LIQUIGAZ PHILIPPINES CORPORATION

Financial Statement Analysis 2006-2011

Submitted to: Ms. Jhyn Concordia AcFinMa Professor May 26, 2012

TABLE OF CONTENTS Company Profile Audited Financial Statements 2011 and 2010 Balance Sheets 2011 and 2010 Statementf of Total Comprehensive Income 2011 and 2010 Statementf of Changes in Equity 2011 and 2010 Statementf of Cash Flows 2009 and 2008 Balance Sheets 2009 and 2008 Statementf of Total Comprehensive Income 2009 and 2008 Statementf of Changes in Equity 2009 and 2008 Statementf of Cash Flows 2007 and 2006 Balance Sheets 2007 and 2006 Statementf of Total Comprehensive Income 2007 and 2006 Statementf of Changes in Equity 2007 and 2006 Statementf of Cash Flows Consolidated Financial Statements Liquidity Ratio Analysis Leverage Ratio Analysis Profitability Ratio Analysis Horizontal Analysis Balance Sheet Horizontal Analysis Income Statement Vertical Analysis Balance Sheet Vertical Analysis Income Statement

I. COMPANY PROFILE
Liquigaz is wholly-owned subsidiary of SHV Gas of the Netherlands, was established in 1995 with the dedication to provide innovative solutions to every user of LPG that promotes customer satisfaction, reliability, safety enforcement and environmental compliance.These are manifested in our actions and the products we serve. Liquigaz is the fastest growing LPG Company in the Industry. Since operation in 1995, we are proud to say that we are already the second-largest supplier of LPG in the Philippines today. Our market share is 31% of the country's total LPG demand. We believe in growth through performance and this strategy made us market leader in the various segments of the LPG business. Looking forward, our Company will continue to optimize our business and become the market leader in all business segments of the Industry. We work closely with business, large and small, national and local; building relationships and partnerships through most important values, Integrity and Loyalty. That is why we are entrusted with the LPG needs of the top companies like Mariwasa, Asia Brewery, Mc Donalds, Chowking, SM North Edsa, Max's Restaurants, Andok's Litson, and many others. Business Initially, commercial/household cooking and Industrial heating are the known applications of Liquefied Petroleum Gas (LPG) in the Philippines. With Liquigaz, being at the forefront of LPG Innovations shall continually innovate to become a sustainable LPG company in the country. AUTOGAS Liquigaz is at the fore front in the introduction of Autogas as a cost-effective alternative fuel for automobiles and light commercial vehicles. Liquigaz has influenced the way Autogas business is managed supporting every initiative in the Industry that will grow the population of Autogas users. Liquigaz is considered the biggest supplier in this segment and will continue with its efforts in supporting environmentallyfriendly solutions promoting excellent Corporate Social Responsibility.

BULK Liquigaz is dominantly the leading and most reliable supplier of Bulk LPG in the market. In this segment, LPG in bulk is sold to Independent Refillers that use the product in their own re-selling requirements. Being the market leader in this segment, Liquigaz continues to manage efficiently its Inventory, Logistics, Distribution, Pricing, and its Influence to remain as the most competitive in this business.

COMMERCIAL Liquigaz provides LPG cooking requirements in the Food, Catering, Hotel and Shopping Mall Industries. This segment of our business continues to pose significant growth making our brand LIQUIGAZ the most-preferred brand in the Food Business. Liquigaz has pioneered the supply of LPG directly to restaurants and is catering to all the big companies in the Fast-Food Chain Business. We are presently serving more than 600 customers in this segment investing close to a Hundred Million pesos already in LPG equipment installations.

CYLINDER Liquigaz provides the LPG domestic requirements of households all over Luzon. We are supported by a network of dealers carrying our brand LIQUIGAZ. We make sure that our LPG cylinders are filled following stringent standards of the industry that will ensure homes of safe and reliable product at all times. Our network is supported by strong partnerships with third-party refilling plants that are strategically located. We have engaged in their services with commitment of making sure that LIQUIGAZ is always available.

