abbbot

8/3/2019 abbbot

1/46

Group membersManahil Jalwana

Shehnaz Javiad

Shumaila JabbarIqra Amjad

8/3/2019 abbbot

2/46

Qualitative and

Quantitative Analysis of

Abbott Laboratories

(Pakistan) Limited

8/3/2019 abbbot

3/46

Qualitative Analysis

External Analysis

8/3/2019 abbbot

4/46

Economical and Political Factors

The inflation rate in Pakistan was last reported at 10.2 percent in November

of 2011.

From 2003 until 2010, the average inflation rate in Pakistan was 10.15%

Health care spending per capita in Pakistan in 2011 is $62 . Total health

care expenditure in 2011 was only 2.6%.

8/3/2019 abbbot

5/46

GDP Growth Rate

8/3/2019 abbbot

6/46

GDP by Sector

Sector GDP %

agriculture 21.2

industry 25.4

services 53.4

8/3/2019 abbbot

7/46

Budget deficit

year Budget Budget deficit %age of GDP

2010-11 Rs 2,453 billion Rs 1,157 billion 6.9



8/3/2019 abbbot

8/46

PHARMACUETICAL INDUSTRY

OF PAKISTAN Starting from a virtual zero at the time of inception of Pakistan, the

Pharmaceutical Industry is now worth more than 100 billion rupees.

Today Pakistan has about 400 pharmaceutical manufacturing units including

those operated by 25 multinationals present in the country. The Pakistan Pharmaceutical Industry meets around 70% of the country's

demand of Finished Medicine.

The domestic pharma market, in term of share market is almost evenly

divided between the Nationals and the Multinationals.

8/3/2019 abbbot

9/46

THE PHARMACEUTICAL

MARKET: PAKISTAN

The macroenvironmental indicators for the Pakistani pharmaceutical

market are positive despite economic concerns.

Economically, the Economist Intelligence Unit (EIU) projects that

Pakistan will be the fourth smallest economy in the Asia Pacific region

covered by Espicom in 2016.

In GDP per capita terms, Pakistan will rank the second lowest in the Asia

Pacific region in 2016. According to the EIU, Pakistan will

8/3/2019 abbbot

10/46

CRITICAL SUCCESS FACTORS

Critical success factor in pharmaceutical industry are:

Strong R&D

Good Labs

HighDemand Of Product

Quality

Availability

Contract Relationship With Doctors & Pharma

8/3/2019 abbbot

11/46

MAJOR PLAYERS IN INDUSTRY

NAMES MARKET SHARE

GSK 11.6%

ABBOTT LAB 7.9%

HIGHNOON LABS 6.3%

GETZ PHARMA 3.9%

SANOFI AVENTIS 3.8%

ROCHE 3.1%

8/3/2019 abbbot

12/46

COUNTRYDEMAND

Pharma has inelastic demand because its demand is forever.

The market for pharmaceuticals in Pakistan has been expanding at a rate ofaround 10 to 15% since last few years.

8/3/2019 abbbot

13/46

EXPORTS AND IMPORTS

The share of pharmaceutical industry in exports has been reached to 4.04%

that was 3.28% in 2008.

So far as imports are concerned Pakistan imports nearly 95%of the basic

raw-material used for manufacturing from countries such as China, India,Japan, U.K, Germany, and others and major importers are in Islamabad,

Karachi, Lahore, Peshawar and Quetta.

8/3/2019 abbbot

14/46

SOME KEY STATISTICS OF THE

INDUSTRYREGISTERED DRUGS 47000

REGISTEREDMOLECULES 1100

R&DEXPENDITURES 1% of the profit

AVE

RAGE

G

ROWTH RATE

11%MARKET SHARE OF

MULTINATIONAL COMPANIE

45%

MARKET SHARE OF LOCAL

COMPANIES

55%

MARKET LEADERS Glaxosmithkline

8/3/2019 abbbot

15/46

DEMAND AND PRICE

SENSITIVITYOptimal pricing strategy requires understanding the factors-both clinical and

economic-that are most critical to prescribing decisions.

Product managers must understand

patients, physicians, and MCO segments the medical conditions for which the product will be used

how the product stacks up against competitors with regard to key attributes

such as efficacy, safety, tolerability, and convenience.

