Free Business Essays - Food Distribution Industry
The food wholesale industry is composed of sixteen companies. The top five companies in the industry are SYSCO Corp., United Nation Food Inc., Performance Food Group Co., Dominos Pizza Inc. and Nash-Finch Co. The companies that I will go into detail and compare their structure, financial analysis are SYSCO Corp., Performance Food Group Co. and Nash-Finch Co.
The reason that I choose these three companies is come from the rating on The Value Line Investment Survey. The Rating is timeliness, Safety and technical. SYSCO Corp. has 3 timeliness, 1 safety and 4 technical. Performance Food Group Co. has 3 timeliness, 3 safety and 3 technical. And Nash-Finch Co. has 2 timeliness, 4 safety, 2 technical. I will also discus the reason for the industry that has high revenue but a small net profit margin.
The food wholesaler or they will also call foodservice distributor is a company that provides food and non-food products to restaurants, cafeterias, industrial caterers, and hospitals and nursing homes. They operate like an intermediary between food manufacturers and the foodservice operator. They provide food supply and service to their customer. Some company will also have their own retail store to sell their product to the consumer.
History and size of company
The first company is SYSCO Corp. they are the No.1 Company in the industry. They through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. The company distributes a line of frozen foods, such as meats, fully prepared entrees, fruits, vegetables, and desserts; a line of canned and dry foods; fresh meats; imported specialties; and fresh produce.
It also supplies a range of non food items, including paper products, such as disposable napkins, plates, and cups; tableware comprising china and silverware; cookware, such as pots, pans, and utensils; restaurant and kitchen equipment and supplies; and cleaning supplies. They have a market capitalization is 20.97 Billions. Their Revenue for fiscal year 2007 is 35 Billions dollars.
The company has about 50,900 employees to support their daily operation, which include the ingredients that needed to prepare meals, and also several additional preparation and serving items. SYSCO Corp. has business and service relationship to about 400,000 customers around the United State.
The company was founded by John F. Baugh in 1969 and their headquartered is in Houston, Texas. The company went public on March 3, 1970. Since then on, the Revenue grow from $115 million, up to fiscal year 2007, $35 billion. In year 1977 SYSCO Corp. surpassed its competitors and became the leading food wholesale supplier in North America. Since then, the industry it serves has expanded from $35 billion to more than $200 billion.
Today, SYSCO Corp. has operating about more than 170 distribution facilities which was locate throughout the United States and part of Alaska, Hawaii, and Canada. Performance Food Group Co. and its subsidiaries market and distribute brand food and nonfood products to various customers in the foodservice industry primarily in the United States. Its products include entrees, canned and dry groceries, frozen foods, refrigerated and dairy products, as well as paper products and cleaning supplies, produce, restaurant equipment, and other supplies.
The second company that was in the report is Performance Food Group Co. Performance Food Group Co. was found in 1875, as a food brokerage and distribution company in Richmond, VA. Performance Food Group Co. took its current name in 1987 when Pocahontas Foods merged with Caro Foods in Houma, LA and the Kenneth O. Lester Company in Lebanon, TN, and their headquarter is in Richmond, VA. In the next few years, many food distributors joined the Performance Food Group Co. family.
In 1993, Performance Food Group Co. went public, trading on the NASDAQ. In 2005, the company opened their first Midwest Customized facility which was located in Indiana. The company has Market Capitalization 910.5 Millions dollars. Their Revenue for fiscal year 2007 is 5.8 Billions dollars. The company has about 7,000 employees to support their daily operation.
The Company's product line and distribution system allow them to service both of the major customer types in the foodservice or street foodservice, which include independent restaurants, hotels, cafeterias, schools, healthcare facilities and other institutional customers. They deliver more than 68,000 difference products to approximately 41,000 customers.
The last company that I am going to compare is Nash-Finch Co. Nash-Finch Co. is one of the food distribution and retail Companies in the United States. The Company was first found in 1885 when the Nash oldest brothers, Fred, opened a small candy and tobacco store in Devils Lake, North Dakota. In 1899, the company's operations were moved to Grand Forks, North Dakota where Harry Finch, joined the firm and wholesaling started. In 1905, a partnership between Nash brother and Harry Finch was started. In 1919, the company moved to Minneapolis, Minnesota.