II. LIQUIDITY RATIOS

1 0.81 1 0.65 1 0.82 0.76

0.71

Current Ratio Quick or Acid Test Ratio

0 2006 2007 2008 2009 2010 2011

Current Ratio As defined, it is a measure of short-run solvency or the ability of the firm to pay its current debt as they come due. With regards to Liquigaz 6-year trend, it seems that it is maintaining a positive near-1.00 ratio. This is quite prudent because it is maintaining flexibility in funding its operations. Also, it has a supportive parent company, SHV Energy, an efficient collection of customers accounts and available credit lines from several banks. The increase in CL ratio in years 2009, 2010 and 2011 were affected mainly by the increase in trade receivables and inventories, and decrease in borrowings, Quick Ratio Having a less-than-1.0 quick ratio, it shows that Liquigaz is somehow dependent on its inventory for the years 2006 to 2010. In 2011, however, there was really a significant decrease in the current liabilities, particularly those due to related companies like the SHV Gas, from whom LPG is being purchased.

III.LEVERAGE RATIOS
180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 2006 2007 2008 2009 2010 2011
Figure 2 Leverage Ratios 2006-2011

1.586 1.344 1.331 1.404 1.279

0.899

Equity ratio Debt Ratio Debt to equity ratio

57% 43%

61% 39%

57% 43%

58% 42%

56% 44%

53% 47%

Debt-to-Equity Ratio One reason for the sudden shoot up in the equity ratio in 2007 has something to do with the acquisition of the industrial and commercial segment of Chevron Philippines. Borrowings and Due to Related Companies had increased as well because the increase in contract prices of LPG. SHV Holdings had started collecting management fees from Liquigaz. On the contrary, there was a decrease in the payables to Related Companies in 2011 making the Equity dropped to .90. Equity Ratio According to the requirement of Bureau of Investment, a BOI-registered enterprise is required to maintain a minimum base equity ratio of 25%. For the years 2006 to 2011, Liquigaz upholds an average of 44%-ratio. Debt Ratio For the years 2006 to 2011, Liquigaz has an average debt ratio of 56%. This means that majority of the funds used on the years mentioned comes from creditors. This also implies that the management has been utilizing its credit lines with financial institutions like banks. Doing so has a tax advantage to the company since borrowings incur interest, which is an expense.

IV. PROFITABILITY RATIOS

Return on equity Return on assets Return on sales

10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2006

Gross profit margin

Net profit margin

1.03% 1.03% 1.13% 0.48% 0.13% 0.13%

2007

2008

2009

2010

2011

Figure 3 Profitability Ratios 2006-2011

Gross Profit Margin One concern for this is the economic crisis that occurred during that year which has distressed the company significantly. Being an importer who pays in foreign currency (US Dollars), the weakening of Philippine Peso has affected the cost of sales. This is because the prices of commodities went up due to USD-PHP exchange rate. Since the COS has drastically increased, it had a negative impact on the profit. However, in 2009, the company had reverted. Cost of Sales in 2009 had decreased making the Gross Profit increased by 95.4%. The company had also increased its operation of its commercial, industrial and autogas business, which provided higher margin. Return on Sales Aside from the negative effect on gross profit margin in 2008, finance cost has also increased by 59.20% from the previous year, thereby affecting the Net Income. The same happened in 2011 when there was a 71.1% increase in the finance costs, which were due to foreign exchange losses, interest on bank borrowings and bank charges. 2009, on the other hand, had a soaring 2.25% ROS brought about by the increase in gross profit margin and decrease in finance cost even if there was a 20.7% increase in the operating expenses. In 2011, the price of commodity had increased because there was also an increase in the international contract price. Return on Equity Ratio It is so noticeable the sudden drop in the ROE for year 2008. This was due to the 85% decrease in the Net Profit and the small 1% increase in the Total Equity both from the previous year.

On the contrary, 2009 was a better year. 15.98% attributed the increased in the total equity. 2010 was also a good year, but not as good as 2009. It had a 10.39% share in the total equity of the company. However in 2011, ROE was only 4.05%. This was affected by the decreased in profit and the increased in total equity.