8/3/2019 abbbot

16/46

OPPORTUNITIES FOR

INVESTMENT

Pharmaceutical industry in Pakistan is producing all the major

pharmaceutical dosage forms.

Similarly, there are some special products e.g. immunological, anti-cancerdrugs, certain antidiabetics, antidotes and products manufactured from

biotechnology, which are still being imported, in the finished form.

These specific areas provide excellent opportunities for investment.

8/3/2019 abbbot

17/46

Qualitative Analysis

Internal Analysis

8/3/2019 abbbot

18/46

Internal Analysis

OWNERSHIP :

LEGAL STRUCTURE

Abbott Laboratories (Pakistan) Limited is a public limited company.

The Company is incorporated in Pakistan and its shares are quoted on the Karachi,

Lahore and Islamabad stock exchanges.

The KSE code of Abbott Laboratories Pakistan Ltd is ABOT.

TYPE OF BUSINESS ORGANIZATION

Abbott is principally engaged in the manufacture, import and marketing of research

based pharmaceutical, nutritional, diagnostic, hospital and consumer products.

8/3/2019 abbbot

19/46

OwnershipBoard ofDirectors

Munir A. Shaikh (Chairman) Asif Jooma (Chief Executive Officer)

Kamran Y. Mirza

Thomas C. Freyman (AlternateDirector

Sadi Syed)

Syed Anis Ahmed

Angelo Kondes

Shamim Ahmad Khan

Senior Management Team

Asif Jooma (Chief Executive Officer) Syed Anis Ahmed (Chief Financial Officer)

Sadi Syed (Operations Director)

Dr. Sarmad Maqbool (Marketing & Strategy

Director)

Dr. Farrukh Hafeez (Quality Assurance

Director) Ayub A. Siddiqui (Head of Nutrition Division)

Habib Ahmed (Head ofDiagnostic Division)

Syed Imtiazuddin (Head ofDiabetes Care

Division)

8/3/2019 abbbot

20/46

ABBOTT PAKISTAN HISTORY

Abbott Pakistan is part of the global healthcare corporation of Abbott

Laboratories, Chicago, USA.

Abbott started operations in Pakistan as a marketing affiliate in 1948; the

company has steadily expanded to comprise a work force of over 1500

employees. It has the honor of being the first pharmaceutical company in Pakistan to

achieve Class-A certification by a world renowned organization, Messrs Oliver

Wight.

Abbott Pakistan has leadership in the field of Pain Management, Anesthesia,

Medical Nutrition and Anti-Infective.

8/3/2019 abbbot

21/46

FINANCIAL RELATIONSHIPS

RatingAgency

Ratings December 31,2010

Name of Banks Short term Long-

term

(Rupees 000)

MCB Bank

Limited

PACR A A1+ AA+ 33

Standard

Chartered Bank

(Pakistan) Limited

PACR A A1+ AAA- 283,872

National Bank of

Pakistan

JCR-VIS A-1+ AAA 1,987

Faysal Bank

JCR-VIS A-1+ AA 563

8/3/2019 abbbot

22/46

Production

PRODUCTS:

Abbott Products are been categorized in four divisions, which

are as under:

Abbot Pharmaceutical Products

Abbot Nutritional Products

AbbotDiagnostics Services

Abbot

Diabetes Care

8/3/2019 abbbot

23/46

Abbott Products

8/3/2019 abbbot

24/46

Volume of sales

Abbott Laboratories Pakistan Ltd. achieved their vision of Rs 10

Billion Sales by 2010 and their flagship brand Brufen achieved

the Rs 1 billion mark.

Brufen became Abbott Pakistan's first ever brand to have crossed

the Billion Rupee barrier. It became the 6th brand in Pakistan's Pharmaceutical industry to

have achieved the feat. This achievement is not only a depiction

of the high volume of sales, but also a symbol of trust in the

brand by the medical fraternity as well as by patients.

8/3/2019 abbbot

25/46

Breakdown of sales by product line

Pharmaceutical sales increased by 39% over last financial year Vitamins,

antiinfectives, cough and cold, gastro and consumer products recorded

strong double digit growth.

Nutritional sales increased by 28% year due to price increase on certain

products.

General Health Care (GHC), Diagnostic and Diabetes Care sales grew by

34% over last financial year owing primarily to focused marketing on

consumer products and increased sales of Mospel.