Since then on it became headquarter for the company. In 1921, the company incorporated into two major wholesale companies: the Nash-Finch Co. in the United States and Nash-Simington Ltd. of Canada, which the Company sold in the 1930's. Following World War II, modern supermarkets began to anchor new suburban shopping centers. The Nash-Finch Co. took advantage of this opportunity by purchasing a chain of 17 supermarkets in Nebraska, as a result entering supermarket retailing.
In 1983, the Company went public and started trading on the NASDAQ. Nash-Finch Co. is a member of the Fortune 500 and one of the leading food distribution companies in the United States. Their Market Capitalization is about 481 Millions dollars. In 2007 fiscal year, they have $4.6 billion dollars in sales and employing approximately 5000 employees. They have about 2,000 business related customer. The company owned 17 distribution centers to approximately 2,000 grocery stores located in 26 states across the United States.
Structure of the Company
The structures of these companies have two major segment, boardline distribution segment and system distribution segment. Some company may have other segment, such as military segment and retail segment. A boardline distribution segment is a distributor that services a wide range of customer with a wide diversity of products. And system distribution segment have the same function but they only focus on restaurant chain customer.
For SYSCO Corp., their boardline distributor segment distribute a full line of food products and difference kind of non-food products to both of the Company's traditional and chain restaurant customers. They distribute Grocery Produce, Dairy, Meats, Seafood, Imported Foods, Disposables, Equipment. In this segment, they running over 170s distribute center throughout the United States and part of Alaska, Hawaii, and Canada.
In the system distribution segment, SYSCO Corp. calls it SYGMA. While SYSCO Corp. Foodservice distribution facilities can also service chain accounts, the SYGMA Network customer is often considerably larger and has a much more formalized procurement process, store inventory, and designated manufacturer brands. The segment run 18 distribution centers and they have about 13,500 restaurants. SYGMA is one of the larger foodservice distributors in the United States.
Their annual revenue is about 4.2 billions dollars. They can deliver 165 millions cases of products to their customer. They have approximately 2,800 employees support this segment. The chart below is from SYSCO Corp. web site, it show us that all of the distribution centers that was own by SYSCO Corp. Most of the facilities locate in the east coast and the west coast.
In Performance Food Group Co., In the Broadline distribution segment, the Company distributes more than 65,000 difference type of national, private label food and non-food products. They primarily services only two types of customers, street customers and chain customers. All of their customers are located within 250 miles from one of their 19 Broadline distribution facilities, they also divided the own country in difference regions, Eastern, Midwestern, Northeastern, Southern and Southeastern, which help the company to designs its product mix, distribution routes and delivery schedules to hold the needs of a large number of customers.
The Customized distribution segment focuses on serving casual and family dining chain restaurants, such as Outback Steakhouse, Ruby Tuesday and T.G.I. Friday's. They operate eight distribution facilities. The map below is from PFG web site which show that the location for all distribution center that the Performance Food Group Co. have.
Last but not least, Nash-Finch Co. Their structure of the company is difference to the other company. They have a boardline distribution segment, instead of system distribution segment, they have a military segment and retail segment. Their boardline distribution segment sells and distributes various nationally boarded and private label grocery stores which were located in 25 states across the U.S.
The segment also provides difference kind of support services to their customers, such as promotional advertising and merchandising program installation of computerized ordering, receiving, and scanning system; retail accounting, retail equipment procurement assistance consumer and market research. It is very difference to other company. Instead of system distributor, Nash-Finch Co. has a Military segment which distributes grocery products to the United State military commissaries which was located in Virginia. Nash-Finch Co. is the only company that has a retail segment which is made up of 78 corporate-owned stores.
