FINANCIAL STATEMENT ANALYSIS OF DANKOTUWA PORCELAIN PLC THE YEAR 2018- 2022

 

FINANCIAL STATEMENT ANALYSIS OF DANKOTUWA PORCELAIN   

                                    PLC YEAR 2018-2022

 

Company Profile

Dankotuwa Porcelain PLC is a world-renowned manufacturer of award-winning porcelain tableware & giftware. With over 35 years of true Sri Lankan heritage and craftsmanship, our products grace the tables of homes, hotels & restaurants in over 50 countries. Famous for its porcelain collections, Dankotuwa is a specialty product manufacturer for niche markets.

Dankotuwa porcelain owns for Ambeon Holdings is one of the LMD 100 companies in Sri Lanka. The company is also one of the top 20 conglomerates in the country. Ambeon Holdings controls a number of notable subsidiaries including Ceylon Leather Products, Dankotuwa Porcelain, MillenniumIT ESP, and Royal Fernwood Porcelain.

Dankotuwa Porcelain 's competitors are Alternatives and possible competitors to Dankotuwa Porcelain may include Haipunuokai 1897 , WUJU Foods , and Ajinomoto (Malaysia) Berhad .

VISION - “Enhance people’s lifestyles through exquisitely crafted Porcelain products”

MISSION – “To be Asia’s leading manufacturer and marketer of Porcelain tableware”

 

Financial Statement Analysis

 This report analysis audited financial statements of Dankotuwa Porcelain  PLC from year 2018 to 2022 through this report it is intended to provide strong analysis about the financial statements of this organization over its stake holder.

 

 

                                                 STATEMENT OF FINANCIAL POSITION                                                                    

	2022	2021	2020	2019	2018
Non-Current Assets
Property, Plant and Equipment	1410758078	1355007263	1325725972	1213623351	891066362
Right to Use Asset	27415139	39761635	29990483	-	-
Investment Property	580028314	580028314	565721251	468762750	210795000
Intangible Assets	16813563	23804232	30794902	38557696	41215466
Investment in Subsidiaries	966591253	883903253	877030253	741700839	741700839
	3001606347	2882504697	2829262861	2462644636	1884777667
Current Assets
Inventories	511844451	471214569	615468641	439464926	327647853
Trade and Other Receivables	500274270	372,723,140	345425558	435453896	305913945
Income Tax Receivable	6833825	14647579	20699534	12309727	1423084
Cash and Cash Equivalents	381451418	460443619	324060306	307076269	416702914
	1400443964	1319028907	324060306	1194304818	1051687796
Total Assets	4402050311	4201533604	4134916900	3656949454	2936465463
Equity
Stated Capital	1402101647	1402101647	1402101647	1402101647	1402101647
Other Components of Equity	1225541480	131868139	940453663	846773283	603053065
Retained Earnings / (Losses)	383957714	-46038932	142810242	79814309	-155869105
Equity Attributable to Equity Holders of the Parent	3011600841	2487930854	2485365552	2328689239	1849285607
Total Equity	3011600841	2487930854	2487930854	2328689239	1849285607
Non-Current Liabilities
Interest Bearing Loans and Borrowings	104870898	12333890	11678909	12345632	116919659
Lease Liability	15234451	17519811	17004947	16789076	15678432
Retirement Benefit Liability	162402339	167264145	142992117	123062032	145152557
Deferred Tax Liability	203057373	123209427	206717412	223862817	71419313
	485565061	307993383	366714476	346924849	533491529
Current Liabilities
Interest Bearing Loans and Borrowings	538073562	955729625	1077753424	737876214	229971616
Lease Liability	14694188	21439722	9948751	87654332	9632456
Trade and Other Payables	352116659	428440020	195134697	243459152	323716711
	904884409	1405609367	1282836872	981335366	553688327
Total Equity and Liabilities	4402050311	4201533604	4134916900	3656949454	2936465463

 

Horizontal Analysis of Statement of FINANCIAL POSITION

Horizontal analysis signifies to review the behavior of each individual variable in the financial statements over past five years. This describes the difference of each item and directs to find the cause of differences. Through this analysis this trigger to carry an opportunity to compare and contrast the financial positions of Dankotuwa Porcelain PLC across from year 2018 to 2022.

