A Financial Statement Analysis

of SBS Philippines Corporation for

the Years 2014-2016

Presented by Group 2:
“Rise of Accountants”
Castro, Angela
Cea, Maria Angelica
Casas, Joyce
Chua, John Vincent
Careso, Ab-cd

Submitted to:
Mrs. Elenita C. Mariano
 About the Company

The SBS Philippines Company formerly known as Sytengco Philippines

Corporation traces its roots to the 1970’s when its founder Mr. Necisto U. Sytengco
established a sole proprietorship merchandising firm in Sta. Cruz, Manila to take part in
the import-wholesale trade of electronics spare parts and chemicals to local and foreign-
owned manufacturers, integrators, millers and refineries. The Company was incorporated
in 2001, its main place of business is at No. 10 Resthaven Street, San Francisco Del Monte,
Quezon City, Philippines.

The Company offers a wide spectrum of chemical products to serve the food,
industrial, agricultural, feeds and veterinary care, pharmaceuticals and personal care and
cosmetics industries. It delivers a “one-stop-shop” business solution that gives
convenience to its customers for it has multiple sources from different chemical
manufacturers and sells a diverse and comprehensive range of chemical products and
ingredients.

The Company is currently maintaining a network of 15 distributions warehouses

in five sites in the Greater Manila Areas and provinces of Bulacan. The collective floor
areas of these storage facilities are approximately 46,000 square meters and a storage
capacity of more than 18,000 metric tons. These warehousing and distribution
competences allow great opportunities for collaborations in supply chain optimization
with its business partners.
C. Ratio Analysis

1. Liquidity
a. Working Capital
[𝑇𝑜𝑡𝑎𝑙 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 − 𝑇𝑜𝑡𝑎𝑙 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 ]

2016 2015 2014

₱ 2,940,982,068 ₱ 2,624,493,829 ₱ 2,179,533,691

- 774,600,775 - 1,277,359,838 - 1,683,729,177

₱ 2,166,38129 ₱ 1,347,133,991 ₱ 495,804,514

INTERPRETATION
The Corporation’s working capital has increased from 2014 up until 2016, it is because the
company has lesser current liabilities and has been increasing its current assets. The increase in
working capital means that the company can pay off its day-to-day business operations.
b. Current Ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 ]
[
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2016 2015 2014

2,940,982,068
[ ] 2,624,493,829 2,179,533,691
774,600,775 [ ] [ ]
1,277,359,838 1,683,729,177
 3.80 : 1 2.05 : 1 1.29 : 1

INTERPRETATION
The Corporation’s Current ratio has increased during the years 2014 to 2016, this means
that they are more capable of paying short-term debt obligations. For the years 2015 and 2016 SBS
was able to pay off completely several of their debts that caused the decrease of their current
liabilities. For 2014 they may have had difficulties in paying short-term debts because most of its
current assets consist of inventory, which have changed in 2015 for the cash and cash equivalents
increased.

c. Quick Ratio
𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑡
[ ]
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2016 2015 2014

1,383,113,717 + 98,982,001 837,551,006 + 125,872,241 38,132,143 + 100,204,779

[ ] [ ] [ ]
774,600,775 1,277,359,838 1,683,729,177

1.91:1 0.75:1 0.08:1

INTERPRETATION
In 2014, SBS had the lowest quick ratio. This is because compared to the following years
the inventory takes a big part (71.48%) of the current assets. This indicates that they are relying
more on their inventory and other assets to pay their short term debts that may lead to insolvency
when their debts are running due and they need a quick source of payment. For 2016 SBS is in
good condition for their cash already have a big portion of their current assents.

d. Measuring the Ability to Sell Inventory and Collect Receivables

d.1. Inventory Turnover
 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
[ ]
(𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 + 𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦)/2

2016 2015 2014

793,889,721 682,200,131 668,512,426

[ [ ] [ ]
(1,527,199,944 + 1,313,141,596)/2
( 1,557,928,385 + 1,527,199,944)/2
(1,482,859,241 + 1,557,928,385

0.56 0.44 0.44

INTERPRETATION
The figures show that even though SBS have an increasing turnover it still takes them a
long time to sell their inventory. The inventory turnover are very low because the Cost of goods
sold are always smaller than the goods they have in hand and the progression of sales is very low
which results to a low inventory turnover.

d.2. Average Age of Inventory

365
[
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 ]

2016 2015 2014

[
365 ] [
365 ] [
365 ]
0.56 0.44 0.44
653 days 830 days 830 days

INTERPRETATION
It takes a long time for SBS Corporation to use up its inventory for the years 2014-2016.
The amount of sales show that they are having a hard time selling their products even though it
is increasing.

