
1.39%
38.47%
 Comment:
 From 2017 to 2018 the company depended on about in internal sources with 81.95 %
of its total sources.
 50.69% of the sources were short term and used for 61.53% for short term uses while
the remaining 49.31 of sources were long term and used for 38.47 long term uses.
 The company was able to increase the stockholders’ equity by 430,045,523 EPS.
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4th - Financial Ratios:

 Liquidity Ratios :
2016 2017 2018
1 Current ratio = 3.74 2.32 2.18
2 Quick ratio = 3.27 2.01 1.75
3 Cash ratio = 1.39 0.77 0.698
4 AR Liquidity (using total FA) = 16.19 9.986 18.34
5 Inventory Liquidity = 68.83 50.11 76.87
(ACP < 360 days) as ACP = 16.19 9.986 18.34
(ASP < 360 days) as ASP = 52.64 40.12 58.54
 Remarks: No benchmark ratios of the petrochemical industries in Egypt. And text

after every ratio is not an opinion but only comments.
1. Current Ratio:
 This ratio measures a company’s ability to pay short-term obligations. It tells investors
how a company can maximize the current assets to satisfy its current liabilities.
 In 2016 every one unit of current liabilities is financed by 3.7 units of current assets,
and decreased till it reached 2.2 in 2018. It sounds good – as long as it is greater than
one.
2. Quick Ratio:
 The quick ratio or acid test is a calculation that measures a company's ability to meet
its short-term obligations with its most liquid assets
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 In 2016 every one unit of current liabilities is financed by 3.27 units of assets –
excluding inventory, and decreased till it reached 1.75 in 2018.
3. Cash Ratio:
 The cash ratio is a measurement of a company's liquidity, specifically the ratio of a
company's total cash to its current liabilities. It indicates a company's ability to repay its
short-term debt with cash or near-cash resources, such as easily marketable securities
 In 2016 every one unit of current liabilities is financed by 1.4 units of cash, and
decreased till it reached 0.7 in 2018.
 N.B. the three ratios were declining, and it is a negative sign regarding sources of
money.
4. ACP & ASP values evaluation (to choose a suitable liquidity ratio):
 Note that ACP + ASP < 360 through 2016 to 2018, we will spot on the current ratio.
 We must remember that the larger the Liquidity of INV, the greater the need for cash
to finance operations.
 We will use the current ratio in the financial analysis, but in association with the debt
and assets management ratios.
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 Debt Management Ratios :

2016 2017 2018
6 Debt ratio = 0.23 0.32 0.33
7 Debt / Equity ratio = 0.31 0.46 0.50
8 Capital Structure Ratio (CSR) = 0.068 0.077 0.088
9 Interest coverage ratio = 553.3 237.4 48.1
 Comments:
5. Debt Ratio:
 The debt ratio is defined as the ratio of total debt to total assets, expressed as a
decimal or percentage. ... In other words, the company has more liabilities than assets.
A high ratio also indicates that a company may be putting itself at a risk of default on its
loans if interest rates were to rise suddenly.
 In 2016 every one unit of total assets financed 0.22 units of total liabilities, and
increased till it reached 0.33 in 2018. In other words, every one unit of total liabilities is
financed by 4.4 units of cash, and decreased till it reached 2.99 in 2018.
 It sounds bad for the time being with respect of assets utilization, which appeared
low efficiency. By time it increased, it sounds good that it increased.
6. Debt / Equity Ratio:

 The debt-to-equity (D/E) ratio is calculated by dividing a company's total liabilities by
its shareholder equity. These numbers are available on the balance sheet of a
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company's financial statements. The ratio is used to evaluate a company's financial

leverage in 2016 every one unit of total equity is associated by 0.31 units of total
liabilities, and increased till it reached 0.5 in 2018. In other words, every one unit of
total liabilities is associated by 3.3 units of total equity, and decreased till it reached 1.99
in 2018.
 It sounds good – for the time being as most of the assets appeared in the corporate
wealth (Equity). But it decreases by time.
7. Capital Structure Ratio:

 Capital structure refers to the degree of long term financing of a business concern as in
the form of debentures, preference share capital and equity share capital including
reserves and surplus. There should be a proper mix between debt capital and equity
capital, in 2016 every unit of long term liabilities is associated with 13.7 units of
monetary equity, and decreased till it reached 11.3 units of monetary equity.
 The ratio of stable, which means that the corporate does not finance the operations
with much long terms. It sounds good with respect to the industry – if the return on
investment is much higher than the borrowing interest of long term loans.
8. Interest Coverage Ratio:

