Overall, it can be concluded that KMG’s profitability has been falling over time. Gross profit margin went down from 32.9% to 27.6% in the period of 2010-2013. As KMG’s upstream, midstream and downstream operations volume increased, it can be concluded that falling gross profit is a result of a rising cost, particularly maintenance and extraction costs. In the same period, net profit margin went down from 23.6% to 15.0%, hitting 14.0% in 2013. In a similar trend, KMG’s ROA and ROCE have fallen by 2.1% and 1.1% respectively. While, ROA and ROCE remain to be sufficiently high at 6.5% and 13.0% respectively, current trend suggests rising capital intensity of the firm. KMG’s ROE has fallen from 18.1% to 12.1%, which is indicative of firm’s reduced
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In 2014, firm’s current ratio was equal to 1.90, which is 0.03 increase compared to 2010. Firm’s quick ratio increased from 1.68 to 1.73 in the period of 2010-2013. The firm’s cash ratio went up from 0.64 to 0.69. Although current ratio and quick ratio above 1 indicate sufficient liquidity, a cash flow analysis revealed KMG’s high dependence on JV and associates in cash generation. As it was mentioned before, most prominent and profitable oil fields are mainly developed in a partnership with foreign entities. High dependence on JV cash inflow is reflective of this fact. In addition, firm’s cash balance has been falling rapidly up to 2013, largely due to modernisation of oil refineries and other fix assets associated spending. A rise in firm’s cash balance in 2014 was due to a reduced investment activity, as well as capital restructuring activities. Nevertheless, it can be concluded that the firm maintains relatively comfortable level of …show more content…
The firm’s gross profit margin was equal to 27%, while groups median and average were equal to 35% and 44% respectively. At the same time, KMG’s gross profit margin reduction was in line with the group, which suggest that KMG’s low profit margins are more likely to be associated with a higher cots compared to peer group. While having one of the worst gross profit margin among peers, firm’s net profit margin is approximately equal to group’s average. Better net profit margins are likely to be achieved through efficient management of operating costs. In addition, it can be concluded that all firms within the group had slummed net profit margins in 2014 due to low oil prices and KMG is among those firms who had the highest decline in profit margin. In addition to net profit margin results, it can be concluded that ROE and ROA yield same
In 2014, firm’s current ratio was equal to 1.90, which is 0.03 increase compared to 2010. Firm’s quick ratio increased from 1.68 to 1.73 in the period of 2010-2013. The firm’s cash ratio went up from 0.64 to 0.69. Although current ratio and quick ratio above 1 indicate sufficient liquidity, a cash flow analysis revealed KMG’s high dependence on JV and associates in cash generation. As it was mentioned before, most prominent and profitable oil fields are mainly developed in a partnership with foreign entities. High dependence on JV cash inflow is reflective of this fact. In addition, firm’s cash balance has been falling rapidly up to 2013, largely due to modernisation of oil refineries and other fix assets associated spending. A rise in firm’s cash balance in 2014 was due to a reduced investment activity, as well as capital restructuring activities. Nevertheless, it can be concluded that the firm maintains relatively comfortable level of …show more content…
The firm’s gross profit margin was equal to 27%, while groups median and average were equal to 35% and 44% respectively. At the same time, KMG’s gross profit margin reduction was in line with the group, which suggest that KMG’s low profit margins are more likely to be associated with a higher cots compared to peer group. While having one of the worst gross profit margin among peers, firm’s net profit margin is approximately equal to group’s average. Better net profit margins are likely to be achieved through efficient management of operating costs. In addition, it can be concluded that all firms within the group had slummed net profit margins in 2014 due to low oil prices and KMG is among those firms who had the highest decline in profit margin. In addition to net profit margin results, it can be concluded that ROE and ROA yield same