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FINANCIAL ANALYSIS IN ENG
Rewe Group - Financial analysis
Financial analysis is based on consolidated financial statements. Source are web pages of the company.
Rewe is German company and one of the greatest retailers in Europe. Predominantly it operates in Germany, Austria, Central and Eastern Europe. Line of business consists mainly of classical retail and discounter in addition to travel and tourism segment.
It is holding brands like Rewe, Nahkauf , Penny in Germany and brands like Billa, Merkur, Adeg, Bipa internationally.
TABEL 1: Structure of sales in 2017
TABEL 2: Net sales and year growth rate
There is fluctuation in year to year growth rate of net sales.
TABEL 3: Net sales and year to year growth rate
Net sales are increasing with rapid pace. Larges increase was in 2017 in growth rate of 9%. In years between 2017 and 2013 sales increased for almost 17,2%. All this is indicating that the company is in expansion phase acquiring market share in Central and East Europe.
TABEL 4: Gross margin (Gross margin is calculated as gross profit in net sales)
Gross profit margin is decreasing from 19,3 % in 2013 to 17,4% in 2017. That might be caused because the company is expanding in new markets, with lower purchasing power and BDP per capita.
TABEL 5: Personal expense margin (Personal expense margin is calculated as personal expense in total revenue)
TABEL 6: Other operating costs margin (Other operating costs margin is calculated as other operating costs in total revenue)
Personal expense (12,7% in 2017)and other expanse (14,3% in 2017) are under control and are moving side-line no trends in growth and drop, what indicates that management is well controlling the costs and also reflects economics of industry that expanses are growing proportionate to company growth.
TABEL 7: EBITDA margin ( EBITDA margin is calculated as EBITDA profit in total revenue)
TABEL 8: EBIT margin ( EBIT margin is calculated as EBIT profit in total revenue)
The company is expanding what is implicating higher rate of investments in fixed assets and higher level of depreciation which is putting additional pressure on profit margin. EBIT profit margin in 2017 was 0,9%, dropped from 1,2% in 2013.
TABEL 9: Net profit margin (Net profit margin is calculated as net profit in total revenue)
Net profit margin is staying almost unchanged in observed period of time and is around 0,7% in 2017.
TABEL 10: Asset turnover (Asset turnover is calculated as total revenue divided by assets)
Asset utilisation stays the same around 2,7.
TABEL 11: Inventory in total revenue
Inventory management is efficient. The rate of inventory in revenue stays unchanged around 7,3% in 2017.
TABEL 12: Trade payable in total revenue and trade payable in total liabilities
Trade payable management is efficient. The company is acting ethically and is regularly repaying its debt and obligations to suppliers. That also indicated well liquidity.
TABEL 13: Long term loans (loans due in over 1 year period) and borrowings in total liabilities
Long term loans stays almost unchanged in about 6,2% in total liabilities in 2017.
TABEL 14: Short term loans (loans due in 1 year period) and borrowings in total liabilities
Short term loans increased in 2017 from 2,4% of total liabilities in 2016 to 6,1% of total liabilities in 2017 what is worsening liquidity picture. Reason is that there is insufficient operating gross cash flow to cover investment needs in 2017 (company is expanding and increasing investments in fixed assets – see cash flow picture)
TABEL 15: Gross cash flow (net profit + depreciation), capital expenditures and free cash flow
The company is investing in accordance of available operating cash flow, producing small free cash flow. Although company is in phase of expansion, in 2017 financial position deteriorated and there was need for additional borrowing.
Consulting – the company is exposed to pressure on gross operating margin, what is impacting overall performance and profitability of whole retailer. The management has to increase retail sale prices (if that would not lead to loss in market share) or renegotiate purchasing price of suppliers.
Costs and personal expenditures are under control of the management and are not increasing and are not putting additional pressure on profit margins.
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