Sipef Case
1.) What is the primary focus of SIPEF’s operations? How does the company create value? What are its key success and risk factors?
SIPEF was a diversified international agro-industrial conglomerate. It produced and traded agricultural products in five segments: palm, rubber, tea, tropical fruits and plants, and insurance.
It produced most of its revenues in Indonesia through palm oil production. Its products were exported worldwide to a highly concentrated customer base: its 10 largest customers provided 90% of the three core products’ revenues.
SIPEF had substantial growth and high profitability, which were reflected on its financial performance and increased share price. However, since SIPEF had international reach and commodities focus, it had substantial exposure to fluctuations in market prices of its core products, which made it choose not to employ substantial commodity price hedges.
2) How has SIPEF performed in the last three years, particularly sales growth, profit margin, asset turnover, and return on equity (ROE)?
Based on the financial ratios we calculated, SIPEF had a great financial performance in the last three years. We assume SIPEF and Ledesma used the same method to prepare the financial statement before IAS 41. Therefore, we adjusted the figures of SIPEF to the ones before IAS 41. The following are some financial ratios of SIPEF. (Appendix 1)
| 2007 | 2006 | 2005 | Sales growth | 27.98% | 10.81% | 1.66% | Profit margin | 20.59% | 11.92% | 11.41% | Asset turnover | 58.61% | 57.03% | 63.14% | Return on equity | 21.35% | 12.56% | 12.80%
SIPEF was a diversified international agro-industrial conglomerate. It produced and traded agricultural products in five segments: palm, rubber, tea, tropical fruits and plants, and insurance.
It produced most of its revenues in Indonesia through palm oil production. Its products were exported worldwide to a highly concentrated customer base: its 10 largest customers provided 90% of the three core products’ revenues.
SIPEF had substantial growth and high profitability, which were reflected on its financial performance and increased share price. However, since SIPEF had international reach and commodities focus, it had substantial exposure to fluctuations in market prices of its core products, which made it choose not to employ substantial commodity price hedges.
2) How has SIPEF performed in the last three years, particularly sales growth, profit margin, asset turnover, and return on equity (ROE)?
Based on the financial ratios we calculated, SIPEF had a great financial performance in the last three years. We assume SIPEF and Ledesma used the same method to prepare the financial statement before IAS 41. Therefore, we adjusted the figures of SIPEF to the ones before IAS 41. The following are some financial ratios of SIPEF. (Appendix 1)
| 2007 | 2006 | 2005 | Sales growth | 27.98% | 10.81% | 1.66% | Profit margin | 20.59% | 11.92% | 11.41% | Asset turnover | 58.61% | 57.03% | 63.14% | Return on equity | 21.35% | 12.56% | 12.80%