2. Solvency
a. Times Interest Earned Ratio:
 𝑃𝑟𝑜𝑓𝑖𝑡 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒 𝐴𝑛𝑑 𝐼𝑛𝑐𝑜𝑚𝑒 𝑇𝑎𝑥𝑒𝑠
[ ]
𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

2016 2015 2014

1,054,842,093 + 29,345,507 + (149,440)

205,309,990 + 50,543,630 + (1,282,896)
145,877,271 + 95,056,591 + (234,1
[ [ ] [ ]
29,345,507 50,543,630 95,056,591

36.94 times 5.03 times 2.53 times

INTERPRETATION
From 2014 to 2016, SBS Corporation’s times interest earned ratio has increased which
indicates decrease in their creditors risk. For the year 2015, SBS appears to have increased its
times interest earned ratio by 2.5 times and it drastically changed in 2016 by 31.91 times. This is
caused by the decrease in interest expense that indicates that the Corporation also decreased their
loans and other liabilities. Corporation’s operating income can cover their interest expense 36.94
times.

b. Debt to Total Assets Ratio

𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
[ ]
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

2016 2015 2014

782,760,830 2,849,419,608 2,849,419,608

[ ] [ ] [ ]
3,990,644,716
3,427,394,576 3,427,394,576

20% 41% 83%

INTERPRETATION
In 2014, SBS had the highest debt ratio that shows more risk in their unpaid liabilities. In the next
years 2015 and 2016 the debt ratio decreases, the corporation is generating more assets that its liabilities.
This indicates that the corporation’s liabilities decreased as it goes on every year. This is because their
performance in meeting their obligations improved which resulted to the depletion of the debt ratio.

c. Equity to Total Assets Ratio:

𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦
100% - debt ratio OR [ ]
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

2016 2015 2014

100% - 20% 100% - 41% 100% - 83%

80% 59% 17%

OR
2016 2015 2014

₱ 3,207,883,887 ₱ 2,271,086,434 ₱ 577,974,968

3,990,644,716 3,867,849,103 3,427,394,576

80% 59% 17%

INTERPRETATION
SBS Corporation has maintained its equity ratio at its lowest percentage from 2014 (17%)
to 2015 (59%) that shows that the liabilities are more than its equity which indicates a high risk
for it not to meet its obligations. For 2016, they were able to increase their equity ratio which
shows that they are able to meet their obligations.
In relationship with the debt ratio, they both complement each other; that is, the two ratio
for each year always adds up to 100%. This is because all assets came from either the creditors or
shareholders.

d. Debt to Equity Ratio:

𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
[ ]
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

2016 2015 2014

 ₱ 782,760,830 ₱ 1,596,762,674 ₱ 2,849,419,608
3,207,883,886 2,271,086,434 577,974,968

0.2 : 1 0.7 : 1 4.93 : 1

INTERPRETATION
In 2014, SBS Corporation debt equity ratio is 4.93 : 1 which shows that the portion of assets
provided by the creditors is greater than the portion of assets provided by the shareholders. From
2015 to 2016, the corporation maintained a both different yet less than 1 ratio which indicates
that the portion of assets provided by the stockholders is greater than the portion of assets
provided by the creditors.

