Financial Performance Commentary

KEY FINANCIAL INDICATORS

In 2001, the Company compensated for reduced operating revenues by a cost-cutting measure in the area of operating expenses, thus maintaining its long-term financial stability. This can be demonstrated by comparing selected indicators of profitability, asset management, liabilities management, and liquidity.

 

Indicator
Unit
of measure
2001
2000
1999
1998
1997
Return on equity
%
7.28
5.73
7.56
8.95
9.79
Production strength
of operating activities
%
4.70
2.60
5.27
5.62
6.87
Basic production strength
%
7.21
5.40
8.21
9.61
10.29
Returns on operating costs
%
13.04
6.20
11.70
12.59
14.23
Inventory turnover
days
4.00
3.91
5.19
8.22
9.96
Receivables turnover
days
60.71
53.87
50.02
49.23
41.83
Fixed assets turnover
days
649.30
611.68
537.31
537.45
493.14
Debt ratio
%
27.75
26.94
26.27
25.12
24.38
Loans-to-liabilities ratio
%
4.53
12.31
18.86
27.66
37.76
Interest coverage
64.40
27.14
27.22
21.38
13.52
Current ratio
4.00
4.31
4.71
5.34
5.09
Quick ratio
3.02
3.25
3.46
3.63
3.23
Net working capital
CZK'000
4,402,770
3,971,489
3,841,979
3,282,136
2,639,016

 

The declines of return on equity, return on operating costs, and basic production strength were tied to the negative impact of lower operating revenues on operating profits, which was levelled out in 2001 by an operating cost cutting policy. The drop in operating revenues also affected year-on-year growth figures for receivables turnover and fixed assets turnover. On the other hand, inventory turnover improved.
Development of the liabilities-to-assets ratio was impacted by massive additions to statutory provisions. The sharp decline in the loans-to-liabilities ratio corresponded to the decline in the debt load and the growth in interest coverage, which indicates the Company's ability to cover interest expense out of gross earnings. It should be noted that at the end of 2001 the Company repaid its remaining bank credit.
All three liquidity indicators indicate that the Company's liquidity is very high. What is more, these indicators are undervalued to the extent that they do not include liquid bonds, which are carried as financial investments. Surplus liquidity in the form of financial assets was kept invested in stable financial market instruments.