8/3/2019 abbbot

26/46

CAPITAL EXPENDITURE

Abbott is continuously striving to improve the productivity and efficiency ofplant operations.

During the year 2010-2011 a total of Rs 493 million was spent on various

capital projects such as plant upgradation and procurement of manufacturing

equipments for improving productivity.

MANUFACTURING:

Abbott Pakistan manufactures over 150 different pharmaceutical and

general health care products for the local and export markets.

8/3/2019 abbbot

27/46

QUALITY OF PRODUCTS Abbott products are of high quality and their buyers are happy with

the quality of products and with the timeliness of delivery as well.

They deliver consistently superior products and services which

contribute significantly to improve the quality of life of the

consumers.

Abbott quality management system is supported by policies,

processes, procedures and resources that ensure products are

designed and manufactured to be safe and effective.

8/3/2019 abbbot

28/46

COMPETITORS

GSK

NOVARTIS

Merck & Getz

Ferozons Laboratories

Sanofi-Aventis Ltd

Abbott Lab. Pakistan is ranked second among its competitors due to its

competitive approach in the market.

8/3/2019 abbbot

29/46

Suppliers

Abbott works with more than 1,700 local suppliers and 2500 suppliers from

UK,Germany, Thailand, New Zealand, Holland and Malaysia .

Imported Materials Average Lead Time, By sea is approximately 75 days

By air approximately 45 days.

Abbott work closely with suppliers holding them to the same quality andsocial responsibility standards to which company hold.

Abbott suppliers identify all applicable laws, regulations, ordinances,

permits, Licenses, approvals, orders, standards and relevant customer

requirements and ensure compliance with them.

8/3/2019 abbbot

30/46

Facilities Two manufacturing facilities located at Landhi and Korangi in Karachi continue to use

innovative technology to produce top quality pharmaceuticals products.

Own concrete block building free of mortgage.

Adequate energy and infrastructure.

Imported machinery old but in good shape.

Suppliers and distributors relations are good

After manufacturing, Finished Products are again sent to the Quality Assurance

Department for testing, leading to produce only good products.

8/3/2019 abbbot

31/46

Distribution

Direct Distribution is done through the manufacturing plant i.e. after

manufacturing, products are distributed via ABBOTT delivery trucks to the

customers according to contracts and demand.

IndirectDistribution is done by distributing through appointed distributors

i.e. those distributors who have proper contracts and than they distribute the

respective product to the wholesalers and different chemists.

8/3/2019 abbbot

32/46

Distribution

Abbott local distributors are:

Premier AgencyMuslimabad, Karachi.

Babar Medicine, Lahore.

Nadeem Traders, Peshawar.

Baloch Enterprise, Multan.

D.S Pharma, Rawalpindi.

