Comparing Uniliver's Financial Ratios with Nestle and Proctor Gamble
Confronting Unilever, Nestle and Procter&Gamble cash flow ratios
(Main graph)
Confronting the Unilever cash flow to sales ratios in the last three years with the same ratios of Nestle and Procter&Gamble gives several interesting points.
(A)
The constant relevant gap with Procter&Gamble is due both for the P&G’s superior gross margin, due to lower costs of goods sold, which leads to better net profits, and the advantages of to the generally accepted accounting principles (G.A.A.P.) used in the United States, which are slightly more flexible than the International Financial Reporting Standards (I.F.R.S.).
The minimal exposure of P&G to the global market drove the stability of its cash flow to sales ratio. The increase, in 2012, from 16.5 to 17.7 is due to the EUR/CHF low exchange rate (a bit higher that 1.2) during the last months of 2011 and the beginning of 2012. It’s reasonable to expect in 2013 the same ratio to be going down to the levels of 2011 because of the reappreciation of the USD in the first period of of 2013.
(EUR-USD exchange rate and CHF exchange rate graphs)
(B)
The gap (12.4 to 14.6) between cash flow to sales ratios of Unilever and Nestle in 2010 is essentially due to a big one time sale of assets by Nestle.
(C)
In 2011 the cash flow to sales ratio of both Unilever and Nestle went down to 11.7 and the reason can be identified in the weakness of the USD during the 2010. The negative effect is much stronger for Nestle because of the bigger appreciation of the Swiss currency compared to the EUR.
(D)
Both Nestle and Unilever cash flow to sales ratios went up in 2012. The reasons are similar: a loss of working capital non cash adjustment boosted the ratios up. The gap here is explained by the amounts of the adjustments (1EUR billion for Unilever against 2CHF for Nestle) and the reappreciation of the USD.
(Main graph)
Confronting the Unilever cash flow to sales ratios in the last three years with the same ratios of Nestle and Procter&Gamble gives several interesting points.
(A)
The constant relevant gap with Procter&Gamble is due both for the P&G’s superior gross margin, due to lower costs of goods sold, which leads to better net profits, and the advantages of to the generally accepted accounting principles (G.A.A.P.) used in the United States, which are slightly more flexible than the International Financial Reporting Standards (I.F.R.S.).
The minimal exposure of P&G to the global market drove the stability of its cash flow to sales ratio. The increase, in 2012, from 16.5 to 17.7 is due to the EUR/CHF low exchange rate (a bit higher that 1.2) during the last months of 2011 and the beginning of 2012. It’s reasonable to expect in 2013 the same ratio to be going down to the levels of 2011 because of the reappreciation of the USD in the first period of of 2013.
(EUR-USD exchange rate and CHF exchange rate graphs)
(B)
The gap (12.4 to 14.6) between cash flow to sales ratios of Unilever and Nestle in 2010 is essentially due to a big one time sale of assets by Nestle.
(C)
In 2011 the cash flow to sales ratio of both Unilever and Nestle went down to 11.7 and the reason can be identified in the weakness of the USD during the 2010. The negative effect is much stronger for Nestle because of the bigger appreciation of the Swiss currency compared to the EUR.
(D)
Both Nestle and Unilever cash flow to sales ratios went up in 2012. The reasons are similar: a loss of working capital non cash adjustment boosted the ratios up. The gap here is explained by the amounts of the adjustments (1EUR billion for Unilever against 2CHF for Nestle) and the reappreciation of the USD.