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Financial Analysis Exxon Mobile

In: Business and Management

Submitted By jungamals
Words 3182
Pages 13
EXXON MOBIL

Financial Analysis

JUNE 2015

Prepared by:

Maria Karpowicz-Wójcik

Monika Tyburska

Executive Summary

This report was commissioned to analyze financial statements for years 2010- 2014 of Exxon Mobil. It presents overall review of this company’s history and business, as well as its strategies and mission. Additionally, this report presents an impact of Exxon Mobil on social and natural environment. Moreover it describes how the company communicates social and environmental issues.

In analytical part of the report, we examined income statement and balance sheet for the above mentioned years. We looked for trends and presented them in form of graphs. Furthermore, this report shows calculations of financial ratios such as:

• Profitability ratios

• Liquidity ratios

• Solvency ratios

It presents trends over time and our comments.

Exxon Mobil – the story of success

Exxon Mobil Corporation is a motor fuel brand. The history of the company begun in 1870, when John D. Rockefeller and his partners established Standard Oil Company. This company was very successful for thirty years and by the year 1878, it was controlling 95% of US the oil industry. Because of the public protest that took place in 1911, the Supreme Court of the United States decided to divide one big company into 34 small companies. Two of these companies finally became Exxon and Mobil. In 1998, these companies signed an agreement, which cost $73.7 billion, in order to merge and create a new company called Exxon Mobil Corporation. The merger was done on November 30, 1999. During these years it has evolved from a regional marketer to the largest petroleum and petrochemical enterprise and has become the largest company in the world[1].

Exxon is engaged in exploration and production, refining, and marketing of oil and natural gas. Currently, it operates in most of the countries and it has been known by familiar brand names: Exxon, Esso and Mobil. These brands serve motorists at almost 29,000 service stations and provide more than one million of industrial and wholesale customers with fuel products. Fuel products and services are being sold to aviation customers at more than 630 airports and to marine customers at more than 180 ports around the world.[2]

The headquarters are located in Texas and company employs about 80,000 people.

During last years Exxon announced two major oil discoveries and a gas discovery in Gulf of Mexico. This is one of the largest discoveries in the Gulf of Mexico in the last decade.[3]

Exxon Environmental Policy

Around ten years ago Exxon Mobil introduced its project called “Protect Tomorrow. Today” This project is a set of expectations that serves as the foundation for company’s environmental performance. It was created to show that the company is aware of the social and economic needs of countries in which they do business. This project has become an integral part of company’s policy. The three key principles of “Protect Tomorrow. Today.” are:

• Delivery of superior environmental performance, leading to a competitive advantage;

• Driving environmental incidents with real impact to zero, through a process of continuous improvement; and

• Achieving industry leadership in focus areas valuable to the business.[4]

Environmental management is very important for Exxon. The company, on regular basis, tries to identify, assess, manage and monitor risks for environment that may be caused by its operations.

Exxon’s reputation regarding environmental sustainability was damaged by the Exxon Valdez oil spill in Prince William Sound, Alaska, on March 24, 1989 when more than 250,000 barrels of oil were spilled into Alaskan coastal waters, causing pollution to 1,300 miles of coastline, devastating regional fish stocks, killing over 250,000 sea birds and many hundreds more bald eagles, harbor seals, sea otters, and other animals. The company’s response to the disaster that was very bad and damaged its public image[5]. But Exxon learnt their lesson and since then they put a lot of effort to actions protecting environment nowadays.

Results analysis

2)

|a) Trends | | | | | |
| |2010 |2011 |2012 |2013 |2014 |
|Revenue |344,00 |437,64 |428,38 |393,72 |364,76 |
|Gross Profit |93,34 |113,17 |106,98 |89,88 |78,97 |
|Net Income |30,46 |41,06 |44,88 |32,58 |32,52 |

[pic]

|b) Growth | | | | | |
| | | | | | |
| |2010 |2011 |2012 |2013 |2014 |
|Revenue |100% |127% |125% |114% |106% |
|Gross Profit |100% |121% |115% |96% |85% |
|Net Income |100% |135% |147% |107% |107% |

[pic]

The above presented graphs clearly show gradual decrease of revenue, gross profit and net income. The best results were gained by the company in 2011 and 2012, whereas 2014 proves significant drop of these values.