 The interest coverage ratio is used to determine how easily a company can pay its
interest expenses on outstanding debt. The ratio is calculated by dividing a company's
earnings before interest and taxes (EBIT) by the company's interest expenses for the
same period.
 In 2016 every one unit of interests is covered by 553.3 units of earnings before interest
and tax, and decreased till it reached 40 in 2018.
 The ratio decreased sharply in 2018. This is an alarm that the company may face
problems if the interest installments will increase and/or last for several coming years
without an efficient source of financing it.
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 Assets utilization/ Efficiency Ratios :
2016 2017 2018

10 Total Assets Turnover TATO = 0.82 1.02 1.018
11 Fixed Assets Turnover (FATO) = 7.94 7.98 5.93
12 Current Assets Turnover (CATO) = 1.23 1.69 1.73
13 Cash Turnover = 3.31 5.09 5.4
14 Accounts Receivable Turnover = 2.43 3.16 3.58
15 Inventory Turnover = 6.84 8.97 6.15
 Comments:
9. Total Assets Turn over:

 The total asset turnover ratio measures the value of a company's sales or revenues
relative to the value of its assets. The asset turnover ratio can be used as an indicator of
the efficiency with which a company is using its assets to generate revenue.
 The higher the asset turnover ratio, the more efficient a company. Conversely, if a
company has a low asset turnover ratio, it indicates it is not efficiently using its assets to
generate sales.
 In year 2016, every unit total assets was capable of generating 0.17 units of sales, and
increased to one unit of sales in 2018. This sounds good with respect to increasing the
total assets efficiency.
10. Fixed Assets Turn over:
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 Fixed asset turnover ratio (FAT) is, in general, used by analysts to measure operating
performance. This efficiency ratio compares net sales (income statement) to fixed assets
(balance sheet) and measures a company's ability to generate net sales from its fixed-
asset investments, namely property, plant, and equipment (PP&E).
 The fixed asset balance is used as a net of accumulated depreciation. In general, a
higher fixed asset turnover ratio indicates that a company has more effectively utilized
investment in fixed assets to generate revenue.
 In year 2016, every unit fixed assets was capable of generating 5.7 units of sales, and
5.9 unit of sales in 2018 – which almost the same. We noticed that the ratio was 9.2 in
2017, which means the increased efficiency of fixed assets to generate sales in year
2017. In other words, the fixed assets in this year were relatively high.
11. Current Assets Turn over:

 Current Assets Turnover Ratio indicates that the current assets are turned over in the
form of sales more number of times. A high current assets turnover ratio indicates the
capability of the organization to achieve maximum sales with the minimum investment
in current assets.
 In year 2016, every unit current assets was capable of generating 1.2 units of sales,
and increased to 1.7 units of sales in 2018.
 This sounds good with respect to increasing the current assets efficiency.
12. Cash To, AR To & Inventory To:
 The cash turnover ratio equals the sales revenue generated during a year divided by
the average cash and cash equivalents during the same year.
 For the cash turnover, it also increased from 2016 to 2017&2018 and this indicates
that the company efficiently used its cash to generate sales.
 Accounts receivable turnover is the number of times per year that a business collects
its average accounts receivable. The ratio is used to evaluate the ability of a company to
efficiently issue credit to its customers and collect funds from them in a timely manner.
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 In 2016 every EP of AR generated about 0.805 EP of sales and this increased slightly to
0.895 in 2017 and then return to 0.807 in 2018. So it seems that this ratio is nearly
constant over the three years.
 Inventory turnover is the number of times a company sells and replaces its stock of
goods during a period. Inventory turnover provides insight as to how the company
manages costs and how effective their sales efforts have been.
 For the inventory turnover ratio, it showed marked increase from 2016 to 2017 which
is most probably due to floating of the EP which caused increase of the prices at this
period then it returned to 6.150 in 2018.
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 Profitability ratios :
2016 2017 2018

