Financial Analysis of ACEA group

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Information about Financial Analysis of ACEA group

Published on March 18, 2014

Author: greg1510



(a) ACEA's financial position, performance and prospects, as mirrored by ratio analysis of the financial statements it has issued for the fiscal years 2011 and 2012.
(b) The position of ACEA relative to the main competitor in the sector.

Accounting for Managers Coursework Assignment Dimitrakopoulou Pelagia Kotitsa Eleni Lazaridou Dimitra Papadopoulos Grigorios

ACEA Group: Located in Rome, Italy Founded in 1907 Stock market listed since 1997

ACEA Group operates in: Electricity chain Public lighting Gas Integrated water cycle

Financial Ratio Analysis Ratios were used to measure: •Profitability •Liquidity •Cash Flow Indicators •Activity •Financial Structure

Profitability Ratios 2010-2011 2011-2012 ACEA A2A ACEA A2A Gross Profit Margin 31% 16% 20% 16% Net Profit Margin 3.3% -6% 2.6% -6% Return on Equity 7.4% -8.6% 7.2% -8.9% Return on Assets 8.4% 3.5% 4.4% 3.5%

Liquidity Ratios 2010-2011 2011-2012 ACEA A2A ACEA A2A Current Ratio 1.12 1.22 0.97 1.26 Quick Ratio 1.09 1.11 0.94 1.14

Cash Flow Indicators 2010-2011 2011-2012 ACEA A2A ACEA A2A Operating Cash Flow/Sales 13% 10% 12% 11% Short-term Debt Coverage 21% 25% 17% 27%

Activity Ratios 2010-2011 2011-2012 ACEA A2A ACEA A2A DIO 11 days 18 days 7 days 21 days DSO 171 days 125 days 162 days 115 days DPO -204 days -63 days -175 days -92 days Operating Cycle -22 days 80 days -6 days 44 days Fixed Asset Turnover 1.48 1.28 1.68 1.14

Financial Structure 2010-2011 2011-2012 ACEA A2A ACEA A2A Debt Ratio 75% 63% 80% 68% Debt to Equity 3.61 1.70 4.09 1.48 Capitalization Ratio 69% 53% 58% 59% Debt/EBITDA 5.31 7.30 7.67 7.76 Interest Coverage Ratio 5.03 3.69 2.43 2.81

Threat of new entrants -Capital intensive -High entrance barriers -Established in geographical network and profitability areas Threat of Substitute Products -Many sectors and various production methods -Remarkable numbers of substitutes Bargaining power of buyers -Large number of customers -Necessity of product Bargaining Power of Suppliers - Distributors of energy are more affected -Producers of energy are not manipulated by suppliers Rivalry among existing firms Government regulations and policies affect competition Liberalization in the Italian energy industry since 1969 HIGH LOW LOW LOW to MEDIUM MEDIUM to HIGH Analysis of the Competitive Environment Porter’s Five Forces

SWOT Analysis s•Brand Name •Investment Plans •Domestic leadership in water segment •Use of technologies with a low environmental impact w•Geographically limitation •Increase of electricity prices T•Economic crisis •Government regulations O•Photovoltaic development •Development of energy production from renewable sources

Conclusions ACEA’s position  High Profitability  Excellent Cash Flow Management  Consistency of the firm  Key role in the Italian energy market

Conclusions Alerts  Demand is affected by weather conditions  Gap between demand and supply was expanded after economic crisis  Working capital trends need improvement  Overdue receivables related to public entities are observed  Macro-economic environment is negative (negative Italian Government ratings)

Thank you for your attention

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