3)

| |2010 |2011 |2012 |2013 |2014 |
|Sales/ Revenue |344,00 |437,64 |428,38 |393,72 |364,76 |
|Cost of goods sold |250,66 |324,47 |321,40 |303,84 |285,80 |
|SG&A Expense |13,89 |14,18 |13,13 |12,88 |12,60 |
|goods sold vs. Revenue |73% |74% |75% |77% |78% |
|SG&AExpensevs. Revenue |4% |3% |3% |3% |3% |

[pic]

[pic]

These calculations present cost of goods sold and SG&A, as well as their percentage value against sales. Cost of goods sold includes the cost from Exxon’s suppliers plus any additional costs necessary to get ready for sale. This value is on stable level of approx. 74%, apart from 2013 and 2014, when it reached the level of almost 80% of revenue. SG&A is the acronym for selling, general and administrative. These are the expenses connected with promotion, sales, and delivery of the company's products and services. As it is clearly visible in graphs, this expense represents 3% of Revenue.

4)

| |2010 |2011 |2012 |2013 |2014 |
|Total Assets |302,51 |331,05 |333,8 |346,81 |349,49 |
|Non-current Assets |243,53 |258,09 |269,34 |287,5 |296,58 |
|Working Capital |-3,65 |-4,55 |0,32 |-12,41 |-11,72 |
|Long Term Debt |12,23 |9,32 |7,93 |6,89 |11,65 |
|Equity |152,68 |160,74 |171,66 |180,5 |181,06 |

[pic]

Frist graph shows the value of total assets and working capital. As working capital is less than 1.0, it means that Exxon might face serious liquidity problems in the future.

Regarding the next components as: Equity and Long Term Debt in relation to Total Assets the trend is running as follows:

[pic]

5)

| |2010 |2011 |2012 |2013 |2014 |
|Total Assets |302,51 |331,05 |333,8 |346,81 |349,49 |
|Non-current Assets |243,53 |258,09 |269,34 |287,5 |296,58 |
|Long Term Debt |12,23 |9,32 |7,93 |6,89 |11,65 |
|non-current assets vs. TOTAL ASSETS |81% |78% |81% |83% |85% |
|long term debt vs TOTAL ASSETS |4% |3% |2% |2% |3% |

Below graph shows the value of total assets, non-current assets and long term debt.

[pic]

Percentage value shows that both: non-current assets and long term debt increased in 2014, as compared to previous years.

[pic]

6) Profitability ratios

| |
|Gross profit margin |
| |
|2010 |2011 |2012 |2013 |2014 |
|27,1% |25,9% |25,0% |22,8% |21,6% |
| | | | | |

[pic]

This ratio measures how profitable a company sells its goods. Higher ratios mean that the company is selling their inventory at a higher profit percentage. 21,6% gross profit margin means that for every dollar generated in sales in 2014, Exxon had 22 cents left to cover basic operating costs and profit.

Net profit margin

|2010 |2011 |2012 |2013 |2014 |
|6,3% |7,1% |7,2% |6,2% |4,9% |

[pic]

The profit margin ratio shows what percentage of sales are left after all expenses are paid by the company. In other words, it presents how good a company is at converting revenue into profits available for shareholders. It also gives an information if the company is running efficiently. Between 2010 and 2013 this ratio was quite high but in 2014 it dropped, what indicates that the expenses are too high and the management needs to cut them.

ROCE

|2010 |2011 |2012 |2013 |2014 |
|8,9% |12,0% |11,5% |8,4% |6,1% |

[pic]

Return on capital employed shows investors how many dollars in profits each dollar of capital employed generates. So higher ratio would be more favorable. A return of 12% in 2011 indicates that for every dollar invested in capital employed, Exxon made $12 dollars of profits. This result deteriorated dramatically in 2014, as it dropped by half.

Liquidity ratios

Current ratio

|2010 |2011 |2012 |2013 |2014 |
|0,94 |0,94 |1,00 |0,83 |0,82 |

[pic]

Current ratio measures company’s ability to pay off its short term liabilities. A higher value is always better, because it shows the company can more easily make current debt payments. In 2010- 2011 Exxon Mobil had enough current assets to pay off 94% of their current liabilities. In 2012 this value increased even more in order to finally drop down to 83 and 82% in 2013-2014 respectively. This proves that the company earns less and less from operations to support activities and at the same time it can more easily make current debt payment.