16 Gross Profit Margin (GPM) = 0.309 0.294 0.293
17 Operating Income Margin (OIM) = 0.283 0.273 0.268
18 Net Income Margin (NIM) = 0.417 0.227 0.225
19 Return on Assets (ROA) = 0.399 0.303 0.292
20 Return on Equity (ROE) = 0.52 0.441 0.439
21 Return on Borrowed Funds (ROBF) = 0.121 0.138 0.147
 Comments:
 Profitability ratios consist of a group of metrics that assess a company's ability to
generate revenue relative to its revenue, operating costs, balance sheet assets, and
shareholders' equity.
 Profitability ratios also show how well companies use their existing assets to generate
profit and value for shareholders.
 The higher the ratios the better and more favorable, but ratios provide much more
information when compared to results from other, similar companies, the company's
own historical performance, or the industry average.
 GPM: Gross profit margin measures how much a company can mark up sales above
COGS. Operating margin is the percentage of sales left after covering additional
operating expenses. The pretax margin shows a company's profitability after further
accounting for non-operating expenses. Net profit margin concerns a company's ability
to generate earnings after taxes.
 OIM: The operating income margin measures how much profit a company makes on a
dollar of sales, after paying for variable costs of production, such as wages and raw
19 | P a g e
materials, but before paying interest or tax. It is calculated by dividing a company’s

operating profit by its net sales.
 NIM: Net income margin is the net after-tax income of a business, expressed as a
percentage of sales. It is used in ratio analysis to determine the proportional profitability
of a business.
 Here we have in 2017 & 2018 the co. have the same performance but there is a
decline compared with 2016 as in 2016 the Net income in 2016 was higher than in 2017
and 2018.
Also there was currency evaluation differences during 2017 and 2018 also there was
increase in Taxes and increase in interest rates.
 ROI or ROA: Profitability is assessed relative to costs and expenses, and it is analyzed
in comparison to assets to see how effective a company is in deploying assets to
generate sales and eventually profits. The term return in the ROA ratio customarily
refers to net profit or net income, the amount of earnings from sales after all costs,
expenses, and taxes. The more assets a company has amassed, the more sales and
potentially more profits the company may generate. As economies of scale help lower
costs and improve margins, returns may grow at a faster rate than assets, ultimately
increasing return on assets.
 Here in our company the total assets increase every year, in 2016 and 2017 there is
decline in EBIT which resulted in decrease of ROI ratios.
 In 2017 compared with 2018 there is change in total assets equal the change in EBIT
therefor the ratio is the same.
 ROE: is a ratio that concerns a company's equity holders the most since it measures
their ability to earn a return on their equity investments. ROE may increase dramatically
without any equity addition when it can simply benefit from a higher return helped by a
larger asset base.
 As a company increases its asset size and generates a better return with higher
margins, equity holders can retain much of the return growth when additional assets
are the result of debt use.
 Here the EBT in 2017 is less than 2016 while in 2017 compared with 2018 the change
in equity is the same as change in EBT.
20 | P a g e
 Dupont system of ratios :
 Dupont system of ratios is a framework for analyzing fundamental performance

popularized by the DuPont Corporation.
 DuPont analysis is a useful technique used to decompose the different drivers
of return on equity (ROE). There are three major financial metrics that drive return on
equity (ROE): operating efficiency, asset use efficiency and financial leverage.
 Operating efficiency is represented by net profit margin or net income divided by total
sales or revenue.
 Asset use efficiency is measured by the asset turnover ratio.
 Leverage is measured by the equity multiplier, which is equal to average assets divided
by average equity.
 An investor can use analysis like this to compare the operational efficiency of two
similar firms. Managers can use DuPont analysis to identify strengths or weaknesses
that should be addressed.
Since Net Profit Margin reflects the
Profitability
Since Net Profit Margin = EBIT / sales 0.48779489 0.296956059 0.287211195
We can calculate ROI from (NPM X TATO) = 0.399207348 0.302773296 0.292337839
Market Value Added = MVA = 5,796,720,095 9,990,829,221 5,607,533,698
21 | P a g e
6th – Modern techniques of analysis:

a. Market Value Added (MVA):
2016 2017 2018
Market Value Added = MVA = 5,796,720,095 9,990,829,221 5,607,533,698
 Market value added (MVA) is a calculation that shows the difference between
the market value of a company and the capital contributed by all investors, both
bondholders and shareholders. It is calculated as:
Market value added = (No. of shares x market value of shares) – total O/E
 Comments:
 In our case, MVA for 2017 is nearly a double value compared to values of year 2016 or
2018 due the devaluation of the Egyptian pound in November 2016; which caused an
increase in exports revenues and the company foreign currencies balance.
 Note that the MVA nearly equal the value of total assets.
 General Comments on MVA:

 MVA can be interpreted as the amount of wealth that management has created for
investors over and above their investment in the company.
 A high MVA is evidence of effective management and strong operational capabilities.
 A low MVA can mean the value of management’s actions and investments is less than
the value of the capital contributed by shareholders.
 A negative MVA means the management's actions and investments have diminished
and reversed the value of capital contributed by shareholders.
 The MVA may actually understate the performance of a company because it does not
account for cash payouts, such as dividends and stock buybacks, made to shareholders.
22 | P a g e
 MVAs should not be considered a reliable indication of management performance

during strong bull markets when stock prices rise in general. It reflects Commitment to
Shareholder Value.
 MVA is closely related to the concept of economic value added (EVA), representing the
net present value (NPV) of a series of EVA values.
 Economic Value Added (versus market value added):

 Economic value added (EVA) is a measure of a company's financial performance based
on the residual wealth calculated by deducting its cost of capital from its operating
profit, adjusted for taxes on a cash basis.
 EVA can also be referred to as economic profit, as it attempts to capture the true
economic profit of a company. This measure was devised by management consulting
firm Stern Value Management, originally incorporated as Stern Stewart & Co.
 EVA is the incremental difference in the rate of return over a company's cost of
capital. Essentially, it is used to measure the value a company generates from funds
invested into it. If a company's EVA is negative, it means the company is not
generating value from the funds invested into the business. Conversely, a positive EVA
shows a company is producing value from the funds invested in it.
EVA = NP – total cost of capital
2016 2017 2018

71,086,591 -4,601,750 -39,119,614
 Economic value added (EVA) is the incremental difference in the rate of return over a
company's cost of capital. It is a measure of a company's financial performance based
on the residual wealth calculated by deducting its cost of capital from its operating
profit, adjusted for taxes on a cash basis.
23 | P a g e
 EVA can also be referred to as economic profit, as it attempts to capture the true
economic profit of a company. This measure was devised by management consulting
firm Stern Value Management, originally incorporated as Stern Stewart & Co.
 Essentially, it is used to measure the value a company generates from funds invested
into it. If a company's EVA is negative, it means the company is not generating value
from the funds invested into the business. A positive EVA shows a project is
generating returns in excess of the required minimum return.
 The goal of EVA is to quantify the charge, or cost, of investing capital into a certain
project or firm and to then assess whether it generates enough cash to be considered
a good investment. The charge represents the minimum return that investors require to
make their investment worthwhile.
Forecasted Financial Position method:
24 | P a g e
A.Income Statement adjustments for 10 % forecasted increase in Sales revenues:
SDPC Income % of Returned Last

2018 1st stage 2nd stage
statement increase info stage
Sales revenues 5,779,897,959 577,989,796 6,357,887,755 6,357,887,755
Cost Of Sales 4,085,459,360 408,545,936 4,494,005,296 4,494,005,296
Gross Profit 1,694,438,599 1,863,882,459 1,863,882,459

Other Revenues /

Gains
Investment
80,185,689 N.C. 80,185,689 80,185,689
Revenues
Other Operating
14,824,038 1,482,404 16,306,442 16,306,442
Revenues
Miscellaneous
30,066,704 30,066,704 30,066,704
Revenues N.C.
Investment in securities
(deposits interests, 90,111,642 90,111,642 90,111,642
Treasury bills, bonds) N.C.
Currency valuation
20,414,824 20,414,824 20,414,824
differences N.C.
obsoleted provision N.C. 0 0
Total revenues 235,602,897 237,085,301 237,085,301
Other Expenses /

Loss
Distribution & sales
50,874,779 5,087,478 55,962,257 55,962,257
Exp
General &
127,208,882 127,208,882 127,208,882
Administrative Exp N.C.
Provisions 46,000,000 N.C. 46,000,000 46,000,000
Other expenses 45,906,437 N.C. 45,906,437 45,906,437

Currency valuation
0
differences
Total losses 269,990,098 275,077,576 275,077,576
1,825,890,18
EBIT 1,660,051,398 1,825,890,184
4
Interests (Finance
13,025,531 13,025,531
Expenses)
1,825,890,18
EBT 1,660,051,398 1,812,864,652
4
Income Taxes 318,272,974 0
Deferred Taxes 43,052,046
25 | P a g e
Taxes 361,325,020 397,421,314 397,421,314