Their stores located in the Upper Midwest states such as Colorado, Illinois, Iowa, Minnesota, etc. Their conventional grocery stores offer different kind of grocery product and services, such fresh meat counter, delicatessens, bakeries, eat-in café, provide service such a check cashing, and fax services, phone cards. Below is a map that is from the Nash-Finch Co. Website, it show that the location of the distribution centers which was owner by the company, and the distribution service that was cover by the company in the United State.
Issue and difficult time
However, the industry is facing some difficult time, such as, high gasoline price, production in ethanol, increase in corn price and increase in product cost. The quick rise in price for gasoline and cure oil price cause a chain effect to the industry. The graph above is from inflationdata.com, it show that the average annual gas price in nominal term and inflation adjusted term.
The black line represents the average annual gas price, which means how much do a gallon of gasoline cost. The red line represents the adjusted gas, in other word, how much does it cost in 2007 dollars. Keep in mind that if the price shoots up for one week and goes back down, like hurricane Katrina, it will not do a lot affect on the average price. In 1980, the united state was under oil crisis.
The shortage supply in gasoline made the price of a gallon of gasoline reach the historical peak, if we adjusted it into today dollar, it will cost us $3.06 per gallon. On the other hand, the current daily price is about $3.08 per gallon. So if the gas price keep continue, at this level we will soon enough that the gas price will be above the average for the 1980, that is mean that we are very near the all time highs in real Dollar terms.
Because of the high price for oil, in 2005, President Bush suggests that to produce ethanol to replace costly petroleum product. According to the Steve Hargreaves, a CNNMoney.com staff writer, he mentioned that, “Corn demand and prices began surging over a year ago when Bush first touted ethanol in his 2006 State of the Union speech.” The relation between corn and production of ethanol affect the industry. Tim McMahon, a staff writer from inflationdata.com, said that” It is currently taking about 6% of the US corn crop to make 90% of all US ethanol.
But ethanol is only currently 10% of the fuel…Corn prices have almost doubled, going from just over $2.00 a bushel to almost $3.50. So imagine where the price of corn would go if we used 40% of the available supply in making ethanol.” Since the government ordered the change from petroleum product to the ethanol. The corn price was increase from $2.00 to $3.50; it is a 75% increase. More than that Tim Hargreaves also said that,” An Energy Department official said 18 billion gallons was the maximum amount of corn ethanol that we could be produced annually.
Which is only a small fraction of our 140 billion-a-year oil habit. And currently we are only producing something like 25 million gallons of ethanol” So we are producing 25 million gallon of ethanol, and we can only product maximum of 18 billion gallons of ethanol. The increase in corn price will be a shapely, if we started to product maximum amount of ethanol. The graph below is from the energy information administration, it show that the demand for ethanol by 2030.
In reality, almost every farm raised animal in the United States is fed by corn. Everything from Beef to chicken, to pork and even salmon is fed by corn .And meat is not all corn is used in everything from adhesives to crayons, peanut butter and yogurt. As a matter of fact corn is already the nation most important crop.
The increase in corn price would lead the increase in price for meat and other daily products. Steve Hargreaves stated that “Consumers will feel the impact of higher corn prices, not just in the produce isle but in a range of products. Beef and poultry prices are likely to rise as animal farmers rely on corn for feed. Soft drink prices may also jump since drink makers widely use corn syrup as a sweetener.
"Four dollars a bushel causes a lot of pain," said Richard Lobb, a spokesman for the National Chicken Council, who estimated that the price rise has already bumped up wholesale chicken prices 6 cents per pound. "It ripples right across the economy."” If the price of corn increases shapely, it will affect most of the product that we purchase in the supermarket.
Consumer already tingled by high gas prices, the gasoline price was double compare to few years ago, but not the pay check, therefore they have to find some other way to reduce their expense, such as eating out less than before.
Even more, when they go shop for food and other necessities, they will have to track down to less expansive product, which mean less profitable item to the company. As a result, companies in this industry are getting more difficult to increase their sale, at the same time higher cost which will lower their profit margin. This is the reason that the industry has a 60 Billion Revenue, but their Profit Margin is only 2.1%.