Horizontal Analysis – Dollar Change

 

	2022	2021	2020	2019
Non-Current Assets
Property, Plant and Equipment	55750815	49281291	312102621	322556989
Right to Use Asset	82346496	9771152	8990483	92337898
Investment Property	12367894	14307063	96958501	257967750
Intangible Assets	6990669	6990670	7762794	6657770
Investment in Subsidiaries	82688000	6873000	78329414	89065435
	419101650	53241836	366618225	577866969
Current Assets
Inventories	40629882	44254072	456003715	411817073
Trade and Other Receivables	86551130	87297582	90876543	90539951
Income Tax Receivable	7813754	6051955	8389807	8806643
Cash and Cash Equivalents	148992201	136383313	16984037	129626645
	81415057	994968601	870244512	842617022
Total Assets	70516707	66616704	747967446	720483991
EQUITY AND LIABILITIES
Equity
Stated Capital	1400443964	1402101647	1402101647	1402100164
Other Components of Equity	93673341	808585524	93680380	843720218
Retained Earnings / (Losses)	429996646	48849174	52995933	33683414
Equity Attributable to Equity Holders of the Parent	523669987	56598302	556076313	479403632
Total Equity	523669987	56432890	59241615	479403632
Non-Current Liabilities
Interest Bearing Loans and Borrowings	104870898	153218954	134678909	116919659
Lease Liability	4285360	5914864	7004947	6543289
Retirement Benefit Liability	4861806	3472028	4930085	3290525
Deferred Tax Liability	17847946	18507985	17145405	152443504
	177571678	18721093	19789627	186566680
Current Liabilities
Interest Bearing Loans and Borrowings	417656063	122023799	339877210	507904598
Lease Liability	5745534	41490971	4948751	56543290
Trade and Other Payables	76323361	633305323	58324455	62257559
Income Tax Liabilities	123478750	122772495	131501506	146747039
Total Equity and Liabilities	420516707	46616704	477967446	420483991

 

                  

                      Figure 1 – Horizontal Analysis Graph for Dollar Change

Horizontal Analysis of Statement of FINANCIAL POSITION – Percent change (%)

	2022	2021	2020	2019
Non-Current Assets
Property, Plant and Equipment	4.114429238	2.208698601	5.237019122	6.19898615
Right to Use Asset	31.05127845	32.5808424	30.345677	29.334586
Investment Property	28.34567945	22.52899515	20.68391761	23.3784957
Intangible Assets	29.36733687	22.70073793	20.13293014	16.448477375
Investment in Subsidiaries	9.354869972	10.783667379	13.24582188	12.8970965
	14.131880518	13.881827127	14.88717534	13.65968889
Current Assets
Inventories	28.622373898	23.43808643	24.04954766	25.12721066
Trade and Other Receivables	34.22141432	27.902594747	28.67459697	32.34522588
Income Tax Receivable	53.34502036	60.23715577	68.15591442	75.0035416
Cash and Cash Equivalents	47.15567286	42.08578171	35.530885553	36.30810616
	50.1723482	37.0319266	42.86619788	33.5607756
Total Assets	14.772464674	12.611077214	13.07011355	15.53575566
EQUITY AND LIABILITIES
Equity
Other Components of Equity	82.3689054	85.97824176	71.06321868	84.41439007
Retained Earnings / (Losses)	33.9848414	32.2378363	48.92811927	51.205984
Equity Attributable to Equity Holders of the Parent	21.04841403	17.103216285	16.728090222	25.9237205
Total Equity	21.04841403	14.55633490	16.838250993	25.9237205
Non-Current Liabilities
Lease Liability	13.04443296	12.027730695	10.342890	12.3453290
Retirement Benefit Liability	12.906663589	16.97438188	16.19515351	15.21883283
Deferred Tax Liability	64.80668561	40.39717032	57.658889149	43.4485724
	57.65438084	36.01275566	25.704297936	34.97087955
Current Liabilities
Interest Bearing Loans and Borrowings	43.70023196	41.32205162	46.06154848	42.8553416
Lease Liability	31.46278669	11.5016444	23.3456546	12.34533567
Trade and Other Payables	17.81424644	19.561168	19.84910183	24.79252886
Income Tax Liabilities	9.23456178	9.570390256	12.34567890	14.45672823
Total Equity and Liabilities	14.772464674	11.611077214	13.07011355	14.53575566