1,428,468,87
Net Income 1,298,726,378 1,415,443,339
0
Profit shares for
136,113,000 149,724,300 149,724,300
Employees and BOD
Net Income after
1,162,613,634 1,278,744,570 1,265,719,039
profit share
Number Of Shares 525,000,000 525,000,000 531,064,028 531,064,028
EPS (Earnings per
2.21 2.44 2.67
share)
Retained Earnings
Comments:
 Almost all the revenues were distributed as dividends, as in 2018 retained earnings
percentage to the distributable profit was 0.08 % (nearly zero)
 The needed sources – which is 217,092,189 L.E. - will be 25 % LTL, 25 % STL, and 50 %
Common shares.
 Assume that the dividends - in year 2019 – will be 1.25 L.E.
 EVA 2018 = -42,447,797.4 L.E., and EVA 2019 = -41,861,772.75 L.E. which shows that the
economic value added improved by about 600,000 L.E.
(b) Financial Position adjustments for 10 % forecasted increase in Sales revenues:
% of Returned Last
2018 1st stage 2nd stage
increase Info stage
Assets
Long Term Assets
Land 175,661, N.C. 175,661, 175,661, 175,661,
26 | P a g e
848 848 848 848

144,696, 144,696, 144,696, 144,696,
Buildings N.C.
859 859 859 859
395,866, 39,586,6 435,453, 435,453, 435,453,
Equipment
621 62 283 283 283
83,594,7 8,359,47 91,954,2 91,954,2 91,954,2
Transportation
39 4 12 12 12
86,826,3 8,682,63 95,508,9 95,508,9 95,508,9
Tools
02 0 32 32 32
88,853,3 88,853,3 88,853,3 88,853,3
Furniture N.C.
00 00 00 00
975,499, 1,032,12 1,032,12 1,032,12
Total Fixed Assets
666 8,432 8,432 8,432
390,463, 390,463, 390,463, 390,463,
Projects under construction N.C.
401 401 401 401
14,921,5 14,921,5 14,921,5 14,921,5
Real Estate Investment N.C.
14 14 14 14
949,401, 949,401, 949,401, 949,401,
Long Term Investment N.C.
956 956 956 956
Labors Long term (Loan
Receivable)
2,330,28 2,386,91 2,386,91 2,386,91
Total Long Term Assets
6,537 5,303 5,303 5,303
Short Term Assets / Current
Assets
664,287, 66,428,7 730,716, 730,716, 730,716,
Inventory
863 86 649 649 649
206,310, 20,631,0 226,941, 226,941, 226,941,
Customers / Credit Sales
794 79 873 873 873
Other related Companies / Credit 1,024,13 102,413, 1,126,55 1,126,55 1,126,55
Sales 9,622 962 3,584 3,584 3,584
Deferrals / Down payments 42,677,0 4,267,70 46,944,7 46,944,7 46,944,7
(Unearned Expenses) 61 6 67 67 67
Accounts Receivables & Other 294,424, 294,424, 294,424, 294,424,
N.C.
receivables 665 665 665 665
46,484,1 46,484,1 46,484,1 46,484,1
Short Term Investment N.C.
09 09 09 09
1,614,03 1,741,34 1,741,34 1,741,34
Total Accounts Receivables
6,251 8,999 8,999 8,999
Cash & Cash Equivalent
1,069,92 106,992, 1,176,91 1,176,91 1,176,91
Total Cash & Cash Equivalent
6,897 690 9,587 9,587 9,587
Total Short Term Assets / Total 3,348,25 3,648,98 3,648,98 3,648,98