Although the industry is facing a lot of difficult time, Technology still give some benefits to the competitor. The advance technology can help the competitor decrease their distribution cost. Today, most of the company is fighting keep their costs down to increase their competitiveness. It can help them to maintain profitability. Fox example, SYSCO Corp. Co is building a largest regional distributor centers in East Tennessee. According to Josh Flory, a writer from knoxnews.com,” a new business that is driving growth in East Tennessee is SYSCO Corp.
Food Services of Knoxville, which is building a 353,000 square foot distribution center in the Interstate 275 Business Park just north of downtown Knoxville. SYSCO Corp. is investing about $37 million in the new facility, which is expected to employ 311 workers when it opens in May 2008. SYSCO Corp. Food Services is a unit of Houston-based SYSCO Corp. Corp., the largest food service marketer and distributor in North America.”
A new regional distribution center can help them to stock slow-moving items; it can also reduce the need for inventory and storage space at the local warehouses. Also, SYSCO Corp., they have invent a newly design supply chain to decrease their deliver time and cost. Leslie Hansen Harps, an officer from cardlog.com, “SYSCO Corp. has also been very aware of the new model's impact on its suppliers, who will be asked to cut lead time from a week or more to just a day.” We're the largest customer for most of our suppliers, so we have to be very careful that the changes we're pushing work for them, too," Wright says.
The company has an extensive supplier adoption team working to bring suppliers on board with the new process.” Under the new supply chain, the company decrease their deliver from one week to one day, it can reduce the cost, Josh also mentioned that “Food companies are using increased delivery frequencies, smaller orders and faster order cycle times to keep costs low while meeting their customers' and the consumer's increasing demand for fresh food,” because of the reduce in deliver time, the product is getting fresher than before, it can help the company to get a better price to their customer.
Also, Internet service is getting more important than to the industry. A lot of company in this industry started to use internet to let the customer place the order. It helps them to increase efficiency and cut the labor cost shapely.
Financial Analysis
Key Statistics
Key Statistics |
|
SYSCO |
PFGC |
Nash-Finch |
Average |
Market Cap |
20.92 B |
906.96 M |
467.40 M |
24.9 B |
Revenue |
35.04 B |
6.00B |
4.62 B |
57.36 B |
Beta |
1.08 |
1.07 |
2.02 |
N/A |
Debt |
65.56% |
41.55% |
69.15% |
60% |
Profit Margin |
2.86% |
0.75% |
-0.50% |
2.10% |
EPS |
1.6 |
1.28 |
-1.2 |
N/A |
ROA |
10.50% |
3.15% |
-2.41% |
N/A |
ROE |
30.50% |
5.40% |
-7.81% |
30.80% |
Common Stock |
609,970,000 |
35,460,000 |
13,460,000 |
|
Intrinsic Value |
98.2 |
31.91 |
24.06 |
|
Current Price |
35.13 |
29.25 |
34.85 |
|
|
Undervalue |
Undervalue |
Overvalue |
This chart above shows us the key Statistics for all three companies. SYSCO Corp. have a market capitalization 20.92 billion, compare to the whole industry market capitalization, 24.9 billion. It is almost 84% of the market. Their revenue is about 35.04 billion; it is about 61% to the whole industry revenue. They have a beta 1.08and EPS 1.60. Their profit margin is the above market average, which is 2.1%.
The company has a 65% debt ratio; it is a little bit higher than the industry average. Their ROE is the almost as same as the industry. They have common stock 609 million shares. Performance Food Group Co. has a market capitalization of 906.96 million. It is only 5% of SYSCO Corp. market capitalization. Their revenue is 6 billion. They have a beta 1.07 and EPS 1.28. Their profit margin is 0.75%; it is below the industry average.
They are barely breaking even. The company have a debt ratio 41.55%, it is better than the industry average. Their ROE is 5.40%; it is only about 16% of industry average. Also, their ROA is 3.15% compare to SYSCO Corp., 10.50%, it is about 33%. They are much lower than SYSCO Corp. They have common stock 35 million shares.
