Commonwealth Serum Laboratories

Question: Discuss about the Commonwealth Serum Laboratories. Answer: Company Description Commonwealth Serum Laboratories (CSL) is bio therapeutics company. It researches, manufactures new and innovative biotherapies used to save lives of people. Paul Perreault is the chief executive officer. The salary of Paul Perreault is $1771920 and he receives a bonus of 1139000 making the total compensation to be 2910920. The last dividend was paid by the company on 24th March of 81 cents AUD or 58cents in USD. The total assets of the company is $ 6401m in 2015. The company has more than 14000 employees and 1100 experts in the research and development areas. The 52 week high share price is 117.61 and the low share price is 85.40. Excel Spreadsheet Date Closing value CSL 4/29/2016 105.18 4/28/2016 103.94 4/27/2016 104.06 4/26/2016 104.38 4/25/2016 104.65 4/22/2016 104.65 4/21/2016 105 4/20/2016 104.25 4/19/2016 103.5 4/18/2016 103.37 4/15/2016 101.58 4/14/2016 99.93 4/13/2016 100.59 4/12/2016 100 4/11/2016 100.19 4/8/2016 101.25 4/7/2016 101.44 4/6/2016 100.35 4/5/2016 99.39 4/4/2016 101.31 4/1/2016 101 3/31/2016 101.44 3/30/2016 100.36 3/29/2016 98.57 3/28/2016 102.2 3/25/2016 102.2 3/24/2016 102.2 3/23/2016 100.63 3/22/2016 101.67 3/21/2016 100.5 3/18/2016 100.1 3/17/2016 101.85 3/16/2016 102.3 3/15/2016 102.35 3/14/2016 103.59 3/11/2016 103.58 3/10/2016 103.15 3/9/2016 104.7 3/8/2016 102.43 3/7/2016 103.15 Date Closing value of ASX 200 29-Apr-16 5,252.20 28-Apr-16 5,225.40 27-Apr-16 5,187.70 26-Apr-16 5,220.60 22-Apr-16 5,236.40 21-Apr-16 5,272.70 20-Apr-16 5,216.00 19-Apr-16 5,188.80 18-Apr-16 5,137.10 15-Apr-16 5,157.50 14-Apr-16 5,118.60 13-Apr-16 5,054.70 12-Apr-16 4,975.60 11-Apr-16 4,931.50 8-Apr-16 4,937.60 7-Apr-16 4,964.10 6-Apr-16 4,945.90 5-Apr-16 4,924.40 4-Apr-16 4,995.30 1-Apr-16 4,999.40 31-Mar-16 5,082.80 30-Mar-16 5,010.30 29-Mar-16 5,004.50 24-Mar-16 5,084.20 23-Mar-16 5,142.30 22-Mar-16 5,166.60 21-Mar-16 5,166.60 18-Mar-16 5,183.10 17-Mar-16 5,168.20 16-Mar-16 5,119.00 15-Mar-16 5,111.40 14-Mar-16 5,185.50 11-Mar-16 5,166.40 10-Mar-16 5,150.10 9-Mar-16 5,157.20 8-Mar-16 5,108.00 7-Mar-16 5,142.80 29-Apr-16 5,252.20 28-Apr-16 5,225.40 27-Apr-16 5,187.70 Overview It can be seen that the CSL shares performed similarly to the ASX200. With the decline of the ASX200, the share prices of CSL also declined till April and later both increased in similar proportions. 1. The major news for CSL for the given period are: 2. The company CSL Behring awards LEAD grants to help rare disease patient groups. The share price increased by 2.2% on 9th 3. The company announced dividends on 24th March and the share prices increased by 1.56%. 4. The share price decreased by 3.55% on 29th The ASX200 decreased by 98 points on the same day. 5. The company announced medicine for Hemophilia B in US on 21st The share prices increased after declining continuously for a week. 6. CSL Behring celebrates 100 years on 25th The prices increased by 1.1% on this day. The news have been published on Wsjcom. (2016). Wsjcom. Retrieved from https://quotes.wsj.com/AU/XASX/CSL Gain from shares Share Price on 7th March = $103.15 Thus Number of shares of CSL purchased for $5000= 48.47 ~48 shares The price of the shares on 29th April = $105.18 Thus the total price of the shares = 48*105.18 = 5048.64 Thus profit from the shares = $48.64 Buy/ Sell shares The company has started growing again with the increase in shares prices. The calculation of various ratios shows that the company has improved its profitability ratios and the net profits has also increased compared to previous year. The company is one of the biggest player in the industry and has huge growth potential. Also the company has acquired Novartis Influenza will help company increase sales and the company has planned huge investments in RD. Thus in the coming future, the company will be able to capitalize on these investments. Hence it makes more sense to hold on the current