Current Assets 1,011 5,235 5,235 5,235
5,678,53 6,035,90 6,035,90 6,035,90
Total Assets
7,548 0,538 0,538 0,538
Liabilities
27 | P a g e
285,000, 285,000, 285,000, 285,000,
Provisions N.C.
000 000 000 000
54,273,0 54,273,0 54,273,0
Long term bonds
47 47 47
81,658,2 8,165,82 89,824,0 89,824,0 89,824,0
Deferred tax liabilities
59 6 85 85 85
366,658, 374,824, 429,097, 429,097,
Total non-Current Liabilities N.C.
259 085 132 132
Current liabilities
66,746,3 6,674,63 73,420,9 73,420,9 73,420,9
Suppliers Accounts Payable
52 5 87 87 87
Related Companies Accounts 1,297,19 1,297,19 1,297,19 1,297,19
N.C.
Payable 4,496 4,496 4,496 4,496
Total Credit Accounts / Other 211,593, 211,593, 211,593, 211,593,
N.C.
Payables 667 667 667 667
54,273,0 54,273,0 54,273,0
Short term loan
47 47 47
-
4,312,15 47,433,6
income tax Payable 43,121,5 47,433,6 47,433,6
3- 81-
28 81- 81-
1,532,41 1,534,77 1,589,04 1,589,04
Total Current Liabilities
2,987 5,469 8,517 8,517
1,899,07 1,909,59 2,018,14 2,018,14
Total Liabilities
1,246 9,554 5,649 5,649
1,050,00 1,050,00 108,546, 1,158,54 1,158,54
Issued and paid capital N.C.
0,000 0,000 095 6,095 6,095
525,000, 525,000, 525,000, 525,000,
Legal reserve N.C.
000 000 000 000
904,775, 904,775, 904,775, 904,775,
other reserve N.C.
375 375 375 375
Retained Earnings 964,549 N.C. 964,549 964,549 964,549
1,298,72 1,428,46 1,428,46 1,428,46
Revenues
6,378 From IS 8,870 8,870 8,870
3,779,46 3,909,20 4,017,75 4,017,75
Total Stockholders’ Equity
6,302 8,794 4,889 4,889
5,678,53 5,818,80 6,035,90 6,035,90
Total Liabilities & S/E Equity
7,548 8,349 0,538 0,538
28 | P a g e
I. Percentage of Sales revenue method:

Financial Position adjustments for 10 % Percentage of Sales revenues:
5,779,897,95
2018 9
6,150,000,000
Proposed
Actual Actual Sales
Sales
Last Stage
Assets
Long Term Assets
Land 175,661,848 N.C. 175,661,848 175,661,848
29 | P a g e
Buildings 144,696,859 N.C. 144,696,859 144,696,859

Equipment 395,866,621 6.85% 421,215,000 421,215,000
Transportation 83,594,739 1.45% 88,947,529 88,947,529
Tools 86,826,302 N.C. 86,826,302 86,826,302
Furniture 88,853,300 N.C. 88,853,300 88,853,300
1,006,200,83
Total Fixed Assets 975,499,666 8.30% 1,006,200,836
6
Projects under construction 390,463,401 N.C. 390,463,401 390,463,401
Real Estate Investment 14,921,514 N.C. 14,921,514 14,921,514
Long Term Investment 949,401,956 N.C. 949,401,956 949,401,956
2,330,286,53 2,360,987,70
Total Long Term Assets 8.30% 2,360,987,707
7 7
Short Term Assets / Current Assets
Inventory 664,287,863 11.49% 706,823,959 706,823,959
Customers / Credit Sales 206,310,794 3.57% 219,521,416 219,521,416
1,024,139,62 1,089,717,97
Other related Companies / Credit Sales 1,089,717,971
2 17.72% 1
Deferrals / Down payments (Unearned
42,677,061 45,409,785 45,409,785
Expenses) 0.74%
Accounts Receivables & Other receivables 294,424,665 N.C. 294,424,665 294,424,665
Short Term Investment 46,484,109 N.C. 46,484,109 46,484,109
1,614,036,25 1,695,557,94
Total Accounts Receivables 22.03% 1,695,557,946
1 6
Cash & Cash Equivalent
1,069,926,89 1,138,437,12
Total Cash & Cash Equivalent 1,138,437,125
7 18.51% 5
Total Short Term Assets / Total Current 3,348,251,01 3,540,819,03
52.03% 3,540,819,030
Assets 1 0
5,678,537,54 5,901,806,73
Total Assets 5,901,806,737
8 60.33% 7
Liabilities
Provisions 285,000,000 N.C. 285,000,000 285,000,000
Long term loan 10,495,976
Deferred tax liabilities 81,658,259 N.C. 81,658,259 81,658,259
Total non-Current Liabilities 366,658,259 366,658,259 377,154,235
Current liabilities
Suppliers Accounts Payable 66,746,352 1.15% 71,020,296 71,020,296
1,297,194,49 1,380,257,26
Related Companies Accounts Payable 1,380,257,265
6 22.44% 5
Total Credit Accounts / Other Payables 211,593,667 3.66% 225,142,565 225,142,565
Short term facilities 10,495,976
30 | P a g e
income tax Payable -43,121,528 -0.75% -45,882,713 -45,882,713

