Associated British Foods plc Case Study Example | Topics and Well Written Essays - 2000 words

Associated British Foods plc - Case Study Example It grows sugar from beets in the UK and Poland, and owns and operates cane plantations in Zambia and Swaziland in Africa and in Guanxi Province in China. The company also produces bioethanol from wheat and cane production waste, and sells animal feeds and feeds microingredients to farmers in over 40 countries. ABF's revenues increased 13% to 6.8 billion in line with operating profit, which increased by 11% to 622 million in 2007. These accomplishments reflect the company's presence in high-growth markets such as China, India, Latin America, and Africa. Despite the strength of the sterling having an adverse effect on financial figures, the increases reflect good management and operating performance. The company is active in the search for alternative bio-fuels at a time of rising petrol prices, allowing ABF to benefit from and take advantage of the increasing demand for environment-friendly energy sources. The value of the profit margin was calculated from the adjusted profit before tax amounting to 613 million whilst total sales amounted to 6,800 million. The profit margin for the year is slightly lower than the previous year's figure of 9.36% from profits of 561 million on sales of 5,996 million. The profit margin went down slightly because of losses from currency transactions when translating non-sterling revenues to sterling revenues. Since the sterling is stronger than other currencies, most especially the U.S. dollar in which some of the company's revenues are recorded, the amount of sterling that could be earned for each dollar would be slightly lower than if the dollar were strong. Non-UK sales (3,547 million) were over half the total sales. According to the financial statements, operating costs were much higher this year than last year. This was explained in several places of the report as due to the number of acquisitions spent this year, resulting in higher employee expenses for example. The total number of employees in Europe, Middle East, and Africa went up from 4,917 in 2006 to 37,084 in 2007 because of acquisitions in these regions. Asset Turnover = 1.97 times The asset turnover was calculated using the sales figure of 6,800 million and the total capital employed of 3,460 million. This means that every 1 invested in the company's assets returned sales of 1.97 or almost twice the invested capital. This figure gives an indication of how well the company utilised its assets. In the absence of comparative figures with other companies, this figure does not signify much. However, the asset turnover in 2006 was much higher at 2.1 because the company had higher margins and lower assets (valued at 4,579 million) before the company went on an acquisition spree that increased the total capita