Nash-Finch Co. has a market capitalization of 467.40 million. Their revenue is about 4.62 billion. They have a beta 2.02 and EPS-1.20. Their profit margin is -0.50%, which means they are not making profit in their business. The debt ratio is highest within all three companies, it is about 70%. Their return on asset is -2.41% and return on equity is -7.81%. They have common stock 13 million shares.
Intrinsic Value
SYSCO Corp.
The return for SYSCO Corp. is r = 0.0464+1.08(0.0671-0.0464)
= 0.0688 = 6.88%
ROE = 0.305, DPO = 0.45
The growth rate for SYSCO Corp. is g = 0.305(1-0.45)
= 0.1635
Dividend for 2007 is 0.74
I use the intrinsic value for constant growth stock to calculate the value
IV=0.74(1+0.1635)
0.0688-0.06
IV=98.20
Current price is 35.13, which is undervalued.
Performance Food Group Co.
The recent P/E for PFGC is 23.4, 29.8, 23.3, and 23.2
Average P/E is (23.4+29.8+23.2+23.2)/4 = 24.93
EPS 1.28
I use P/E as an earning multiplier
IV = 24.93 x 1.28
IV = 31.91
Current price is 29.25, it is slightly undervalued.
Nash-Finch Co.
The recent P/E for NAFC is 13.7, 12.2, 8.7, and 5.5
Average P/E is (13.7+12.2+8.7+5.5)/4 = 10.025
EPS 2.40, this is the EPS on 2005, because the EPS on 2006 is negativity.
I use P/E as an earning multiplier
IV = 10.025 x 2.40
IV = 24.06
Current price is 34.85, it is overvalued.
Ratio Analysis
SYSCO Corp.
Activity |
2006 |
2005 |
2004 |
2003 |
DIH |
22.4081 |
22.5840 |
22.1305 |
21.9271 |
DSO |
27.1952 |
27.7843 |
27.5303 |
27.2378 |
TA Turnover |
3.6813 |
3.6286 |
3.6626 |
3.7381 |
Debt |
|
|
|
|
Debt |
65.5592% |
66.0556% |
66.6319% |
67.3213% |
Profitability |
|
|
|
|
GPM |
19.2839% |
19.2817% |
19.0996% |
19.3414% |
OPM |
5.9102% |
5.6395% |
6.2951% |
6.1913% |
NPM |
2.8568% |
2.6214% |
3.1750% |
3.0925% |
ROA |
10.5167% |
9.5121% |
11.6288% |
11.5603% |
ROE |
30.5356% |
28.0227% |
34.8502% |
35.3756% |
Cash Flows |
|
|
|
|
CFFO |
1,402.9200 |
1,123.8300 |
1,192.1600 |
1,191.0200 |
CFFI |
-648.7100 |
-608.6700 |
-413.4400 |
-683.8100 |
CFFF |
-748.2500 |
-504.6200 |
-784.5900 |
-643.3500 |
CFFO+CFFI |
754.2100 |
515.1600 |
778.7200 |
507.2100 |
CFFO+CFFI+CFFF |
5.9600 |
10.5400 |
-5.8700 |
-136.1400 |
The chart above is the Ratio Analysis of SYSCO Corp. Daily inventory held compare to 2005 to 2006 is a slightly decrease, but compare to over all past 4 years, it is still a little bit higher, which mean they may have a excess inventory problem. Day Sale Outstanding is slightly decrease from 2005 to 2006, and it is the lowest compare to past 4 years, which mean they receive account receivable faster than before.
Total Asset Turnover is higher than 2005, they use their asset more efficiency. They have a lowest debt ratio which means they depend on less debt. Their net profit margin, operating profit margin, return on asset and return on equity are higher than 2005. But compare to 2003 and 2004, it is not as high as before.
It is because of the increase in gasoline price which lead to high product cost and slow growth in sale, so we should be concern about it. Their operating cash flow have jump compare to 2005, and it is the highest compare to the last four years, which mean they make more profit than before. Basically, their ratio is very stable and consistence.
Performance Food Group Co.