1,532,412,98 1,641,033,38
Total Current Liabilities 26.51% 1,630,537,414
7 9
1,899,071,24 2,018,187,62
Total Liabilities 26.51% 1,997,195,673
6 4
1,050,000,00 1,070,991,95
Issued and paid capital 1,050,000,000
0 N.C. 1
Legal reserve 525,000,000 N.C. 525,000,000 525,000,000
other reserve 904,775,375 N.C. 904,775,375 904,775,375
Retained Earnings 964,549 N.C. 964,549 964,549
1,298,726,37 1,381,887,23
Revenues 1,381,887,238
8 22.47% 8
3,779,466,30 3,883,619,11
Total Stockholders’ Equity 22.47% 3,862,627,162
2 3
5,678,537,54 5,901,806,73
Total Liabilities & S/E Equity 48.98% 5,859,822,834
8 7
Comments:
 From the above tables, FSN = 41,983,902 L.E.
 Same as above, the needed sources will be 25 % LTL, 25 % STL, 50 % Common shares
 FSN = (A/S1)*ΔS - (L/S1)*ΔS-PS2(1-D)
 Assuming D = 1; i.e. Almost all the revenues are distributed as dividends, as in 2018
retained earnings percentage to the distributable profit was 0.08 %.
 Therefore, FSN = (A/S1)*ΔS - (L/S1)*ΔS, applying values from the tables the same
FSN results.
 This is a double check for work.
31 | P a g e
 After adjusting the new balance sheet, the profitability ratios will certainly change.
Here a sample of some ratios.
Before After
CA / CL 2.18 2.12
TD / TA 0.33 0.35
32 | P a g e

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SIDPEC FINANCIAL POSITION (THROUGH

Project Presented To:

1st - SDPK Financial positions for years 2016, 2017, 2018:

2nd - SDPK Income statement for years 2016, 2017, 2018

Sidi Kerir Petrochemical Co. (Sidpec)

Other Operating Revenues 6,655,828 7,015,791 14,824,038

Other Expenses / Loss 38,199,107 35,551,000 91,906,437

Interests (Finance Expenses) 3,017,000 6,248,000 34,522,000

Profit shares for Employees and BOD 148,035,000 118,497,000 136,113,000

Number Of Shares 525,000,000 525,000,000 525,000,000

3rd - Financial analysis using sources and uses:

Total Stockholders’ 3,201,779,90 3,349,420,77 147,640,87

Short term Long term

Sources and Uses for the year 2017 vs. 2018

Short term Long term

4th - Financial Ratios:

 Remarks: No benchmark ratios of the petrochemical industries in Egypt. And text

 Debt Management Ratios :

6. Debt / Equity Ratio:

company's financial statements. The ratio is used to evaluate a company's financial

7. Capital Structure Ratio:

8. Interest Coverage Ratio:

 Assets utilization/ Efficiency Ratios :

2016 2017 2018

9. Total Assets Turn over:

10. Fixed Assets Turn over:

11. Current Assets Turn over:

2016 2017 2018

materials, but before paying interest or tax. It is calculated by dividing a company’s

 Dupont system of ratios :

 Dupont system of ratios is a framework for analyzing fundamental performance

6th – Modern techniques of analysis:

 General Comments on MVA:

 MVAs should not be considered a reliable indication of management performance

 Economic Value Added (versus market value added):

EVA = NP – total cost of capital

2016 2017 2018

Forecasted Financial Position method:

A.Income Statement adjustments for 10 % forecasted increase in Sales revenues:

SDPC Income % of Returned Last

Gross Profit 1,694,438,599 1,863,882,459 1,863,882,459

Other expenses 45,906,437 N.C. 45,906,437 45,906,437

Taxes 361,325,020 397,421,314 397,421,314

(b) Financial Position adjustments for 10 % forecasted increase in Sales revenues:

848 848 848 848

I. Percentage of Sales revenue method:

Buildings 144,696,859 N.C. 144,696,859 144,696,859

income tax Payable -43,121,528 -0.75% -45,882,713 -45,882,713

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