8/3/2019 abbbot

33/46

Quantitative analysis

8/3/2019 abbbot

34/46

Ratio analysis2009 2010

Net Trade Cycle

20.50 17.63

Cash Ratio0.48 0.46

Cash Flow adequacy

0.37 0.38Cash reinvestment ratio 13% 17%

Working capital 1,652,696.00 2,093,973.00

8/3/2019 abbbot

35/46

Benchmark analysis2009 2010

Acid Test Ratio - Industry 1.4715 1.017

Acid Test Ratio - Company 0.98612 1.01381

Current Ratio - Industry 2.515 1.91

Current Ratio - Company 2.03 2.19

Days to Collect A/R - Industry 16.29 25.58

Days to Collect A/R - Company 8.06 8.26

Days in Inventory - Industry 101.29 90.266

Days in Inventory - Company 100.38 93.50

8/3/2019 abbbot

36/46

2009 2010

Asset Turnover - Industry 1.5 1.2776

Asset Turnover - Company 1.70208 1.89895

Net Profit Margin - Industry 7% 7%

Net Profit Margin - Company 7% 11%

Return on Total Assets -

Industry 26% 23%

Return on Total Assets -

Company 12% 20%

Return on Equity - Industry 16% 19%

Return on Equity - Company 19% 30%

Benchmark analysis

8/3/2019 abbbot

37/46

Description 2009 2010

Growth in Net Sales19% 30%

Cost ofGoods Sold 32% 19%

Growth in Gross Profits -6% 59%

Growth in Income Tax

Expense -29% 111%

Growth in Net Income -30% 93%

Horizontal Analysis of Inc-Statement

8/3/2019 abbbot

38/46

Description 2009 2010

Growth in Total Assets -1% 17%

Growth in Total Liabilities 19% 9%

Growth in Total Equity (Net

Worth) -9% 21%

Horizontal Analysis ofBalance sheet

8/3/2019 abbbot

39/46

Pro-forma income statementAverage common

size 2011 2012

TOTAL REVENUES 100.00% 12,716,924.88 14,707,582.38

Cost ofGoods Sold 64.35% 8,333,388.23 9,629,408.59

GROSS PROFIT 35.65% 4,383,536.64 5,078,173.79

TOTAL OPERATING

EXPENSES, 16.95% 2,225,785.55 2,568,029.43

EBIT 18.61% 2,166,253.59 2,519,977.80

PBT 18.57% 2,162,017.44 2,514,864.99

NET INCOME 12.75% 1,491,792.04 1,735,256.85

8/3/2019 abbbot

40/46

Assumptions Revenues grow by 10% that is the average historical growth rate.

COGS are 64.35% of total revenues along with depreciation amount added bybreakdown of depreciation.

Gross profit is 35.65% of sales.

Selling and general expenses are 14.6% of sales along with depreciation adjustedand same is the case with other expenses, operating and operating charges

Finance cost is calculated by taking weights of finance cost to current liabilitiesand applying it on new short-term liabilities

Income tax expense is calculated by taking average tax rates over 5 years and

applying it to profit before tax.

8/3/2019 abbbot

41/46

Pro-formaBalance Sheet2010 2011 2012

TOTAL CURRENT ASSETS3,856,673.00 4,280,006.86 6,121,726.29

Total non-current assets 1,933,748.00 2,117,348.11 2,323,467.72

TOTAL ASSETS 5,790,421.00 6,397,354.97 8,445,194.01

TOTAL CURRENT

LIABILITIES 1,762,700.00 2,115,314.78 2,553,071.86

NON-CURRENT

LIABILITY 115,182 115,182 115,182

TOTAL LIABILITIES 1,877,882.00 2,230,496.78 2,668,253.86

Total Equity 3,912,539.00 4166968.55 5776940.19

TOTAL EQUITY AND

LIABILITIES 5,790,421.00 6,397,465.33 8,445,194.05

8/3/2019 abbbot

42/46

Assumptions

Stock in trade is calculated by using inventory turnover formula. Average turnover

rate was used and new cost of goods sold is divided by the average rate.

Trade debts are calculated by using account receivable turnover formula. Averageturnover rate was calculated of the past 5 years and new projected sales are dividedby rate.

Fixed assets were grown at historic average rate of growth that is 10%.

Trade payables are calculated by using payable turnover formula. Average turnoverrate was calculated of the past 5 years and new projected cost of sales is divided byrate.

Reserves are calculated as a percentage of net income and applied on new netincome.

8/3/2019 abbbot

43/46

Conclusion

Overall financial position in 2010 remained good as compared to previous

years. 2010 has been a year of celebration for Abbott Pakistan as theyachieved their vision of Rs 10 billion sales.

By calculating and interpreting various liquidity ratios of the company we canconclude that the companys liquidity position is good and we can say that it isable to pay its short-term debts in a better way as working capital is also

positive and mostly liquidity ratios are above or equal to industryperformance.

Therefore we are positive in extending loan to Abbot. Through solvencyanalysis we observed that company is 100% equity based company and theonly external funding source is short-term loans. Thus it has bear lowerfinance charges.

8/3/2019 abbbot

44/46

Recommendations

Increase sales volume to achieve higher operating efficiency that is to reach

industrys operating efficiency but not increasing asset base rather working on

marketing efforts.

Manage inventories efficiently so as to avoid much capital tied up by looking

at the demand patterns of consumers

8/3/2019 abbbot

45/46

Recommendations

Stay efficient and competitive by Collecting account receivables on time

Current liabilities should be paid off as often and as early as possible. It

would decrease the level of current liabilities and therefore improve thecurrent ratio. Early payments to creditors can save interest cost and earn

discount which will have direct impact to the profits of the firm.

8/3/2019 abbbot

46/46

THANK YOU

abbbot

Documents