 

 

 

 

 

Trend Analysis

	2022	2021	2020	2019	2018
Revenue	185	119	104	97	100
Cost of Sales	134	101	94	84	100
Gross Profit	249	208	155	162	100
Other Income	210	195	139	131	100
Selling and Distribution Expenses	180	135	141	102	100
Administrative Expenses	75	63	92	50	100
Operating Profit /(Loss)	52	45	68	37	100
Finance Cost	297	233	379	290	100
Finance Income	13	12	16	24	100
Change in Fair Value of Investment in Subsidiary					100
Profit / (Loss) Before Tax	32	68	34	28	100
Income Tax (Expense)/Reversa	96	49	42	83	100
Profit / (Loss) for the year	221	210	265	295	100

 

 

                           

                                              Figure 2 – Trend Analysis Graph

 

 

 

 

 

 

 

Vertical analysis of  Income statement

 

	2022	2021	2020	2019	2018
Revenue	100	100	100	100	100
Cost of Sales	61	72	76	73	84
Gross Profit	39	28	24	27	16
Other Income	8	6	4	5	7
Selling and Distribution Expenses	14	6	19	15	14
Administrative Expenses	7	18	15	9	16
Fair Value Gain /(Loss) from Investment Property	6	1	7	21	9
Operating Profit /(Loss)	19	5	9	5	14
Finance Cost	3	6	8	5	2
Finance Income	1	1	2	3	12
Change in Fair Value of Investment in Subsidiary	4	9	10	6	5
Profit / (Loss) Before Tax	21	9	2	21	12
Income Tax (Expense)/Reversa	3	2	4	5	6
Profit / (Loss) for the year	18	11	4	19	6

 

 

 

 

        

        Figure 3 -  Graphical Analysis of Common size in the Income statement of Year 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vertical Analysis of Financial Position

 

 

Liquidity and Efficiency
	2022	2021	2020	2019	2018
Current Ratio	1.55:1	0.94:1	0.25:1	1.21:1	1.90:1
Acid-Test Ratio	0.98:1	0.60:1	0.22:1	0.77:1	1.31:1
Account Receivable Turnover	5.4 times	3.5 times	3.40 times	3.32 times	3.24 times
Total Asset Turnover	0.55 times	0.67 times	0.34 times	0.36 times	0.32 times
Days Sales in Inventory	37.56 days	45.09 days	35.25 days	40.56 days	39.48 days
Days ‘Sales Uncollected	77.5 days	89.8 days	94.9 days	128.8 days	87.5 days
Merchandise Turnover	2.91 times	1.99 times	1.86 times	2.73 times	2.79 times

 

The liquidity ratio indicates the company's ability to settle short-term liabilities and debt planning and to make revenues. and these ratios are important to the parties like stakeholders/lenders. In fact, the higher rate of this ratio means the company has healthy finances.

The current ratio determines the ability to settle short-term liabilities (Trade Credits, other short-term Liabilities) by current assets (Trade receivables, cash, inventory). A higher ratio means a company is capable of settling its short-term liabilities and maintaining good financial health. In Dankotuwa Porcelain PLC the current ratio indicates more than 1, current liabilities company has 1.55 current assets. It  says short-term dept. pays ability of therm.It is clearly appeared that from 2020 to 2022 the Current ratio has been increased upto 1.55.

-          Acid test Ratio is the ratio that measures a company’s ability to settle short-term liabilities over the quick assets, which indicates except inventories.  This provides a better understanding of organization liquidation.

