Financial Analysis of Carrefour

Résumé du document

This report is the financial analysis of a EU-listed consolidated group, the Carrefour group. This company, operating on the retail sector, seemed to be an interesting company for us to analyze. Majority of the companies in this industry are characterized by a negative working capital requirement (WCR) due to cash payment from customers and deferred payment to its suppliers, which makes their financial structure particular. Other particularities of companies from the retail sector include:
- Nearly a third of the assets are tangible assets.
- Stocks: Given the area of hypermarkets, stocks are very significant
- Receivables: in the retail domain, customers are individuals, therefore they pay immediately in cash, check or credit card. Payment delays are kept to a minimum.
- Payables: Like any company, Carrefour pays its suppliers with a delay of 30, 60, 90 or 120 days; in other words it has already sold the property it purchased even before paying a penny.
-Debt
- Net cash: It is largely positive.
In the first part of this report, we will present the activity and profitability of the group. In the second part, we will study the specific financial structure, the debt and the financing of the company.

Extraits

[...] Indeed, its analysis will allow determining how this is used in the company: investments, self-financing, etc. Most of the companies generally have a positive WCR (usually between and 30% of the turnover). A positive WCR means that the company has spent more money than it has loans and a negative WCR indicates that the company runs by contracting loans. While some companies are trying to find means to finance this WCR, mass- market retailing companies like Carrefour try to find means either to place their money on the stock exchange (Gain on Sale of Securities) or to use them to provide consumer credits. [...]

[...] Along with its development in France, the company explores new markets and implements hypermarkets in Belgium, Italy, Spain, Brazil and Argentina. Since 1998, the group has been developing the "supermarket" format and in 1999, through a merger with Promodes, the first European group of distribution was created (second worldwide after Wal-Mart). Other competitors include Tesco, Auchan, Metro AG, Ahold. However, from 2001 to 2004, the group faced difficulties due to its loss of market share in France because the prices were not competitive in the territory. [...]

[...] Other particularities of companies from the retail sector include: - Nearly a third of the assets are tangible assets. - Stocks: Given the surface of hypermarkets, stocks are very significant - Receivables: in the field of retail, customers are individuals, therefore they pay immediately in cash, check or credit card. Payment delays are kept to a minimum. - Payables: Like any company, Carrefour pays its suppliers with a delay of or 120 days; in other words it has already sold the property he has purchased even before having paid a penny. [...]

[...] The higher is the IRR, the more profitable is the project for the company. The expected discount rate is given by the following calculation: NPV = 0 ( 30(1+ + 40(1+ 50(1+ 20(1+ 100 = 0 ( t = Conclusion The analysis of the financial statements shows the healthy situation that Carrefour is maintaining throughout the studied period from 2004 to 2008. Indeed, our analysis reveals that Carrefour has succeeded in maintaining satisfying levels of ratios, in terms of activity, profitability and financial capacity, especially thanks to a negative working requirement which is a particularity in the retail sector. [...]

[...] For example, in 2008, an investor was willing to pay 28 euros for 1 euro of current earnings. While the P/E has been relatively stable from 2004 to 2007, we can that there has been a huge increase from 2007 to 2008 which is due to a big decrease in the net profit for Price to book This ratio compares a stock's market value to its book value. The P/B ratio has been superior to 1 over the period which means that the profitability of the equity is superior to the profitability expected by the shareholders 3. [...]