An empirical analysis of Universal Robina Corporation's financial plan
Date of Publication
Master of Science in Computational Finance
Ramon V. Del Rosario College of Business
Financial Management Department
Rene B. Betita
Defense Panel Chair
Edralin C. Lim
Defense Panel Member
Dioscoro Baylon, Jr.
Brian C. Gozun
This paper will develop a long-term financial plan from 2018 to 2020 and short-term financial plan for 2018 for Universal Robina Corporation (URC). The financial plan will be used to analyze its financial standing and develop a strategic plan to fully maximize and utilize its resources.
This paper aims to: (1) assess the company's performance over four years from 2014 to 2017 (2) establish long-term and short-term financial plan for the company that will define and structure the company on how cash will be managed to work within the budget as cash budgeting helps reduce the uncertainty, forecast cash flow, and guidance for decision making (3) determine if the company will be generating enough cash to meets its operating expenses, dividend payment, and its aggressive growth plans (4) develop a borrowing plan for the company and (5) provide a recommendation based on the financial plan that was developed.
The three-year financial plan will serve as guidance and build strategy for the short term plan. The three-year plan includes operations from domestic, international and joint ventures while the short-term plan will only focus on URC Philippines operations
Results of the three-year financial plan showed thinner margins despite the double digit sales growth due to higher input costs, increase in selling and distributions costs, and general and administrative expenses. The financial plan also showed a robust balance sheet as URC expects liquidity indicators to improve. The company expects in 2019 to partially prepay its long-term debt when it acquired Griffins Food, therefore, freeing up more cash. Moreover, cash conversion cycle slightly improved due to faster collection and improved payment period. Major uses of cash are still dividends, capital expenditure (CAPEX), tax payments, and interest payments.
Since CAPEX is one of the major uses of cash, this paper included capital budgeting analysis on the top four approved CAPEX in 2018. All top four approved CAPEX returned an IRR of above 40% and payback period not greater than 3.5 years. Due to its bulk, this paper prepared two short-term financial plans with the following assumptions: (1) straight or outright payment of CAPEX in 2018 and (2) CAPEX will start in 3Q2018 with a payment term of 30-60-10 (30% down payment, 60% progress billing, 10% final payment), and an average payment period of three to four months. If CAPEX will be paid outright in 2018, total short-term borrowing in 2018 will be PHP3.8 Bn. If the financial plan will follow the second assumption, total short-term borrowing will be PHP3.9 Bn, PHP0.1 Bn higher compared to the first assumption. The company usually settles its short-term borrowing within 2018, ending URC Philippines with zero short-term borrowing for the year.
The borrowing plan using the second assumption is to draw in two tranches: (1) PHP1.3 Bn in March and (2) PHP2.6Bn in April. Both loan tranches will have a loan tenor from 28 days to 35 days. Company can partially prepay or pay in full if target ending cash will not fall. below the desired ending balance of PHP2.5 Bn therefore, the prepayment schedules are PHP800 Mn in May, PHP900 Mn in July, PHP2,100 Mn in September and PHP100 Mn in October. The plan will leave URC Philippines with zero short-term borrowing in 2018, 2019, and 2020.
There are caveats to the financial plan. If any of the major items do not materialize as planned, financial plan will change. The company should come-up with a rolling forecast of financial plan to adjust to changes. The intention is to use this initial financial plan as a monitoring tool against the actual expenses throughout the year.
Archives, The Learning Commons, 12F Henry Sy Sr. Hall
1 computer disc ; 4 3/4 in.
Corporations--Finance; Universal Robina Corporation
Jurado, J. A. (2018). An empirical analysis of Universal Robina Corporation's financial plan. Retrieved from https://animorepository.dlsu.edu.ph/etd_masteral/5513