-         In 2022 Dankotuwa Porcelain PLC has 0.98:1 at the Acid test ratio. If the Acid test ratio is greater than 1 they were able to settle short-term liabilities quickly. But in Dankotuwa Porcelain PLC the scenario is different, they would not be able to settle short-term liabilities by quick assets since each year their quick asset ratio is less than 1. That means without inventories and prepayments is in difficult to pay short-term debit. However from 2020 to 2022 Acid test ratio has been increased.

-          Account receivables turn over indicates how many times the company convert their receivables into cash during the year. If Account receivable turnover is in high value it is not a good position to company. It has been increased from 2020 to 2022 in this company. So there must be relevant actions to be taken to avoid the risk.

-          Merchandise (Inventory) Turnover ratio measures the number of times inventory is sold and replaced during the year. A lower turnover means the poor sales and poor performance of the organization. In Dankotuwa porcelain PLC  Merchandise Turnover is always greater than 1 and its in positive figure. And it indicate company’s strong sales and performances .

-          Days’ sales uncollected ratio measures the company’s liquidation of receivables, and in another way it is the debtor collection period or Days sales outstanding .. And lower ratio is specified healthy collection.From 2020 to 2022 is has been decreased Days’ sales uncollected ratio.So it is a high position in this aspect.

-          Days' sales inventory measures the liquidation of inventory of particular period of time. And other way to call it as  inventory holding period. This ratio should be in lower rate , but in Dankotuwa porcelain PLC it shows higher rate,When comparing Year 2021 to 2022 it has been decreased so it indicates a good position. However organization should take immediate marketing strategies and innovative implications to reduce much more in this situation.

-          Total asset turnover measures the efficiency of assets producing sales. In this company, this aspect has been obviously increased upto 2021 from 2018. It shows 0.67 times from 0.32 times respectively. However it has been slightly decreased from 2021 to 2022.It is from 0.67 times to 0.55 times. So it must be concerned to overcome this problem further to generate revenue from its assets. 

 

Solvency
	2022	2021	2020	2019	2018
Debt Ratio	32	41	40	33	37
Equity Ratio	68	59	60	67	63
Times Interest Earned	26.94	24.76	23.45	22.56	20.89

 

The solvency ratio concluded the long-term debt-paying ability of the company. This Ratio reflects the respective creditors and shareholders against the assets. Debt, equity ratio measures the relationship between borrowings and total assets /and equity and measures the financial solvency of the company. And also the capability to generate future revenues and meet long-term requirements.

-          Debt ratio measures how a company's total assets contribute to liabilities, total liabilities increasing effect to increase debt ratio. If it is high ratio it will be a risker investment because the business might not be able to repay its debts. When comparing year 2018 and 2022 it decreased. So it is a better position.But it seemed earlier from 2019 to 2021 it has been increased.However in 2022 it has been clearly decreased upto 32.  So it is a good achievement.

-          Equity ratio measures how an organization's assets contribute by owner's equity. The higher the ratio the stronger the indication that the money is managed effectively and that the business will be able to pay off its debts in a timely way.In this company it has been obviously increased from 2020 to 2022. It is a better sign of achieving progress.

-     A higher Times interest earned ratio is favorable because it means that the company is less of risk to investors and creditors in term of solvency. It has been increased from 2018 to 2022. So it is a good sign of this organization.

Profitability
	2022	2021	2021	2019	2018
Profit Margin	18%	11%	3.96%	19.35%	6.34%
Gross Margin	39%	28%	24.04%	27.15%	16.16%
Return on Total Assets	39.45%	35.02%	34.10%	37.42%	38.72%
Return on common Shareholders' Equity	65.69%	52.33%	55.16%	59.06%	61.11%
Book value per common Share	18.58	15.31	10.67	12.34	17.89
Basic Earnings per Share	14.50	9.32	8.67	6.45	5.89

   

Profitability ratios are calculated to determine the profitability of the firm. The objective of each firm is to earn profit to grow and existence of the company. Investors need higher returns, need to settle wages to employees, and also day to day operational activities.

-          Profit Margin ratio describes a company’s ability to earn net income from sales. High profit ratio is high profitability of the firm, in Dankotuwa Porcelain PLC shows high profit ratio in 2022 , it is 18% and In year 2021 it is 11%, but still, they are in good position in sales. And with this situation this organization  has taken immediate actions and some more new initiatives to maximize their profit in year 2022.