Activity |
2006 |
2005 |
2004 |
2003 |
DIH |
22.4454 |
22.3585 |
20.2621 |
20.3461 |
DSO |
14.1609 |
12.1518 |
10.1618 |
16.0248 |
TA Turnover |
4.2851 |
4.3598 |
3.3642 |
3.1788 |
Debt |
|
|
|
|
Debt |
41.5486% |
40.8271% |
52.1647% |
53.7095% |
Profitability |
|
|
|
|
GPM |
13.2946% |
13.0635% |
14.9597% |
15.4813% |
OPM |
1.7845% |
1.6930% |
2.7915% |
3.4414% |
NPM |
0.7363% |
4.3196% |
0.8548% |
1.3441% |
ROA |
3.1549% |
18.8327% |
2.8756% |
4.2725% |
ROE |
5.3975% |
31.8266% |
6.0116% |
9.2297% |
Cash Flows |
|
|
|
|
CFFO |
72.3400 |
692.7300 |
115.9700 |
127.0400 |
CFFI |
-53.3400 |
-81.3500 |
-85.2700 |
-121.7400 |
CFFF |
-43.3800 |
-564.2400 |
-17.2900 |
-0.0400 |
CFFO+CFFI |
19.0000 |
611.3800 |
30.7000 |
5.3000 |
CFFO+CFFI+CFFF |
-24.3800 |
47.1400 |
13.4100 |
5.2600 |
Next, this is the ratio analysis for Performance Food Group Co. Daily inventory held compare to 2005 to 2006 is a slightly increase, also when we look at the past 4 years, it is highest, which mean they may have an excess inventory problem. We should concern about their inventory problem. Day Sale Outstanding is increase from 2005 to 2006, and there is an upward trend since 2004, which mean they take longer to collect account receivable.
Total Asset Turnover is lower than 2005, they use their asset less efficiency. Their debt ratio is slightly increased from 2005 to 2006 which means they depend on less debt. But compare to 2003 and 2004 it is about 10% lower, which mean they are depending on less debt. Gross profit margin and operating profit margin are higher than 2005.
However, when we look at past 4 years, we found that it is lower and we should concern that the company did not generate as much as profit than pervious years. Net profit margin, return on asset and return on equity have a drop from 2005 to 2006. It is also the lowest compare to the last 4 years. Their operating cash flow drop from 692 million to 72 million from 2005 to 2006, and it is the lowest to the last 4 years, we should concern about their profit.
Nash-Finch Co.
Activity |
2006 |
2005 |
2004 |
2003 |
DIH |
20.8958 |
25.6080 |
22.4354 |
24.5448 |
DSO |
14.7233 |
15.6536 |
14.7421 |
13.4089 |
TA Turnover |
4.8534 |
4.2282 |
4.7780 |
4.4807 |
Debt |
|
|
|
|
Debt |
69.1523% |
70.0609% |
66.4149% |
71.0667% |
Profitability |
|
|
|
|
GPM |
8.6756% |
9.4648% |
10.8476% |
11.4576% |
OPM |
1.8760% |
2.9358% |
3.3546% |
3.2950% |
NPM |
-0.4966% |
0.9055% |
0.3831% |
0.8835% |
ROA |
-2.4101% |
3.8286% |
1.8305% |
3.9589% |
ROE |
-7.8130% |
12.7875% |
5.4503% |
13.6824% |
Cash Flows |
|
|
|
|
CFFO |
90.1400 |
61.3200 |
101.8900 |
114.4500 |
CFFI |
-24.5100 |
-230.6800 |
-8.2800 |
-36.6000 |
CFFF |
-65.9300 |
165.5900 |
-101.3400 |
-96.5200 |
CFFO+CFFI |
65.6300 |
-169.3600 |
93.6100 |
77.8500 |
CFFO+CFFI+CFFF |
-0.3000 |
-3.7700 |
-7.7300 |
-18.6700 |
The chart above is the Ratio Analysis of Nash-Finch Co. Their daily inventory held drop from 2005 to 2006, and it is the lowest compare to the last 4 years. Day Sale Outstanding is decrease from 2005 to 2006, which mean they receive account receivable faster. They have a jump in total asset turnover from 2005, it is also the highest in the past 4 years, which means they use their asset more efficiency.