investments. Key Financial Data 2015 US$m Revenue 5458.6 Interest Expense 59.6 EBIT 1773.6 Net Profit Before Tax 1714 Net Profit After Tax 1379 Current Assets 3339.1 Total Assets 6401 Current Liabilities 936.1 Total Liabilities 3654.1 Total Equity 2746.9 Ratio Analysis Profitability Ratio The following are the profitability ratios Gross margin ratio = Gross profit/ Total sales Operating margin = Operating profit/ Total sales Return on Assets = Average total Assets/ Total sales For CSL, CSL 2015 2014 Gross Margin 0.522607 0.511884 Return on assets 1.161351 1.176745 Operating margin 0.314 0.300724 It can be seen that the gross margin of the company has increased since the last year. Thus the company has reduced the additional expenses and increased profitability. The operating margin has also improved. Thus the costs related to the sales and other administrative expenses are better utilized to improve profits. The return on assets tell the additionally increase in sales due to additional assets by the company. The return on assets has decreased. Thus the company should focus on utilizing its assets in a better way to improve the net profits. The biggest competitor of CSL is Baxter. The profitability ratios of Baxter are Baxter 2015 Gross Margin 0.415931 Return on assets 2.363212 Operating margin 0.045044 CSL has performed better than Baxter in case of profitability margin but the company needs to utilize its assets in a better way. Activity ratio The following are the Activity ratios Inventory Turnover ratio = Cost of goods sold/ Average Inventory Total assets turnover = Sales / Average total assets Accounts Payable to sales ratio = Accounts Payable/ Sales For CSL, 2015 2014 Inventory turnover 1.532 1.583 Total assets turnover 0.861 0.849 Accounts Payable to sales ratio 0.128 0.118 Thus the figures of activity ratio shows that the company has decreased inventory ratio compared to last year. Thus the company had more capital tied up in the inventory compared to last year. The accounts payable to sales ratios shows that the company has more creditors per unit of sale. Thus the creditors are willing to lend more to the company. Thus overall the company has improved since last year. Baxter 2015 Inventory turnover 3.660 Total assets turnover 0.423 Accounts Payable to sales ratio 0.267 Comparing with Baxter, it can be seen the company has better activity ratios than CSL. Liquidity Ratio The following are the Activity ratios For CSL, 2015 2014 Current ratio 3.567 3.795 Quick Ratio 1.692 1.848 Interest times earned ratio 29.758 31.270 All the ratios have decreased when compared to the previous year. The higher the current and quick ratio, the better it is for company to pay its current liabilities. The company should focus on improving its Liquidity ratio which might be low because of its acquisition of Novartis Influenza Baxter 2015 Current ratio 2.051 Quick Ratio 1.773 Interest times earned ratio 3.563 Comparing with Baxter, CSL has better interest earned ratio and current ratio than that of Baxter. However, the company has more investment in inventory which reduces its quick ratio References Accounts Payable (A/P) to sales ratio. (n.d.). Retrieved from https://www.businessdictionary.com/definition/accounts-payable-A-P-to-sales-ratio.html Profitability Ratios. (n.d.). Retrieved from https://www.myaccountingcourse.com/financial-ratios/profitability-ratios Liquidity ratios. (n.d.). Retrieved from https://www.investopedia.com/terms/l/liquidityratios.asp Activity ratios. (n.d.). Retrieved from https://www.investopedia.com/terms/a/activityratio.asp Profitability Ratios. (n.d.). Retrieved from https://www.investopedia.com/terms/p/profitabilityratios.asp Corporate Profile CSL. (n.d.). Retrieved from www.csl.com.au/s1/cs/auhq/1187378980806/content/1255929310417/content.htm Baxter annual report 2015. Retrieved from https://investor.baxter.com/phoenix.zhtml?c=86121p=irol-reportsannual Yahoo finance. (n.d). Retrieved from https://au.finance.yahoo.com/q/hp?s=ASX.AX