-          Gross margin ratio measures the amount remaining from Rs.1 sales that is left to cover operating expenses and a profit after considering cost of sales. If this value is (-) organization cannot continue the business. Here this organization occurs high level of gross margin and it also good identification of financial health.

-          Return on total assets ratio identifies how many net incomes generated as per each rupee of assets invested. This is the best ratio to measure company’s profitability . in Dankotuwa Porcelain PLC. Here it has been obviously increased from 2020 to 2022.The higher the Return in total asset number,the better.Because the company is able to earn more money with a smaller investment.

-         Return on common Shareholder’ Equity is the measure of company’s net income divided by its shareholders’ equity.It has also been increased from year 2020 to 2022.  So it is a good achievement in profits. 

 

 

 

Market
	2022	2021	2020	2019	2018
Price Earnings Ratio	3.81 times	9.8 times	14.06 times	3.61 times	13.8 times
Dividend Yield	6.57%	3.88%	1.45%	6.38%	2.34%

 

       A high price Earrings Ratio means that a stock is expensive and its price may fall in the future. A low PE ratio means that a stock is cheap and its price may rise in the future.In this company from 2020 to 2022 it has been decreased.

A high average Dividend Yield is preferable for investors because they are likely to provide a steady stream of income. From 2020 to 2022 it has been increased in this company.

 

Z Score Bankruptcy Model

The Z-score is the output of a credit-strength test that measures a openly traded manufacturing company's probability of bankruptcy. The Altman Z-score is a combination of five weighted business ratios that is used to estimate the probability of financial distress. The formula based on information found in the income statement and balance sheet of an organization; as such, it can be willingly derivatived from commonly available information. The Altman Z score formula for Dankotuwa Porcelain PLC as follows.

Z = 1.2X₁ + 1.4X_{2 +} 3.3X₃ + 0.6X₄ + 0.999X₅

Z = 1.2 * 0.112575 + 1.4 * 0.087222473 + 3.3 * 0.111598001 + 0.6 * 1.09 + 0.999 * 0.535289791

Z = 1.814229025

1.8 < Z < 2.99 = “Grey” Zone

X₁ = Working capital / Total assets

X₂ = Retained earnings / Total assets

X₃ = Earnings before interest and taxes / Total assets

X₄ = Market value of equity / Book value of total liabilities

X₅ = Total sales / Total assets

 

Zones of Discrimination:

 

Z > 2.99                  -    Safe zone

1.8 < Z < 2.99         -    Grey zone

Z<1.80                    -    Distress zone

For 2022 Year,

Z = 1.2X₁ + 1.4X_{2 +} 3.3X₃ + 0.6X₄ + 0.999X₅

Z = 1.2 * 0.112575 + 1.4 * 0.087222473 + 3.3 * 0.111598001 + 0.6 * 1.09 + 0.999 * 0.535289791

Z = 1.814229025 ( “Grey” Zone )

For 2021 Year,

Z = 1.2 * 0.1054 + 1.4 * 0.116 + 3.3 * 0.0819 + 0.6 * 0.65 + 0.999 * 0.50

Z = 1.45 ( “ Distress” Zone )

 

Upon the above calculations, it can be realized that the company is in a “Grey Zone” in the year 2022.But during, year 2021 company was in the “ Distress zone”. By analyzing the company’s current situation, the organization’s decision-makers have a huge part to play in the stability of the organization. since the current year, Dankotuwa Porcelain PLC is in the “Grey” Zone.In oder to achieve the safe zone the company must have proper attention on the performances of organization.

 

References

Dankotuwa Porcelain. (2022). Dankotuwa Porcelain Financial Annual Report 2022. Dankotuwa Porcelain.

Dankotuwa Porcelain. (2020). Dankotuwa Porcelain Financial Annual Report 2022. Dankotuwa Porcelain.

Dankotuwa Porcelain. (2018). Dankotuwa Porcelain Financial Annual Report 2022. Dankotuwa Porcelain.