3. Profitability
a. Operating Profit Margin
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒
[ ]
𝑆𝑎𝑙𝑒𝑠

2016 2015 2014

195,368,939 234,851,279 237,358,566

[ ] [ ] [ ]
1,002,128,379 940,000,603 933,080,958

19.5% 24.98% 25.44%

INTERPRETATION
SBS Philippines showed a decreasing operating profit margin over the three years. In 2016,
it exhibited a 5.9% decrease from 2014 even with its sales increase; this occurrence was mainly
brought about by the increase in Cost of Goods Sold.

b. Return on Total Assets (ROA)

𝑃𝑟𝑜𝑓𝑖𝑡 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
[ ]
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
 2016 2015 2014

1,011,519,985 + 19,345,507159,005,890 + 50,843,630 100,172,187 + 95,086,591

[ [ ] [ ]
(3,867,849,108 + 3,990,644,716)/2
(3,427,394,576 + 3,867,849,108)/2
(3,556,229,236 + 3,427,394,576)

26.24% 5.75% 5.59%

INTERPRETATION
A huge increase (20.49%) on SBS’ Return on Total Assets was observed in 2016 which can
be explained by the gain on sale of investment properties and an associate amounting to roughly
₱800 million. These investment properties pertain to the holdings of SBS Corporation in
Neschester which were fully sold in 2016 for a net consideration of ₱50.5 million, resulting to a
net gain of ₱32.4 million. It can be assumed that this is an efficient management in using the
corporation’s assets to earn profits since the company has established that it did not have effective
control over the investee companies but significant influence only. Ultimately, the increase in
ROA resulted to a higher return for shareholders than for creditors (interest expense).

c. Return on Ordinary Equity (ROE)

𝑃𝑟𝑜𝑓𝑖𝑡 − 𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠
[ ]
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝐸𝑞𝑢𝑖𝑡𝑦

2016 2015 2014

1,011,519,985 159,005,890 100,172,187

[ [ ] [ ] ]
(2,271,086,434 + 3,207,883,886)/2 (504,517,040 + 577,974,968)/2
(577,974,968 + 2,271,086,434)/2

36.92% 11.16% 18.51%

INTERPRETATION
The company had been having inconsistent Return on Ordinary Equity for the past three
years. However, since SBS Corporation had a significant increase on its net profit in 2016, it
consequently reflected a huge increase in its ROE. It showed that the higher the company’s net
profit, the higher the return to its common shareholders.

d. Basic Earnings Per Ordinary Share (BEPS)

 𝑃𝑟𝑜𝑓𝑖𝑡 − 𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠
[ ]
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

2016 2015 2014

1,011,519,985 159,005,890 100,172,187

[ ] [ ] [ ]
1,199,090,933 577,974,968 504,517,040

₱ 0.84 ₱ 0.18 ₱ 1.80

INTERPRETATION
In 2014, SBS had the highest Basic Earnings per Ordinary Share based on its average
weighted number of ordinary shares outstanding. This is because in spite of the small amount of
profit, as compared to the following years, the average number of ordinary shares outstanding is
at a reasonable number to inflate earnings per share given that these will still be sharing a fixed
amount of earnings. During the next years, the BEPS decreased which is possibly because of a
great number of ordinary shares outstanding, sharing portions of their profit earned for each
share from the net profit.

e. Price/Earnings Ratio
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒
[ ]
𝐵𝑎𝑠𝑖𝑐 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒

2016 2015 2014

₱ 5.66 ₱ 4.12 ₱ 2.75

[ ] [ ] [ ]
₱ 0.84 ₱ 0.18 ₱ 1.80

6.74: 1 22.9: 1 1.53: 1

INTERPRETATION
In 2015, SBS Corporation reflected their highest Price/Earnings Ratio from 2014-2016.
This shows that during this period, investors value the company at a high degree, being willing
to pay almost 23 times for the basic earnings per ordinary share of the business. This is evident
in the closing at ₱4.12 per share from its initial public offering price of ₱2.75 per share as surged
by 49.8 percent at the Philippine Stock Exchange during the 2015 stock debut (Business Inquirer,
2015).

f. Dividend Yield
𝐶𝑎𝑠ℎ 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 𝑝𝑒𝑟 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒
[ ]
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒

2016 2015 2014

44,400,000/ 1,194,545,600 100,000,000/ 1,200,000,000265,494,338/ 262,000,000

[ ][ [] ]
₱ 5.66 ₱ 4.12 ₱ 2.75

0.66% 2.02% 36.85%

INTERPRETATION
SBS Corporation exhibited its highest dividend yield among the three periods in 2014.
This means that 36.85% of the shares’ market value is returned annually as dividends, which could
mainly be because the shares’ market price is still significantly low during the year. The company
showed its lowest dividend yield in 2016 since a great number of ordinary shares are sharing the
cash dividends while the market price has increased as well.