Their debt ratio is lower than 2005 which means they depend on less debt but their debt ratio is about 70% which is very high, so we should concern about it. Their gross profit margin and operating profit margin have a downward trend. Also, net profit margin, return on asset and return on equity are negative number.
Compare to the past 4 years, all these ratio are the lowest, which mean the company did not make enough money. We should be concern about it. In 2006, the company did not do so well. Their operating cash flow have jump compare to 2005, but still is lower than 2003 and 2004 more than 10 million dollars.
Compare between companies in 2006
Activity |
SYSCO |
PFGC |
Nash-Finch |
DIH |
22.4081 |
22.4454 |
20.8958 |
DSO |
27.1952 |
14.1609 |
14.7233 |
TA Turnover |
3.6813 |
4.2851 |
4.8534 |
Debt |
|
|
|
Debt |
65.56% |
41.55% |
69.15% |
Profitability |
|
|
|
GPM |
20.32% |
13.79% |
8.78% |
OPM |
19.28% |
13.29% |
8.68% |
NPM |
2.86% |
0.74% |
-0.50% |
ROA |
10.52% |
3.15% |
-2.41% |
ROE |
30.54% |
5.40% |
-7.81% |
Cash Flows |
|
|
|
CFFO |
1,402.92 |
72.34 |
90.14 |
CFFI |
-648.71 |
-53.34 |
-24.51 |
CFFF |
-748.25 |
-43.38 |
-65.93 |
CFFO+CFFI |
754.21 |
19 |
65.63 |
CFFO+CFFI+CFFF |
5.96 |
-24.38 |
-0.3 |
The chart above shows the ratio analysis between SYSCO Corp., Performance Food Group Co. and Nash-Finch Co., in year 2006. Nash-Finch Co. had a lowest daily inventory held, which mean their inventory store in the warehouse is the short time. They also had a highest total asset turnover, they use their asset more efficiency that other company.
Performance Food Group Co. had a lowest Day sale outstanding, which mean they receive account receivable faster than other company. And, they have a lower debt ratio compare to other company. They only use 40% of debt over their asset. SYSCO Corp. has the highest ratio for gross profit margin, operating profit margin, net profit margin, return of equity and return of asset.
They generate more money than the competitor. Their net profit margin is higher than the industry average, 2.1%. The company is doing better than the industry average.
Conclusion
The industry is facing some difficult time. The shapely rise in gasoline price, it leads to a chain effect to the industry. Increase demand for ethanol product to replace petroleum product. In United State, most of the ethanol produces by corn. It leads to increase in corn price. Most of the farm in United State use corn to raise animal, when the corn price increase, it raise the food price too.
More than that, corn also uses to make other non-food product. Because of the high gasoline and weaken housing market, they chose to cut expends on food and other necessities. Turn out, company within the industry more difficult to increase their sale. As a result, because of the high cost and slow growth in industry, the profit margin was getting smaller and smaller.
On the other hand, newly advance technology helps the company to reduce cost of storage and deliver. Internet also helps the companies to increase efficiency and reduce labor cost. Furthermore, SYSCO Corp. is one of the large competitors in the industry.
They have 400,000 customers. Their market capitalization is almost 84% of the industry; their revenue is about the 60% of the industry too. The rest of the 40% revenue id competitor by about 15-16 company, the competition between company is very high. Because of the low profit margin and a high competition, the potential of the industry is not very high.
Work Site
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About Us – SYSCO CORP. Story – SYSCO CORP. Corporation. Retrieved October 2, 2007, from SYSCO CORP. Corporation Web site: http://www.SYSCO Corp..com/aboutus/aboutus_story.html
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PFGC Quote – PFGC Stock Quote – Performance Food Group Co. Stock Quote – PFGC Stock Price – Retrieved October 14, 2007 from Wall Street Journal. Web site: http://online.wsj.com/quotes/main.html?symbol=PFGC&type=usstock+usfund&lateralbox.x=0&lateralbox.y=0
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