Cyclon Hellas Sa in the Industrial Production of Lubricants Finance Essay

Cyclon Hellas is a company that operates in Greece in the industrial production of lubricants and the production and trade of packaged lubricants as also at the distribution of liquid fuels. Cyclon Hellas main target, is to provide quality products and services that respect both the needs of consumers and the environment. Since the beginning of the company which is estimated around 1981, through research and technological performance the company archived a high quality and ecological dimension of the products it developed.A  Even the high competition not only in Greece but also in rest of Europe and Middle East, Cyclon Hellas has achieved to expand and play a great role among these markets only by maintaining the same philosophy, which springs not only from its consumer's liability and satisfaction but also their partner's collaboration.

Analysis of Cyclon Hellas SA (Group)

The year of 2009 was marked from :

• a) the impact of the global financial crisis (reducing demand, reducing prices, foreign exchange and credit risks, given the uncertainty of the market).
• b) The reduction of prices of petroleum products (fuels, base oils) as a result of falling international prices of crude.
• c) The Reduction on the demand for lubricants.

The Group's turnover CYCLON Hellas SA in that year amounted to A¢”šA¬ 372.651 against A¢”šA¬ 403.615 in the corresponding period of 2008, a decrease of 7.98%.The decrease was primarily due to lower prices of petroleum products (fuel) of the parent company and the fall in sales of other activities and in particular lubricants.

Operating earnings before interest, taxes, depreciation and amortization (EBITDA) In a group operating profit before tax, depreciation and amortization (EBITDA) decreased by 25% and determined the amount of A¢”šA¬ 6.277 compared to A¢”šA¬ 8.386 in fiscal year 2008.This decrease is the result of lower sales of lubricants and profits. The net results of the Group, after taxes, profits amounted to A¢”šA¬ 1.054 thousand compared to profits A¢”šA¬ 2.156 in the corresponding last year 2008. The net profit after tax were detrimental to this use at A¢”šA¬ 244 compared profit A¢”šA¬ 106 for the corresponding last year. The Probability Ratios Reveal: Roce: We have an increase on the level of profits in relation to overall capital employed to produce the profits (27.8 / 21.5). So the performance of the group is increasing. Roe: The decrease (almost 50%) of the efficiency of shareholders value. Roa: Since the great amount of decrease in Profit before Taxes from 3.592 to .1874 and the small deference between Total Assets of the 2 years we see that the ratio has decreased from 3.15 to 1.83 so the Group has not achieved its objective, which is the increase in sales volume and increase market share. Return of Shareholders Capital : We see , the great decrease of the Net Profit after Tax form 2.156A¢”šA¬ to 1.054A¢”šA¬ got us to the result of the simultaneously decrease of the Return of Shareholders Capital ratio from 14.7 to 7.2 (over 50%)

Liquidity 

The company achieves effective management of liquidity risk primarily through the equation to credit period, and secondly by providing sufficient reserves (cash and bank) as well as a rapid means of securing bank financing in the event of an unforeseen emergency.

The Liquidity Ratios reveal:

Current Ratio: Due to the fact that the change of the rate is small (1.19 to 0.95) we assume that the Group will not have any problem to cover all its Short Term Liabilities as its Short Term Assets remain in a great level.

Quick Ratio: Even though we see a low rate in both years 0.48 - 0.58 and the Inventories (8.510A¢”šA¬ - 9.295A¢”šA¬) are not in a level that in an emergency case should be easily converted into cash in order to cover the Liabilities, the Marketable securities (16.490A¢”šA¬ - 21.812A¢”šA¬) and the debtors receivables (26.768A¢”šA¬ - 29.582A¢”šA¬ ) could help the Group to solve an unexpected Liquidity problem.

Capital Structure 

The Group manages its capital to ensure that Group companies will continue to be viable maximizing return to shareholders by optimizing the ratio debt to equity. The Group's capital structure consists of debt , cash and cash equivalents and shareholders' equity of the parent company include share capital, reserves and retained earnings. The capital structure of the Group is monitored on an ongoing basis. Part of this monitoring is the review of capital costs and risks.

Debt/Equity Ratio: We see the great deviation between the two periods ratio 0.03 - 1.34 t inflects to the repayment of the loan(16.000A¢”šA¬) in year 2008 and that has helped the Group to come in such a position that can have a health operating function and also a good finance growth.

Working Capital 

Working capital is the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (Current Assets), and cash requirements (Current Liabilities). As a result, the decisions relating to working capital are always current, i.e. short term, decisions. n addition to time horizon, working capital decisions differ from capital investment decisions in terms of discounting and profitability considerations. They are also "reversible" to some extent. (Considerations as to Risk appetite and return targets remain identical, although some constraints - such as those imposed by loan covenants - may be more relevant here).

Best Inventory managerial at year 2009 which helps the Group for uninterrupted production although it reduces the investment in raw materials , it minimizes reordering costs and hence increases cash flow.

The Operating Cycle has a 4.2 difference between the two operating years , the funding of the Working Capital is inevitable.(Bank loan - Factoring)

The cash balance in year 2008 allows the Group to meet day to day expenses, but reduces cash holding costs.

In year 2009 credit terms may l attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital

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