Quick ratio

|2010 |2011 |2012 |2013 |2014 |
|0,73 |0,75 |0,78 |0,60 |0,56 |
| | | | | |

[pic]

Quick ratio shows how well the company can quickly convert its assets into cash in order to pay off its current liabilities. If a company has enough assets that can be quickly converted into cash, it will be able to pay off its obligations without having to sell any long-term assets. Between 2010 and 2013 Exxon Mobil had a quick ratio around 0.8, whereas in 2014 it reached the lowest level of 0.56. It means that in the event of difficult financial situation, it will have to sell a part of its long term assets.

Receivables collection period

|2010 |2011 |2012 |2013 |2014 |
|34,25 |32,23 |29,81 |30,73 |28,03 |

[pic]

Receivables collection period means how long customers are taking to pay a company. In 2010 this period was over 34 day but it is clearly visible that Exxon was looking for a way to reduce it, so that it finally reached the level of 28 days in 2014.

Inventory holding period

|2010 |2011 |2012 |2013 |2014 |
|18,90 |16,90 |16,51 |19,39 |21,30 |

[pic]

Inventory holding period is used to measure how efficiently a company manages its inventory. Lower value proves better performance in fuel industry, which part is Exxon Mobil.

Risk Ratios

Gearing

|2010 |2011 |2012 |2013 |2014 |
|0,10 |0,08 |0,06 |0,12 |0,16 |
| | | | | |

[pic]

This ratio shows the percentage of company financing that comes from creditors and investors. A lower value usually implies a more financially stable business. As gearing went up drastically in 2013 and 2014 as compared to 2012, Exxon might be considered more risky to creditors and investors than companies with a lower ratio.

Interest cover

|2010 |2011 |2012 |2013 |2014 |
|0,00 |0,01 |0,02 |0,00 |0,00 |

[pic]

This ratio calculates the company’s ability to afford the interest on the debt. Result less than 1 in 2013 and 2014, means that Exxon isn’t making enough money to pay the interest on its debt. It showed the investors, that the company is risky and probably would never get additional financing from the bank.

Appendix 1

Annual Financials for Exxon Mobil Corp. -Balance sheet
Assets
|Fiscal year is January-December. All values USD millions. |2010 |2011 |2012 |2013 |2014 |
|Cash & Short Term Investments |8.46B |13.07B |9.92B |4.91B |4.66B |
|Cash Only |8.45B |13.07B |9.92B |4.91B |4.66B |
|Short-Term Investments |2M |- |- |- |- |
|Total Accounts Receivable |32.28B |38.64B |34.99B |33.15B |28.01B |
|Accounts Receivables, Net |25.44B |30.04B |28.37B |25.99B |18.54B |
|Accounts Receivables, Gross |25.79B |30.21B |28.52B |26.13B |18.7B |
|Bad Debt/Doubtful Accounts |(350M) |(167M) |(145M) |(140M) |(161M) |
|Other Receivables |6.85B |8.6B |6.61B |7.16B |9.47B |
|Inventories |12.98B |15.02B |14.54B |16.14B |16.68B |
|Finished Goods |9.85B |11.67B |10.84B |12.12B |12.38B |
|Work in Progress |0 |0 |0 |0 |0 |
|Raw Materials |3.12B |3.36B |3.71B |4.02B |4.29B |
|Progress Payments & Other |- |- |- |- |- |
|Other Current Assets |5.27B |6.23B |5.01B |5.11B |3.57B |
|Miscellaneous Current Assets |5.27B |6.23B |5.01B |5.11B |3.57B |
|Total Current Assets |58.98B |72.96B |64.46B |59.31B |52.91B |
|Net Property, Plant & Equipment |199.55B |214.66B |226.95B |243.65B |252.67B |
|Property, Plant & Equipment - Gross |373.94B |394B |409.31B |434.52B |446.79B |
|Buildings |- |- |- |- |- |
|Land & Improvements |- |- |- |- |- |
|Computer Software and Equipment |- |- |- |- |- |
|Other Property, Plant & Equipment |373.94B |394B |409.31B |434.52B |446.79B |
|Accumulated Depreciation |174.39B |179.33B |182.37B |190.87B |194.12B |
|Total Investments and Advances |28.27B |28.25B |28.93B |30.21B |30.36B |
|Other Long-Term Investments |1.56B |1.54B |437M |0 |526M |
|Long-Term Note Receivable |7.07B |6.08B |5.79B |6.12B |0 |
|Intangible Assets |- |- |- |- |- |
|Net Goodwill |- |- |- |- |- |
|Net Other Intangibles |- |- |- |- |- |
|Other Assets |5.11B |4.87B |4.4B |4.7B |9.6B |
|Tangible Other Assets |5.11B |4.87B |4.4B |4.7B |9.6B |
|Total Assets |302.51B |331.05B |333.8B |346.81B |349.49B |

