FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Introduction

This paper attempts to analyze financial statements of a company to have better understanding of its financial environment. For this purpose, the chosen company is “Centamin Egypt”. The first section explains about the company, its operations and further it explains briefly about the industry. The main focus of this paper is on examining Return on Equity (ROE) of the company. Further, it analyzes the cash generating ability and investing activities of the company.

In attempting to analyze financial statements through the use of financial ratios organizations should have the expertise to interpret them in order to bring about positive changing in the organizational performances. The paragraphs here onwards interpret the ratios to extract meaningful information for decision-making process.

Discussion

Centamin PLC Company is based on Arabian Nubian Shield. This core operation of this company is focused on exploring minerals and developing the mining company. It is listed on (TSX: CEE) Toronto Stock exchange, the (LSE: CEY) London stock exchange and the Australian Stock Exchange (ASX: CNT). Centamin Egypt is majorly known for its prime asset called the Sukari Gold Mine. This gold mine is considered to be the largest modern scale gold mine based in Egypt. This experience has laid a foundation to further make exploration in order to acquire and develop other gold mining projects (centamin.com, n.d).

Cash Return on invested Capital

2007

2008

2009

2010

2011

Free Cash Flow

-39.06M

-92.55M

-38.58M

-10.44M

13.93M

divided by

Invested Capital

75.70M

171.30M

329.31M

424.74M

644.62M

Cash ROIC

-51.59%

-54.03%

-11.72%

-2.46%

2.16%

Analysis

The Centamin Egypt Company generated very poor cash returns on the invested capital. It failed to produce returns on buildings, project and equipments. This may be due to managing investments in a poor and inefficient manner. Further, there may be other reasons, such s lack of economic moat or may be capital intensive nature of the business. It can be said that Centamin Egypt (CEE.TO) has made loss of around $23.53 for every $100 dollars that has been invested. This is an outcome from past 5 years of financial performance of the company. It can be further illustrate by the following graph (vuru.co).

The total asset turnover is calculated by dividing Net Sales by Total Assets. It tells the management's effectiveness in generating sales from investments in total assets. It measures the efficiency of managing company's all assets. The total asset turnover ratio is 0.3 times, which indicates that the company is not at all efficient in managing its assets by generating sales out of it. There is a strong need to manage ...