Liabilities & Shareholders' Equity
| |2010 |2011 |2012 |2013 |2014 |
|ST Debt & Current Portion LT Debt |2.79B |7.71B |3.65B |15.81B |17.47B |
|Short Term Debt |2.44B |4.28B |2.63B |14.77B |16.7B |
|Current Portion of Long Term Debt |345M |3.43B |1.03B |1.03B |770M |
|Accounts Payable |30.78B |33.97B |33.79B |30.92B |25.29B |
|Income Tax Payable |10.26B |12.94B |10.02B |8.25B |5.39B |
|Other Current Liabilities |18.81B |22.89B |16.68B |16.74B |16.49B |
|Dividends Payable |- |- |- |- |- |
|Accrued Payroll |- |- |- |- |- |
|Miscellaneous Current Liabilities |18.81B |22.89B |16.68B |16.74B |16.49B |
|Total Current Liabilities |62.63B |77.51B |64.14B |71.72B |64.63B |
|Long-Term Debt |12.23B |9.32B |7.93B |6.89B |11.65B |
|Long-Term Debt excl. Capitalized Leases |11.92B |9.06B |7.5B |6.52B |11.28B |
|Non-Convertible Debt |11.92B |9.06B |7.5B |6.52B |11.28B |
|Convertible Debt |0 |0 |0 |0 |0 |
|Capitalized Lease Obligations |304M |260M |431M |375M |375M |
|Provision for Risks & Charges |19.37B |24.99B |25.27B |20.65B |25.8B |
|Deferred Taxes |31.62B |32.4B |34.3B |37.71B |35.28B |
|Deferred Taxes – Credit |35.15B |36.62B |37.57B |40.53B |39.23B |
|Deferred Taxes – Debit |3.53B |4.22B |3.27B |2.82B |3.96B |
|Other Liabilities |20.45B |21.87B |27.23B |26.52B |27.11B |
|Other Liabilities (excl. Deferred Income) |20.45B |21.87B |27.23B |26.52B |27.11B |
|Deferred Income |- |- |- |- |- |
|Total Liabilities |149.83B |170.31B |162.14B |166.31B |168.43B |
|Non-Equity Reserves |0 |0 |0 |0 |0 |
|Preferred Stock (Carrying Value) |0 |0 |0 |0 |0 |
|Redeemable Preferred Stock |0 |0 |0 |0 |0 |
|Non-Redeemable Preferred Stock |0 |0 |0 |0 |0 |
|Common Equity (Total) |146.84B |154.4B |165.86B |174B |174.4B |
|Common Stock Par/Carry Value |9.37B |9.51B |9.65B |10.08B |10.79B |
|Retained Earnings |298.9B |330.94B |365.73B |387.43B |408.38B |
|ESOP Debt Guarantee |0 |0 |0 |0 |0 |
|Cumulative Translation Adjustment/Unrealized For. Exch. Gain |5.07B |4.17B |2.41B |(846M) |(5.95B) |
|Unrealized Gain/Loss Marketable Securities |0 |0 |0 |0 |(60M) |
|Revaluation Reserves |0 |0 |0 |0 |0 |
|Treasury Stock |(156.61B) |(176.93B) |(197.33B) |(212.78B) |(225.82B) |
|Total Shareholders' Equity |146.84B |154.4B |165.86B |174B |174.4B |
|Accumulated Minority Interest |5.84B |6.35B |5.8B |6.49B |6.67B |
|Total Equity |152.68B |160.74B |171.66B |180.5B |181.06B |
|Liabilities & Shareholders' Equity |302.51B |331.05B |333.8B |346.81B |349.49B |

Appendix 2

Annual Financials for Exxon Mobil Corp.
Income statement
|Fiscal year is January-December. All values USD millions. |2010 |2011 |2012 |2013 |2014 |
|Sales/Revenue |344B |437.64B |428.38B |393.72B |364.76B |
|Cost of Goods Sold (COGS) incl. D&A |250.66B |324.47B |321.4B |303.84B |285.8B |
|COGS excluding D&A |235.9B |308.88B |305.51B |286.66B |268.5B |
|Depreciation & Amortization Expense |14.76B |15.58B |15.89B |17.18B |17.3B |
|Depreciation |14.76B |15.58B |15.89B |17.18B |17.3B |
|Amortization of Intangibles |- |- |- |- |- |
|Gross Income |93.34B |113.17B |106.98B |89.88B |78.97B |
|SG&A Expense |13.89B |14.18B |13.13B |12.88B |12.6B |
|Research & Development |1.01B |1.04B |1.04B |1.04B |971M |
|Other SG&A |12.88B |13.14B |12.09B |11.83B |11.63B |
|Other Operating Expense |36.89B |40.78B |36.31B |33.23B |32.29B |
|Unusual Expense |18M |0 |(6.5B) |0 |5M |
|EBIT |(18M) |3.5B |6.5B |(3M) |(5M) |
|Non-Operating Income/Expense |0 |0 |0 |146M |4.52B |
|Non-Operating Interest Income |0 |0 |0 |0 |0 |
|Equity in Affiliates (Pretax) |10.68B |15.29B |15.01B |13.93B |13.32B |
|Interest Expense |259M |247M |327M |132M |286M |
|Gross Interest Expense |791M |840M |833M |441M |630M |
|Interest Capitalized |532M |593M |506M |309M |344M |
|Pretax Income |52.96B |73.26B |78.73B |57.71B |51.63B |
|Income Tax |21.56B |31.05B |31.05B |24.26B |18.02B |
|Income Tax - Current Domestic |1.61B |2.04B |2.48B |1.51B |957M |
|Income Tax - Current Foreign |21.09B |28.85B |25.65B |22.12B |14.76B |
|Income Tax - Deferred Domestic |49M |1.58B |1.1B |(116M) |900M |
|Income Tax - Deferred Foreign |(1.19B) |(1.42B) |1.82B |757M |1.4B |
|Income Tax Credits |- |- |- |- |- |
|Equity in Affiliates |- |- |- |- |- |
|Other After Tax Income (Expense) |0 |0 |0 |0 |0 |
|Consolidated Net Income |31.4B |42.21B |47.68B |33.45B |33.62B |
|Minority Interest Expense |938M |1.15B |2.8B |868M |1.1B |
|Net Income |30.46B |41.06B |44.88B |32.58B |32.52B |
|Extraordinaries & Discontinued Operations |0 |0 |0 |0 |0 |
|Extra Items & Gain/Loss Sale Of Assets |0 |0 |0 |0 |0 |
|Cumulative Effect - Accounting Chg |0 |0 |0 |0 |0 |
|Discontinued Operations |0 |0 |0 |0 |0 |
|Net Income After Extraordinaries |30.46B |41.06B |44.88B |32.58B |32.52B |
|Preferred Dividends |0 |0 |0 |0 |0 |
|Net Income Available to Common |30.46B |41.06B |44.88B |32.58B |32.52B |
|EPS (Basic) |6.24 |8.43 |9.70 |7.37 |7.60 |
|Basic Shares Outstanding |4.89B |4.87B |4.63B |4.42B |4.28B |
|EPS (Diluted) |6.22 |8.42 |9.70 |7.37 |7.60 |
|Diluted Shares Outstanding |4.9B |4.88B |4.63B |4.42B |4.28B |

Copyright 2015 FactSet Research Systems Inc. All rights reserved. Source FactSet Fundamentals.

-----------------------
[1] www.company-histories.com

[2] http://www.britannica.com/topic/Exxon-Corporation

[3] www.exxonmobil.com

[4] www.exxonmobil.com

[5] http://www.ukessays.com/…...

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